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To close out the convertible securities funding facility, Lake Resources NL (ASX: LKE) announced to raise a total fund of A$3.5 million via private placement and Share Purchase Plan (SPP) to the eligible shareholders. The move is intended to increase the shareholder value and advancement of projects, commencing with Kachi Lithium project.
Interesting Read: Lake Resources Reports Larger Grade Lithium Carbonates
The raised funds are intended to be used for following purposes-
- Early close-out of Convertible Securities Agreement.
- For direct extraction pilot plant’s development, construction, transport and operation.
- To conduct qualification testing to from the high-purity samples for downstream participants (off-takers).
- To optimise the Pre-Feasibility Study (PFS) of Kachi Lithium project and general exploration.
- To raise working capital and for the costs of the SPP Offer and the Placement.
Do You Know Share Price of Lake Resources Surged Post PFS Announcement of Kachi Lithium Brine Project? Please Click Here.
Early Close-Out of Convertible Securities Funding Facility
On 28 February 2019, the lithium explorer and developer entered convertible securities funding facility with SBI Investments (PR) LLC through two tranches to facilitate the progression of Kachi Lithium Brine Project to Pre-Feasibility Study (PFS) and test the direct extraction method.
However, LKE recently entered into a formal agreement with SBI Investments to close the Convertible Securities funding facility via both a cash payment and the issue of shares to SBI. As per the agreement, A$1,959,615 cash payment and 11,558,021 ordinary shares will be offered to the SBI on or before 14 and 11 February 2020, respectively.
Capital Raising Details
For the same, the company has secured A$2 million via private placement to the sophisticated and professional investors (through the issue of ~50 million shares at an issue price of A$0.04) and announced A$1.5 million SPP to the shareholders of the company registered on or before 7 February 2020 ( 7 pm AEDT ) with having Australia and New Zealand as their registered address.
The Share Purchase Plan opened today, i.e. on Monday 10 February 2020 and is expected to close on 28 February 2020 (5.00 pm AEDT).
Shareholders under the SPP scheme can apply for new shares at A$0.04 up to a maximum of A$30,000 worth.
Also, it is worth mentioning that the issued price of the new shares is at a 20% discount to the 5-trading day volume-weighted average price (VWAP) before the date of announcing the capital raising program ($0.050) and a 15.8% discount to the 20 trading day VWAP ($0.047).
What if intended fundraise of $1.5 million under SPP is not reached?
As per the prospectus, the company intends to provide a Shortfall Offer (closing on 13 March 2020) on the same terms as the SPP Offer, issuing any shortfall ( up to 37.5 million shares) under the SPP Offer up to the maximum of A$1.5 million. The issuance of Shortfall shares will depend on the extent of shortage under SPP.
Further, in addition to the SPP and Placement, LKE is also in talks to raise $600,000 short term unsecured debt facilities, which is likely to be used for the cash payment for the early close-out and termination of the Convertible Securities Facility.
How is Lake Resources positioned?
The proposition of raising funds is expected to turn out excellent, courtesy the company’s projects in the Lithium Triangle. Also, the company is using promising technology to produce lithium carbonate with very low impurities. Moreover, this is generating traction for the companies involved in batteries and electric vehicles (EV), the potential off takers.
The other parameters setting LKE in a strong position are: -
- High Purity lithium carbonate: During the pilot plant, high purity (99.9%) lithium carbonate samples with shallow impurities were produced via direct extraction process (ion exchange).
- Steps towards providing samples to off takers: The larger samples are expected to be produced for off-takers to start qualification testing from late March 2020, aiding to financing assistance.
- Kachi Project: The Kachi Project is likely to be on lower end of cost curve, expected to be validated in the Project’s PFS.
- Sustainable and Scalable: The EV original equipment manufacturers (OEM's) are looking for both quality and ESG adherence or sustainability and carbon footprint reporting. In the milieu of which, the direct extraction method add advantage since the process reinjects brine once the lithium has been removed without affecting the chemistry — thus resulting in lesser consumption of water and lower footprint due to non-usable of evaporation ponds. Also, the total resources of 4.4 Mt LCE announced in November 2018 is believed large enough for long term production.
- LKE valuation: The market cap of LKE is around $25 million, which is comparatively lower to the peer companies with similar advanced brine projects, adds advantage for the future.
Further to advance Kachi to pre-production phase, discussions are in progress with downstream entities as well as financiers, regarding the potential joint development of the project.
Updates will be provided over the coming weeks as the first larger samples are produced, together with advances in the pilot plant.
In addition, the low cost, low footprint of the company’s lithium projects with minimal impurities is expected to support the foothold of the company in the market. Besides, lower valuation in comparison to its peer may add a favorable scenario for the company in future.
Stock Price Information – The trading of LKE’s stock re-commenced today post announcement of capital raising updates. The stock closed at A$0.039 on 10 February 2020.
