Why is the Liontown Resources (ASX:LTR) share price frozen today?

Liontown Resources is undertaking a major capital raising…

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A woman crosses her hands in front of her body in a defensive stance indicating a trading halt

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The Liontown Resources Limited (ASX: LTR) share price won’t be going anywhere on Wednesday.

This morning the lithium developer requested a trading halt for its shares.

Why is the Liontown Resources share price frozen?

The Liontown Resources share price has been frozen today so the company can undertake a capital raising by way of an institutional placement.

As things stand, the company has yet to update the market on how much it is aiming to raise and at what price.

However, the AFR is reporting that Liontown Resources is planning to take advantage of its incredible share price rise by raising a massive $450 million from investors.

The report states that the company is understood to have held discussions with institutional investors in Australia and overseas, before settling on a price for its capital raising.

This is believed to be a 10% to 15% discount to the Liontown Resources share price at Tuesday’s close of $1.92. This would place the issue price in the region of $1.63 to $1.73 per new share.

Why is Liontown Resources raising $450 million?

The funds from the capital raising are reportedly going to be used to support the construction of Liontown Resources’ flagship Kathleen Valley Lithium project in Western Australia.

The company notes that the 100%-owned project is a Tier-1 battery metals asset with excellent grade and scale in one of Western Australia’s best mining districts.

A recently updated Definitive Feasibility Study (DFS) confirmed the potential to develop a state-of-the-art, second generation lithium-tantalum mining and processing operation with exceptionally strong financial and technical merits. It will be targeting production of 511,000 tonnes of lithium-rich spodumene concentrate once operational.

In addition, management highlights that the project has a class-leading sustainability and ESG framework.

And while it isn’t expected to be operational until 2024, the company appears confident that it won’t miss out on the sky high prices that lithium is commanding currently. Management notes that when the project comes on-line, it will be well positioned to benefit from a significant lithium supply deficit forecast to emerge from 2024.

The Liontown Resources share price is up 357% since the start of the year.

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Motley Fool contributor James Mickleboro 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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