The failure of a partial sale (20% to 49%) for what the directors considered a reasonable value, has forced the need for a capital raising. It's unfortunate, but they needed to have one or the other.
They will have received some offers for the partial sale, but not ones the directors thought adequate. It's interesting, personally I'd love to know who made offers, and at what price they offered. For instance, was Wesfarmers one of them. I don't think so, because they have Kidman. What about Albemarle or some of the other big global players.
And I don't think the USA v China trade war is helping either.
Neither is the continuing falling value of the Chinese currency, it's getting beaten up quite badly, though I'm not sure if companies like PLS are getting paid in AUD or USD or some other currency.
With the weakening Chinese currency, and the increasing trade tariffs being placed on chinese goods, Chinese companies are finding it more difficult to profit. The Chinese government however, over the years, have shown themselves to be masters of currency manipulation, but then unfortunately for them, along came the Trumpster. Maybe they should have done what the Russians did, but backed the other side and hacked votes for Hillary. China has an army of government hackers, the next USA Election is going to be fascinating.
Ganfeng have just bought 50% of Lithium America's Cauchari project in South America when they topped up their holding with a USD$160 million cash injection.
I'm wondering if Ganfeng made an offer to PLS, given the Lithium America JV they have entered into. They obviously saw other things in Lithium America, probably a lower production and shipping cost. And maybe politics comes into it, Ganfeng may not have wanted to work with POSCO, who knows, it's all speculation, and we'll never find out the real reasons for all of this.
I think PLS went to Macquarie for the capital raise, and in early discussions they suggested Macquarie contact some of their clients and get a feel for how much may be taken at 30 cents. They probably also mentioned to Macquarie that they were hoping for about $60 million.
Someone in Macquarie probably leaked to the press, hence the trading halt.
Now what will happen, is Macquarie will do the ring-around, and come back to PLS and say how much they think they can raise at various price-points, like 30 cents, 28 cents, 25 cents, and so on.
It will then be up to PLS to decide on a balance between price and amount-raised. For instance, they may go for something like $45 million at 28 cents, if Macquarie can find the backers for this, or $30 million at 30 cents, or even possibly $60 million at 25 cents.
It depends on what the Macquarie investors are prepared to pay, and for how much, at each price-point.
So we wait to see what the formula is, and what eventually comes back.
I personally think this may take into next week to complete, because Macquarie will have international investors on their books, who they will want to talk with. The raising may be especially attractive for international investors, given the low price of the Aussie dollar. The Aussie dollar has just hit a 10 year low.
I think the bottom line at the moment for these Lithium companies, is doing what is necessary to survive. Once you have survived, then you can re-build somehow, but you've gotta survive first.
Gw
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