Letter to Company

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Letter sent to Company

Dear Sirs,

By way of background and with regards to the most recent correspondence in relation to the previous queries on the status of the Company's Financial Reports and; referencing statements presented in announcements as described below in "italic text" and released to the ASX Market platform prior to being delisted;

1. Update - Interim Accounts, 4 October 2023
2. Quarterly Activity Report, 31 October 2023
3. Quarterly Activity Report, 22 January, 2023

"The Company continues to work closely with its Auditors, Pricewaterhouse Cooper ("PwC"), on the half-year review and the interim accounts which have been substantially completed. Finalisation of the half-year review and the interim accounts is subject to an outcome of the discussions with the Government regarding the Company's plans to dispose of its interests in Morila SA."

4. Audit Update, 28 March 2024

"The Company continues to work with its Auditor, PricewaterhouseCoopers, on finalising the Accounts. The half-year review and the interim account together with the annual accounts are expected to be completed in April 2024. Delays have been experienced whilst discussion continues with FFX and the Government of Mali on the Company's plans to dispose of its interest in Société des Mines de Morila SA."

5. Quarterly Activity Report, 30 April 2024
~ Audit

"The Company continues to work closely with its Auditors, Pricewaterhouse Cooper ("PwC"), on the half-year review and the interim accounts, together with the annual financial statements. The Company anticipates these documents to be lodged imminently."

6. Settlement with Government of Mali and agreement with Leo Lithium and Ganfeng, 8 May 2024

Memorandum of Understanding between the Government of Mali, Leo Lithium, GFL International Co. Ltd (Ganfeng), Firefinch, Mali Lithium B.V (MLBV) and Lithium du Mali SA (LMSA) resolving claims made by the Government in relation to the Morila Gold Mine (Morila) and the Goulamina Lithium Project (Goulamina) (the MoU)Overview of the MoU
Firefinch has agreed to;

• "transfer all the shares it holds in Morila SA to SOREM SA (a State-owned entity) for US$1; and
• "transfer either directly or indirectly all mining titles held in Mali by Firefinch (via its Malian Subsidiaries) for US$1"

7. Market Update, 28 May 2024

"The outstanding financial statements, which are still undergoing audit prior to being lodged, may likely report a deferred tax liability which is more than the current cash holding of Firefinch. A component of the deferred tax liability will likely reflect the potential tax liability which could be incurred by Firefinch in relation to an in-specie distribution of the Leo shares to shareholders (absent a favourable tax ruling as discussed below)."

"The sale and transfer of documents with SOREM SA, once executed, will provide Firefinch with clarity and certainty on tjhe loan balances outstanding with Morila operating company Morila SA and to finalise the Firefinch accounts."

Information post the Company being removed from the Official List, 28 June 2024

To date, there has been one official Company update being via a letter attached to the recently received (27 July 2024) Firefinch share certificates.

Quoting from the letter and signed by Brett Fraser;

"In terms of next steps we are currently in the process of finalising the overdue financial accounts, which once completed and audited will lead to call an Annual General Meeting for shareholders to vote on, among other things the sale of Morila SA."

Unofficial Information

Newswire article from Bamanko 27 June 2024

Crisis at Morila SA mine: A sale agreement concluded with investor Firefinch

Quoting the article verbatim;
"In an official press release dates 19 June, 2024, the General Administrator of Morila SA informed all employees of the conclusion of an agreement for the transfer of the company's assets and liabilities with the investor Firefinch."
Full link to the article: http://news.abamako.com/h/293807.html

Given that the Company has indicated in the above, the status of the financials have;

• been substantially completed, and;
• subject to an outcome of discussions with the Government of Mali and the market was advised they will be completed in April 2024, and;
• after experiencing delays, advised the market (30 April) the Company anticipated the documents to be lodged imminently, and;
• advised the market 4 weeks later that the financials were still under going an audit, with the Company now advising that there may be a deferred tax liability, and once the sale and transfer of documents with SOREM SA were completed the accounts can be finalised.

Given that the above items appear to have been completed on the settlement agreement with the Government of Mali, and the news article that the conclusion of the agreement was completed 19 June 2024, should have enabled the Auditors to complete the outstanding accounts.

