Firefinch to revamp Morila Gold Mine plan to boost production and lower costs

Firefinch (ASX:FFX) reports it is revamping the mine plan at its Morila Gold Project and implementing a new regime of financial and operational controls to bolster production and lower costs.

The new mine plan is targeting 8,000-9,000 ounces of gold production per month in the short-term and is designed to move the Morila operation in Mali to positive operating cashflow.

As part of the reworked mine plan, Firefinch’s capital projects including tailings repatriation, tailings dam construction, and exploration drilling have been put on hold for the near-term.

The operational review is well underway with an upgrade to Morila’s resource and reserve estimates anticipated during the current quarter, which will feed into a new strategy regarding production and forward capital requirements.

New mining equipment is now arriving at site and the company has been advised that more equipment is now enroute. A material improvement in mining productivity is expected to follow and material movements have already improved since the mining fleet at the Morila Super Pit was expanded.

The company is in discussions with various parties on potential financing measures to address its current working capital position.

Production is estimated to be about 13,300 ounces of gold at the mine, located about 280km south-east of Bamako in the capital of Mali in West Africa, compared to the previous June quarter guidance of 17-20,000oz of gold.

Firefinch reports that while the orebody itself has not underperformed, production has not ramped up as fast and as cost effectively as planned due to poor equipment availability.

This delay is a result of the Economic Community of West African States (ECOWAS) sanctions imposed on the state of Mali restricting the movement of goods.

Commenting on the situation, Firefinch Executive Chairman Dr Alistair Cowden said: “A confluence of events, including cost inflation, ECOWAS sanctions and contractor performance has resulted in underperformance at Morila.

The board has acted decisively to address this with management changes, cost cutting, a pivot in the mining strategy and the acceleration of a new mine plan to inform the way ahead.

I also want to make it clear that the orebody has not underperformed, rather production has not ramped up as fast and as cost effectively as planned

I also want to make it clear that the orebody has not underperformed, rather production has not ramped up as fast and as cost effectively as planned.

Firefinch has experienced significant cost pressures in the past quarter, in line with others in the global gold sector, including material increases in diesel prices, the cost of explosives, and other consumables.

The weakness in the AUD/USD exchange rate has also affected on AUD denominated funding provided to Morila by Firefinch.

Due to the aforementioned issues, Firefinch advises that the 2022 calendar year production guidance announced on 12 April 2022 in relation to Morila is now withdrawn. An updated production guidance will be provided once the review is completed.

As of 30 June 2022, Firefinch had about $35.8 million in cash and US$3.6 million in shipped gold bullion with funds receivable mid-July. In addition, Morila has two overdraft facilities with West African banks with undrawn limits of about US$4.4 million. Morila also has about US$25 million in VAT credits available to offset future royalty and certain tax payments as they are  incurred.

This is in addition to its 20% shareholding in Leo Lithium which for Firefinch equates to a market value of about $124.6 million, 88% of this shareholding is subject to a two-year mandatory escrow.

Morila is a world-class gold deposit with extensive operational infrastructure and which has produced over 7.5m ounces of gold and has a current resource of 2.5m ounces.

Images: Firefinch Ltd
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Written By Adam Orlando Editor-in-Chief Adam Orlando has more than 20 years’ experience in the media having held senior roles at various publications, including as Asia-Pacific Sector Head (Mining) at global newswire Acuris (formerly Mergermarket). Orlando has worked in newsrooms around the world including Hong Kong, Singapore, London, and Sydney.