Punters pile into Red Metal in oversubscribed share plan

Red Metal has been knocked over by punters in the rush for shares after its latest share purchase plan received applications totalling $6.6 million blowing an initial target of $2 million out of the water. 

The company’s exploration plans at its massive Sybella rare earths project, that sits 20km from the Queensland mining town of Mount Isa, in addition to planned drill programs at its other prospective targets are now fully-funded for the next year.

The share purchase plan (SPP) was open to all shareholders, providing the opportunity to buy up to $30,000 worth of shares at a moderately-discounted price of 10c. It received 534 applications for $6.597 million far exceeding its target level.

Management, who have described the Sybella project previously as “globally unique”, can now drive the monster project further down the road with pre-development metallurgy, geological and mining works, in addition to infrastructure studies for the site.

It plans to complete drill testing at its various range of other Queensland prospects, including the high-priority copper-gold targets at Gulf, Corkwood, Three Ways and Pernatty Lagoon. The company also has a clutch of gold targets it plans to chase down at its Pardoo prospect which appear similar in style to De Grey Mining’s huge Hemi deposit.

Red Metal managing director Rob Rutherford said: “This is an extremely welcome result as it demonstrates the strong support Red Metals management and exploration team enjoys from its shareholder base. We are excited to put these funds to work by accelerating studies on our giant Sybella rare earth discovery and testing several high-priority base metal targets within our impressive exploration portfolio.”

The stellar result achieved by the company’s SPP continues a trend of impressive outcomes from other recent small cap raisings which many investors will no doubt hope is a sign of more promising times to come.

Silver explorer Maronan Metals, in which Red Metals own a 43.98 per cent stake, enjoyed considerable success with their recent efforts to raise funds from existing shareholders.

Maronan raised $3.368 million against a target of $1.5 million in June, with a common denominator being Rob Rutherford, who is a non-executive director of the silver junior.

Other recent examples extend to Neurizon Therapeutics, a neurodegenerative medical company taking the fight to motor-neurone-disease (MND) who raised $7.8 million against a $2 million target and SRG Global, an infrastructure services firm who received a whopping $53.2 million in applications when seeking $6 million.

Interestingly, these successful raises were offered at modest discounts to the prevailing price at the time and offered no “option sweeteners” at a compelling price and long expiry period, indicating a great project-innovation-idea can still draw plenty of interest without the need for them.

Red Metal recently tabled a mammoth 4.8 billion-tonne rare earths resource for the Sybella project at 302 parts per million (ppm) NdPr and 28ppm dysprosium-terbium (DyTb), using a 200ppm NdPr cut-off grade.

Increasing the cut-off grade to 360ppm NdPr, the resource was estimated at 209 million tonnes grading 377ppm NdPr and 34ppm DyTb.

To get to those numbers the company covered more than 8km of enriched granite to collect 1,778 composite samples from a 10,511m air core (AC) and reverse circulation (RC) program, which included 139 drill holes.

Importantly, the resource material starts at surface and remains open at depths below 100m. However, the material also includes up to 788 million tonnes of soft weathered granite running at 297ppm NdPr and 28ppm DyTb, using a 200ppm NdPr cut-off grade, which provides an option for early, low-cost mining. This will now be the focus of initial infill drilling.

Early metallurgical testing has been promising, indicating that 21 per cent of the project’s mineral basket value comes from the high-demand heavy rare earth elements such as dysprosium and terbium.

Heavy rare earths are generally mined in significant quantities out of China which would make Red Metal’s Sybella project something of an Australian groundbreaker if it was able to also produce heavy rare earths at those levels.

The recent SPP oversubscription provides ample evidence that Sybella’s potential is well-regarded by the market and with further infill drilling and metallurgical testing, it could really set the project down a lucrative pathway.

Is your ASX-listed company doing something interesting? Contact: matt.birney@businessnews.com.au