Given the above, it is frustrating as shareholders that there is a lack of communicating information, even more so the Company having the opportunity to include in the letter (share certificate) that Morila SA and title/s document transfers had been completed circa 4 - 6 weeks prior to the Certificates and the attached letter being dispatched.

It is even more frustrating that the document transfers were (allegedly) completed whilst the Company was still listed on the ASX and could have utilised the Market Announcement Platform to advise shareholders.

Furthermore, the financial reports have a varying rotation of reasons for their delay to be finalised and lodged.

Is the Company now in a position to;

• inform shareholders of what the current delay is for having financial accounts finalised and lodged, and;
• indicate revised timelines for the Annual General Meeting to;
• approve the sale of Morila SA
• approve the contribution of the settlement payment of $11.5m payable to Leo Lithium

Given that the Company initiated seeking a class ruling from the Australian Tax Office, as announced in the Quarterly Activities report for period ending 30 June 2023) and now that the value of the Leo Lithium shareholding can be determined, either based on the last trading share price of LLL or the value attributed to the sale of the Goulamina Lithium project or what is reported in the last lodged Annual Report (period ending 31 December 2022)

• is there any reason why the Company cannot include in the Annual General meeting a resolution for shareholders to vote on the return of the Leo Lithium shares held by the Company prior to any ATO class ruling,
• also given that the ATO class ruling is not negotiable, and that shareholders will need to seek financial advice on the outcome of the class ruling
• is there any reason why the Company cannot also include in the Annual General Meeting a resolution to vote on the return of capital (cash) this is surplus to the Company finalising all activities and winding up.
• is there any restrictions or legalities in either the Corporations Act, the Company's Constitution or Australian Tax Office guidelines why the Leo Lithium shares cannot be distributed to FFX shareholders earlier than the previous indicative timelines, and;
• can the Company advise why the distribution of Leo Lithium shares back to shareholders is conditional on a favourable tax ruling
• can the Company explain why the following was included in the Market Update - 28 May 2024

Quote: "Given the nature of a return of assets to shareholders and the likely need to apply for a tax rulingfrom the Australian Tax Office, the process may take between three and six months to complete."

Can the Company also explain, why since the 13 July 2023 the Company has inferred there has been engagement with the Australian Tax Office to obtain a class ruling, but are now suggesting we likely need to apply for a tax ruling?

Quote: "Currently, these steps relate primarily to the process to obtain a class ruling from the Australian Tax Office as to the treatment on the return of Assets."

Which one is it?
(a) The Company has been engaging with the ATO for a class ruling, or
(b) The Company will likely need to engage with the ATO seeking a class ruling.

Can the Company explain why there is an estimated timeline of between 3 and 6 months to complete given that;
(a) The Company initiated correspondence over 12 months ago;
(b) Is the estimated timeline additional to the time already accrued engaging with the ATO.

Can the Company advise why the distribution of the Leo Lithium shares back to shareholders is conditional on the Company receiving a favourable tax ruling.

Can the Company also outline any alternative plan, including indicative timelines to achieve the alternative plan (if any), if the tax ruling is not favourable.

Can the Company advise why the distribution of the Leo Lithium shares back to shareholders is conditional on the Company ceasing to be a party to any potential arbitration, given that,

(i) the Company has made repeated assurances that it is not a party to any agreements between Société des Mines de Morila SA ("Morila SA") and its vendors and suppliers, nor is there any agreement between Firefinch Limited and Morila SA that would require Firefinch Limited to either continue to fund Morila SA, or meet its debts, or other liabilities.

(ii) The Company not only engaged the services of Gilbert & Tobin and corporate advisors prior to the decision to cease funding Morila SA, but also engaged top International Law firm, Clifford Chance post ceasing to fund and receiving letters of communication from the Mali Government and also engaged specialist advisors.

(iii) The Company considers the claim by EGFT is entirely without merit, and plans to use Company assets (cash) to fund the engagement of International Arbitration Specialists.

(iv) Can the Company provide shareholders with an estimation of the cost to defend itself using international specialists, and what time frame the Company envisages the arbitration proceedings will take.

(v) Can the Company give any justification to why its expects shareholders, given the conditions proposed, that have already had their capital locked for over two years in a trading halt/suspension and ultimately to be delisted from quotation on the Australian Stock Exchange, to have further delays to any return of Capital and in-specie distribution of Leo Lithium shares for years waiting for the Court of Arbitration to set hearing dates.

