Canada Lithium slides on $30M financing

Canada Lithium (CLQ-T) saw its share price deflate after saying it will raise $30 million in equity to finish building and commissioning the Quebec Lithium project near Val d’Or, Que., by year-end.

The junior filed a preliminary short-form prospectus for the offering, saying it would use $25 million of the net proceeds to complete constructing its $207-million open-pit, hardrock lithium mine and process plant.

The offering led by Scotia Capital and Casimir Capital should close around May 21.

On the news – released on May 1 – investors, unhappy with the stock being further diluted, pushed Canada Lithium shares down 10.5% to 51¢ as 2.4 million shares changed hands.

The company can only hope investor confidence returns as it moves closer to production, and farther away from its 2011 resource fiasco which destroyed its share price.

Moving in the right direction, the junior most recently secured $92 million in loans to continue advancing its project, which it started building last August.

These financings as announced in February include the Bank of Nova Scotia and Caterpillar Financial Services providing a $75-million loan, backed by a partial financial guarantee from Investissement Quebec, a provincial economic development agency, and Caterpillar providing another US$17 million lease financing for mining equipment.

Canada Lithium also raised funds for the project in an early 2011 financing when its shares were trading at three times the price thanks to a positive feasibility study and resource update, released in late 2010.

The junior raked in $126.5 million by selling 84.4 million shares at $1.50 apiece in January and February of 2011.

Soon after, the company’s stock price took a severe hit as it confirmed errors in its October 2010 resource estimate.

This brought on a $50-million class-action lawsuit by investors against the company, its directors and certain officers, and the geologist who prepared the estimate. London, Ont.,-based Siskinds LLP filed the notice of action last April in the Ontario Superior Court of Justice. The case is still ongoing.

But since then, the company has updated its feasibility study and resource estimate. As of December 2011, measured and indicated resources at the project stood at 33.2 million tonnes grading 1.19% lithium oxide. Inferred resources came at 13.7 million tonnes at 1.21% lithium oxide. A cut off grade of 0.8% lithium oxide was used for both categories.

The company ended 2011 with $100 million in cash.

It is currently in talks to secure offtake agreements with domestic and international customers. Sales of battery-grade lithium carbonate are anticipated to start in 2013.

The project is expected to swing into full production late next year, producing more than 20,000 tonnes of battery-grade lithium carbonate per year.