The one-for-one pro-rata non-renounceable entitlement offer will open on December 20 and be for 1.8 million shares, at a price of 1c each.

This represents a 17% discount on its closing price yesterday and a 12% discount to the six-month volume-weighted average price of 1.1c per share.

Proceeds are expected to improve market confidence, enhance a financial platform for growth and strengthen the company’s balance sheet through the repayment of a $4 million secured loan provided by H&H Holdings Australia.

VDM said it had already received a commitment to subscribe for $9 million of the offer from H&H, as well as a commitment from shareholder Hunter Hall to take up $1 million, subject to H&H subscribing for $4 million of its entitlement.

It also reported that a placement was made to a private investor at the offer price for a raising of $750,000.

The rights issue marks the final step in a recapitalisation plan intended to maintain the company’s solvency in the wake of a contract dispute earlier this year that resulted in VDM being removed from a project site.

VDM detailed a plan in October to repay creditors related to BHP Billiton’s Jimblebar iron ore mine in Western Australia via the rights issue and a share conversion process, whereby 35% of the debt would be converted into shares at 1c per share.

The company said it has issued 143.9 million shares to the Jimblebar creditors in accordance with a proposal approved by shareholders at its annual general meeting in November.

VDM expects to pay 45% of the debt to the creditors by no later than July 1.

The remaining 20% of the debt has already been paid.

“VDM is making prudent and essential steps to strengthen its balance sheet to best position the company to continue to enhance its existing construction capability and position itself to win new contracts, build out its services offering in its chosen niches and develop an in-house mining capability to assess and exploit opportunities to become more directly involved in mining projects,” VDM executive chairman Dongyi Hua said in a statement.

“We thank shareholders for their loyalty and note that with your support of the offer, we will be positioned to move the company forward into an exciting period of growth.”

Financial restructuring since the Jimblebar dispute has included a decision in September to cut at least 40 employees, a review of overhead costs and the divestment of the company’s construction business by way of a $2.7 million share purchase agreement.

Last month, VDM said it was divesting a majority of its consulting business via a series of management buyouts.