FireFly Metals Ltd (FFM) Earnings Call Transcript & Summary

Good morning, and thanks for joining us for this Firefly Metals presentation. I'm Paul Armstrong from Read Corporate. FireFly Managing Director, Steve Parsons, will take us through the presentation. He will then be joined by FireFly Executive Director, Michael Naylor; and Chief Executive, Darren Cooke. A recording of this presentation will be available later today. I will now hand over to Steve.

Great. Thank you. Good morning, everyone, and thanks for joining us on what is a milestone occasion for FireFly. I have with me today for this call, Mr. Michael Naylor, Executive on the financial side of the company; as well as Mr. Darren Cooke, our Chief Executive Officer, to run through some of the technical aspects of today's call. There is an ASX release along with this presentation on the ASX and TSX platforms, and there will be a large-format independent technical report lodged within 45 days on the TSX SEDAR platform. If you can now please turn straight to Page 5 of today's presentation, which shows the investment highlights. I'd also like to remind people to read the prior few disclaimer and compliances pages as well. The results of the Green Bay preliminary economic assessment are by any measure, exceptional. They show why Green Bay is one of the best undeveloped copper projects in the world. The study also makes it clear that Green Bay has the potential to be one of the largest copper mines in Canada and also one of the largest copper mines globally that is not owned by a multinational diversified mining house. The scale of the project, the exceptional grades, the outstanding financial returns and the scope for ongoing growth, all in a Tier 1 location put Green Bay in an exclusive club. And we offer concentrated copper exposure. We're not diluted by other bulk commodities such as zinc, lead, iron ore, et cetera. This PEA encapsulates the size of the prize we have at Green Bay, the opportunity is simply huge and has every potential to keep getting better as well. For these reasons, we're determined to keep up the fast pace that we set from day 1 at Green Bay. This means pursuing several avenues of value creation all at the same time. We will maintain an aggressive exploration program, including testing for new big exciting targets regionally. And at the same time, we'll undertake and complete the full feasibility study, while also conducting early site works and ordering long lead items ready for the start of construction. To ensure we take full advantage of these opportunities in an expedited manner, we're conducting a capital raising today, along with a share purchase plan aimed at our loyal retail shareholders. This ensures that we are fully funded to implement this multipronged strategy, maintaining a low-risk financial position, while giving us maximum exposure to the upside at Green Bay. If you now turn to Page 6 for the start of the study and then on to Page 7, and we'll go through a high-level summary of the PEA. And so today, after 3 years from acquiring the project at Green Bay and only 2.5 years from when we first started drilling at the project, shareholders and investors have seen ongoing resource growth, high-grade growth during that time. And so for the first time, we show the economic outcomes of that study. We're putting out a 1.8 million tonne per annum scenario, which is a very short lead time into production. It produces a large amount of copper of over 50,000 tonnes of copper equivalent per annum. And when I say copper equivalent throughout this presentation or anyone else talks about it, this project is about 70% copper and 30% gold and silver. And as I said previously, with no zinc, lead and other commodities. The project is a multi-decade mine life of over 30 years, producing a huge amount of cash flow. And remembering this project, the study was put together using a 7% discount and using commodity prices that are around about 25% to 30% below spot, so showing very high NPVs. And probably the real key takeaways when you look at these numbers today, and Mike Naylor will talk about these shortly, the free cash flow is without a doubt one of the real key aspects to the project. And just remembering the 30% below spot price when producing these cash flows year-on-year over a multi-decade period of time is quite outstanding. So obviously, rapid payback. And of course, being a brownfields previous mine site, the initial capital to get up and running is a very low AUD 513 million to do that. Now what we also want to do with such a large resource there, we wanted to demonstrate that the project can be upscaled and it can be upscaled to what we're showing as a 4.6 million tonne per annum operation for only a small amount of further capital that can be fully funded using the first 1.8 million tonne per annum case through cash flow from that. And as I said, this project does produce a large amount of cash flow and the upscale case utilizing the existing resource, so it doesn't take into account any further resource growth. It's just what we have right now, takes the project up to 100,000 tonne per copper production for a 6-year period of time and then runs for a further -- for a total of 22 years production as well. And obviously, free cash flow, when you look at that 30% discount on commodity spot price of $550 million, you can tell that, obviously, if you take that back to spot prices, it produces a