Fiore Gold Ltd. FIOGF

Spinoff of Golden Eagle Would Create Most Shareholder Value

[blackgold14]

I checked out the recent video interview with Tim.  It was quite informative and just bolstered my confidence in continuing with my investment in the company which I bought at 30 cents.  As Tim noted, it's quite clear that the market is assigning viryually zero value to the Golden Eagle Poject which has a resource of 2 million ounces of gold. He noted that comparable companies with such a resource are trading at a market cap of $300 million. 

There was talk of the various alternatives to deal with Golden Eagle.  The complication is that Hecla property adjoins the company's property.  The edge of the pit, not the resource, goes onto the Hecla property where they have drilled and found substantial gold there - over 1 million ounces.  A JV between the two companies has been discussed or an outright sale of one company's property to the other.  

The best way for Fiore to unlock this value is NOT a sale of the property to Kinross.  Fiore already has enough cash and the market will not move the share price substantially if the company gets a wack of cash.  While a large cash payment would certainly help in building the company's cash reserve which will be needed if it wants to acquire a 50,000 ounce producer within the next two years, shareholders want more short-term realizable returns.  

Buying Hecla's property would be a huge mistake.  It would take a lot of cash and may require the issuance of Fiore shares - more dilution.  The development of Golden Eagle is a long-term project - a lot longer than Gold Rock which is slated to reach production in 2023.  The market wouldn't get too excited about a project that may take 5-10 years to reach production.  

The best way for Fiore to create shareholder value NOW is to spinoff the project into a new public company.  Current shareholders would then get shares in a new public company devoted exclusively to developing the project.   To truly create shareholder value, current shareholders should receive shares on a 1 for 1 basis (1 share of new public company for each Fiore share held) or 1 for 2 basis.  Anything beyond 1 for 2 is not creating substantial shareholder value.The new public company, not Fiore, should be the one to pursue the combination of both properties.  Combining the properties of Hecla and Fiore would create one of the largest undeveloped gold resources in North America - now that would excite investors.