(vi) Firefinch Limited was/is (who knows) an 80% shareholder of Société des Mines de Morila SA (Morila SA), both Firefinch Limited and Morila SA have been named as respondents in the Arbitration Notice, can the Company provide any rationale or insights to why the Government of Mali, being a 20% shareholder of Morila SA was not also named as a respondent.

(vii) As the Company hasn't advised of a Mareva Injunction or similar being served on the Company's assets, then how is the LLL in-specie transaction contingent on the Arbitration.

The Company has now flagged a possible deferred tax liability, has the Company been in constant dialogue with the ATO specifically to address this and what is the current status.
~ can and will the Company clarify to shareholders, why and what basis there could be a deferred tax liability.

Can the Company advise why the deferred tax liability and potential tax liability for an in-specie distribution of the Leo Lithium shares would be a concern given that the Company was carrying $198,426,634 of accumulated loses as per note 23, Annual Report for year ending 31 December 2022

The 28 May 2024, Market Update also included;

• " Following the demerger of Leo Lithium Limited ("Leo") in June 2022 Firefinch retained 20% equity stake which was subsequently sold down in July 2022 to 17.6%"
• "A sale of the Leo shareholding may likely result in a capital gain for Firefinch and an amount of payable tax."

Can the Company explain exactly what does this mean.
~ we fail to comprehend how selling down the part of the Leo holding the cost $20m to purchase, 9 days after Leo was listed on the ASX for net proceeds of $12,893,000 will trigger a CGT event .

Distribution of the Leo Lithium Shares held by Firefinch Limited.

The Company has been consistently making an undertaking to return the Leo Lithium held shares back to Firefinch shareholders, in Company released announcements beginning with the Managing Directors letter to shareholders 14 December 2022.

Leo Lithium shares held by the Company is 210,941,543, the Shares on Issue ("SOI") recorded on the Firefinch registry is currently 1,182,846,577, which equates to FFX shareholders being eligible for an in-specie share ratio of .1783 LLL shares per 1 FFX share held.

The SOI Will potentially change given that Messrs' Fraser & Gordon respectively both have 1,200,000 unvested "Performance Rights" which under the provisions of the Employee Long Term incentive plan, the sale of Morila will trigger a "Change of Control" event and the performance rights will vest and exercise.
* Note: this is from memory, as the Employee incentive plans are no longer available to view of the Firefinch Limited website.

With the additional performance rights added to the SOI, the in-specie ratio will be reduced to .1779 LLL shares per 1 FFX share.

Currently, the Firefinch share registry has 182 holders that will receive a single digit LLL share under the in-specie distribution. Has or will the Company advise Leo Lithium of this, only for reasons of costs associated with maintaining a large registry with a lot of very small holders, with a possible view of making a cash payment versus receiving a single digit amount of shares.

Additionally, will the Company advise Leo Lithium that on completion of the in-specie distribution of LLL shares to FFX shareholders, there will be 1,422 new Leo Lithium shareholders that will hold an unmarketable parcel of shares (as per the last traded share price) with the view of minimising the additional costs to Leo Lithium for maintaining a larger share registry, the unmarketable share parcels could be paid in cash equal to the Tranche 1 payment per share?

Can the Company explain the rationale to delay the distribution of the Leo Lithium shares back to Firefinch shareholders, as per the Company's undertaking to do so but also a contradiction of sorts, per the letter received from the Company;

Quote: "The Board is committed to deliver to shareholders what they want - that is, a return of the Leo Lithium Limited shares owned by Firefinch and a distribution of available cash."

Quote: "For this to occur there is a process to follow which was previously set out in the 28 May 2024 Company announcement. We understand the frustration with the time frame, but our hands are tied. We are moving as quickly as possible to return assets to shareholders. There is simply no desire for your Board to prolong this process longer than is absolutely necessary."

Given that the "incumbent" Board were also party to the Firefinch Limited ("FFX") demerger of Leo Lithium Limited ("LLL") and orchestrated the distribution of in-species shares in LLL to FFX shareholders, notwithstanding the differences between distribution of shares to facilitate a demerger versus a return of Capital the Board will be familiar to the process of distribution as well as satisfying the requirements of the Australian Tax Office to make a class ruling on the tax treatment of in-specie distributed shares.

