The Galan Lithium Ltd [ASX: GLN] share price fell by 6% in early morning trade after completing a $50 million institutional placement.
Source: TradingView.com
Galan Lithium (not to be confused with UK pharmaceutical company Galen) is an Australian-based international mining development company.
Its major focus is on lithium brine projects in the Hombre Muerto basin, located in Argentina.
How will this placement accelerate the development of Galan’s lithium projects?
Although share price volatility might not immediately reflect the promise of the placement, it’s clear that Galan is confident in its strategy.
This morning the company revealed it has received ‘firm commitments’ to raise $50 million through a two-tranche institutional placement priced at $1.15 per share.
Galan was quick to clear up any concern that this might be a purposeless cash grab, promising that placement funds would be used wisely towards specific projects.
Among these include existing operations such as the Hombre Muerto West, Candelas and Greenbushes South projects.
So how will this placement look exactly?
A two-pronged approach to funding
Tranche One will see $29.8 million raised. According to Galen, this is ‘well supported by high-quality domestic and offshore institutions’.
However, Tranche Two is subject to Galan shareholder approval.
If all goes ahead, the plan for this tranche is to raise $20.2 million.
Notably, two institutional investors with an excellent track record in the natural resources sector are set to get involved.
Once the company has settled both tranches of the placement, they will have a cash balance of roughly $65.1 million (before costs).
Galan’s Managing Director, Juan Pablo (JP) Vargas de la Vega, commented:
‘We are delighted to announce the completion of the placement which has enabled us to introduce a number of high quality institutions to Galan’s register.’
The placement has been described a ‘significant milestone in the history of the company.’
Management also thanked shareholders for their support:
‘We look forward to forward to accelerating the development of Galan’s projects at a particularly exciting time for the industry.’
While it’s difficult to say how Galan will perform into the future, it’s clear the lithium sector is riding strong investor interest lately.
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Strong tailwinds behind the lithium revolution…
It’s been a red-hot year for lithium stocks, and Galan is no exception.
In the last 12 months, the share price has surged 713%.
And despite today’s drop, the stock is up 229% year-to-date.
But is the stock being overvalued amid a lithium supertrend, or can this company secure real and long-lasting value for investors?
For Galan it may be too soon to tell.
But what we are sure of is that lithium is a compelling space.
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Regards,
Lachlann Tierney,
For Money Morning
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