The MetalsTech Ltd (ASX: MTC) share price is plummeting during early afternoon trade on Friday. This comes after the gold explorer provided the ASX with a clarification update on its previously disclosed lithium spinout announcement.
At the time of writing, MetalsTech shares are down 7.89% to 52.5 cents. This means that its shares have lost around 20% in value in the past week, reversing October's gains.
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Why is MetalsTech shares nosediving?
On Wednesday, MetalsTech advised that its wholly-owned subsidiary Winsome Resources signed a binding agreement with leading fibreglass manufacturer, China Jushi.
However, today's updated release informed that the entity which executed the binding subscription agreement was a subsidiary of Zhenshi.
The Chinese company will subscribe for up to 9.9% of all shares issued in the proposed Winsome float. This equates to around $2.7 million in value, bringing the total float amount to $5.7 million. The remaining $3 million is being committed by North America's Lithium Royalty Corp.
Zhenshi is the second largest shareholder of the $15 billion market capitalised, China Jushi. Furthermore, Zhenshi has a diversified investment in fibreglass products, stainless steel, wind energy, composites minerals, logistics and real estate.
The issue price for each share is listed at 20 cents apiece which equates to roughly 13.5 million shares.
Metalstech shareholders are expected to receive about $9 million worth of shares in Winsome by a way of distribution. This translates to 45 million Winsome shares (1 free share held for every 3.68 Metalstech shares held).
More on MetalsTech's subsidiary, Winsome
A lithium-focused exploration and development company, Winsome operates three project areas in the James Bay Region of Quebec Province, Canada. It's worth noting that all three projects – Cancet, Adina and Sirmac-Clappier are 100% owned by the company.
Cancet is the Company's most advanced lithium asset, comprising of an area of over 20,000 hectares. The project sits on a favourable geological setting with a well-mineralised spodumene bearing pegmatite.
Winsome is currently undertaking an initial public offering (IPO) to list on the ASX under the ticker code of WR1. It is expected that the company will begin trading on the ASX around mid-November this year.