Furthermore, the timelines of the previous (demerger) in-specie share distribution was substantially shorter and the sequence of events was also quite different, whereas, the sequence after the Company announced proceeded with a flow of announcements;

(a) Notice of General Meeting, 29 April 2022 for 31 May 2022
(b) Notification of Return of Capital, Share Issue, Appendix 3A.5, 29 April 2022
(c) Priority Offer, 9 May 2022
(d) Priority Offer closing date reminder, 24 May 2022
(e) Raised $100m in IPO and timetable update, 31 May 2022
(f) results of General Meeting, 31 May 2022
(g) Listing date update, 21 June 2022
(h) Leo Lithium Limited, admitted to quotation on the Australian Securities Exchange, 23 June 2022
(i) Australian Tax Office ruling, Leo Lithium Demerger, 17 August 2022

From calling the demerger meeting, to shares issued a month later, and a further 11 weeks later received the ATO Ruling = 15 weeks from go to whoa. Whereas, in this instance the Company are waiting on a tax ruling prior to calling a meeting, makes no logical sense given the ATO ruling will be what it is. Also given that the Company's current olan is to hold the Annual General Meeting after the financials are eventually completed which has already surpassed the indicative timelines, with no information as to current status nor a revised timeline.

Can the Company advise why this in-specie distribution of shares is being treated differently and the rationale for doing so.

Is it still the Company's intent (although stated otherwise) to prolong the distribution of the LLL shares to FFX shareholders to be in receipt of the (LLL) Tranche 1 capital return cash payments due to a possible shortfall in cash reserves as a contingency for the "potential" deferred tax liabilities.

If the Board are committed to what shareholders actually want, that being the distribution of the LLL shares prior to the Leo Lithium tranche 1 payment, then expediting the distribution of the shares via a General Meeting would achieve that.

Mitigating any undue costs associated with the Company holding a physical meeting can be achieved by a virtual meeting. Further cost saving can be achieved as the Corporations Act also allows for a notice of meeting to be transmitted by email and displayed on the Company's website as the Company are now a non listed disclosing entity.

From 1 April 2022, permanent amendments of the Corporations Act Section 249R and Section 252P, apply to permit hybrid meetings, if expressly required or permitted under the entity's constitution, virtual only meetings.
~ Provisions of the Firefinch Constiution, Section 5,2(a)(iii) allows for a virtual only meeting.

8. Arbitration Notice - 27 May 2024

It has been over 2 months since this notice was released, can the Company;

1: provide information to the status of the claim made by EGTF
2: has there been any preliminary hearings / meetings / dialogue between EGFT and the Company's INternational Arbitration Lawyers and/or other Company engaged Lawyers.
3: has the Company's international Arbitration Lawyers and/or other Company engaged Lawyers been given access to the Financial Accounts of the Morila Gold Mine
4: has the Company's International Arbitration Lawyers and/or other Company engaged Lawyers been given access to the Financial Accounts of Société des Mines de Morila SA

Is it the Company's intent (although stated otherwise) to further prolong the distribution of the LLL shares to FFX shareholders to be in receipt of the LLL Tranche 1 capital return cash payment to have contingency cash reserves pending an unfavourable outcome to the Arbitration Notice that may also coincide with the "potential" deferred tax liabilities.

Can the Company advise the approximate amount of funds required for the combined potential liabilities of the above mentioned;

- deferred tax
- tax liability component of in-specie distribution (absent of a favourable ATO ruling)
- CGT on sale of LLL shares
- settlement to EGFT (absent of an favourable defence)
- cost of International Arbitration Lawyers and other Company engaged lawyers (estimate)
- total shortfall of cash at hand versus the above potential liabilities

9. Shareholder nominated Director notice, 24 April 2024

It is our understanding that a resolution to appoint the nominated director will be included in the first convened meeting post the nomination, this being either an Annual General Meeting, a General Meeting or an Extraordinary General Meeting.

It is therefore our expectation that the Member nominated person will be included in the voting agenga of either of the general meeting variants (as above) called by the Company to expedite the wishes of shareholders to bring a meeting forward to vote on a resolution for the in-specie distribution of Leo Lithium shares to Firefinch shareholders.

