The Perth-based miner said the raising would allow it to recapitalise and simply its funding framework as it revamps its flagship Texas silver operations in southeast Queensland, which include the Twin Hills mine.

The company plans to repay outstanding debt, consolidate funding arrangements and fund improvements to Texas’s crushing circuit as well as purchase equipment and construct a power line at the site.

Improvements at Texas are expected to reduce operational overheads, lower unit costs and increase production.

Alcyone chairman Paul Sylva said the turnaround of Texas was a matter of getting a solid and simplified financial structure in place.

“This is a project in production that has the potential to deliver very solid earnings and cash flow if we get this process right,” Sylva said.

“Despite two one-in-100-year floods, plant constraints and unfortunate board and management issues last year, Alcyone still managed to produce 439,000oz of silver in the six months to December 31, 2012.

“We think it is appropriate to give existing shareholders the opportunity to support Alcyone at the discounted price in this rights issue and participate in the upside from our flagship silver project.”

The non-renounceable pro-rata entitlements issue is on the basis of three new shares for every two shares held at the record date at an issue price of 6c per share.

Subscribers to the issue will also receive one free attaching option exercisable at 1c per share for every two shares subscribed to.

As the raising is still conditional on receiving waivers from the ASX, Alcyone said it expected to advice whether or not it would be able to proceed with the plan by the end of the week.

Patersons Securities has been appointed as corporate adviser and lead manager to the issue.

The company intends to remain in voluntary suspension until it completes its refinancing efforts.

The company said it had already completed a bridge funding through the issue of $1.8 million in convertible promissory notes and was progressing formal documentation to complete a $10 million rolling pre-pay facility to be retained after the entitlement issue.

Shares in Alcyone were trading unchanged today at 1.2c.