Sayona Mining share price charges higher following $55m cap raise

Sayona Mining has raised funds to boost its lithium ambitions.

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The Sayona Mining Ltd (ASX: SYA) share price has returned from its trading halt and is pushing higher.

In morning trade, the lithium developer's shares are up 4% to 25 cents.

Why is the Sayona Mining share price rising?

Investors have been buying the company's shares this morning after it announced the completion of a capital raising.

While a capital raising would usually have the opposite effect on a share price, things are different this time because Sayona Mining managed to raise the funds at a premium.

According to the release, the company has entered into a subscription agreement with PearTree Securities for the issue of 174,459,177 flow-through shares at a price of 31.5 cents per share for aggregate gross proceeds of $54.9 million.

The issue price of 31.5 cents per share represents a 34% premium to the Sayona Mining share price at Friday's close.

Management notes that the funding will help advance exploration efforts while the company continues to progress the restart of its North American Lithium (NAL) operation, together with Sayona's other growth projects in Quebec, including its emerging northern lithium hub.

How did the company manage to raise funds at a premium?

Firstly, all is not quite what it seems with this capital raising. This is because the shares that PearTree have subscribed to are Canadian flow-through shares (FTS).

The Canadian government explained their usage. It says:

Junior resource corporations often have difficulty raising capital to finance their exploration and development activities. Moreover, many are in a non-taxable position and do not need to deduct their resource expenses. The FTS mechanism allows the issuer corporation to transfer the resource expenses to the investor.

The FTS program provides tax incentives to investors who acquire FTSs by allowing: deductions for resource expenses renounced by eligible corporations; and investment tax credits for individuals (excluding trusts) on resource expenses in the mining sector that qualify as flow-through mining expenditures.

Nevertheless, Sayona's Managing Director, Brett Lynch, believes this is a good outcome for shareholders. He commented:

Sayona has made significant progress in developing the leading hard rock lithium resource base in North America, with the pending restart of production at NAL set to mark our progression from explorer to producer. This funding will provide an added boost to our expansion plans, with the FTS provisions allowing us to raise capital at a premium to the current share price, thereby minimising dilution for the benefit of our shareholders.

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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