Firefinch Limited (ASX: FFX) is brining in new operation changes to the mine plan which it expects will result in an immediate improvement in productivity at the Morila Super Pit in Mali.
The company has revealed a drop in production for the June quarter to an estimated 13,300 ounces of gold. This compares to previous guidance of 17,000 to 20,000 ounces of gold.
The underperformance relative to guidance has been largely due to poor equipment availability which has been exacerbated by the delayed delivery of additional mining equipment. 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. Consequently, production ramp up is behind schedule.
Cost Pressures
Firefinch told shareholders that, In common with many others in the global gold sector, the company has experienced significant cost pressures in the last quarter. This has included material increases in diesel prices, the cost of explosives and other consumables.
The weakness in the A$/US$ exchange rate has also impacted on A$ denominated funding provided to Morila by Firefinch.
At the request of the Government of Mali, Firefinch, in tandem with other local miners, has suspended the offset of royalties and certain taxes against its Value Added Tax (VAT) credit claims to assist the Government with meeting the challenges of the ECOWAS sanctions.
Following the events outlined above, Firefinch advises that the 2022 calendar year production guidance announced on 12 April 2022 in relation to Morila, is withdrawn. An updated production guidance will be provided when available.
Immediate Actions
Combined, these factors have led to a reduction in Firefinch’s working capital position, prompting the following actions to increase gold production and improve cashflow:
• Mining (largely pre-stripping) at the N’Tiola Satellite pit will cease after extraction of available ore on the pit floor;
• The N’Tiola mining fleet is being relocated to the Viper pit and mining equipment from Viper has been relocated to the Morila Super Pit resulting in a single mining contractor and larger fleet at each site;
• A new mine plan is being designed to target 8,000 – 9,000 ounces of gold production per month in the short term and to move the operation to positive operating cashflow;
• Capital projects, including tailings repatriation, tailings dam construction and exploration drilling have been put on hold in the short term;
• A comprehensive plan for immediate cost saving at Morila is being implemented;
• A new regime of financial and operational controls has been instigated at Morila to ensure strict cost and commitment control;
• The company has resumed offsetting its royalty and certain tax payments against its VAT credit;
• Experienced operational and financial managers have recently been appointed to key roles at Morila to bolster the existing team and drive the planned ramp up in production; and
• The Board has been reduced in size with two recent appointments resigning and Dr Michael Anderson leaving by mutual agreement. Mr Andrew Taplin has been appointed Acting Chief Executive Officers and Dr Alistair Cowden has been appointed Executive Chairman.
Forward Plan
A review of operations, mine plan and schedule and capital and operational expenditures is well underway.
An updated production guidance will be provided when the review is completed. 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. In the September quarter, the company expects to release the following updates:
• Recent drilling results;
• Updated near term production plan;
• A likely material upgrade to the Morila Resource Estimate incorporating almost 40,000 metres of drilling over the last nine months;
• An update to Ore Reserve Estimates based on the new Resource Estimate;
• A new Life of Mine Plan, production schedules and mining strategy including bringing forward underground mining in the mine plan; and
• Capital investment profile required to continue to expand production to a long term sustainable and profitable operation.
For further information please visit: https://firefinchltd.com/