10. Continuous Disclosure

As the Company is now an "unlisted disclosing entity" that is subject to the Continuous Disclosure obligations as per Section 675 of the Corporations Act, which is similar to Section 674 ("listed disclosing entity") that under pins ASX Listing Rule 3.1 for continuous disclosure.

Although the Company was in suspension for 2 years, it was still obligated to disclose information a reasonable person would expect to have a material effect on the price or value of the entity.

The Australian Securities and Investment Commission ("ASIC") Regulatory Guide 198 provides "good practice" guidance on how an unlisted disclosing entity should comply with its continuous disclosure obligations under the Corporations Act 2001.

The letter attached to the share certificates stated,

"Despite Firefinch being removed from the official list of the ASX, you remain shareholders of Firefinch Limited and the Company remains subject to continuous disclosure obligations of the Corporations Act, which are similar to ASX listing rules."

The Boards understanding of these obligations is not being questioned per sè, but, its execution to adhere to these rules and regulations could (and deservedly so) at times be treated with a level of doubt and scepticism.

The scepticism was highlighted when on 3 August 2023 the Company released an announcement; Government of Mali, which in essence was to debunk media speculation of being in recipt of a court order from the Government, but it also confirmed that Firefinch had recently recieved a letter from the Government stating;

"the Government will not approve any deed of sale of the Company's interest in Société des Mines de Morila SA, unless Firefinch resolved issues relating to the Morila Gold Mine."

Whereas, the ASX Continuous Disclosure rule states, "once an entity is or becomes aware of any information concerning it that a reasonable person would expect to have a material effect on the price or value of the entity's securities, the entity must tell ASX immediately.

The "Letter from the Mali Government" was also subject to further correspondence from the shareholder groups that were concerned with the continuing pattern of the Company providing Firefinch shareholders with inadequate information on important matters.

The Company at the time never replied to the following, but subsequently disclosed 23 August 2023, the "letter" (a) below was received on 18 July 2023; and (d) below with some vague explanation to the issues; in a legal to company questioning;

(a) when the Company received the letter;
(b) why the announcement was not made immediately;
(c) where had the Company previously disclosed details of the "issues" relating to the Morila Gold Mine";
(d) if not previously disclosed, what are the "issues relating to the Morila Gold Mine" and how does the Company intend to dispose of its interests in Morila SA in light of those issues; and
(e) why the announcement was not marked as "market sensitive" by the Company.

The Shareholder Action and the Substantial Holder groups do appreciate it has been a difficult for not only shareholders but also for the Board of the Company, but the scepticism is more than warranted!

11. In the best interests of all shareholders.

"In the best interests of all shareholders" has been a frequently used phrase in Company announcement, even more so since the Company realised there were serious problems at the Morila Mine and/or with its Mining Contractor performance and financial shortfalls.

"In the best interests of all shareholders", maybe the good intentions were there but it was rarely exhibited, it is difficult not to be cynical of the Company's endeavours by some questionable actions taken whilst claiming to be in the shareholders' best interests.

One of the most notable;

The block sale of 28,571,428 Leo Lithium shares @ $0.455 for $12,999,999 gross with net proceeds of $12,892,750, for a total loss of $7,107,250

As per Frasers' reasoning delivered at the General Meeting;
"we needed to ascertain how much capital was needed."

The proceeds of the sale has never been utilised! with the only upside being the amount of interest earned each quarter (circa $400 - $500k)
Thank goodness for small miracles as the ASX denied the Company's request for a waiver on the escrow shares.

Prior to making the decision to cease funding of Morila SA, and given that the Government of Mali were/are 20% owners of Morila SA, did the Company approach the Malian Government for assistance, by way of;
(a) Government Bonds and/or
* Government Bonds were re-introduced after Mali successfully re-entered the regional financial market post the monetary embargo of the ECOWAS sanctions, the bonds were launched in August 2022
(b) deferred Royalty payments
* a reverse of the assistance Morila SA / Firefinch afforded the Government in the March - June quarter 2022 when they paid all royalties on sales of gold versus offsetting the royalties with VAT credits.

