The Australian share market is pushing higher again on Friday, but the same cannot be said for Lake Resources N.L. (ASX: LKE) shares.
The lithium developer's shares are out of action today after the company requested a trading halt before the market open.
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Why are Lake Resources shares in a trading halt?
The trading halt is quite simply because Lake Resources needs money.
During the last quarter, Lake Resources recorded an operating cash outflow of $18 million. This left it with a cash and cash equivalents balance of $31.3 million at the end of December.
And while the company has announced cost-cutting measures recently, clearly it is running out of money fast and needs a top-up.
So, with its shares up over 40% since early February, management appears to believe that now is the time to rattle the tin.
The company's trading halt request states the following:
[T]he Company provides the following information: 1. the trading halt is requested pending the release of an announcement by a Company (sic) regarding a potential capital raising (Announcement); 2. the Company requests that the trading halt remain in place until the earlier of the commencement of normal trading on 12 March 2024 or upon the release of the Announcement.
What remains unclear is how much the company is seeking to raise and if its trading halt request has a typo or whether there's a third party involved.
One thing that we do know is that Lake Resources will need a huge cash injection if it is ever going to get its Kachi operation off the ground.
In December, it revealed that its estimated initial capex for phase one was US$1.38 billion. And as we have covered here previously, it comes with highly questionable economics.
So, it certainly would take a brave investor to tip money into the company at this point.
Lake Resources shares are down 82% over the last 12 months.