huge amount of free cash flow year in, year out as well. So if we turn to Page 8 of the presentation. And this shows a graph of both scenarios. So the 1.8 million tonne per annum case marked up in the golden color there and again, showing for that long amount of period of time. Post the ramp-up, we have a period of 14 years, producing at 50,000 tonnes per annum before the tail kicks in. And of course, then going straight into the 4.6 million tonne per annum ramped up case, which shows a period of 11 years at 90,000 tonnes per annum. And of course, that 6 years at 100,000 tonne per annum as well. And the real key thing to note on this slide is that the long tail that carries on. And the reason of the long tail that carries on is just because we haven't continued to drill it. So part of this capital raising today is that VMS extensions that very high-grade Core Zone of over 4% copper equivalent copper and gold -- we are now continuing to step out on that, and you will see continued resource growth growing on that, which will ultimately mean further long mine life of that large production figures of 50,000 tonnes per annum and 90,000 tonnes per annum over a period of time. So if we turn to Page 9. And it is quite good to reflect on how big this project is. And remembering this was in production a number of years ago. When you look at the production profile of purely copper, and as I said from the start, this is a copper mine with a gold credit to it. And when you strip it back and have a look at who is producing copper, in Australia and in Canada only on this slide and what they produce for copper from each of their operations, you can see that the start-up 1.8 million tonne per annum case for us takes us into the top 10 copper producers in Australia and Canada and on the ramped up version to 4.6 million tonnes per annum, you can see that we really are a powerhouse when it comes to copper production. And of course, FireFly is strongly leveraged to the copper price for this. If we now turn to Page 10. In Page 10, I'll hand to Mike Naylor, who will run through some of the financial figures for us.

Thanks, Steve. Slide 10 shows a summary of the economics from the PEA. As you can see, the Green Bay Copper Gold project generates outstanding financial and operating metrics. A couple of things to highlight when looking at these numbers. The spot price used in our PEA are about 25% lower than the current spot prices for copper and gold. We are using a 7% discount rate, which given the multi-decade long-life mine plus 32 years of the 1.8 million tonne case, we received very little value post the 15th year on the NPV basis. So looking at the cash flow is very important and it shows how outstanding the numbers are. Also note that I'm quoting all post-tax numbers, so fully costed in these numbers. With regard to the 1.8 million tonne per annum case, the project has an outstanding NPV of $2.2 billion at an IRR of 41% and a rapid payback period of just 1.9 years. Once again, given the discount rate of 7%, I draw your attention to the free cash flow, which the project generates on the 1.8 million tonne per annum base case is $5.4 billion, which in the first 15 years post ramp-up generates $290 million after tax per annum. And then if you use the current spot price on the 1.8 million tonne per annum base case, you can see that the cash flows are a huge $9.1 billion after tax and a 15-year post ramp-up period where the project generates $447 million per annum and the payback is just 16 months. Then moving on to the 4.6 million tonne per annum case, the NPV rockets again to refer to a $3 billion NPV with an IRR of 40% and free cash flows of $6.5 billion after tax. This -- and given the production profile exceeds 100,000 tonnes per annum over that 6-year period after ramp-up, the project generates an average of $550 million annually for the first 11 years post that ramp-up period. And if you use spot prices to that $4.6 million case, the step change in cash flows goes to over $800 million per year after tax and generates a whopping $10.9 billion after tax. These are just extraordinary numbers. And then if you look at the tornado graphs to the right, you can choose your own adventure. But as you can see, if you are a copper and gold bull, the leverage here to the copper and gold price is phenomenal as you get even larger free cash if the copper and gold prices continue to move higher. Moving to Slide 11. This graphically shows the significant free cash flow generation per annum from the Green Bay Copper Gold project. As you can see, in the 1.8 million tonne per annum case, the first 15 years post ramp-up generates on average $290 million of free cash flow per annum after tax. At spot, once again, that's $447 million per annum over those 15 years. So these are very consistent and substantial cash flows generating significant value over a very long period of time. And as Steve mentioned earlier, post 2045, the cash profile shouldn't necessarily fall. This is where the VMS finishes in our study and our upcoming drill program will concentrate our exploration efforts on the extensions of this VMS system. We are hopeful that the ore body continues and that we can maintain that similar cash flow further beyond that 15 years. Moving on to the 4.6 million tonne per annum case. There is a longer ramp-up period. But importantly, the majority of the cash flow generated from the 1.8 million tonne per annum operation