Baobab Resources, the Mozambique-focused iron ore explorer, fell hard on Wednesday after it created millions of new shares.
The firm's stock fell 10% after it drew down £1.02m of its £17m equity line facility with Dutchess Opportunity Cayman Fund.
Under terms of the facility, the company has now allotted 7.14m new shares to Dutchess at a price of 15.25p each.
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Baobab said the funds would be used to accelerate certain aspects of its Definitive Feasibility Study of the company's flagship pig iron project at Tete.
Following this drawdown the outstanding balance of the facility will be £13,825,800, it added.
Chairman, Jeremy Dowler, said the money would allow Baobab to accelerate time critical components of the impending study and in particular seasonal baseline studies and metallurgical drilling.
"The additional capital will also enable the company to move rapidly on any corporate opportunities that may arise," he said.
"The funding was completed at a pre-commission value of 15.25p which is substantially higher than Baobab's previous funding at 8p per share and leaves the company with a significant cash balance at the start of 2013".
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