Sayona Mining Ltd (ASX: SYA) shares have returned from their trading halt on Thursday.
In morning trade, the lithium miner's shares are down 13% to 3.3 cents.
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Why are Sayona Mining shares sinking?
Investors have been selling the company's shares this morning after responding to news that it plans to merge with Piedmont Lithium Inc (ASX: PLL).
According to the release, the two parties have signed a definitive agreement to their operations to create a leading lithium business known for now as MergeCo.
The release notes that the transaction will result in an approximate 50%/50% equity holding of shareholders of Sayona and Piedmont Lithium on a fully diluted basis in MergeCo immediately following its close.
Sayona Mining's CEO and managing director, Lucas Dow, commented:
This merger marks a transformative step for Sayona and Piedmont, creating a leading North American lithium producer with the scale and capabilities to meet the growing demand for lithium products. We believe our combined resources and expertise will enable us to deliver significant value to our shareholders and stakeholders. We are excited about the opportunities this merger presents to accelerate our growth plans and enhance our strategic flexibility.
This sentiment was echoed by Piedmont Lithium's CEO, Keith Phillips. He said:
This merger combines two complementary businesses and will create a larger and stronger company. MergeCo will be North America's largest lithium producer and will have an attractive growth profile with three DFS-stage development projects and an exciting near-term brownfield expansion opportunity at NAL.
The merger financing, corner-stoned by leading mining private equity group RCF, will enable us to weather the current industry downturn while making intelligent investments in our growth projects to be positioned for the recovery in lithium markets that we expect in the medium-term. MergeCo will be domiciled in Australia, but will maintain a listing on Nasdaq and a strong commitment to our Carolina Lithium project and our U.S. headquarters in Belmont, North Carolina.
Capital raising
In preparation for the deal, Sayona Mining is undertaking a capital raise of approximately $40 million and a conditional placement for $69 million. The latter is subject to completion of the transaction and shareholder approval.
The former is now complete after the company received firm commitments from institutional and sophisticated investors. This will see the issue of approximately 1,250 million new Sayona Mining shares at an offer price of A$0.032 per new share. This represents a 15.8% discount to its last close price.
And with Piedmont undertaking a capital raise of approximately US$27 million, MergeCo is expected to receive a total cash injection of A$149 million should everything go to plan. Management believes this will "ensure MergeCo is well positioned to accelerate growth within its enlarged portfolio."
Commenting on the capital raise, Lucas Dow said:
We are very pleased with the level of support shown by high quality investors, with the strong demand received representing a clear endorsement of the proposed merger combination. By combining with Piedmont and delivering a well-supported financing package, we are creating a premium global lithium hardrock production and development business. The Equity Raising will ensure the combined entity has significant balance sheet strength and flexibility and will enable the merged business to progress value-accretive growth opportunities across its diverse project suite.
Piedmont Lithium shares are down 8% at the time of writing.