is funding the expansion capital. Once we're processing at that run rate of 4.6 million tonnes per annum, the project generates close to $550 million of free cash flow per year on average over that 11-year period, which is shown in that graph. At spot prices, once again, that increases to $844 million per year on average. As you can see, these are phenomenal cash flows, very consistent, substantial and capable being generated over a long period of time. And once again, that decline from 2043 is just a function of lack of drilling at the VMS, which we hope to address in the next 6 to 12 months. Moving on to Slide 12, which shows our operating costs. These are projected to sit at the lower end of the cost curve for copper developers and producers. As you can see, in the 4.6 million tonne per annum case, C1 Cash Costs are expected to be USD 1.02 net of gold credits. And for the 1.8 million tonne case, it comes at USD 1.17 per tonne. There are a number of reasons why we expect to sit at the lower end of the cost curve, but a lot of it comes down to the existing infrastructure and grade we have at Green Bay. We have access to hydro power, which is projected to cost approximately $0.065 a kilowatt hour. That's a very low cost for power, particularly when you compare it to the power cost we see in Western Australia, which is close to 4x higher than that rate. Also importantly, we have a port that's only 5 kilometers away. We've got sealed roads already in place. And once again, the high-grade nature of the deposit further supports a very low operating cost profile. Moving on to Slide 13. which shows the low capital intensity nature of the project. The slide really highlights just how low our capital intensity is, particularly for a project of this scale, producing between 50,000 tonnes and 100,000 tonnes of copper equivalent per year. Obviously, the high-grade nature of the deposit significantly assists, but we're also benefiting significantly from the existing infrastructure of Green Bay, as I highlighted earlier, and the estimated replacement value of what we've got there already of around USD 250 million, access to low-cost hydropower, year-round sealed road access, favorable ground conditions in the mine with low ground support requirements and a port that's only 5 kilometers away and access to a skilled local workforce. As you can see, we sit in the range of approximately USD 7,000 to USD 9,000 per tonne of copper equivalent, so very low from an average capital intensity perspective. That's a remarkable figure when you consider the scale of the project and compare it to other copper projects globally. I'll now hand over to Darren Cooke, who will talk through some of the technical overview aspects of the project.

Thanks, Mike. If we turn to Slide 14, basically, the key message here on this study is that it's extremely robust. It was compiled and contributed to by industry-leading consultants, as you can see from this slide here. And the level of detail that's gone into this study probably exceeds what I would normally expect from a PEA study. I'd also like to just acknowledge the contribution of our team to this study. A lot of hard work has gone into it, a lot of contributions from many different consultants and people internally. If we move to the next Slide 15. The way that we've designed this operation and this project is using industry standard, simple mining and processing techniques. So we're very confident in achieving the metrics that we've proposed in this study. They have all been benchmarked. I'll go into these in a little bit more detail in upcoming slides, but the mining is simple conventional sublevel long-haul open stoping with Paste Backfill, and that will be a combination of transverse and longitudinal. And as Mike pointed out previously, the ground conditions here are excellent. The extensive geotechnical work that we've done has identified no issues or risk to the mine plan from the geotechnical issues. The haulage for the cases that we're looking at, that is where the different scenarios vary. So the 1.8 million tonne per annum scenario utilizes trucking. The larger upscale production at 12,500 tonnes per day requires a haulage shaft. Ventilation is simple. We've accounted for that and all the vent simulation work that we have done shows that there's enough air flow at the bottom for the life of the entire mine plan. On the processing side, very simple. We have great recoveries of both copper and precious metals and the actual ore itself is extremely amenable to processing. It's quite soft, and we'll go through a little bit of that in the next slide, but it is a very simple 2-stage flotation process. And as Mike alluded to, we have a great concentrate very much in demand from global traders and smelters. We do not have an offtake agreement in place, which gives us a lot of benefits moving forward, particularly in the financing side of things, and Mike will touch on that a bit later. And it is very high grade, and it's a very clean concentrate. So it's highly sought after. And we are very close to the markets, particularly the European markets and also to Canada. Mike touched on this, but we're blessed to be in Newfoundland. It's a great part of the world from -- to develop a project. We have great infrastructure. We have great power available. We have a 138-kilowatt -- megawatt line that -- kilowatt line that actually runs through our property, and we're