Why the Liontown Resources (ASX:LTR) share price is sinking 13% today

Liontown’s shares are back from a trading halt but aren’t roaring…

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The Liontown Resources Limited (ASX: LTR) share price has returned from its trading halt and is tumbling lower.

At the time of writing, the lithium developer’s shares are down 13.5% to $1.66.

Why is the Liontown Resources share price sinking?

The Liontown Resources share price has come under pressure this morning after completing its massive $450 million underwritten institutional placement.

According to the release, the company will place approximately 272.7 million new fully paid ordinary shares with new and existing investors at an offer price of $1.65 per new share. This represents a 14.1% discount to the Liontown Resources share price prior to its trading halt.

Management advised that the placement received strong demand from high-quality domestic and offshore institutions, which it feels provides a strong endorsement of Liontown’s world-class Kathleen Valley Lithium Project.

Liontown Resources will now push ahead with a share purchase plan at the same price as the placement. This aims to raise a further $40 million, bringing the total gross proceeds ~$490 million.

Why is the company raising funds?

The proceeds from the equity raising will be used primarily for developing the Kathleen Valley Lithium Project.

The company’s recently completed Definitive Feasibility Study (DFS) for the Project outlined an initial $473 million development, processing 2.5Mtpa and delivering ~500ktpa of 6% spodumene concentrate to global markets. It then outlines a plan to ramp up to 4Mtpa and ~700ktpa in year six.

Liontown Town’s Managing Director and CEO, Tony Ottaviano, said: “The strong demand from both domestic and offshore institutions for this landmark equity raising is testament to the world-class nature of the Kathleen Valley Project and represents a strong endorsement of our development pathway.”

“The Placement was well supported by existing Liontown shareholders and will also see new investors join the register. The introduction of these high-quality institutions together with the support shown by current shareholders has ensured that we emerge well capitalised with certainty of funding for the Stage 1 capital cost of the initial 2.5 Mtpa development at Kathleen Valley,“ he added.

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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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