Firefinch Limited (ASX: FFX)

Incorporated in 2005, FFX is involved in lithium development and gold mining. It operates in three segments, namely, Morila, Mali Exploration, and Corporate. FFX holds a market capitalization of AUD 723.95 million as of 17^th December 2021.

Financial & Operational Updates – As per the announcement dated 13^th December 2021, FFX completed an institutional placement of ~AUD 100 million, which will be used at Morila’s aggressive growth plans. This includes gold production of over 100,000 ounces in 2022 and over 200,000 ounces in 2024. The funds will also be used in Goulamina’s lithium exploration, which will be considered as world’s largest lithium projects.

As per its 6^th December 2021 Definitive Feasibility Study update, the Goulamina project resulted with post-tax NPV of ~AUD 4.1 billion and post-tax IRR of ~83%. On 1^st December 2021, Jiangxi Ganfeng Lithium Co. Ltd. have contributed ~USD 39 million towards the Goulamina’s development.

As per its Quarterly Updates released on 22^nd October 2021, its cash used in operating activities amounted to ~AUD 14.36 million for 3QFY21. It reported ~AUD 32.24 million as cash receipts from customers for 3QFY21 and closed its accounts with a cash balance of ~AUD 33.52 million at the end of 30^th September 2021 versus ~AUD 53.85 million at the end of 30^th June 2021.

Technical Analysis: On the weekly chart, FFX stock prices are trading in a rising channel pattern and hovering near upper band of the pattern. The momentum oscillator RSI (14-period) is at ~60.37 level and formed negative divergence, indicating negative momentum in the stock. However, the prices are trading above the trend-following indicators 21-period SMA and 50-period SMA, which may act as a support level for the stock. An important support level for the stock is placed at ~AUD 0.66 while the key resistance level is placed at ~AUD 0.81.

Considering the company’s negative operating cashflows in 3QFY21, net losses in H1FY21 and technical analysis, investing in this stock at such uncertain levels should be taken with calculated approach, hence a ‘Watch’ stance is suggested. The stock was analyzed as per the closing price of AUD 0.715 per share, up by ~1.418%, as of 17^th December 2021.

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 any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and 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-in the stock prices tend to find resistance when they are rising, and the uptrend may take a pause due to profit booking or selling interest. 

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

The Blue colour line reflects the 50-period moving average. SMA helps to identify existing price trend. If the prices are trading above the 50-period, then it shows prices are currently trading 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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