Savannah Goldfields Faces Dilution Risk as $15M Equity Raise Seeks Shareholder Nod

Equity Raising Overview

Savannah Goldfields Limited (ASX, SVG) has launched a significant equity raising initiative designed to inject up to $15 million into the company. The raise comprises a $4.1 million placement of approximately 274.5 million new shares priced at $0.015 each, alongside a conditional placement of up to 725.5 million shares to sophisticated and institutional investors, subject to shareholder approval. This capital injection is accompanied by an offer of free attaching options, providing investors with additional upside potential.

Details of the Offer and Options

Placement participants will receive one free attaching option for every two new shares subscribed under both the placement and conditional placement. These options carry an exercise price of $0.03 and expire on 31 December 2026. Subject to shareholder approval, up to 500 million options will be issued to placement participants, with an additional 20 million options allocated to the joint lead managers as part of their engagement. The options offer a potential future capital inflow of $15.6 million if fully exercised.

Use of Funds and Strategic Intent

The funds raised will be strategically deployed across several key areas, increasing environmental bonds, covering project operating costs including plant maintenance and mining restart approvals, funding an exploration drilling program, purchasing camp accommodation, repaying senior secured loans, covering capital raising costs, and supporting working capital and creditor payments. Notably, the company aims to address outstanding creditor claims and default events that have arisen due to operational disruptions and extreme weather impacts earlier in 2024.

Impact on Shareholders and Capital Structure

Following completion of the equity raising, Savannah Goldfields expects to have approximately 2.14 billion shares on issue, with options potentially increasing this number by 520 million if exercised. Existing shareholders will experience dilution, with the placement and conditional placement shares representing roughly 46.7% of the post-raise capital. However, the company does not anticipate any material change in control or voting power among substantial shareholders. The raising is positioned as a necessary step to stabilize the company’s financial footing and support its path back to production.

Risks and Considerations

The prospectus outlines several risks inherent to the equity raising and Savannah Goldfields’ operations. These include dilution risk, exploration and operational uncertainties, environmental and native title compliance, and broader market and economic factors. The company is currently on care and maintenance due to weather-related disruptions and faces creditor pressures, which the raise aims to mitigate. Investors should weigh these risks alongside the potential benefits of the capital raise and the attached options.