Agriculture-focused company Australian Potash (ASX:APC) plans to fund the development of its flagship Lake Wells project via an AU$5.23-million rights issue.

The funds raised through the rights issue will be used to complete the definitive feasibility study for the Lake Wells potash project, which the company dubs high-grade and low-cost.

Left over funds will be added to and used for general working capital.

The company issued a self-imposed trading halt on February 7, ahead of the announcement. Shares of Australian Potash commenced trading on the morning of February 11, 2019.

Australian Potash will offer three rights shares for every 14 existing shares held, at an issue price of AU$0.08 per rights share, with one attaching option exercisable at AU$0.12 before August 8, 2019.

“Shareholders of the company will be afforded the opportunity to subscribe for rights shares in excess of their entitlement to the extent that there is a shortfall,” noted the announcement. “The rights issue is intended to be underwritten to AU$4.2 million by Patersons Securities, which is also acting as lead manager to the rights issue.”

The company’s directors plan to take part as well.

At the end of January, Australian Potash released its Q4 2018 report, which highlighted the ongoing development and production efforts at Lake Wells. The report also included an update on the efforts to explore the site’s potential gold resource.

“We finalized an agreement with St Barbara to facilitate the exploration of the Lake Wells gold project, which saw us not only receive AU$1.25 million but introduce one of Australia’s most respected mid-tier gold producers and active explorers as a partner,” CEO and director Matt Shackleton said in the January announcement.

“APC’s commitment and focus on the SOP can continue in the confidence that the gold exploration is being managed to the highest professional and technical levels.”

January was an eventful month for the potash-focused company. On January 22, APC announced sulfate of potash produced at its Lake Wells pilot plant reached a purity of 98 percent.

This milestone was a first for the company, as well as the country.

“Combined with what is now a proven processing pathway to high-grade SOP, APC’s Lake Wells potash project’s superior logistical advantage driven by proximate rail and port access and the low-risk brine abstraction model our geological setting affords us, gives us even more confidence we will be able to deliver a low-cost product for the competitive world market,” Shackleton said at the time.

Australian Potash will release more details about the renounceable rights issue in a prospectus slated for publication on February 13, 2019.

Shares of Australian Potash were down 26.09 percent on Monday (February 11), trading at AU$0.085.

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Securities Disclosure: I, Georgia Williams, hold no direct investment interest in any company mentioned in this article.