Risks Loom as Andromeda Metals Seeks Funding for Major Project Development

Capital Raising Details

Andromeda Metals Limited (ASX, ADN) has issued a prospectus dated 27 June 2025 announcing a significant capital raising initiative aimed at securing approximately $5 million before expenses. The raise involves a Placement of around 385 million new shares at $0.013 each, primarily targeting institutional and sophisticated investors. Alongside the Placement, the company is offering approximately 288 million Placement Options exercisable at $0.0195 each, subject to shareholder approval at an Extraordinary General Meeting (EGM) scheduled for 30 June 2025.

In addition, 5 million Broker Options will be issued to the Joint Lead Managers, Bell Potter and Canaccord Genuity, as part of their remuneration for managing the capital raise. These options carry the same exercise price and expiry terms as the Placement Options, expiring two years from the date of issue.

Strategic Use of Funds

The funds raised will primarily support the advancement of Andromeda’s Great White Project, including early works, advanced plant design, engineering, and preparatory activities for project funding. The capital will also facilitate ongoing development of the company’s High Purity Alumina (HPA) project, including scoping studies and market development efforts, alongside general working capital requirements.

Complementing the equity raise, Andromeda has secured credit approval for a $75 million debt facility from Merricks Capital, intended to underpin the Great White Project’s development financing. While documentation is still under negotiation, this facility represents a critical component of the company’s funding strategy, though it carries typical risks associated with debt financing, including security over company assets.

Capital Structure and Shareholder Impact

Post-raise, the company’s share count will increase to approximately 3.8 billion shares, with total options outstanding rising to nearly 678 million. The Placement Options and Broker Options introduce potential future dilution if exercised. However, no single shareholder’s stake will exceed 20% as a result of this raise, indicating no immediate material change in control.

Risk Considerations

Andromeda’s prospectus provides an extensive overview of risks, reflecting the inherent challenges of mining and mineral project development. Key risks include the need for additional funding beyond this raise, operational uncertainties such as project delays or cost overruns, regulatory and environmental compliance, and market volatility affecting product pricing and currency exchange rates.

Specific risks tied to the Great White Project include securing necessary approvals, water supply constraints on the Eyre Peninsula, and counterparty risks related to offtake agreements, notably with Traxys Europe S.A. The company also highlights risks around commercialising its HPA project, which, despite recent lab-scale breakthroughs, requires further scale-up and funding.

Governance and Offer Mechanics

The Placement Options will be issued for nil consideration to Placement participants on a ratio of three options for every four new shares issued. Broker Options will be allocated among the Joint Lead Managers or their nominees. The small Cleansing Share Offer of 10,000 shares at $0.013 each aims to remove trading restrictions on prior share issues.

Shareholder approval at the upcoming EGM is a prerequisite for issuing the Placement Options. The company has also disclosed director interests and remuneration arrangements, including service fee options in lieu of cash fees for some directors.