The Liontown Resources Limited (ASX: LTR) share price is currently in a trading halt as the lithium business carries out a capital raising.
Liontown’s capital raising
The business is doing a capital raising for institutional investors and regular shareholders to raise up to $490 million at a price of $1.65 – a 14.1% discount to the last closing price.
This raising is after completing the definitive feasibility study (DFS) for its Kathleen Valley lithium project in Western Australia.
The DFS outlined an initial $473 million for development to achieve processing of 2.5 million tonnes per annum and deliver around 500kt per annum of spodumene concentrate (lithium) to global markets. This is expected to ramp up to 4mt per year and delivery of around 700kt per annum in year six.
The money raised will provide Liontown with maximum optionality and flexibility around remaining debt and offtake discussions with clients, while retaining the ability to accelerate its development and growth to take full advantage of the good outlook for the lithium market.
After completion of the institutional part of the capital raising, but before receiving the cash from the share purchase plan for regular investors, it will have cash reserves of around $474 million.
What will the money be used for?
This cash will allow it to place orders for long-lead items, award key engineering and mining service contracts and build its team to ensure that project development remains on schedule to meet its 2024 production target.
Liontown said it’s well advanced on funding discussions with multiple options for securing the remaining expected funding of between $81 million and $121 million.
The board expects to secure the remaining funding before making a final investment decision, which is expected to occur in the second quarter of 2022.
The funds will also be used to advance its existing growth profile, allowing it to progress its downstream pre-feasibility study on the proposed lithium hydroxide plant and undertake resource expansion and further exploration drilling at both Kathleen Valley and Buldania.
Liontown’s management said that it was important to have the balance sheet to do these things quickly, and to secure the best available people and organisations to support the lithium company in the current competitive market for people and services in the WA mining industry.
Summary thoughts on the Liontown share price
Liontown shares has done incredibly well over the last year, rising by 611%. I’m not sure if it’s a buy at this level considering how strong lithium prices are at the moment, as well as the very strong run of the Liontown share price. The business has good plans for growth and I’d be happy if I were a long-term shareholder.