planning to build accommodation camps and supplement what we see in the local community. Next slide, please. On the processing side, this shows you the basic flow sheet that we are planning to build for the mine. And this is the upscale case. The way we've designed this process is to simply twin the 1.8 million to achieve the 4.6 million tonne per annum production rate. We've done extensive test work and what that shows us is that the ore is moderately hard. So it's not a difficult ore to process. The abrasion index for the ore is quite low. So that means our maintenance costs are down. And because this ore is predominantly Chalcopyrite, it floats very easily. And this is backed up not only by our test work, but by historical production at the former Nugget Pond mill. The process itself is very industry standard. It's basically simple jaw crushing and then a SAG and Ball mill and 2 stages of flotation. We have a basic rougher flotation and a cleaner stage. What we're doing to increase the gold recovery is we're floating the tail of the cleaner stage and leaching the gold on site. So the concentrate that we produce will be copper and gold. However, we will be producing a small amount of doré on site as well. So -- all of these processes are off the shelf, very simple. And the recoveries we've been able to achieve both from test work and utilizing historical information is over 98% on the copper. It's over 80% on the gold and around 85% on the silver. And I would point out also that we're still doing more work to increase that gold recovery as well. As I mentioned before, the concentrate market is very strong at the moment with Ocean Partners, who have looked into the available options for us in terms of the concentrate. And I can just say that there are plenty of options for us. There is demand globally for this concentrate. So Mike will talk a little bit more about that in the financing area. If you turn to Slide 18. The key thing here is basically the mine design and how we're going to achieve the upscale production case. Now the 4.6 million tonne per annum option is achieved by having multiple mining fronts as you can see from this image. And what I'd encourage people to do is to go to our website. We actually have a video of this that shows the infrastructure that we're planning. But for the upscale case, we're looking at a new shaft. The cost for that shaft is very robust. We've had Redpath on site and a number of engineering firms work on that. We've already done a geotechnical hole in that shaft position that shows there are no issues with it. So we're very confident that, that shaft is fairly simple in terms of how shaft sinking goes. We're looking at a number of vent raise bores as well to make sure that we get the air exhausted. And the key attribute of the 1.8 million tonne per annum case is a new bypass decline. So what we're doing there is in order to enable us to use the 63-tonne trucks. We're doing a few kilometers of development from the old shaft to the surface that enables us to bypass the narrower part of the historical decline and achieve that productivity out of the mine. Next slide, please. This is one of the absolute key slides that we have of this presentation. Now one thing that I didn't mention earlier in terms of it being a robust plan and a robust PEA study is that with this study, we have also released a new resource and the resource has increased significantly. We're up at 83.7 million tonnes total at an incredible grade of 2.5% copper equivalent. So the grade has gone up, and that's to be expected with the drilling that we've released recently. So the grade has gone up quite significantly. But the most important aspect of that resource for the Main Mine, 77% of the resource is now in the high confidence measured and indicated category, which gives us a lot of confidence in that mine plan. Now what you can see on here is the grade of the deposit. You can see the upper high-grade VMS and what we're calling the Core Zone. And that zone itself is 25 million tonnes at 4.3% copper equivalent. So when I talk about it being like DeGrussa without the rest of the Lower Footwall Zone, that is huge in itself, 25 million tonnes at 4.3% copper equivalent. And what we try to do in this mine plan is bring forward as much of that VMS as we can. And you can see the first 14 years after ramp-up production at around the 3% copper equivalent mark in the 1.8 tonne per annum case and still around the 2.5% mark on the upscale case as well. So the grades are phenomenal. And as Mike pointed out, as Steve pointed out, the reason those grades don't continue on is purely drilling. The ore body remains open. There's a downhole EM anomaly down there that shows that the higher-grade VMS continues onwards, and we look forward to utilizing our 6 drill rigs, some of them to actually extend that ore body even further. If we could move to Slide 21, please. Just take you through very quickly some of our forward work plans. And look, we've been very, very consistent with our strategy right from the start of having this operation, and it's hard to believe it's been less than 3 years. The first pillar that we were looking at was the resource growth and resource conversion. And when you consider we've come from 40 million tonne resource up to 84 million tonnes in less than 3 years. It's been an amazing achievement by the team. There's no reason to think that, that resource growth will