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Broker Upgrades: RBC coppers a hit of FireFly, Goldman Sachs ups gaming stock price targets
Experts
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- Argonaut upgrades gold forecasts by 11-35% over the next five years, tipping a US$3000/oz peak in 2026
- Ramelius, Bellevue, Ora Banda and Spartan see upgrades
- Turaco Gold initiated by WA brokerage as a spec buy
Copper prospects on the ASX are few and far between, especially those with the capacity to become producers with any sense of scale.
That’s driven interest in recent mid-tier copper floats like Metals Acquisition (ASX:MAC) and Capstone Copper Corp (ASX:CSC), which have ventured to the Land of Oz from other capital markets with to fill the gap between leading ASX pure play Sandfire Resources (ASX:SFR) and the small cap miners and explorers at the speccy end.
RBC, typically a bank that covers larger cap stocks, has lowered its eyes to Steve Parsons led FireFly Metals (ASX:FFM), putting a $1.55 price target on the Newfoundland copper developer.
That’s 23% above its $1.26 share price when the report was posted on Monday, with analyst Paul Wiggers de Vries giving FFM an outperform rating.
“FireFly offers a well-advanced, partially permitted copper/gold project with significant underground development, and asymmetric upside potential during a time of emerging global copper shortages,” Wiggers de Vries said.
“We consider resource extension and first production within 4 years as feasible outcomes and the technical risk as manageable. Resource and reserve updates, feasibilities, project funding then delivery, should provide positive news flow over the next few years.”
The project in question is Green Bay, a previously operating copper and gold mine former Bellevue Gold boss Parsons is aiming to revive.
With a 59Mt resources at 2% copper equivalent grade, Wiggers de Vries thinks using 70% of indicated and measured resources the mine could generate $130-160 million in EBITDA a year at costs of $2.94/lb (Aussie), with a $385m NAV and capex bill of $300m.
Those costs would place Green Bay between the second and third quartile on costs.
Exploration upside
RBC thinks FFM, which picked up a 500,000tpa facility ~20km from its Ming and Little Dear mines as part of the deal that took Green Bay out of bankruptcy in 2023, will build a new 1.8Mtpa processing plant near Ming to begin production around FY28, expecting FID to be undertaken in 2026.
Wiggers de Vries thinks the Aussie company has solved many of the issues that sent its previous owner into administration, ramping up drilling to uncover more copper resources and rethinking the processing route for the Ming deposit.
“Yes, the prior owners of Green Bay went into administration but in our view, the issues are solvable and some have already been resolved,” he told clients.
“The key issues, in our view, for the prior owners were transport costs, unit costs and lack of drilling/forward planning. FireFly has already started rectifying these issues.
“The key change to date has been increased drilling as FFM is spending approximately A$10m per quarter through the drill bit while utilising the underground exploration drives to better understand the orebody ahead of production. In addition, we believe the transport costs will be solved via a plant on site and unit costs should fall via a fit for purpose mill and a more productive mining method at scale.”
Every 5Mt of ore added to the deposit is worth $60m in NAV. At long term copper prices of US$4/lb, gold of US$2200/oz and silver of US$28/oz and a long term US-AUD exchange rate of 75c, FFM is trading at a P/NAV of 0.82x, or 0.56x at higher spot prices, “one of the lowest” in RBC’s Aussie coverage.
Future dilution for the $735m company, up 105% YTD, should be noted, with Wiggers de Vries expecting $350m in equity raises and a $200m debt facility will be needed to bring Green Bay online.
Goldman ups PT on gaming stock
A change of pace for us here at Stockhead, and major investment bank Goldman is looking ahead to earnings reports for FY24 and Q324 respectively for Aristocrat Leisure (ASX:ALL) and Light & Wonder (ASX:LNW).
Analysts led by Annabel Li said this week that a strong FY24 is expected for ALL, which produces casino and online gambling games.
“We expect a strong FY24, forecasting revenue +6% to A$6,672mn (VA consensus data A$6,676mn) driven by NA gaming ops incl. +6,050 net installs, EBITA +16% to A$2,097mn (VA A$2,093mn) at 31% margins, EPS +20% to ¢243 (VA ¢241), and DPS of ¢80 (VA ¢78),” Goldman’s team said.
For Light & Wonder, Goldman is tipping a 15% lift in revenue to US$839 million, with AEBITDA up 16% to US$332m at a margin of 40%.
ALL, rated neutral by GS, has had its price target upgraded from $58.30 to $62. LNW meanwhile is rated as a buy with an unaltered PT of $172.20.
“We remain constructive on ALL & LNW given robust US GGR demand (and mix towards premium leased), recovery in Asia, the proposed IGT/Everi (both Not covered) merger presenting potential opportunities (i.e. market share, designer talent), and long-term share capture in iCasino content; but we prefer LNW (Buy) to ALL (Neutral) given a greater risk-reward skew,” Li et. al. said.
The future of Aristocrat’s non-gambling mobile games division Pixel United, currently under a strategic review, remains a potential overhang however.
“…we note high frequency data is indicating continued softness in casual games; presenting potential downside risk to portfolio earnings. We do not take a view on the outcome of the review, but note recent proposed transactions within social gaming have been within a 7-11x NTM EV/EBIT range,” say GS’ analysts.
The views, information, or opinions expressed in this article are solely those of the broker and do not represent the views of Stockhead.
Stockhead has not provided, endorsed or otherwise assumed responsibility for any financial product advice contained in this article.
