Carnavale Faces Dilution Risk as $4.09M Capital Raise Prepares for Share Consolidation

Capital Raising Details

Carnavale Resources Limited (ASX, CAV) has launched a fully underwritten pro-rata non-renounceable entitlement issue aimed at raising up to approximately $4.09 million before costs. Eligible shareholders are invited to subscribe for one new share for every four shares held at an issue price of $0.004 per share. Additionally, shareholders will receive one free attaching share for every seven shares subscribed under the offer.

The entitlement issue is fully underwritten by Canaccord Genuity (Australia) Limited, which also acts as lead manager. The offer is conducted on a pre-consolidation basis, with a proposed 15, 1 share consolidation scheduled for shareholder approval at the Annual General Meeting on 27 November 2025. Should the consolidation be approved, the new shares issued under the entitlement offer will be consolidated accordingly.

Use of Funds and Strategic Intent

The funds raised through this capital raising are primarily intended to advance Carnavale’s Kookynie Gold Project in Western Australia. The company plans to allocate approximately 61% of the proceeds towards progressing feasibility studies, including scoping and prefeasibility work. Exploration activities will receive around 12% of the funds, while heritage surveys and associated agreements will be supported with about 6%. The remaining funds will be used for working capital and to cover expenses related to the offer.

This capital injection is critical for Carnavale as it seeks to move its projects closer to production readiness. The company has highlighted the importance of completing feasibility studies to confirm the economic viability of its projects and to secure necessary approvals, including mining agreements with native title holders.

Risks and Shareholder Impact

Carnavale’s directors caution that the offer is highly speculative and carries significant risks. Exploration and development activities are inherently uncertain, and there is no guarantee that the feasibility studies will confirm economic viability or that mining operations will commence as planned. The company also faces risks related to capital requirements, with further funding likely needed beyond this raise to support medium- to long-term operations.

Shareholders who do not participate in the entitlement offer face dilution of approximately 33%, compounded by the recent placement of 857 million shares at $0.0035 per share. The offer excludes shareholders outside Australia and New Zealand, limiting participation to eligible investors within these jurisdictions.

Governance and Underwriting Arrangements

The underwriting agreement with Canaccord includes sub-underwriting commitments from related parties, including the spouses and entities controlled by directors Ron Gajewski and Andrew Beckwith. The underwriting ensures the full subscription of the offer, providing a degree of certainty to the company’s funding plans.

Post-offer, the total shares on issue are expected to increase from approximately 4.09 billion to over 6.1 billion on a fully diluted basis, including shares issued under the placement and free attaching shares. The proposed consolidation, if approved, will reduce the number of shares on issue by a factor of 15, potentially improving liquidity and market perception.

Outlook

Carnavale Resources is positioning itself to advance its gold exploration projects with a strengthened balance sheet. However, the company’s future hinges on shareholder approval of the consolidation, successful completion of feasibility studies, and securing additional funding as needed. Investors should weigh the speculative nature of the business and the dilution risks against the potential upside from exploration success and project development.