Liontown Resources (ASX:LTR) Ltd is turning to equity markets to raise A$400 million, alongside an additional A$760 million in debt financing, as it seeks to recover from its failed merger with US-based miner Albemarle, according to a report in the Australian Financial Review (AFR).
The lithium developer initiated the capital raise on Wednesday evening, led by financial institutions such as UBS and Greenhill & Co.
This move comes after Liontown shares surged in value, consistently trading above $2.50 a share for the past six months, following Albemarle’s $6.6 billion buyout bid.
The US firm withdrew its buyout proposal amid "growing complexities” after Hancock Prospecting, an iron ore miner controlled by Australia's richest person Gina Rinehart, raised its stake to 19.9% of Liontown.
Shares offered at premium
Shares in the capital raise are being offered at a price range of $2.20 to $2.60 each, significantly higher than Liontown’s $1.52 trading price in March, the report said.
Liontown chairman Tim Goyder is expected to invest about $10 million but Rinehart’s commitment is uncertain.
The fund-raising effort has also reportedly secured backing for $760 million in debt, with government entity Export Finance Australia listed as one of the lenders.
This brings the total funding Liontown is pursuing to $1.16 billion.
Questions have been raised regarding the assurance of these debt commitments and the high share price, given the loss of the merger and acquisition premium.
Short sellers could also affect the share pricing, with around 200 million shares understood to have been shorted, the AFR reported.
Funds for lithium exploration
The equity raise is expected to be predominantly offered as a share placement.
Funds raised are designated for Liontown's flagship Kathleen Valley Lithium Project in Western Australia, which requires an estimated $951 million in capital costs for initial production, which is a 6% increase from estimates made in January.
Liontown had previously rejected three premium bids from Albemarle before it allowed the latter a look at its books last month.