Cygnus Metals Ltd (ASX: CY5) shares are catching the eye on Thursday.
In morning trade, the ASX lithium stock was up as much as 100% to 16 cents.
Its shares have since pulled back but are currently up 72% and changing hands for 13.75 cents.
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What's going on?
Investors have been scrambling to buy this lithium explorer's shares today after they returned from a trading halt.
That trading halt was requested earlier this week so that the company could undertake a capital raising.
According to the release, Cygnus Metals has received commitments from institutional and sophisticated investors to raise $11 million before costs at an issue price of 7.2 cents per new share. This represents a 10% discount to where the ASX lithium stock ended Monday's session.
Why is this ASX lithium stock rocketing?
When companies raise capital at a discount, it usually weighs on its share price. So, today's rocketing share price may come as a surprise.
However, there is good reason for this rise. As well as announcing the capital raising, Cygnus Metals revealed plans to merge with Dore Copper Mining Corp (CVE: DCMC) by way of a Canadian statutory plan of arrangement.
This plan of arrangement will see the ASX lithium stock acquire 100% of the issued and outstanding common shares of Dore. Its shareholders will receive 1.8297 fully paid ordinary shares of Cygnus for each share owned.
Management notes that the merger of equals will create a Canadian-focused copper and lithium company with two core assets both within Quebec, Canada.
This includes a high-grade copper and gold resource of 10.8Mt @ 3.5% CuEq at the Chibougamau Copper and Gold Project. The company notes that this will be one of the highest copper resource grades on the Australian share market.
Commenting on the proposed merger, Cygnus executive chair, David Southam, said:
This merger is an exceptional opportunity to create value for both groups of shareholders. By combining the proven exploration and management skills of the Cygnus team with the high-grade resource and immense upside at the Chibougamau Copper-Gold Project, we have the potential to unlock substantial value.
We intend to devise and implement an aggressive exploration program, utilising highly experienced geologists and the latest technology, with the aim of driving strong resource growth at a time when the world desperately wants more copper from tier-one locations.
This sentiment was echoed by Dore president and CEO, Ernest Mast. He said:
The Dore team is delighted at the thought of working with the Cygnus team to create a critical metals company and to maximise the value of what we know is an outstanding asset at Chibougamau. This merger will provide the funding, additional expertise and the strategy to hopefully generate superior shareholder returns through brownfields exploration at Chibougamau.
