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Saudi Arabian Mining shares fall on report of up to US$5B capital raise

In order to finance potential acquisitions, Saudi Arabian Mining Co., or Ma'aden, is planning a rights offering to raise up to US$5 billion, Bloomberg News reported May 26 citing people with knowledge of the matter.

The company is said to be working with the Saudi unit of HSBC Holdings PLC on the possible offering, which could take place in 2019, though the size is not yet final and may be lesser than US$5 billion.

Shares were down 9.55% by trading close on May 27. The negative market reaction to the news could be stemming from no specific plan to use the funds, the possibility of overspending on acquisitions, and potential dilution to current shareholders, EFG-Hermes analyst Yousef Husseini said, according to Bloomberg.

Ma'aden's largest shareholder, Public Investment Fund of Saudi Arabia, will participate in the rights issue through a debt-for-equity swap and would swap its loans to Ma'aden units for shares, the sources added.

Based on the newswire's data, the offering will be the Middle East's largest in over 10 years if it emerges at US$5 billion.

In April, Ma'aden announced its first international acquisition — the purchase of an 85% interest in Mauritius-based fertilizer distributor Meridian Group, which has operations across Malawi, Mozambique, Zambia and Zimbabwe. The company has plans to more than double its gold output to 1 million ounces by 2025, from about 415,000 ounces in 2019 as part of a strategy to diversify its business.