Alliance Share Price Jumps 7.5% after Institutional Agreement

Alliance Mineral Assets Ltd [ASX:A40] has announced a $22.5 million institutional agreement with Galaxy Resources Ltd [ASX:GXY] after a brief capital raising trading halt.

The dual-listed lithium explorer is a producer of lithium spodumene and tantalum at its principle project based at Bald Hill, WA, in which they have a 100% stake.

At time of writing, shares for A40 sit at 22 cents, up 7.5%.

Galaxy takes a bigger share of the pie

A40 has entered into two agreements as part of their capital raising initiative, with a remaining $10 million conditional placement with Jiangxi Special Electric Motor Co Ltd. The total proceeds of $32.5 million (at a price of 20 cents per share) will go further production and expansion of the Bald Hill plant.

Galaxy now have a 12% stake in A40’s operations, making it the company’s largest shareholder.

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The conditional strategic agreement comes after last’s months sign-up with Jiangxi to pursue plans for a Lithium Hydroxide mine in China. This will allow A40 (who are undoubtedly looking to expand) to get ‘involved in the hydroxide production and sales market within the next 12 months.

The agreement with Galaxy is slightly less surprising; given their prior stake in the company, Galaxy seem fairly intent on increasing their position in the Australian lithium sector.

The institutional placement will comprise of 112,500,000 shares while the conditional placement will total 50,000,000 shares.

Lithium boom never bigger?

While not officially confirmed, there was speculation that A40 could be dealing with a potential takeover bid. The timing of the trading halt did raise suspicions — especially as it came so close soon after Wesfarmer’s proposed takeover of Kidman Resources Ltd [ASX:KDR].

But unlike those invested in Kidman, A40’s shareholders may be more welcoming of the extra investment. Not only will it provide extra ammunition for further production and expansion capabilities, it will also go a long way to cementing A40’s position as a solid producer of high-quality lithium and tantalum.

The latest venture shows a growing incidence of consolidation throughout the lithium sector, with both Galaxy and Jiangxi left with cash to spare from previous undertakings.

Regards,

Ryan Clarkson-Ledward,
For Money Morning

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Ryan Clarkson-Ledward is one of Money Morning’s junior analysts. Ryan holds degrees in both communication and international business. He helps bring Money Morning readers the latest market updates, both locally and abroad. Ryan tackles all the issues investors need to know about that the mainstream media neglects. Ryan’s primary focus is assisting Sam Volkering with background research and insight for readers by dissecting the latest events affecting the world. Working closely with Sam, they explore the latest in small-cap and technology stocks as well as cryptocurrency opportunities. You can find Ryan’s contributing research, developments, and supporting information across several e-letters, including:


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