Pilbara Minerals Ltd (ASX: PLS) just raised $91.5 million from major investors, was this a good move?
Pilbara Minerals is an Australian lithium producer with its 100%-owned Pilgangoora Lithium-Tantalum Project. The Pilgangoora project is located in West Australia and is one of the largest lithium ore deposits in the world. With this asset, Pilbara Minerals plans to become one of the world’s largest producers by 2020.
Pilbara Minerals’ Large Capital Raising
Pilbara announced that is executing a capital raising of $55 million to the leading Chinese battery manufacturer for electric vehicles called Contemporary Amperex Technology (CATL). This will represent an 8.5% ownership stake.
CATL has existing relationships with leading global EV manufacturers like Toyota, BMW, Volkswagen and Honda.
The agreement also allows for the possibility of further customer diversification with an established participant in the lithium-ion supply chain.
Pilbara Minerals is also raising $36.5 million from institutional investors, which combined means Pilbara is raising $91.5 million – issuing 305.1 million new shares at $0.30 per share.
Pilbara also said it is going to conduct a share purchase plan (SPP) for regular investors to raise up to an additional $20 million.
The cash is going to be used for a variety of uses including: general working capital to strengthen the balance sheet, the POSCO joint venture, Pilgangoora Project Stage 1 Process Plant works and Pilgangoora Project Revised Stage 2 Expansion Studies.
The relationship with CATL is important because it could be the start of a long term relationship for supplying one of China’s leading battery manufacturers for electric vehicles.
Pilbara Minerals Manager Director Ken Brinsden said: “While there has been commentary talking down the current state of lithium markets, it has belied the significant interest we have continued to see from the strategic players in the lithium-ion supply chain and their focus on lithium raw material supply.”
Time To Buy Shares?
Not only is this capital raising being done at a 14.3% discount to the last closing price, but it’s after the share price has fallen substantially over the past year (down 57%).
Shareholders will be hoping that the partnership with CATL is worth the issue of shares at such a low price. It may be a good time to buy shares for the long term due to the low price, but I prefer businesses that aren’t totally reliant on commodity prices, like the ones in the free report below.
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