Takeover CandidateFiore is one of the clearest takeover candidates right now that I've seen in over four decades of watching and particpating in the Canadian stock market.
At the current market price of CDN $1.25, the current market capitalization is about CDN$122 million which equals US$96 million using the current exchange rate of Cdn $1 = US$0.7875 .
At year end, the company reported that it had over US$23 million in cash and no debt - basically this cash is redundant, non-essential cash as the company is adding the positive daily cash flow to the bank every day the mine continues to operate.
Therefore, the market is valuing the cash flow producing component of the company - the Pan Mine - at US$73 million (US96 million - US$23 million cash).
In the recently completed fiscal year, the company generated net cash flow of US$24.3 million - this was generated based on an average sales of US$1,681 per ounce.
The current price of gold has been recently at a multi-month low of US$1,850 per ounce, a difference of US$169 per ounce.
Assuming production and sales of 46,000 ounces for the current fiscal year (as within the company's guidance) and a minimum sales price of US$1,850 per ounce, we should see the company generate net cash flow of over US$30 million.
Given the current market capitalization of US73 million - entirely attributed to the Pan Mine and zero to the Gold Rock project and zero to the Golden Eagle project - the company is currently trading at a 2.4 price/cash flow multiple.
Most profitable mining companies trade at a much higher price/cash flow multiple - double or triple times what Fiore is currently trading at.
Factor in the value of the Gold Rock project and the Golden Eagle project.
The market is valuing gold deposits like Golden Eagle at over $200 million !!!!
In short, the market's valuation of Fiore is completely ridiculous.
It's like someone were to approach you and say "hey man, I want to sell you my company. It makes $100,000 profit each year. I want $240,000 for it. Oh and by the way, it is debt free and has an asset that's worth $500,000." Would you buy such a business ? The payback period would be 2.4 years. I think it's fair to say that anyone with an ounce of common sense would deem such a buying opportunity as a steal - especially when the price of gold is expected to rise substantially over the next decade due to the obscene level of money printing by governments worldwide.
Soon, you'll probably see a sophisticated investor / company with serious coin, make a takeover bid for the company. In recent months, we've seen a few more of these takeovers happening. The activity will continue to rise in 2021 and beyond as the upward pressure on the price of gold continues.