Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
FireFly Metals (ASX: FFM) expanded its Green Bay copper-gold project’s contained metal by 42% in an update this week, putting it on course to restart the Ming mine in 2028 at more than six times its former output, according to an analyst.
Ming in northeast Newfoundland annually produced 7,000 tonnes of copper before former owner Rambler Metals entered creditor protection in February 2023. The Green Bay project, which also includes the Little Deer deposit about 40 km from Ming, could produce 46,000 tonnes of copper annually, Canaccord Genuity mining analyst Tim McCormack says.
The project’s plant and underground infrastructure might cost C$400 million, McCormack wrote in a report on Tuesday. Green Bay could be financed through a C$100 million share capital raising late next year, A$400 million in debt financing and Firefly’s sale of its Pickle Crow gold project in northern Ontario, he said.
“Green Bay gets serious scale,” the analyst said of the new resource. “Upgrade comfortably beats our expectations.”
Shares in Firefly gained 20% in the past five days to close at A$1.26 apiece on Wednesday in Sydney. The company’s market value is A$691.6 million. The stock has traded in a 52-week range of A$0.44 to A$1.27 and has nearly doubled year-to-date.
Canaccord revised its Firefly share price target to A$1.95 from A$1.40. “We maintain a speculative buy recommendation, highlighting the potentially catalyst-rich 12 months ahead that we believe should continue to augment the scale and economics of the project positively.”
Canaccord forecasts Green Bay’s net present value at A$861 million, at a 10% discount rate over a 15-year mine life. It envisions the site mining and milling 3 million tonnes a year, also producing 22,000 oz. gold annually. Copper cash costs might be $2.30 per pound. The spot copper price was $4.28 per lb. on Wednesday.
“We model an 18-month construction period before first production in third-quarter 2028 followed by a six-month ramp-up period with steady production rates from second-quarter 2029 onwards,” McCormack said.
Green Bay may generate average annual earnings before interest, tax, depreciation and amortization of about A$280 million and free cash flow of about A$215 million, increasing to A$320 million and A$245 million, respectively, at spot prices.
Green Bay’s total contained metal now stands at 1.2 million tonnes copper-equivalent comprised of 1 million tonnes copper (a 39% increase), 550,000 oz. gold (48% increase) and 5.4 million oz. silver (57% increase), Perth-Australia-based Firefly said on Monday.
The 58.9-million tonne total resource grades 1.7% copper, 0.3 gram gold per tonne and 2.8 grams silver, the company said. It’s compared with a non-Australian mining code total resource from August 2023 of 39.2 million tonnes grading 1.83% copper, 0.29 gram gold and 2.7 grams silver. The Little Deer component is now 9.1 million tonnes at 2% copper-equivalent.
Firefly plans to update the resource twice next year, around June and in the fourth quarter. The latter effort could be an initial reserve, Canaccord said. It expects the company to start economic studies by mid-year and allow about 12 months to complete a definitive feasibility study, permitting, funding and a final investment decision.
Four rigs are currently drilling underground at the Ming mine. About 40,000 metres of the 2024-2025 130,000-metre drill program have been completed so far. The program intends to extend resources, convert inferred areas to indicated, and to discover more lodes within 600 metres of the mine’s underground works.
“We expect the resource could grow to 80-100 million tonnes, which depending on cut-off optimization, should contain more than 1.5 million tonnes of contained metal,” McCormack said. “We also highlight that Firefly recently outlined multiple compelling regional targets within close proximity to its flagship Ming mine.”
The company plans to test eight such targets with 10,000 metres of drilling early next year. It may likely start at the Little Deer project area and move to volcanogenic massive sulfide targets closer to Ming, Canaccord said.
The Ming mine produced 134,000 tonnes of copper from 1972 to 1982 and from 2012 to 2023. AuTECO Minerals, which changed its name to Firefly, acquired it and the Nugget Pond mill for A$65 million in September 2023.
The Pickle Crow project near Sioux Lookout, Ont., hosts an inferred resource of 2.8 million oz. gold at 7.2 grams as of last December.
