Why the Argosy Minerals Limited share price plunged 20% lower today

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The Argosy Minerals Limited (ASX: AGY) share price emerged from its self-imposed suspension this morning and sank a massive 20% to 20.5 cents.

It has since rebounded but still sits 10% lower at 23 cents in afternoon trade.

Why are its shares lower?

On Wednesday the lithium-focused mineral exploration company called for a trading halt after China-based Qingdao Qianyun requested that its $9.5 million offtake agreement be terminated.

The $9.5 million upfront prepayment for an agreed quantity of battery grade lithium carbonate equivalent was to be used to cover the Stage 2 development expenditure budget for its Rincon Lithium project.

Qianyun requested its termination after Argosy Minerals pulled the plug on its proposed $15 million placement of shares at 8 cents per security following prolonged delays to the due diligence period.

This placement was to be replaced with a $15 million placement with institutional and sophisticated investors at 22 cents per share.

However, the company has advised today that in light of Qianyun’s request to terminate the offtake agreement, it has agreed to reduce the placement price to 18 cents per share. An 18% discount to the placement price agreed just days ago.

While this is still far greater than the original deal it had signed with Qianyun, it is still undoubtedly a disappointing turn of events for shareholders. Especially given the potential loss of the off-take agreement.

But lithium carbonate is a hot commodity and I expect Argosy Minerals will be on the radar of many battery manufacturers and automakers.

So ultimately this could just prove to be a minor blip that has created a buying opportunity for investors with a high tolerance for risk.

While Galaxy Resources Limited (ASX: GXY) remains my first pick in the industry, I do think Argosy Minerals’ world class asset could make it worth a look.

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Motley Fool contributor James Mickleboro owns shares of Galaxy Resources Limited. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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