Firefinch Ltd (ASX:FFX) has agreed to a recapitalisation package with relevant stakeholders, including institutional investors, MEIM Morila SARL and other trade creditors to facilitate the company's long-term growth.
This package includes a $90 million equity raise, which will provide the company with the strong balance sheet it needs to continue the Morila production ramp-up under the company’s production plan through to 2024 – but more of that later.
The two-tranche placement is set to raise around A$10.4 million (tranche one) and $79.6 million (tranche two, subject to shareholder approval).
In addition to the equity raise, the company’s current mining services contractor MEIM Morila SARL is poised to convert roughly US$23.4 million of outstanding debt and future liabilities to equity, while additional trade creditors have agreed to convert at least US$4.89 million of outstanding debt to equity.
All this is subject to shareholder approval.
Once the placement has settled, Firefinch will have a pro-forma August 31 cash balance in the vicinity of A$126 million before costs.
Firefinch also plans to launch a share purchase plan (SPP) offer to shareholders of up to A$10 million, subject to shareholder approval and subject to the discretion of the board to accept over-subscriptions.
New production target
In what has been a busy news day for the company, it also announced a production target of 180,000 ounces defined for the 18-month period to March 2024.
Its medium-term production plan (MTPP) is based on recently updated mineral resources.
The new MTPP envisages a target production rate of 30,000 ounces of gold per quarter on average for the 18-month period, via the processing of 4.17 million tonnes of ore at an average grade of 1.54 g/t gold and a rate of 700,000 tonnes per quarter.
Importantly, the input costs and consumption rates used in the MTPP are based on current actual costs at Morila.
The AISC over the 18-month period is forecast to be between US$1,425 per ounce and US$1,475 per ounce over the period of the MTPP.
The project is anticipated to be cashflow positive by the December quarter.
August production from Morila totalled 8,122 ounces of gold, a new record for the mine under Firefinch’s ownership.
Updates to ore reserves and a longer-term life-of-mine plan will be finalised in the final quarter of this year.
New leadership
The company is also assembling a new leadership team, with a proposed restructured board to leverage industry knowledge and expertise.
Scott Lowe has been appointed managing director and the proposed board will consist of Lowe, Brett Fraser, Mark Hepburn, Bradley Gordon and, subject to the satisfaction of certain conditions, a nominee of MEIM Morila SARL.
Following the August update to the Morila deposit’s mineral resource and today’s production target, defined for the 18-month period to March 2024, the company’s revised operating strategy provides a clear path to achieve business improvement, drive production and develop the significant resource base at Morila.
Non-executive chairman Brett Fraser said: “The agreement of the recapitalisation package, together with the alignment of key stakeholders, represents a significant milestone and provides a strong balance sheet to enable the company to continue the Morila production ramp up under the company’s Stage 1 and Stage 2 production plan through to 2024.
“Under Scott Lowe’s new leadership, the company plans to complete its review of the Morila life-of-mine plan, to release an update to the company’s ore reserve estimates based on the August update to the Morila Deposit’s mineral resources and to continue to implement its revised mining, capital expenditure and operational plans to ensure that Morila’s operations are more cost-effective and efficient.
“We appreciate the strong support that each of MEIM, Morila’s other service providers and the company’s new and existing institutional shareholders have given the company in order to implement the recapitalisation strategy.”