Firefinch offloads 28.6m Leo Lithium shares to support underperforming Morila project

Firefinch (ASX: FFX) offloaded 28.6m shares in its recently demerged lithium asset Leo Lithium (ASX: LLL), for a cash injection of $12.9m. 

The sale of Leo Lithium shares was executed after market on Monday, 4 July through a block trade at 45.5 cents per share. Leo Lithium shares closed the session down -8.7%.

Firefinch's remaining 210.9m shares are held in escrow until June 2024.

The timeline

Leo Lithium made its ASX debut on 23 June after successfully raising $20m at 70 cents per share.

Firefinch retained a 20% stake or 240m shares in Leo Lithium as at 17 June 2022.

The hyped-up lithium IPO might've fallen well-short of investor expectations, closing its debut day at 52 cents, down -25.6% from its 70 cent offer price.

Production downgrade for Morila

Firefinch announced a massive production downgrade at its Morila gold mine in Mali on Monday - a reminder of the risks of operating in African jurisdictions.

June quarter production will fall well-short of guidance, down to 13,000 oz of gold from the expected 17-20,000 oz. The project's full year guidance of 100,000 oz was withdrawn due to poor equipment availability.

Firefinch blamed the equipment shortage on sanctions imposed on Mali's military government, which seized power in late 2020.

Firefinch said it will undergo immediate actions to reduce its working capital and improve its gold production, including:

• New mine plan to target 8,000 - 9,000 oz of gold per month in the short-term and move the operation to cashflow positive

• Capital projects including tailings dam repatriation and construction, exploration drilling put on hold

• Comprehensive cost saving plan being implemented

Firefinch expects to deliver an updated resource estimate in the September quarter, which will support a new mine plan, production and cost outlook and forward capital requirements.

The sale of Leo Lithium shares will bolster the company's cash position. However, the damage has already been dealt.

Firefinch shares have plunged -42% since its demerger on 3 June.

Firefinch price chart