Core Lithium raises $100m to spearhead new and aggressive exploration

Core Lithium (ASX: CXO) entered a trading halt this morning before the lithium developer announced plans to hit the market up for $100m to rapidly grow ore reserves and mineral resources at its Finniss Lithium Project.

Buoyed by recent exploration success and favourable lithium pricing in the spot market, Core has launched a fully underwritten institutional placement of 97.1m new fully paid shares.

At an offer price of $1.03, the placement represents a -6.8% discount to the September 29 close price and a -13% discount to the five-day volume weighted average price of $1.18.

As the fourth-largest ASX-listed lithium miner, today’s placement represents no more than 5% of the company’s $2bn market cap.

Financial grunt

Management told the market that the placement allows the developer to maintain a strengthened balance sheet during the construction and ramp-up phases, while allowing for increased financial flexibility on future growth options.

Funds raised will be divided between:

• Accelerated Resource definition, extensional and exploration drilling, with a budget of $25m planned for calendar year 2023

• Advancing development of the proposed BP33 underground mine by investment in early works, previously funded out of cash flows

• Introducing a night shift to facilitate an accelerated commissioning of the Finniss concentrator

• Enhancing Core’s project management and corporate development capabilities

• Working capital during completion of construction and ramp-up

Following drill results posted earlier this week, Core reiterated a previous commitment to delivering its first lithium concentrate production from Finniss in the first half of 2023.

Commenting on today’s announcement, the company notes new and aggressive exploration programs will be designed to rapidly grow Ore Reserves and Mineral Resources through extensional and Resource definition drilling at the Finniss Lithium Project.

Locking in gains

Today’s announced capital raise follows a dismal fortnight for the stock’s share price which has tumbled from $1.69 13 September to $1.10 amid some recent shareholder gymnastics.

Earlier this week, Ganfeng, one of the world’s biggest lithium companies which last year invested $34m in the company, decided to off offload stock to the point where it is no longer a substantial shareholder.

However, in light on the China company’s binding offtake arrangement with Core at Finniss, management recently reminded the market the recent selldown was less about its ongoing commitment and more about monetising a portion of its investment.

Since Ganfeng’s placement at a price of 33.8c in August 2021, Core is up 225%.

Other investors have also been selling off Core following a week of panic trades.

It’s understood 46.4m Core shares were recently transferred in a trade handled by Petra Capital, at $1.05 per share, a -14% discount on the previous closing price.

What brokers think

The Core Lithium share price is up 160% over 12 months.

Consensus on Core is Moderate Buy.

Based on Morningstar’s fair value of $1.71 the stock appears to be undervalued.

Macquarie, which has an Outperform rating and $1.80 target price, reminded the market that Ganfeng’s selldown has no impact of the offtake agreement between the two companies.

Ganfeng’s planned offtake 75,000 tonnes of spodumene annually was one of two offtake agreements covering 80% of the company’s production over the first four years. 

a third agreement with Tesla remains outstanding.

Core Lithium share price over one year.