Shares in Whyalla-based iron ore and steel maker Arrium have dived more than 25 per cent in response to its $754 million capital raising.

Arrium shares resumed trading today after being placed in a trading halt on Monday, while the company carried out a $465 million capital raising from institutional investors.

It has now launched a $289 million entitlement offer for retail shareholders.

The company’s shares were down 14.25 cents to 42.25 cents at 1100 AEST.

Arrium plans to use the capital-raising to pay down some of its $1.7 billion debt pile as it deals with the impacts of a lower iron ore price.

The entitlement offer prices the company’s shares at 48 cents, which is a 26 per cent discount compared to where Arrium was trading late last week.

Analysts say the company has been forced to heavily discount the shares to make the offer attractive to investors, given the negative sentiment surrounding high cost iron ore miners.

In a statement to the stock exchange earlier this week, Arrium chairman Peter Smedley said the capital-raising move “positions the company for current markets”.

“Debt reduction is a key priority for the company and today’s announced capital raising reduces our debt significantly in a single step,” he said.

“While the company last month reported it had achieved significant progress with debt reduction, iron ore prices have fallen significantly in the last month to five-year lows and there is increased uncertainty over the extent and timing of recovery.

“We are taking this action to position Arrium with a more appropriate capital structure in the current environment.”