The Global Lithium Resources Ltd (ASX: GL1) share price has returned from its trading halt and dropped deep into the red.
In late morning trade, the lithium developer's shares are down 9% to $2.37.
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Why is the Global Lithium share price sinking?
The weakness in the Global Lithium share price today has been driven by the announcement of an institutional placement.
According to the release, the company has received firm commitments for a $100.2 million fully underwritten institutional placement. These funds will be raised at $2.25 per new share, which represents a 13.8% discount to the Global Lithium share price prior to its halt.
Management notes that the placement bookbuild was strongly supported by a significant number of new and existing high-quality domestic and offshore institutions.
In addition, the company is raising a further $11.2 million via a strategic placement of ~4.95 million new shares at the same price to Suzhou TA&A Ultra Clean Technology. This brings the total commitments received to $111.4 million.
But it won't stop there. Retail shareholders will have the opportunity to buy $30,000 worth of shares via a share purchase plan that aims to raise a further $10.1 million at $2.25 per new share.
Why is Global Lithium raising funds?
The release notes that the proceeds from the placement and share purchase plan, together with existing cash, will be applied towards a number of activities.
This includes the acquisition of the underlying tenements and the remaining 20% interest in the lithium rights in the Manna Lithium Project from Breaker Resources NL (ASX: BRB) for $60 million.
In addition, the proceeds will be used for exploration at Manna and the Marble Bar Lithium Project, the Manna Feasibility Study, approvals and permitting, camp infrastructure, and general working capital.
Global Lithium's chair, Warrick Hazeldine, commented:
The outstanding on-the-ground exploration work completed by the Global Lithium team over the past 6 months has delivered impressive results at Manna, affording us the opportunity to now present an offer to Breaker which we believe is a win-win for both companies. The acquisition of the underlying tenements provides Global Lithium with a clearer development pathway as we look to conclude these development focused studies in late 2023.
The Placement announced, along with the accompanying SPP, allows Global Lithium to complete the Manna Transaction whilst continuing to undertake value accretive exploration and study activities. We believe these additional funds will drive long term shareholder value.
