Variscan Mines Limited (ASX:VAR) has announced firm commitments from institutional and sophisticated investors for a two-Tranche Placement of new shares to raise A$5 million in cash before costs at an issue price of A$0.004 per share. The placement comprises Tranche 1 of approximately A$0.69 million (174,064,708 new shares using available capacity under ASX Listing Rule 7.1), expected to settle on or around 18 May 2026 with shares issued on or around 19 May 2026, and a conditional Tranche 2 of approximately A$4.31 million (1,075,935,292 new shares) subject to Shareholder approval at a General Meeting expected to be held in July 2026.

The placement was priced at a 42.9% discount to the last closing price of Variscan shares on 6 May 2026 and a 42% discount to the prior 15-trading-day Volume weighted average price. Powerhouse Advisory Australia Pty Ltd (a Subsidiary of Powerhouse Ventures Limited, ASX: PVL) and Alpine Capital Pty Limited acted as Joint Lead Managers. The Joint Lead Managers, subject to shareholder approval, will receive 1 Option for every 3 shares issued under the placement, exercisable at A$0.008 on or before 29 September 2028. Powerhouse Ventures' Funds Management division was a cornerstone investor. Directors have indicated their intention to participate, with a substantive contribution of A$0.5 million from Tom Kent (subject to shareholder approval).

What was announced

Variscan has confirmed firm commitments for a two-tranche placement totalling A$5 million before costs. Tranche 1, raising approximately A$0.69 million through the issue of 174,064,708 new shares, will be issued using available placement capacity under ASX Listing Rule 7.1 and does not require shareholder approval. Tranche 2, raising approximately A$4.31 million through the issue of 1,075,935,292 new shares, is conditional on shareholder approval at a General Meeting to be held in July 2026. The Placement Price of A$0.004 per share represents a 42.9% discount to the last closing price on 6 May 2026 and a 42% discount to the 15-trading-day VWAP. Both tranches will use the same issue price.

The Joint Lead Managers — Powerhouse Advisory Australia Pty Ltd and Alpine Capital Pty Limited — will, subject to shareholder approval, receive one option for every three shares issued under the placement, exercisable at A$0.008 per share on or before 29 September 2028. Powerhouse Ventures' Funds Management division is a cornerstone investor. Directors have indicated their intention to participate, with a substantive contribution of A$0.5 million indicated from Tom Kent, subject to shareholder approval. The funds are to be applied to targeted drilling at the Novales-Udias Project to expand the mineral resource base and unlock future scale potential, completion of metallurgical and engineering workstreams, corporate and operational Working Capital, and costs of the placement. An Appendix 3B is to follow.

Key facts and figures

The aggregate new share issuance under the two tranches is 1,250,000,000 new shares (174,064,708 + 1,075,935,292). At an issue price of A$0.004, the gross proceeds are A$5 million. The Joint Lead Manager option entitlement (subject to shareholder approval) is approximately 416,666,667 Options (one option for every three shares issued under the placement), exercisable at A$0.008 per share on or before 29 September 2028. If those options were exercised in full at A$0.008, the company would receive an additional approximately A$3.33 million.

The discount of 42.9% to the last close and 42% to the 15-day VWAP is large in absolute terms, reflecting both the small Market Capitalisation of the company and the institutional/sophisticated investor channel through which the placement has been conducted. The Novales-Udias Project is located in the Basque-Cantabrian Basin of Spain, approximately 30 km southwest of Santander. The current JORC Mineral Resource Estimate (as previously announced on 9 December 2024, at a 2% Zn+Pb cut-off) totals 3,378,580 tonnes at 7.61% zinc and 0.88% lead (8.49% Zn+Pb), comprising Measured 480,254 t (9.18% Zn, 1.80% Pb), Indicated 641,881 t (8.69% Zn, 1.50% Pb), and Inferred 2,256,445 t (6.97% Zn, 0.51% Pb). Contained metal includes 257,187 t zinc and 29,794 t lead.

Why the announcement matters

A capital raising of this size is, for Variscan, a material event in two respects. First, it provides the funding required to undertake the drilling and engineering workstreams that the company has previously identified as necessary to advance Novales-Udias toward production restart. Without funding, the technical workstreams stall. Second, it imposes a significant dilutive cost on existing shareholders. The issue price of A$0.004 is a 42.9% discount to the prior close, and the aggregate new share issuance of approximately 1.25 billion shares (before option exercises) is a substantial expansion of the Issued Capital base.

The structure of the placement — two tranches, with the bulk of the funding contingent on shareholder approval in July 2026 — is a standard approach when the raise exceeds Listing Rule 7.1 placement capacity. It is operationally clean but means that the largest portion of the proceeds will not be received until at least August 2026.

The participation of directors and existing significant shareholders is positive sentiment-wise but does not eliminate the dilution for non-participating shareholders. The cornerstone Investment from Powerhouse Ventures' Funds Management division provides an external validation point. The size of the placement gives Variscan a defined runway for the next phase of work at Novales-Udias, particularly drilling to support an updated Mineral Resource Estimate.

Strategic context

The Novales-Udias Project is centred on the former San Jose underground mine, with a delineated 9 km mineralised trend and a sub-parallel 3 km trend across the Buenahora exploration permit and Novales Mining permits. The San Jose Mine is approximately 9 km from the historic Reocin Mine, described in the announcement as the largest known strata-bound carbonate-hosted Zn-Pb deposit in Spain and one of the world's richest Mississippi Valley Type (MVT) deposits. The project is within trucking distance (~80 km) of the San Juan de Nieva zinc smelter operated by Asturiana de Zinc (100% owned by Glencore).

The company describes its delivery focus as "re-starting production" at Novales-Udias, supported by drilling results and an updated Mineral Resource Estimate. The strategic logic is that an established resource on granted mining tenements, combined with proximity to a major operating smelter, can support a development pathway that is materially shorter and less capital-intensive than a greenfield project.

The choice of issue price and the size of the discount reflect the realities of the Equity Capital Markets for small-cap zinc-focused issuers. Zinc prices and broader risk appetite for base-metals juniors have a direct bearing on the terms a company can secure. The cornerstone participation of Powerhouse Ventures' Funds Management division, and the role of Powerhouse Advisory as Joint Lead Manager, is also notable, given Powerhouse's broader presence on the ASX as an investment specialist.

Investor takeaway

The placement provides Variscan with the funding required to advance Novales-Udias toward an updated Mineral Resource Estimate, supported by targeted drilling, completion of metallurgical and engineering workstreams, and ongoing working capital. The participation of a cornerstone investor, directors and existing significant shareholders supports the credibility of the raise. However, the placement comes at a substantial discount and creates significant dilution.

Investors should monitor the General Meeting timetable and notice of meeting in respect of Tranche 2 approval, the Appendix 3B filings, the timing of drilling commencement, and the eventual release of drill results and the updated MRE. Successful execution against the stated workstreams could reduce the project's perceived risk and potentially support a more constructive future Capital Structure; failure to execute may necessitate further dilutive raises.