Magnum Mining Launches $1.94M Entitlement Offer to Boost Rare Earths Exploration

Overview of the Entitlement Offer

Magnum Mining and Exploration Limited (ASX: MGU) has launched a pro-rata non-renounceable entitlement issue designed to raise up to $1.94 million. Shareholders registered as of the record date will be entitled to subscribe for two new shares for every five shares held, priced at $0.006 each. In addition, for every share subscribed, shareholders will receive one free new option exercisable at $0.012 within three years.

This capital raising initiative is a strategic move to bolster the company’s financial position and fund ongoing exploration activities at its key assets, the Palmares Projects in Brazil and the Buena Vista Project in Nevada, USA.

Use of Funds and Strategic Intent

The proceeds from the entitlement offer are earmarked primarily for advancing exploration and development at the Palmares and Buena Vista projects, which are prospective for rare earth elements and iron ore respectively. The company plans to allocate approximately 38-40% of the funds to Palmares, 16-25% to Buena Vista, with the remainder supporting working capital and offer expenses.

Magnum’s focus on rare earth elements aligns with growing global demand for these critical minerals, essential in high-tech and clean energy applications. The capital raise is intended to provide sufficient runway for the company to progress its exploration objectives and maintain operational momentum.

Offer Mechanics and Lead Manager Role

The entitlement offer is non-renounceable, meaning shareholders cannot trade their entitlements separately. Any entitlements not taken up will form part of a shortfall offer, which may be allocated to other eligible shareholders or third parties, subject to voting power limits.

Indian Ocean Securities Pty Ltd has been appointed as the lead manager for the offer. As part of their remuneration, the lead manager will receive a 6% fee on gross proceeds and 20 million listed options exercisable at $0.05 by October 2025, subject to shareholder approval.

Impact on Shareholders and Capital Structure

Assuming full subscription, the number of shares on issue will increase from approximately 809 million to over 1.13 billion, with options rising from 194 million to over 537 million. Shareholders who do not participate risk dilution of their holdings by about 28.57%, which could extend to 44.4% if all new options are exercised.

The company has confirmed that no shareholder will increase their voting power beyond 19.9% as a result of the offer, maintaining a balanced control structure.

Risks and Considerations

Magnum Mining cautions that the securities offered are highly speculative. Risks include exploration uncertainties, commodity price volatility, sovereign risks in Brazil and the USA, and potential dilution. The company’s financial reports note material uncertainty regarding its ability to continue as a going concern without successful capital raising.

Investors are advised to consider these risks carefully and seek professional advice before participating.

Next Steps and Market Implications

The offer opens shortly after the record date of 10 February 2025, with a closing date currently set for 24 February 2025, subject to extension. The market will be watching closely for shareholder uptake, which will influence Magnum’s immediate financial health and capacity to advance its rare earth and iron ore projects.