PERTH (miningweekly.com) – ASX-listed Firefinch is hoping to raise A$90-million to continue production ramp-up at the Morila gold project, in Mali.

The company on Wednesday said that it had reached an agreement on a recapitalisation package with its relevant stakeholders, including institutional investor MEIM Morila and other trade creditors, to facilitate the long-term growth of the company.

The recapitalisation will include the proposed A$90-million capital raise, a new agreement with mining services contractor MEIM to convert the $23.4-million of outstanding debt into new shares in the company, reducing outstanding debts and strengthening the balance sheet by negotiating settlements with other trade creditors for the conversion of at least $4.89-million of outstanding debt into new shares, and undertaking a non-underwritten share purchase plan (SPP) to raise a further A$10-million.

“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,” said Firefinch nonexecutive chairperson Brett Fraser.

“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.”

The capital raise will be undertaken in the form of a two tranche share placement, priced at 6c a share. The first tranche of the placement will consist of more than 173.6-million shares, and will raise A$10.4-million under Firefinch’s existing placement capacity.

The second tranche of more than 1.3-billion shares, to raise a further A$79.6-million, will be subject to shareholder approval. Firefinch shareholders are expected to meet at the end of October to vote on the share placement.

Under the SPP, eligible shareholders will be able to subscribe for up to A$30 000 of additional shares in the company, also priced at 6c each, to raise up to A$10-million. The SPP will open on November 1 and close on November 21.

The funds raised will go towards the further development of the Morila operation, as well as to fund exploration work and general working capital and to pay aged creditors.

Meanwhile, the company has struck an agreement with MEIM in which MEIM has agreed to forebear from taking any action or exercising any rights to recover outstanding amounts, and subject to the receipt of shareholder approval, the outstanding amounts owed to MEIM under the mining services agreement, and amounts that will become payable under that agreement in its current terms, which totals some $23.4-million, will be converted into equity in Firefinch, at a deemed issue price of 6c a share.

Firefinch estimated that MEIM will be issued with 582.4-million new shares in the company, representing around 49% of the company’s existing shares on issue. Assuming that the company’s capital raise is successful, MEIM’s share in the company will be 17.2%.

In addition to the agreement with MEIM, Firefinch has also entered into agreements with several creditors, who have agreed to not take any action to recover outstanding debts, and to convert $4.9-million of this debt into equity in the company, priced at 6c a share, subject to shareholder approval.

These creditors will receive 121.7-million new shares in Firefinch, representing 10% of the company’s existing shares on issue.

Meanwhile, Firefinch on Wednesday set a production target of 180 000 oz for the 18-month period to March 2024, based on the current mineral resources at Morila.

The new mid-term production plan envisages a target production rate of 30 000 oz 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 at a rate of 700 000 t per quarter.

The all-in sustaining cost over the 18-month period is forecast to be between $1 425/oz and $1 475/oz. The project is anticipated to be cashflow positive in the fourth quarter of 2023.