Shaw & Partners have published a research report on FireFly Metals Ltd (ASX:FFM) after the company raised $52 million to accelerate drilling at the Green Bay Copper-Gold project in Newfoundland, Canada, and ahead of expectations of a “sizeable Resource upgrade in the September quarter”.
FireFly raised the $52 million at an average price of $0.64, via a charity flow-through offering, a traditional flow-through offering, and a two-tranche institutional placement.
It intends to use the proceeds to accelerate drilling at Green Bay, including the addition of a third rig with the aim of rapidly growing the Resource.
Shaw & Partners has maintained its Buy recommendation on FireFly, with a revised price target $1.10 — down from $1.20 previously, to account for dilution from the raise. The price target is based on comparative peer group multiples on the assumption FireFly grows its resource base by 50% over the next 12 months.
The $300 million capped FireFly had $17.2 million in cash at December 31. The addition of the current raise makes for pro-forma cash $69 million, leaving the company well-funded for future work programs.
Phase 1 drill program
FireFly's Phase 1 drill program will be upscaled from 40,000 metres of diamond drilling to 100,000 metres as a result of the raise. With this, Shaw & Partners anticipate a sizeable Resource upgrade in the coming quarter.
Drilling is underway from the new underground exploration platform. An underground drill drive is well advanced with 500 metres completed of the 750 metre exploration drive planned in Phase 1.
Latest drilling results from the large-scale Footwall Zone returned strong grades over large widths including:
- 9-metres at 4.0% copper equivalent,
- 63.1-metres at 2.2% copper equivalent, including 12.4-metres at 3.1% copper equivalent ,
- 51.0-metres at 2.2% copper equivalent, including 5.3-metres at 3.3% copper equivalent and 4.9-metres at 3.2% copper equivalent,
- 9.8-metres at 3.7% copper equivalent.
“A strong year for copper equities”
Shaw and Partners sees 2024 shaping up as a strong year for copper equities on a combination of falling interest rates, improving global economy and attractive valuations.
It recently upgraded its copper price forecasts by 10% to US$4.50/lb in 2025 and by 20% to US$5.00/lb in 2026. The research group notes that FireFly is well positioned to benefit from stronger copper prices given the company is highly leveraged to resource growth, and tagged the company as a “key pick” for 2024.
Taking a longer term view, the group says the copper market is set to experience a significant surge in demand over the next decade due to an acceleration in the adoption of renewable energy, electric vehicles, and associated infrastructure. However, this surge in demand is likely to be met with significant supply challenges.
Projections of an 8mt gap between supply and demand in 2030 mean the positive outlook for the copper price remains intact, despite headwinds posed from rising interest rates globally over the past two years.