The Firefinch Ltd (ASX: FFX) share price has come out of a trading halt today as one of the worst performers on the ASX. This comes after the gold producer and lithium developer provided an update to its capital raising efforts.
At the time of writing, Firefinch shares are down a sizeable 8.89% to 41 cents.
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What's sending Firefinch shares lower?
One catalyst for the huge falls in the Firefinch share price today may be investor fears over an impending share dilution.
According to its release, Firefinch has successfully raised $47 million (before costs) by a way of placement. The company received strong support from both existing and new shareholders, including a number of high-quality Australian and global institutions.
The offer will see roughly 117 million new ordinary shares, at a price of 40 cents each, allocated to participating investors. This represents an 11.1% discount on the issued capital prior to when the company announced the placement (45 cents).
Firefinch will seek to use the proceeds from the capital raise together with its anticipated debt facility for various initiatives. This includes accelerating production growth at the Morila Gold Mine to 200,000 ounces by 2024. The company will also allocate funds to continuing exploration and resource development drilling at the Morila Super Pit.
In addition, Firefinch will proceed with the demerger of the Goulamina Lithium Project into a separate ASX-listed company.
Firefinch managing director, Michael Anderson commented:
…This equity funding, combined with the expected debt funding during the September quarter of 2021, will enable us to deliver on our strategic vision of becoming a West African gold producer of scale, as well as progress our Goulamina demerger plans.
About the Firefinch share price
Over the past year, Firefinch shares have surged almost 300%, with year-to-date sitting at gains of 120%. The company's share price reached a multi-year high of 57 cents in the middle of this month, before heading lower.
Based on today's price, Firefinch has a market capitalisation of around $321 million, with about 785 million shares on issue.
