Why the Core Lithium (ASX:CXO) share price remains frozen today

The lithium producer's shares are in a trading halt after the company made two announcements yesterday

| More on:
Person covered in snow and freezing

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Core Lithium Ltd (ASX: CXO) share price remains frozen today after the shares entered a trading halt on Monday. This follows two new market announcements from the lithium producer after market close yesterday.

At Friday's market close, Core Lithium shares were swapping hands for 36 cents apiece.

Core Lithium announces placement, inks Chinese deal

According to yesterday's releases, Core Lithium has undertaken a fully underwritten institutional placement. The offer is seeking to raise $91 million through the issuance of 293 million new ordinary shares.

Under the placement, Core Lithium will price each of the shares at 31 cents apiece. This represents a 13.9% discount on the closing price on 6 August 2021, and a 2.4% discount on the 5-day volume-weighted average price.

Core Lithium stated it has also executed a binding offtake agreement with leading Chinese lithium supplier, Ganfeng Lithium. The company is considered one of the world's largest lithium producers by capacity.

The deal will see Ganfeng Lithium buy 75,000 tonnes per annum of spodumene concentrate from the Finniss Lithium Project in the Northern Territory. The agreement is valid for 4 years.

Furthermore, Ganfeng Lithium will make an equity investment of $34 million to contribute towards the Finniss stage 1 development costs.

Core Lithium will issue approximately 100.5 million shares at 33.8 cents each for Ganfeng Lithium. However, the offtake agreement is subject to Chinese regulatory approvals, as well as approval from Core Lithium shareholders, by 31 October 2021.

In addition, the company will launch a share purchase plan (SPP) for retail shareholders at the same issue price. The company is hoping to raise an extra $15 million through the SPP. Shareholders can apply for up to $30,000 worth of Core Lithium shares when the offer opens on 13 August 2021.

What will the funds be used for?

The monies raised from the placement will be used to fund an array of initiatives. They include the following:

  • Upfront capital expenses at Finniss such as plant construction costs;
  • Environmental bond payments to the Northern Territory state government;
  • Drilling to accelerate reserve and resource growth; and
  • Working capital.

Core Lithium managing director Stephen Biggins commented:

The equity raising, including the offtake and equity investment by Ganfeng, represents a transformational moment for Core. We now have immediate certainty over Finniss Project funding and we remain on track to commence construction activities within the 2021 calendar year, ahead of anticipated first production in late 2022.

Core Lithium share price review

It has been an interesting year for Core Lithium shares. They have moved in circles for most of 2021 until recently shooting higher. The Core Lithium share price reached an 8-month high of 36.5 cents before it was halted yesterday.

Based on today's price, Core Lithium has a market capitalisation of roughly $422.6 million, with over 1.1 billion shares outstanding.

Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Share Market News

asx share price boosted by us investment represented by hand waving US flag across winning athlete
Best Shares

Here are the best-performing ASX 200 shares since the US election result

We reveal the 10 ASX stocks that have had the highest share price gains since the US Presidential election.

Read more »

A young man sits at his desk working on his laptop with a big smile on his face due to his ASX shares going up and in particular the Computershare share price
Share Market News

5 things to watch on the ASX 200 on Friday

A decent finish to the week is expected for Aussie investors.

Read more »

A smiling man at a shop counter takes payment from a female customer, with racks of plants in the background.
Best Shares

Here's why I think Wesfarmers shares are a great buy for any ASX investor

I argue that Wesfarmers offers investors both growth and income potential.

Read more »

A golfer celebrates a good shot at the tee, indicating success.
Share Market News

Here are the top 10 ASX 200 shares today

ASX investors finally enjoyed a win this Thursday...

Read more »

a man sits back from his laptop computer with both hands behind his head feeling happy to see the Brambles share price moving significantly higher today
Industrials Shares

Up 39% in a year, is there more growth to come for this ASX 200 share?

IML Equity Analyst Josh Freiman shares his views on a major ASX 200 industrial stock.

Read more »

Man looking at his grocery receipt, symbolising inflation.
Share Market News

What the latest US inflation print means for ASX 200 investors

The ASX 200 is likely to benefit if the US Fed cuts interest rates again in December. But will it?

Read more »

guy helping girl invest in shares and dividends
Opinions

5 ways for investors buying ASX shares to stay focused during economic uncertainty

AMP Chief Economist, Dr Shane Oliver, offers advice on how to handle the Trump factor.

Read more »

A worried man holds his head and look at his computer.
Share Fallers

Why Graincorp, Light & Wonder, Orica, and Wildcat shares are falling today

These shares are having a tough time on Thursday. But why?

Read more »