The Firefinch Ltd (ASX: FFX) share price has come out of a trading halt to plummet during late morning trade. This comes after the lithium developer announced an update on its recent capital raise.
At the time of writing, Firefinch shares are down 9.93% to 68 cents apiece.
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Firefinch completes placement
One catalyst for today's fall in the Firefinch share price could be investor concerns over an impending share dilution.
According to its release, Firefinch announced it has received firm commitments for its institutional placement to raise $100 million before costs. The company highlighted that it had strong support from both domestic and offshore institutional investors.
The offer will see approximately 149.3 million new ordinary shares issued at a price of 67 cents each. This represents an 11.3% discount to the last closing price of 75.5 cents on 8 December (before going into a trading halt).
Firefinch will use its existing placement capacity to create the new shares. Under listing rule 7.1, this allows up to an additional 15% of its total shares to be issued without shareholder approval.
The proceeds will be used to fast track the production growth at the Morila Gold Mine in Mali (West Africa). The company is targeting more than 100,000 ounces of gold in 2022 and over 200,000 ounces of gold in 2024.
In addition, Firefinch will also allocate funds to facilitate the proposed demerger of the Goulamina Lithium Project into a separate ASX-listed company. Recently, Goulamina was confirmed as being amongst the world's largest lithium development projects, highlighting the inherent value of the world-class asset.
Settlement of the new shares is expected to occur on 17 December, with allotment scheduled on the next business day.
What did management say?
Firefinch managing director, Michael Anderson commented:
This is a fantastic outcome for Firefinch which speaks to the outstanding growth potential inherent in our assets, the exceptional work our team has done ramping up gold production to date and in completing an updated DFS for Goulamina. We now have a huge opportunity in front of us.
2021 has been a transformational year for the Company and this funding provides a tremendous foundation for further growth as we enter 2022. We are now well funded to deliver on our strategic vision of becoming a West African gold producer of scale, as well as developing the next major lithium project to enter production, ahead of our Goulamina demerger in the new year.
About the Firefinch share price
Despite today's heavy losses, the Firefinch share price has accelerated 420% in the past 12 months. When looking at year-to-date, the company's shares are hovering upwards of around 320%.
Based on valuation grounds, Firefinch presides a market capitalisation of around $775.30 million with approximately 1.03 billion shares on hand.
