Prospect Resources is feeling the pain of last week’s market slip, with the junior lithium explorer now having to lower the price of its $10 million placement and issue more shares.

But the news isn’t all bad and could potentially mean a bigger deal with China’s Sinomine Resources Exploration.

The ASX200 was a sea of red early last week after the Dow Jones industrial average plunged 4.6 per cent. Most major markets were impacted.

“These global market corrections caused a significant drop in the share price of Prospect Resources,” the company told investors.

Prospect’s (ASX:PSC) share price fell a further 7.7 per cent to 4.8 by 11.30am AEDT Monday.

The company has decided to drop the price of the placement to 5c from 6c and issue a further 35 million shares.

PSC shares over the past three months.
PSC shares over the past three months.

Prospect stressed, however, that the dilution for existing shareholders was less than 2 per cent of its capital.

While Chinese geo-tech services company Sinomine has asked for more time to complete the $10 million placement, it is also considering whether it wants to just take a 51 per cent stake in Prospect or make an outright offer for the entire Arcadia lithium project in Zimbabwe.

The two companies struck a conditional deal back in November last year under which Sinomine would inject $10 million into Prospect and fully fund construction of the mine and plant in exchange for offtake.

Executive chairman Hugh Warner told Stockhead that although Prospect wasn’t expecting the bump in the road, he was confident the deal would go ahead.

“It’s positive. Basically they are wanting to do their homework to see if they make an offer to try and get control of Prospect or make an offer to buy the whole deposit,” he said.

“So it’s a bigger transaction than the one we signed up and that’s why we decided to give them time to investigate it properly.”

Lithium has become popular with companies and investors because of the rapidly rising demand for electric vehicles, which use lithium-ion batteries.

Prospect is also pursuing talks with other investors, financiers, commodity traders and offtake partners after receiving several enquiries.