One of the most incredulous and disappointing moments in this whole s249D sage, was the resignation of Scott Lowe, it had nothing to do with the fact he resigned but more to the tales of grandeur of him staying whilst it appears he had the the resume already circulating.

The sequence leading to his resignation:

By way of background, the shareholder groups' intentions were to serve the s249D on the Company early June, but at the request of the Company (Lowe) a meeting was arranged to discuss the groups actions and timing and the Company's current position/s in regards to the ongoing negotiations.

The shareholder group representative met with Scott Lowe on two occasions basically for the handing of hard copy / wet signed documentation related to the s249D action, but to also discuss the Company and groups actions.

The original intention to issue the s249D was delayed after the meeting with Lowe, on the basis of an inference negotiations (Sale of Morila SA) were progressing well and were only weeks away, but we also took into consideration the shareholders that were against the s249D for fear of destabilising the negotiations. Lowe stated that he was determined to see these processes through to the end, the last hooray so to speak!

The second meeting with Lowe and more paperwork changing hands, which was 4 weeks later and still no progress on either the Sale of Morila SA or the Corporate transaction. Lowe was disappointed when he was advised that we were going ahead with the s249D, and from that point on sent instructions to our lawyer that any future correspondence between the Company and Shareholder group will be lawyers representing the parties.

Although just prior to the General Meeting (s249D) the Company were keen to provide information that Lowe had meeting with representatives of the Government, including the previous Minister of Mines, he disclosed that one of those meetings was with the current Minister of Mines in June 2023, also in Canada because he refused to go to Mali.

See it through to the end, was right up to the Company receiving the 18 July 2023 letter from the Government, 3 days later he tendered his resignation. All the hoopla of 20 years experience, working across 6 continents, including African countries meant nothing as he went running for the door when it all got a bit hard.

12. Final questions;

In no order of importance as they are all important for shareholders to at least know why a $Billion Company is now delisted, and with what is looking like more funds being extracted from shareholders assets to cover cash shortfalls for "potential" tax liabilities.

As the Company is no longer in "confidential" negotiations with the Government of Mali:

1: Can the Company disclose exactly what the issues / concerns were in some more substantial detail, of the items in the letters, being;

(a) alleged financial liabilities of Morila SA, notwithstanding the Company's position and explain why Firefinch is contributing to the "settlement" through the tripartite agreement, and;
(b) Community programs of concerns, and;
(c) what exactly was / is the environmental impact at the Morila Gold Mine, and:
(d) the issue of the tailings deposited in the mine by the previous owner,
~ note: we take to mean the Morila Super Pit?
~ note: we notice that although tailings were directed to the Morila Pit when Firefinch Limited were the owners wasn't mentioned in the letters, and;
(e) provide some insight or reasoning why the Government of Mali stopped the sale to Firefinch's preferred buyer of Morila SA, because here we are with the Mine not operating, and it will be some time as the Government is still seeking investors.

2: Can the Company disclose what the $11.5m contribution to the "settlement" is being paid for?

3: Can the Company disclose in detail what the issues were at the mine that lead to the withdrawal of the production guidance?

4: In a response to the "Aware Letter", 21 July 2022 the Company cited Mining Contractor underperformance as a contribution to the withdrawal of guidance, it also indicated taking comercial action in accordance with the mining contract, did the Company persue this action and if so, what was the outcome of the action?

5: Given that the said contractor underperformance contributed to the withdrawn guidance, can the Company explain why they attempted to include the mining contractor in the recapitalisation Package under very favourable terms, and was the reduction in debt inclusive of any monetary outcome to the commercial action taken.

With the statements made in the final announcement made on the ASX - 28 May 2024 being Market Update, re: tax liabilities, it is difficult for the groups not to be sceptical of the Company in that, the indicative times for the process of the return of LLL held shares to FFX shareholders is being orchestrated to suit the Company receiving proceeds of the Tranche 1 payment for Leo Lithium shareholders to have access to funds to cover any of the tax liabilities.

The groups fully understand the need for the Company to cover any potential liabilities and are also confident that the funds will be returned to FFX shareholders if they are not required but it would be much more palatable if the Company clearly disclosed this rather than using ambiguous hints of potential cash shortfalls in announcements.

For and on behalf of the Shareholder Action Group
For and on behalf of the Firefinch Substantial Holder Group

Names withheld to protect the innocent