Title : The cruel reality of Fiore Gold (F.v)
link : The cruel reality of Fiore Gold (F.v)
The cruel reality of Fiore Gold (F.v)
On the back of the company's 3q18 financials out last night, your humble scribe decided to take a peek at the state of Fiore Gold (F.v) to see whether it justified its recent ski-slope sell-off. Numbers got plugged in, charts came out the other side and here below are a few of those. What follows will not be explained to you by the CEO.ca writers who are on "sponsored coverage" deals with F.v (i.e. they get paid $20k by Frank Giustra to write nice things), but it does explain just why the stock price has gone South while those whores with laptops swore blind it was cheap, all the way down.
Before you start scratching the surface (which is exactly what the pumpers don't want you to do), F.v and its Pan mine seems to be returning good numbers. Revenues up, free cash flow positive etc. But then you see how the costs have risen too, and how income from mining operations has remained basically static:
To be precise, operating income per share remained static compared to Q2 (the only quarter with which it's fair to compare F.v, last year it was still ramping back up), at 1.9c. Now that might not sound too bad, a straight line fwd operating earnings of 7.6c on a 40c stock (not bottom line EPS, but still less than 6X which isn't bad), but there are other things below the backward-looking results to consider.
For one thing, Q3 was pimped by selling more gold than it produced. Now that's fair enough, there has been a slight lag on sales all the way back since F.v re-started Pan but this quarter that's all been used up. By selling 620oz extra in Q3, Fiore got an extra $750k into the company and no problems there, but it's a one-time benefit.
Those extra sales are a minor point, but before we get to the major issue lets note in passing that this is the company which BSses the world with the Fake News All In Sustaining Capital (AISC) number. In its 3q18 literature it claimed AISC of U$971/oz, but as noted previously, even though the AISC rules are law there is a generally accepted way of presenting the number...which F.v ignores. That can be neatly and accurately translated as "Hah! Sucker!", so if we de-construct F.v bullshittery and present its AISC in the way 99% of gold mining companies do (i.e. including the G&A), its AISC for 3q18 comes to U$1,114/oz. And twenty-two cents.
Those are the kind of things you see that unfurl the yellow flags on a company, but for the red flag let's move to the MD&A and this section of script:
Looking ahead to the fourth quarter of 2018, the Pan Mine is entering a planned period of higher stripping that will extend through the bulk of fiscal year 2019. While the life of mine strip ratio is not expected to change from the 1.3:1.0 number reported in the 2017 Feasibility Study, the strip ratio is expected to be in the range of 2.2:1.0 for the next three to four quarters. While partially offset by higher grades in the fiscal year 2019 mine plan, the increased stripping is expected to result in higher mining costs which will in turn affect operating cash flow. We are currently projecting a return to significantly lower strip ratios in fiscal year 2020.
To begin, let us note that "fiscal year 2020" will begin on October 1st 2019, that means there is at least a year of this higher strip ratio to go. If we then note the company is now guiding to the low end of its 35,000 to 40,000 ounce production range for calendar year 2018, then work out how much ore it needs to place to get to that number, then have a best guess on the total amount of dirt they mine, then factor in the new strip rate average (which is bound to have a couple of quarters of higher ratio as well), here's a best guess on what that looks like compared to previous quarters:
I've stuck in two quarters' worth of guesstimates there, but it's worth recalling that F.v will run at that strip average for at least five quarters. Its production will be lower, strip higher, AISC higher and as its real AISC is already over $1.100/oz, there's precious little meat left on that financial bone.
The bottom line is that F.v is running to stand still. Its balance sheet position isn't bad (no debt to speak of) but with $7m and bits left in the treasury and a producing asset that is about to go through five quarters of breakeven at best (unless gold puts in a big pop), anything it wants to do at its exploration assets will require a new source of funding. That's probably why they pared off the Chilean asset this quarter, too. It's not a case of whether F.v runs a dilutive round of financing, it's a case of when and all the people who bought into the CEO.ca paid pumper enthusiasm at the beginning of the year (when it was a $1+ stock and trading over a million shares a day, begad!) will get another lesson in how they are being ripped off by the whores at the periphery of Giustra's empire. But don't worry about Frank, he sold enough stock to you in January to guarantee his own winning trade on this one.
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