Leo Lithium share price fails to roar and sinks 26% following demerger

Leo Lithium shares aren’t roaring after their listing…

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Key points

  • Leo Lithium has landed on the ASX boards after its demerger from Firefinch
  • As part of the demerger, the lithium developer raised $100 million at 70 cents per share
  • Its shares were trading as low as 51.5 cents shortly after listing

The Leo Lithium Limited (ASX: LLL) share price is on the slide after hitting the ASX boards on Thursday morning.

This follows the completion of the lithium developer’s demerger from Firefinch Ltd (ASX: FFX).

The Leo Lithium share price was down as low as 51.5 cents but is currently fetching 57.7 cents.

Is this a good start for the Leo Lithium share price?

The Leo Lithium share price appears to have had a disastrous start to life as a standalone listing.

The demerger was more complicated than others we have seen recently such as BHP Group Ltd (ASX: BHP) and Tabcorp Holdings Limited (ASX: TAH).

That’s because as well as Firefinch shareholders being distributed 1 Leo Lithium share for every 1.4 Firefinch shares they own, the company also issued 142,917,008 shares at 70 cents each to raise $100 million.

So, based on the latter, the Leo Lithium share price was trading as much as 26% lower at one stage this morning.

What is Leo Lithium?

Leo Lithium has a 50% ownership in one of the world’s largest undeveloped high quality spodumene deposits – the Goulamina Lithium Project.

This project, which is co-owned with Chinese giant Ganfeng Lithium, is expected to produce 726,000 tonnes of annual spodumene concentrate at an average cash cost of US$312 per tonne once at full capacity.

Initial product is expected to commence during the first half of 2024, with Ganfeng and Leo Lithium aiming for stage one production of 506,000 tonnes of spodumene concentrate per year.

Based on the current Leo Lithium share price and its approximate 1.2 billion shares outstanding, the company has a market capitalisation of $680 million.

Management commentary

Leo Lithium CEO, Simon Hay, was pleased with the demerger. The former Galaxy Resources CEO said:

It is a very exciting day for Leo Lithium as we commence trading on the ASX as our own listed entity following the demerger from Firefinch. I would like to personally welcome all shareholders to the register – thank you for your support. I would also like to acknowledge the exceptional work and support from our Board, advisors, Firefinch and Ganfeng to achieve this demerger and IPO. We have a highly dedicated and experienced team who are determined to deliver real value for shareholders, as well as our employees and the community in which we operate.

We have an exciting journey ahead as we work to realise the full potential of Goulamina and bring the project into production, alongside our JV partner Ganfeng. We have wasted no time in getting started with development already underway including the 2022 drilling program, procurement of long lead items and commencement of roadworks. Socialisation with local communities is also well advanced. I look forward to keeping shareholders updated of our progress as we fast track Goulamina into production.

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 Scott Phillips.

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