Liontown Resources Ltd (ASX: LTR) shares aren't going anywhere on Thursday after the lithium miner requested a trading halt.
Let's find out why the company has paused its shares from trade today.
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What's going on with Liontown shares?
Liontown requested a trading halt on Thursday so that it could undertake a surprise capital raising.
According to the release, the lithium miner is launching a fully underwritten institutional placement to raise approximately $266 million at an issue price of $0.73 per new share.
This represents a sizeable discount of 14.1% to where Liontown shares last traded.
But Liontown isn't stopping there. It will also invite existing eligible retail shareholders to participate in a non-underwritten share purchase plan (SPP) to raise up to a further $20 million before costs at the same price as the placement.
All members of Liontown's board of directors intend to participate in the SPP.
The company also notes that it reserves the right to accept oversubscriptions by way of a non-underwritten conditional placement.
Why is it raising funds again?
The release reveals that the proceeds from the capital raising will be used to "fortify" Liontown's balance sheet.
It will also provide a prudent liquidity buffer during a period of lower prices, support the ramp up and underground transition of the Kathleen Valley Lithium Operation, and fund general corporate purposes and transaction costs.
Management estimates that it will have a pro forma cash balance of $422 million upon completion of the capital raising.
Cornerstone investment
Liontown revealed that the National Reconstruction Fund Corporation (NRFC) is participating in the placement as a cornerstone investor. It will be investing $50 million at the offer price.
It notes that this investment aligns with the NRFC's strategy to support the Australian critical minerals sector and to capture the opportunities from the global transition to net zero.
Management believes that NRFC's investment "highlights the quality and strategic importance of Kathleen Valley to the Australian economy and national interests."
It also notes that the investment "follows a rigorous investment review process, including conducting independent diligence on Kathleen Valley, and approvals by the NRFC Investment Committee and Board."
Commenting on the capital raising, Liontown's managing director and CEO, Tony Ottaviano, said:
This Capital Raising fortifies Liontown's balance sheet, provides prudent liquidity, and supports the ramp-up and underground transition at Kathleen Valley. We are pleased to welcome NRFC as a cornerstone investor in Liontown. Their investment is a strong endorsement of Kathleen Valley's strategic importance and long-term value.
Liontown is well placed to remain resilient in this low-price environment whilst retaining flexibility to pursue low-cost, high return opportunities to maximise value. We have preserved optionality over our growth options including the potential expansion of Kathleen Valley to 4Mtpa which, currently, remains subject to improving market conditions. Our collaborative relationship with customers and partners provides a unique opportunity set of strategic and value-accretive growth opportunities which we continue to evaluate.
