Firefinch Limited (ASX: FFX)

Firefinch Limited is a mineral exploration company with gold and lithium deposits. Its 100%-owned Goulamina Lithium project is located in Southern Mali. It also owns interests in the Massigui and Dankassa gold projects in Southern Mali.

Demerger of Lithium Assets: In a move to separate its lithium asset – Goulamina Lithium Project located in Mali, FFX proposed a demerger of its wholly-owned subsidiary, Leo Lithium. As announced on April 29, 2022, FFX shareholders will receive 1 Leo Lithium share for every 1.4 shares they own in FFX. As part of the IPO, Leo Lithium intends to raise A$100 million through Pro-rata Offer and Firefinch Offer. In the Pro-rata Offer, it plans to raise A$80 million through the issue of 1 Leo Lithium share for every 10.33 shares in FFX at an issue price of A$0.70 per share.

To stay committed to the long-term prospects of its lithium business, FFX is committed to investing A$20 million in the IPO of Leo Lithium (Firefinch Offer). Below is the summary of the offer details.

Source: Analysis by Kalkine Group

Offer Update and Timeliness: As announced on May 31, 2022, FFX received an overwhelming response from FFX shareholders and institutional investors. The issue was oversubscribed. About 90% of the offer was allotted to the existing FFX shareholders. Firefinch acquired its full A$200 million allocations under the offer. The company is likely to transfer Leo Lithium shares to FFX shareholders by June 9, 2022. Official listing and trading on Leo Lithium share is likely to commence on June 23, 2022.

Technical Analysis: FFX prices broke both crucial support levels i.e., AUD 0.85 and AUD 0.60 after the demerger news. Also, prices are trading below its 21-period and 50-period SMA on a weekly chart. Prices now came to a 138.2% Golden Fibonacci extension supply ratio that indicates prices might reverse from the current levels. The momentum indicator, RSI (14-period) also came down near to oversold region and trading at ~35.06 on a weekly chart that indicates prices might rebound from key support levels in the coming period. Immediate support levels are AUD 0.20 and AUD 0.14 while immediate resistance levels are AUD 0.60 and AUD 0.71.

Considering the reversal price indications, an opportunity for FFX shareholders to get Leo Lithium shares and trade on it post listing on ASX, focus on Lithium with 2.3 million tonne per annum throughput rate of spodumene concentrate, we suggest investors to ‘Hold’ on this stock. The stock was analysed as per the closing price of AUD 0.345 per share on 3^rd June 2022.

Weekly Technical Chart – FFX

Source: REFINITIV

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decisions should be made depending on the investors’ appetite for upside potential, risks, holding duration, and previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and is subject to the factors discussed above.

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where the stock prices tend to find resistance when they are rising, and the uptrend may pause due to profit booking or selling interest. 

The Green colour line reflects the 21-period moving average. SMA helps to identify existing price trends. If the prices are trading above the 21-period, prices are currently in a bullish trend (Vice – Versa).

The Blue colour line reflects the 50-period moving average. SMA helps to identify existing price trends. If the prices are trading above the 50-period, prices are currently in a bullish trend (Vice – Versa).

The Yellow colour line represents the Trendline.

The Purple colour line in the chart’s lower segment reflects the Relative Strength Index (14-Period), which indicates price momentum and signals momentum in trend. A reading of 70 or above suggests overbought status, while a reading of 30 or below suggests an oversold status.

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