stop. The deepest drill hole we have is 49 meters at 6.1% copper equivalent. We're using the funds that we have now and also the funds that we're raising to continue on with 6 drill rigs underground throughout '26 and '27, and that will be a combination of converting more M&I life. So when we put out the feasibility study, it will be higher than where it sits at the moment and also growing the resource. One of the other things we're working on, too, is drilling out one of the satellite deposits called Main Mine, and we're looking at having a maiden resource out on that in the next 6 to 12 months. The other area that we're working towards is in the first quarter of next year, we will declare our maiden ore reserves, and that is one of the key reasons why we focus so much on the measured indicated drilling. We have 70% -- 77% of our resource available to convert into ore reserves in the M&I category. The next one is obviously the upscale project restart, and Steve touched on this in his opening remarks. $61 million committed to early works, camp development, water treatment and other seasonal works. And we're happy to say that we've got the majority of permits to conduct that early works already in place. Looking to secure the long lead time items, particularly around the power infrastructure and some of the milling components. And we are targeting FID and construction for mid-2027. And then the third pillar of all of this is the regional exploration, and that has the potential to be an absolute game changer for us. We've got $16.7 million committed this year. We've got budgeted anywhere between 2 and 3 rigs on surface, testing some of these targets. And that's a combination of brownfields near mine extensions to 1 of the 8 historic mines that we have on our site and also testing some new greenfield targets because there's been some sensational targets that have been generated by both geophysics and on the ground prospecting. So there will be news flow on the regional exploration coming out very shortly. Next slide, please. And look, just to remind people of that exploration upside and the potential, you can see here our land holding, and we do hope to grow that in the future. But what we have there is we're focusing on the Ming extensions, the Ming regional, and we have just really started testing some of those geophysical and geotechnical anomalies. So there's big potential there. We've just started our maiden drilling at the Tilt Cove project, and that was a fairly significant historical producer, and that's progressing well and also Little Deer as well, which is a smaller component of our resource, but still open, and we will do more work there. On to Slide 23. And this is just the time line of work, and I won't talk to this too much in the interest of time. But basically, you can see there the key milestone for us is to get towards that development in the first halfway through 2027, and we believe we can get into copper production by 2029. That's the key target for us. In the meantime, we'll be focusing significantly on underground resource growth and also regional discovery. So a very busy couple of years for us, and the team is well positioned to deliver. I'll just hand back to Mike to talk about the project financing.

Draw your attention to Slide 25, which outlines how we plan to finance the project. The good news here is that we have lots of options. We have appointed a debt adviser, who advised us that based on the outstanding financial metrics, including unleveraged payback period of just under 2 years, as well as the fact that this is one of the lowest capital intensity copper projects of this scale, the initial debt carrying capacity could exceed $500 million on the 1.8 million tonne per annum case. When you combine that with our existing cash and liquid assets of $183 million and the $190 million capital raising that we launched today through a placement and SPP, we have a high level of confidence of our ability to secure the funding required for development. And with those numbers, it gives us a high funding headroom. The finance processing has commenced with banks, offtake customers, export credit agencies out of Europe and other commercial lenders and the response to date has been very positive. We've already received a number of nonbinding indicative terms from Tier 1 banks and potential offtake partners. Just on the offtake, the outreach from our offtake partners has been aggressive to say the least. It's such a clean product and it's a well sought after concentrate that's going to hit the market from 2029. So over the next 6 to 9 months, as we work towards finalizing the DFS, one of our key advantages of this project is a number of financing options available to us. This could be a combination of Tier 1 bank debt, offtake prepayments, export credit agency support from some of the European smelters or potentially a silver streaming arrangement. Once again, the good news is we have significant optionality. We're not in a position where we need to go bend our knees to project financiers. This puts us in a strong negotiating position and should allow us to secure the best possible financing terms for the project. Lastly, the 4.6 million tonne per annum expansion case is expected to be funded predominantly from cash flows from the 1.8 million tonne per annum base case. Moving on to Slide 26, which summarizes the equity raise we have just launched today. FireFly is