The ASX-listed company will raise an initial A$14.3-million through the placement of more than 572.4-million shares at a price of 2.5c each to institutional and sophisticated investors, under its existing placement capacity.

A second tranche consisting of more than 217.1-million shares, will be issued to company director Gavin Caudle and executive chairperson Colin Moorhead, to raise a further A$5.4-million, subject to shareholder approval.

In addition, a convertible instrument with Merdeka, with a face value of A$1.5-million, will be converted into Sihayo Gold shares, at a price of 2.5c each, subject to shareholder approval and Foreign Investment Review Board approval.

In addition to the share placements, Sihayo will also undertake an entitlement offer to raise a further A$19.1-million, also priced at 2.5c each.

Sihayo noted that its key shareholders, which hold a combined 63.7% interest in the company, have provided binding pre-commitments to participate in the entitlement offer via the debt conversion facility for a total amount equal to the debt owed to them by the company, which is estimated to be about A$8.1-million.

The company said on Thursday that proceeds from the capital raise will be used to fund early project construction works and other critical path items, including final permitting, an exploration programme, debt repayment and working capital.

“In our view, the Sihayo starter project is very attractive in the current gold price environment, and upcoming exploration has the potential to re-shape the company. This capital raising is an excellent outcome for Sihayo,” said Moorhead.

“Post completion of the capital raising, Sihayo will be in a materially stronger financial position to execute its near- to medium-term strategy. In addition, the strong show of support from key existing shareholders as well as important new strategic and institutional shareholders is very encouraging.”