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.
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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.
