Pilbara Bags Share Subscription From Chinese Battery Mammoth- CATL

Pilbara Bags Share Subscription From Chinese Battery Mammoth- CATL

Pilbara Minerals Limited (ASX: PLS) introduced China’s largest EV battery manufacturer- Contemporary Amperex Technology (or CATL) as a strategic investor in the company after Pilbara decided to jettison a stake sale in its Pilgangoora mine.

How is Pilbara Aligning with the Current Market Condition?

Pilbara plans for the Stage 2 expansion for its wholly owned Pilgangoora Lithium- Tantalum Project offer the potential for lower upfront capital expenditure and better alignment with the current market conditions, which forced many lithium players to realise lower prices and shut or slash the production.

Also Read:  Lithium Demand Plays Spoilsport; Alita, Galaxy and Pilbara Limits Production

The Stage 2 Expansion Plan:

Pilbara Minerals has been progressing with the technical work to optimise the 5 million tonnes per annum expansion of its Pilgangoora mine by sub-dividing its development into an incremental and phased build-out.

To further roll-out its plan, the company decided to sell a stake in its Pilgangoora lithium-tantalum project.

Pilbara received a various proposal and witnessed strong interest from a number of parties after the company appointed Macquarie Capital in March 2019 for the partnering process. However, Pilbara believed that the proposal received by the company did not represent the true long-term value of the Australia top-tier lithium mine, which in turn, prompted the company to drop the stake sale plan.

Equity Raising: 

Pilbara equity rising from CATL and institutional placement would mark an issue of about 305.1 million ordinary shares at a price of A$0.30 apiece to raise A$91.5 million capital in two parts, which are as below:

  1. A$36.5 million- unconditional and underwritten placement to the institutional investors
  1. A$55.0 million conditional strategic placement to CATL

The CATL placement of A$55.0 million would further mark a settlement in two tranches; the first tranche would be of A$20.0 million, which is within Pilbara’s placement capacity (ASX Listing Rule 7.1). The tranche one would be subjective to the customary regulatory approvals from the People’s Republic of China.

The tranche 2 of A$35.0 million will require the approvals from both the People’s Republic of China and the shareholders of the company.

CATL anticipates that the People’s Republic of China approval would be received after about six weeks. CATL submitted A$5.0 million deposit to the company under the Share Subscription Agreement to demonstrate the CATL’s commitment and confidence towards closing the transaction.

Pilbara Introduces CATL as a Strategic Investor: 

PLS announced an equity-raising on Wednesday which consisted of strategic placement of A$55.0 million to the Chinese lithium battery manufacturer- CATL along with an additional institutional placement of A$36.5 million to raise an approximate of A$91.5 million capital in total.

The placement would further mark and issue of around 305.1 million new shares of the company with an additional SPP (Share Purchase Plan) to raise up to A$20.0 million further from eligible shareholders.

Pilbara overall raising would reach A$111.5 million, post the equity, institutional and SPP’s.

Pilbara mentioned that despite a fall in lithium prices, the company had witnessed a significant interest from the strategic players in the lithium supply chain.

As per the company, the strategic players are focusing on the quality and the security of the lithium raw material supply along with the focus on matching the raw material demand growth in the lithium downstream supply chain, which has driven the company to be bullish over the future growth and freeze on the funding mechanism.  

Institutional Placement

The institutional placement of A$36.5 million will be of about 121.7 million shares at an issue price of A$0.30 apiece to eligible, professional and sophisticated institutional investors in both Australia and select international jurisdictions.

The institutional placement is underwritten by Macquarie Capital (Australia) Limited at an issue price of A$0.30 per share.

The institutional placement, which represents approx. 6.6 per cent of shares on issue is under the company’s remaining placement capacity of 188.4 million shares and would require no approvals from the shareholders.

Pilbara expects the issue to settle on 9 September 2019 with new shares expected to be allocated through ASX and commence trading on 10 September.

Share Purchase Plan (SPP): 

The SPP, which opened on the 3 September 2019 (the record date) for the eligible holders invited the investors to invest up to A$30,000 per shareholders in the SPP, subject to an overall cap of A$20.0 million, which in turn, mark an SPP of about 66.7 million shares.

The SPP will be offered at the lower of the Placement Price and at a 1.0 per cent discount to the volume-weighted average price of Pilbara shares traded prior to five trading sessions before and including the SPP closing date.

 

Placement Proceed Usage: 

Pilbara plans to strengthen the balance sheet of the company from the equity raising and also intends to bolster the working capital to support the production ramp-up at its Pilgangoora Project.

The equity raising would enhance the financial flexibility of the company, and apart from that, it would also support the Pilgangoora Stage spodumene concentrate nameplate capacity.

Pilbara would further utilize the equity raising proceeds in the POSCO Joint Venture, and the fund would assist the company’s 21 per cent interest in the proposed JV, which involves a primary lithium hydroxide chemical processing facility in South Korea.

The POSCO Joint Venture is planned to provide the company with the lithium downstream supply chain value, and the JV will process the spodumene from the Pilgangoora Project and would further integrate Pilbara into the lithium downstream supply chain.

 

Pilbara and CATL Strategic Relationship: 

The Share Subscription between the CATL and Pilbara combines PLS’ expertise in mining, development and upstream (spodumene production) coupled with a CATL’s expertise in the downstream processing. The strategic relationship between PLS and CATL further enhances Pilbara’s downstream integration strategy, for which the company recently inked a binding terms agreement for the downstream POSCO JV in South Korea.

The Share Subscription by CATL also adds a direct lithium battery manufacturer into the client’s bucket of Pilbara, which could further give an additional advantage to the company to tackle the present lithium market scenario.

The ASX-listed lithium player such as Galaxy and Pilbara are focusing on the volume and downstream processing growth to tackle the current market conditions.

Also Read: Lithium Stocks in Action; Galaxy Acquires Alita’s Senior Loan Facility; While Orocobre Wraps Competitive Chemical Pricing

However, both the Australian lithium explorer and processors believe that the short-term lithium jolts would eventually be offset from the longer-term demand, and the recent interest from a large battery manufacture-CATL in Australia despite weaker demand and price conditions in the domestic market of China, represents that the lithium players over the globe such as Albemarle and SQM are still betting on the long-term growth story.

Also Read: Chile And SQM Leap To Regain The Market Share Posses Headwinds For Australian Lithium Miners Ahead


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