The Syrah Resources Ltd (ASX: SYR) share price won't be going anywhere today after it requested a trading halt in order to launch a capital raising.
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What did Syrah announce?
This morning the graphite producer announced a capital raising which aims to raise a total of $124 million. This comprises a convertible note deed, a fully underwritten institutional placement, and a share purchase plan.
According to the release, Syrah is raising approximately $56 million (US$42 million) via a fully underwritten placement to professional and sophisticated investors at a fixed offer price of $0.90 per share.
This represents an 11.3% discount to its last close price.
It will then attempt to raise a further $12 million (US$9 million) via a non-underwritten share purchase plan. This will be offered to eligible shareholders in Australia and New Zealand following the completion of the placement.
Finally, a further $56 million (US$42 million) will be raised via a convertible notes issue in two equal tranches before 31 March 2021 and 30 June 2021 to AustralianSuper. This remains subject to certain conditions, such as the completion of the placement and the company obtaining shareholder approval.
Why is Syrah raising funds?
The release explains that the proceeds will be used to progress Syrah's natural graphite Active Anode Material (AAM) facility in the United States towards a final investment decision for the construction of a 10ktpa AAM plant.
Earlier this month Syrah completed a Bankable Feasibility Study (BFS) for the expansion of its facility, which it believes represents an exciting milestone for the company.
The BFS confirmed a strong business case for natural AAM production at the facility, with completion of the study allowing discussions for project development to progress with potential offtake partners and financiers.
In addition to this, the proceeds will also provide additional liquidity to manage a restart decision at Balama Graphite Project in Mozambique in an orderly manner. This is subject to market demand conditions, which are looking more favourable.
Management notes that it has observed positive leading market indicators in relation to Electric Vehicle (EV) sales growth and increased Government policy support for decarbonisation of the transport sector.
