Firefinch cuts losses at Morila mine

Firefinch’s ailing Morila goldmine in Mali is tipped to fall into insolvency, with the company unable to raise capital to revive the operation or find a suitable buyer. 

The goldminer has been pursuing funding options to recapitalise its flagship since July, after cost inflations, contractor issues and sanctions imposed on Mali put ramp-up behind schedule and led to a severe reduction in gold output.

An attempt to raise capital via a share placement for Morila was pulled in late September, which Firefinch attributed to a drop-off in the gold price and a weak Australian-US dollar exchange rate.

This afternoon, Firefinch informed the market that it could no longer fund Mali subsidiary Société des Mines de Morila to run the operation, and that the company was likely to enter an insolvency process. 

As a result, Firefinch is expected to write-down its investment in the mine to nil.

It has an 80 per cent interest in the Mali company.

Firefinch chair Brett Fraser said the company had worked tirelessly for several months to find a suitable recapitalisation plan.

“This is an extremely disappointing outcome,” Mr Fraser said in a statement.

“The options considered were simply not in the best interests of Firefinch shareholders and the board believes the pathway that has been chosen is the best way to preserve shareholder value and reset the company for a new chapter.”

He maintained that Firefinch was in a strong financial position.

“We will now turn our minds to look for new opportunities that will deliver value for our shareholders.”

Per its most recent quarterly update, Firefinch has about $46.2 million in cash and equivalents.

A handful of board members left the business as the extent of Morila’s problems were released to the market earlier this year.

Non-executive directors Naomi Scott and Liz Wall resigned on June 28, about a month after they were appointed.

Managing director Michael Anderson called time on his 14-month tenure in the role on June 29, about a week before Firefinch pulled production guidance for the project entirely.

Shortly after, executive chair Alistair Cowden announced he would leave the business effective July 10, though he remains non-executive chair of Firefinch spin-off Leo Lithium, which debuted on the ASX in June.

Firefinch has a 17.6 per cent stake in the business.

Firefinch shares have been in a voluntary suspension since June and last changed hands at 20 cents.