Firefinch’s problems at Morila highlight African risks

Headshot of Stuart McKinnon
Stuart McKinnonThe West Australian
Former Firefinch managing director Michael Anderson parted ways with the company on Wednesday after problems at its Morila gold mine in Mali.
Camera IconFormer Firefinch managing director Michael Anderson parted ways with the company on Wednesday after problems at its Morila gold mine in Mali. Credit: Kelsey Reid/The West Australian

A big production downgrade from Firefinch at its Morila gold mine in Mali has highlighted the challenges of working in dubious mining jurisdictions.

The Alistair Cowden-chaired company told the market on Monday it would fall well short of its June-quarter production forecast and would withdraw full calendar year guidance of 100,000 ounces because of poor equipment availability at Morila.

Firefinch said the problem had been exacerbated by sanctions imposed on Mali’s military government by other African nations for saying it would not organise democratic elections as initially planned.

The sanctions followed military coups in the troubled West African nation in August 2020 and May 2021.

As a result of the restricted movement of goods, Firefinch said Morila’s production ramp-up had been delayed and it would produce just 13,300oz of gold in the June quarter compared to previous guidance of 17,000-20,000oz.

While Firefinch’s inflationary pressures and unfavourable foreign currency movements have also been reported by gold miners globally, the company also cited its agreement to suspend the offset of royalties and certain taxes to help the Mali government meet the economic challenges of the sanctions against it.

Last year, Mali was ranked 81 of out 84 by the respected Fraser Institute’s Investment Attractiveness Index, making it one of the least favoured mining jurisdictions in the world. Other African countries to cop a highly unfavourable score included Zimbabwe, the Democratic Republic of Congo and South Africa.

Firefinch’s problems at Morila have forced it to make significant changes to its mine plan aimed at improving productivity and reducing costs.

However, the company said it had already experienced an improvement in performance since the changes were introduced and with new equipment began arriving on site. Reports from international news media sites on Monday also suggested the sanctions imposed against Mali would be lifted.

The company said it had $35.8 million in cash and $US3.6m in shipped gold bullion with funds receivable mid-July as well as two overdraft facilities with West African banks with undrawn limits of about $US4.4m.

It said it was in discussions with a number of parties on potential financing measures to address its working capital position. As a result, its shares would remain suspended.

Firefinch called a trading halt last Monday flagging problems at Morila. On Tuesday, two newly appointed female non-executive directors resigned and on Wednesday, the company parted ways with managing director Michael Anderson.

Mr Cowden said the underperformance of Morila had been caused by a confluence of events including cost inflation, sanctions and poor contractor performance.

“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,” he said.

“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 shares last changed hands for 20¢.

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