The Core Lithium Ltd (ASX: CXO) share price has returned from its trading halt and crashed deep into the red.
In morning trade, the lithium miner's shares are down 25% to 41 cents.
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Why is the Core Lithium share price crashing?
The Core Lithium share price is being sold off today after the company announced the successful completion of a $100 million institutional placement.
According to the release, the company raised the funds at 40 cents per new share, which represents a whopping 26.6% discount to its last close price. It is also a 58% discount to where the company's shares were trading just a month ago.
Core Lithium will now seek to raise a further $20 million from retail shareholders via a share purchase plan (SPP).
This will leave it with a pro forma cash position of ~A$201 million to A$221 million.
Why is the company raising funds?
Management advised that the proceeds of the placement and SPP will allow the company to deliver on its near-term growth projects during the Finniss Lithium Project's ramp-up, whilst preserving balance sheet flexibility.
It also highlights that the equity raising will provide the company with the ability to progress BP33 early works, perform several plant optimisation initiatives aimed at increasing recoveries, pursue a targeted exploration program, and complete study works to better understand key growth projects.
Core Lithium's CEO, Gareth Manderson, said:
We are pleased with the support demonstrated by new and existing institutional investors in the Placement, and we thank our long-term shareholders for their continued support.
Importantly, the proceeds provide us with the opportunity to continue progressing our strategic priorities including optimising recoveries and delivering on our growth objectives, including BP33 early works to maintain the FID timeline (First Quarter CY 2024).
In addition, we are excited with our planned exploration program over the next 12 months which aims to deliver mine life extensions and further resource definition at Finniss.
Tesla legal claim
Hidden away in its equity raise presentation was an update on its agreement with auto giant Tesla.
Core Lithium advised that it has received a notification from Tesla of a potential legal claim relating to a binding term sheet entered between the parties on 1 March 2022, which formed the basis for negotiating the terms of an offtake agreement for the supply of lithium spodumene concentrate from Core's Finniss Lithium Project. It adds:
Core has received notice concerning the parties' failure to execute a definitive agreement and that Tesla intends to avail itself of all available legal remedies to the extent the parties are unable to mutually resolve this matter without litigation. Should those efforts fail, each party intends to avail itself of all legal and equitable remedies.
The Core Lithium share price is now down 71% over the last 12 months.
