Debt Pressure Mounts as Alara Seeks Shareholder Approval for Placement
Alara Resources has announced a private placement to raise A$3.4 million aimed at repaying a significant portion of its Trafigura loan, subject to shareholder approval. The move underscores strong backing from major shareholders and a strategic focus on financial stability.
- Private placement of 85 million shares at A$0.04 each
- Funds to repay part of US$3.45 million Trafigura loan
- Placement to substantial shareholder Al Tasnim Infrastructure and Director Vikas Jain
- Shares priced at 60% premium to recent VWAP
- Shareholder meeting scheduled for 8 July 2025 to approve placement
Alara’s Capital Raise Strategy
Alara Resources Limited (ASX, AUQ), an Australian base and precious metals producer with operations in Oman, has entered into subscription agreements for a private placement to raise up to A$3.4 million. The placement involves issuing 85 million fully paid ordinary shares at A$0.04 each to two key investors, substantial shareholder Al Tasnim Infrastructure LLC (ATI) and company director Vikas Jain. This capital raise is contingent on shareholder approval at the upcoming general meeting scheduled for 8 July 2025.
The placement price represents a 60% premium over the 30-day volume weighted average price (VWAP) prior to the agreements, signaling strong confidence from ATI and Mr. Jain in Alara’s prospects. If approved, ATI’s and Mr. Jain’s voting power in the company would increase to approximately 19.88% and 7.81%, respectively.
Addressing Debt Obligations
The primary purpose of the placement proceeds is to repay a portion of Alara’s outstanding debt under a US$3.45 million finance facility with Trafigura Pte Ltd. The company faces a principal and interest repayment of approximately US$1.59 million (A$2.45 million) due by 15 July 2025, alongside interest and withholding tax obligations extending to June 2026. The total repayment commitment related to this loan, including fees, is around US$2.15 million (A$3.31 million).
Alara recently amended the terms of the Trafigura loan, deferring some interest payments and accelerating principal repayments to mid-July 2025. While the interest rate formula was adjusted for administrative convenience, the company does not anticipate a material impact on interest costs.
Implications for Alara’s Future
Chairman Stephen Gethin emphasized that the placement will enable Alara to meet its imminent debt repayments and focus on advancing its Al Wash-hi Majaza Copper-Gold Project in Oman. The company is also exploring other regional ventures, signaling a commitment to growth despite current financial pressures.
However, the placement is not underwritten, and its success hinges on shareholder approval. This introduces an element of uncertainty, especially given the dilution impact and the increased influence of major shareholders.
Overall, this capital raising move reflects Alara’s pragmatic approach to managing its balance sheet while maintaining operational momentum in a challenging market environment.
Bottom Line?
Alara’s ability to secure shareholder backing for this placement will be pivotal in navigating its debt obligations and sustaining growth ambitions.
Questions in the middle?
- Will shareholders approve the private placement at the July meeting?
- How will the increased stake of ATI and Mr. Jain influence company strategy?
- What are the prospects for Alara’s Al Wash-hi Majaza project post-financing?
