Legal Battles in Greenland Shadow Energy Transition Minerals’ Latest Capital Raise

Capital Raising and Offer Details

Energy Transition Minerals Ltd (ASX: ETM) has released a detailed prospectus dated 24 January 2025, announcing an offer of up to 68.75 million quoted options to participants in a recent placement. These options are being issued on a free-attaching basis, with one option granted for every two placement shares subscribed. The placement itself raised approximately $9.35 million before costs through the issue of 137.5 million shares at $0.068 each.

The quoted options carry an exercise price of $0.12 and will expire 18 months from their issue date. The offer is exclusively available to placement participants and is not open to the general public. The company has applied for official quotation of these options on the ASX, aiming to create a new class of quoted securities.

Use of Funds and Strategic Focus

While no funds will be raised directly from the issue of the quoted options, exercise of these options could inject up to $8.25 million into the company. The proceeds from the placement and any option exercises are earmarked for several strategic initiatives. These include expanding the company’s footprint in Greenland, particularly re-establishing permanent local representation and infrastructure, updating resource and financial parameters for the Kvanefjeld Project, and conducting technical due diligence on potential acquisitions in Greenland and Nordic countries.

Additionally, a portion of the funds will be allocated to cover arbitration and litigation costs related to ongoing legal disputes with the governments of Greenland and Denmark, as well as general working capital and offer expenses.

Ongoing Legal and Regulatory Challenges

A significant risk factor highlighted in the prospectus is the ongoing arbitration and litigation involving the company’s subsidiary, Greenland Minerals A/S, and the governments of Greenland and Denmark. The dispute centers on the refusal to grant an exploitation licence for the Kvanefjeld Project, largely due to Greenland’s Uranium Act which bans exploration and development of mineral deposits exceeding 100 ppm uranium. The Kvanefjeld Project exceeds this uranium threshold, complicating its development prospects.

The arbitration proceedings seek to overturn the licence refusal and challenge the applicability of the Uranium Act. These legal processes are expected to take several years, with no assurance of a favorable outcome. The company has secured non-recourse litigation funding to support these proceedings but faces a security for costs order of approximately AUD 5.57 million, guaranteed indefinitely by the company.

Capital Structure and Shareholder Impact

Upon completion of the offer and placement, the company’s share capital is expected to increase to approximately 1.55 billion shares, with 68.75 million quoted options on issue. If all options are exercised, they would represent about 4.65% dilution to existing shareholders. Notably, Le Shan Shenghe Rare Earth Company Limited retains anti-dilution rights and may subscribe for additional shares to maintain its interest, potentially increasing its stake to just under 20%.

The directors have not participated in the placement or the option offer, and the company does not anticipate any material change in control as a result of the capital raising.

Investment Risks and Speculative Nature

The prospectus underscores the speculative nature of the quoted options and the company’s operations. Key risks include the unresolved legal challenges in Greenland, the need for substantial future capital to develop projects, operational and mining risks, and exposure to commodity price volatility. The company also faces environmental, sovereign, and regulatory risks inherent in the mining sector, particularly in foreign jurisdictions.

Investors are cautioned to consider these risks carefully and seek professional advice before participating in the offer.