seeking to raise approximately $180 million before costs at an issue price of AUD 1.78 per share or CAD 1.76 per share. This comprises $150 million single tranche institutional placement on the ASX and a AUD 30 million bought deal Canadian LIFE offering at the same price as the ASX placement. We are also offering eligible shareholders the opportunity to participate in a non-underwritten share purchase plan targeting initial $10 million before costs, also at the same price. The SPP documentation is expected to come out early next week and a record date for eligible shareholders for the SPP is at 24th of August 2026. The $1.78 placement price represents a 6.3% discount to our last traded price of $1.90 on the ASX on the 21st of August 2026. Draw your attention to Slide 27, which outlines sources and uses of funds. On a pro forma basis, we'll have approximately $365.6 million of cash before costs. The use of funds are focused primarily on project development and underground development, early works, ordering of long lead of capital items and surface early works. We're also going to maintain 6 drill rigs underground, targeting upper mine extensions, M&I resource growth, geophysical targets, parallel lodes and depth extensions. Importantly, as Darren pointed out, also, we have a budget of approximately $16.8 million for regional exploration growth drilling. Lastly, and importantly, we have $188 million allocated to working capital and cost of the offer, but also provides us with the flexibility to undertake additional project development activities and early works that are included in the PEA and to fund the development of the Green Bay Copper project as approvals arise. So with all that underway, our key deliverables over the next 12 months are clear with the completion of the DFS for the 1.8 million tonne per annum base case operation, continuing growth exploration and project development programs and working towards that final investment decision by mid-2027. Slides 26 and 27 outlines the table and the pro forma numbers after the equity raise, but I'll throw back to Steve now for closing comments.

Thanks, Mike. And so really, just to summarize, there's obviously a huge amount of work to be done over the next couple of years for FireFly. The delivery of the PEA today shows a very large-scale copper project, 50,000 tonnes per annum, ramping up to 100,000 tonnes per annum. The size, the scale and the grade is really a standout, especially when you compare it to other Canadian and Australian copper production mines. And this capital raising today, along with how Mike described the future funding for the development, it really puts us in a really strong position there's going to be 6 drill rigs turning underground to grow that high-grade growth. And on Page 9, as Darren Cooke talked about, you can see those areas where that super high-grade plus 4% copper equivalent is going to grow. And currently, that's at 27 million tonnes, and we've grown that just within the last 12 months. So watch that space, that will continue to grow. That will continue to show not only growth on life of mine, but also making the -- making the production of copper higher as well ultimately. You will also see the regional drilling underway as well. That's something that hasn't been included into this study. This study is only talking about what we have currently at the Ming Mine. We're now hitting it hard. You will see a flurry of results now coming out on the regional side of things. Any success we have there will be in addition to what we do have at the current PEA. And so we'd be liking to demonstrate that we have resource growth on some of those regional targets, as Darren talked about, and we have that $17 million ready to go on regional drilling with 3 drill rigs on that as we speak. So watch this space. As Mike talked about with the funding and with this capital raising, it puts us in a strong position to move rapidly now through the development stage through early works and long lead items. And that really then gets us into a position to have FID around the middle of next year and then moving into first production by mid-2029. And of course, as you saw from the numbers, that means free cash flow, and that's what we're all about here. So this really does get people focused that we are not [ compromising ] on building a mine. We have a strong cash position to grow what we have here and to take us forward for the next year or 2 as well with plenty of catalysts for growth on that journey and grade on that journey as well. I'd just like to finalize that and finish by thanking the whole team at FireFly Metals. It's been an amazing couple of years to get to where we are now. And obviously, we're really looking forward to the next couple of years to take us through this next phase of growth development and into cash flow and production and also to thank all the consultants there as well that have helped us on the journey so far, and there's obviously plenty more to come. Please do reach out. This is the end of the call now. Please do reach out via e-mail or calls for any questions over the next little while. There's plenty of information to read here in this presentation and on the ASX and TSX announcements that are going out. And then there will be the independent technical report that will be lodged on the SEDAR platform up on the TSX in 45 days. So thank you for everyone. This will be the end of the call now.