Canada-targeting lithium explorer tapping the market for cash

Cygnus Metals (ASX:CY5) is one of more than 40 ASX players now kicking rocks around Canada, most of them in the James Bay region where David Southam’s firm is drilling out its Pontax project.

But it is one of only a handful to boast a JORC compliant resource, announcing a maiden 10.1Mt at 1.04 per cent Li2O on Monday at Pontax, just 30km south of Allkem’s (ASX:AKE) James Bay resource, where the global lithium giant has outlined 110.2Mt at 1.30 per cent Li2O and is hurtling toward development.

Cygnus entered a trading halt for a capital raising on Thursday morning.

It headed into the new financial year with around $5.5 million in the bank, and is planning to raise at least $7.2 million through a placement, according to a term sheet.

Canaccord Genuity and Euroz Hartleys are leading the deal, with Shaw and Partners as co-manager.

The placement will take place at 22.5c a share, an 11.8 per cent discount to CY5’s last traded price of 25.5c, 19.5 per cent discount to its five-day VWAP and 20.1 per cent discount to its 10-day VWAP.

It will comprise a block trade of $4.2 million under a flow-through placement along with a $3 million institutional placement, which Cygnus could accept over-subscriptions for up to $2 million.

After the placement is done, Cygnus plans to conduct an SPP for existing shareholders to raise up to a further $2 million, meaning it could raise as much as $11.2 million.

The funds will be used to continue resource extension and step-out drilling at Pontax, where Cygnus is earning up to a 70 per cent share in the project – originally held by TSX-V listed Stria Lithium – via exploration spending.

Cygnus says it has spent the equivalent of 55c per resource tonne in drilling at Pontax so far, outlining the maiden resource within a year of ownership, with the project containing 1.2km of strike and boasting mineralisation some 9km from the Pontax Central resource.

It will also put funds to exploration activities at the earlier stage Auclair and Sakami projects, respectively 60km from Nemaska Lithium’s 56Mt Whabouchi resource and 44km west of Patriot Battery Metals’ 109Mt Corvette discovery.

Over in WA, Cygnus also owns the Bencubbin lithium and rare earths project located near ground held by global mining giants Rio Tinto (ASX:RIO) and IGO (ASX:IGO).