It was a difficult start to the day for Sainte-Barbe Ltd (ASX: SBM) actions.

In morning trading, ASX gold shares fell 22 per cent to 36 cents.

Why is this ASX gold stock being sold?

Shares of this gold mining company are down sharply on Tuesday after announcement carrying out the institutional aspect of a capital raising.

According to the release, the ASX gold stock has completed a fully subscribed $100 million two-tranche placement of approximately 263 million new shares to institutional and sophisticated investors.

St Barbara is raising these funds at a price of 38 cents per new share, representing a 17.4% discount to the last trading price.

But it won’t stop there. The gold mining company will also offer eligible retail shareholders the opportunity to participate in a share purchase plan (SPP) at the same issue price to raise an additional $10 million before fees.

Why raise funds?

The statement said the funds raised will be applied to key areas to advance the Simberi Sulfide Expansion Project. The objective is to accelerate the first production of Simberi sulphides by five months.

These key elements of the project include the acquisition and construction of the new larger ball mill circuit, the construction of the expanded concentrate vessel dock, as well as the construction of the new ROM platform. and calibrator installation.

Regarding the expansion of the ball mill, this includes works on the mill, foundations, new cyclones and allocation for additional electricity generation required by it. The capital cost estimate to complete the ball mill is $58 million, including contingencies.

While the upgraded quay, which will accommodate larger vessels for loading gold concentrates, will cost $33 million, and the installation of the ROM and grader will cost $23 million.

But management believes the investment will be worth it. Andrew Strelein, CEO, Managing Director and CEO of ASX gold stock, was very pleased with the success of the capital raise. He said:

We are extremely pleased with the support provided to the placement by our existing institutional shareholders and welcome a number of new domestic and international institutional investors.

The work we have carried out on the Simberi Sulfide Expansion Project continues to highlight a very attractive project opportunity and it makes sense to act quickly, particularly in the current gold price environment. Raising these funds now allows the project team to advance development, which is expected to accelerate the first production of Simberi Sulphide by five months.