The Firefinch Ltd (ASX: FFX) share price has been out of action for almost three months.
However, a long-awaited return to trade could now be in sight following the release of an announcement this morning.
What's going on with the Firefinch share price?
Just days after spinning off its lithium operations as a separate listing, Leo Lithium Ltd (ASX: LLL), in June, Firefinch suspended its shares, announced the sudden exit of its managing director, and released a shocking operational update.
In respect to the latter, gold production at the Morila Gold Project fell well short of expectations during the June quarter due largely to poor equipment availability. This meant its production ramp up was behind schedule and its calendar year guidance was withdrawn.
In addition, the company revealed that it experienced significant cost pressures in the last quarter. This included material increases in diesel prices, the cost of explosives, and other consumables.
This left Firefinch in an incredibly precarious financial position, which brings us to today.
What's the latest?
This morning Firefinch announced a recapitalisation package. According to the release, the company will raise $90 million via a two-tranche placement.
The first tranche will raise approximately $10.4 million, whereas the second tranche, which is subject to shareholder approval, is set to raise $79.6 million.
However, the bad news for existing shareholders is that this will dilute their holdings materially. These funds will be raised at a massive 70% discount of 6 cents per new share.
In addition, the company's current mining services contractor, MEIM Morila, has agreed to convert approximately US$23.4 million of outstanding debt and future liabilities into equity. Once again, this is subject to shareholder approval.
Additional trade creditors have followed suit and agreed to convert at least US$4.89 million of outstanding debt to equity.
Management notes that upon settlement of both tranches of the placement, Firefinch will have a pro-forma 31 August 2022 cash balance of $126 million before costs.
It may even have a touch more. That's because Firefinch plans to launch a share purchase plan for retail shareholders of up to $10 million.
Management commentary
Firefinch's non-executive chairman, Brett Fraser, commented:
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.
The Firefinch share price is expected to return to trade "shortly after announcement of the Placement results and when Firefinch lodges its financial statements for the half year ending 30 June 2022."
