Core Lithium (ASX:CXO) share price rockets 20% on capital raising efforts

The company’s shares are taking off…

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The Core Lithium Ltd (ASX: CXO) share price has come out of a trading halt today and shot straight to a record high. This comes after the emerging lithium producer announced an update to its capital raising efforts.

Core Lithium shares rocketed 20.83% at market open to an all-time high of 43.5 cents. In comparison, the All Ordinaries Index (ASX: XAO) is up 0.46% to 7,866 points.

Core Lithium shares have since retreated to 40 cents apiece, 9.72% higher than yesterday’s close.

What’s driving the Core Lithium share price higher?

Investors are buying Core Lithium shares as the company prepares to fund its Finniss Lithium Project.

According to its release, Core Lithium advised it has received strong support to raise $91 million through an institutional placement. The offer was presented to domestic and global investors at an issue price of 31 cents per share. This represents a 13.9% discount on the closing price on 6 August 2021, and a 2.4% discount on the 5-day volume-weighted average price.

In total, the company’s registry will gain 293 million new ordinary shares.

Core Lithium will use its existing placement capacity to create the new shares. Under listing rule 7.1, this allows the company to issue up to an additional 15% of its total shares without shareholder approval. The company will use an extension to the listing rule (7.1A) to issue the remaining shares (117.3 million).

With the $34 million equity investment from Ganfeng Lithium Co Ltd, Core Lithium will use the combined funds to develop its Finniss Lithium Project. This includes upfront capital expenses such as plant construction, the Grants open pit pre-strip, and other mine establishment costs.

In addition, the company will make an environmental bond payment to the Northern Territory government.

Core Lithium will also use some of the monies for a drilling program to accelerate reserve and resource growth.

A share purchase plan (SPP) is on offer to raise an additional $15 million. The SPP applies to retail investors at the same price as the placement. The closing date of the SPP is 2 September 2021.

What did the managing director say?

Core Lithium managing director Stephen Biggins commented:

We are very pleased with the overwhelming support received in the Placement in this transformational moment for Core.

Together with the Ganfeng equity investment and the share purchase plan, we are now fully funded to complete Stage 1 development of Finniss and have the financial flexibility to assess future growth initiatives.

… We look forward to executing on our plan to commence anticipated first production in late 2022.

The Core Lithium share price has gained more than 700% over the past 12 months and is up 165% year to date.

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Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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