Shareholder Dilution and Tanzanian Regulatory Risks Loom as EV1 Raises $1.45M

Capital Raising to Support Key Tanzanian Assets

Evolution Energy Minerals Limited (ASX, EV1) has launched a renounceable pro-rata entitlement offer to raise approximately $1.45 million through the issue of up to 145 million new shares priced at one cent each. The offer includes one free attaching option for every two new shares issued, exercisable at two cents and expiring three years from issue. This capital raising is designed to fund early works at the Chilalo Graphite Project and continue exploration at the Chikundo Copper Prospect, both located in Tanzania.

The entitlement offer is open to eligible shareholders on a two-for-five basis, allowing them to subscribe for two new shares for every five shares held as of the record date. Shareholders also have the option to apply for additional shares beyond their entitlement through a top-up offer, subject to allocation discretion by the board and lead manager.

Underwriting and Director Participation

The offer is partially underwritten to $500,000 by Mahe Capital Pty Ltd, the lead manager, with two company directors, Craig Moulton and Paul Atherley, sub-underwriting $80,000 collectively. Both directors intend to participate fully in the offer, signaling confidence in the company’s prospects. The underwriting arrangements include the issuance of lead manager options as part of the fee structure.

This partial underwriting provides a degree of certainty around the minimum funds to be raised, although the final subscription level will influence the company’s capital structure and shareholder dilution.

Use of Proceeds and Financial Position

Funds raised will be allocated primarily to advancing the Chilalo Graphite Project, including site preparation, geotechnical investigations, and infrastructure development. Exploration at the Chikundo Copper Prospect will also be supported, alongside repayment of creditors in both Tanzania and Australia and general working capital requirements.

The company’s unaudited pro forma financial statements indicate that full subscription would significantly bolster cash reserves, improving the company’s ability to meet short-term commitments. However, the directors acknowledge that further funding may be required for medium to long-term operations.

Dilution and Control Considerations

Shareholders who do not participate in the entitlement offer face dilution of approximately 28.57% in their shareholding, with potential aggregate dilution reaching 37.81% if all attaching options are exercised. The company’s largest shareholder, ARCH Sustainable Resources GPCo Limited, currently holds just over 25% and could see its voting power increase to nearly 31% if other shareholders do not participate.

The offer complies with relevant Corporations Act exceptions allowing increases in voting power through rights issues and underwriting arrangements, but the board has emphasized careful allocation to avoid unacceptable control effects.

Risks and Regulatory Environment

Investors should be mindful of the speculative nature of the investment and the risks associated with operating in Tanzania, including sovereign risk, regulatory uncertainty, and a recent default notice issued to the company’s subsidiary by the Tanzanian Mining Commission. While the company expects to resolve this matter without material delay, it remains a key risk factor.

Other risks include commodity price volatility, exploration and operational hazards, environmental regulations, and potential dilution from future capital raisings. The company has disclosed these risks comprehensively in its prospectus, urging investors to seek professional advice.

Shareholder Action and Offer Timetable

The entitlement offer opens on 22 August 2025 and closes on 5 September 2025, with rights trading on ASX commencing on 18 August and ending on 29 August. Eligible shareholders can accept their entitlement in full or in part, apply for additional shares under the top-up offer, sell their entitlements on ASX, or allow them to lapse. The company has appointed Mahe Capital as nominee to sell entitlements for ineligible overseas shareholders.

Completion of the offer and issue of new shares and options are expected by mid-September, with trading of new shares commencing shortly thereafter.