Liontown Resources will announce details of its raise on Thursday, with 19.9 per cent shareholder Gina Rinehart believed to be lining up as a participant.
The group has now tapped retail broker Bell Potter to add support, along side UBS.
DataRoom understands that Liontown had been testing market appetite earlier in the week, first asking shareholders to buy stock at $2.50 per share, before winding the price back to $2.25 and then $2 in what has been a highly fluid situation.
As of Tuesday, there was talk that the price range was between $1.90 a share and $2.10 a share and it was looking to raise about $300m, although with retail shareholders on board, it is now thought to be closer to $400m.
The thinking earlier on had been that a price was likely at the lower end of that range, say sources, although some believe it could be even less – at $1.50 per share to appease hedge funds that need to close out their short selling positions, but as of Wednesday night the range was said to be $2 to $2.60.
About ten per cent of Liontown’s register consists of short sellers.
It comes as the $6.1bn company on Wednesday requested an extension to its trading halt and was suspended until the start of trade on October 20.
Liontown is planning to tap the market to fund its Kathleen Valley lithium project in Western Australia.
US suitor Albemarle abandoned its $3 per share bid for the company this week before the raising plans, valuing the business at $6.6bn.
It came after the business interests of Gina Rinehart amassed a 19.9 per cent stake.
Initially, the chatter was that Mrs Rinehart was not participating in the raise, but as of Tuesday, it was believed that she was committing to take up shares.
Shares last traded at $2.79.
One school of thought is that Liontown, chaired by 15 per cent shareholder Tim Goyder, moved to raise funds swiftly after Albemarle walked away before the share price collapsed.
The shortfall in funding for Kathleen Valley was believed to be a point of contention for suitor Albemarle, who abandoned its acquisition plans only after negotiating to extend its due diligence period for a bid by a week.
The Australian earlier reported that Liontown needs a debt package of at least $450m to fully fund the mine’s development, including the $152m needed to cover working capital and corporate costs until the mine is profitable.
Liontown’s Kathleen Valley project will be one of the world’s largest lithium mines, supplying 500,000 tonnes of lithium oxide concentrate per year when it comes on stream in 2024.
It has a net present value of $4.2bn.
The initial cost of Kathleen Valley is $895m, but blew out to $951m.
Final investment decision approval was given by the board in June last year after signing offtake agreements with Tesla, Ford and LG Energy Solution.
The group had pointed out that available is more Export Credit Agency funding or additional bank debt and $300m out of direct shipping ore, but one market expert said he believed it was going to be “very tight”.
Liontown expects to start direct shipping ore, which will release some early cashflow, from Kathleen Valley by the end of the year, bringing in $150m from the export of between 250,000 and 300,000 tonnes.
Estimates are the lucrative project could make somewhere between $2bn and $3bn in earnings before interest, tax, depreciation and amortisation from year one once it is fully commissioned and processing.
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