What’s so special about Gold stocks right now? Please, allow me to elaborate…

At this moment you don’t have to stick your neck out too far.  You’re not really going out on a limb here.  We’re not waiting and hoping for higher prices anymore. The trend is your friend, and the trend is firmly in place.  So the risks relating to whether or not Gold prices would fall below $1,400 again, thereby making the lives of explorers and miners more difficult has basically been removed.

Since the trend is higher, the question and concern over “price” shifts from worries over how low Gold could go to how HIGH it’s gonna to go!

You get my drift?

The importance of this shift in collective psychology can’t be understated.

So with pretty much any and all worries about Gold’s ultimate destination behind us, we can start looking forward and making our investments with an increased level of confidence.

This moment in time is luxurious!

Here’s the real kicker:  For the luxury of knowing which direction Gold prices are going, with a high level of certainty, you’d think you have to pay a higher price. Right?  We don’t expect to buy luxury on the cheap, but that’s the opportunity this market has presented us with!  Despite Gold being at record highs all over the world, and key resistance levels being broken in U.S. dollars (record high Gold prices are coming to America, too!), the stocks are still dirt cheap.  We’re getting the luxury of “knowing” at little to no extra cost.

Some of these stocks might already be up 50%, 100%, or more, but that’s nothing!  It’s merely a big percentage jump from all-time low prices.

In other words, given what we know now, what the market’s telling us, paying slightly higher prices now for stocks like Fiore (F, TSX) is actually less risky, arguably, than it has been at anytime over the past several years (maybe ever).

For some perspective, Fiore is 171% above it’s lowest ever price of 21 cents.  And it’s about 52% below the all-time high, $1.19.

In its short trading history, dating back to November 2017, the stock really hasn’t gone anywhere.  F has traded sideways, between 30 and 60 cents, for most of its life.  Sideways price action is boring, for those who’ve been holding F, but sideways is important.  Sideways is necessary.  You’ll tend to see “sharp spikes” in price following a month’s or year’s long sideways pattern.

Fiore’s underlying fundamentals and growth potential, as is, certainly favor a sharp break above 60 cents.  Fiore represents a GARP stock (growth at a reasonable price), and GARP is good!

Then you start looking at the Gold price!  Let’s say Fiore received $1,350 for each ounce of production last year, could they average $1,550 in 2020?

Napkin mathematics tells you that’s an extra $200 per ounce.  So assuming production and costs stay similar we’re talking an extra $8 million cash flow per year (based on 40,000 ounces production), to Fiore.  Profits for miners gets magnified.  And an extra $8 million or more, possibly on an annualized basis, is not insignificant for Fiore, whose market cap is still just $56 million Canadian.

Will they execute?

Re: Operational Risk

That’s really the only question mark remaining.

Following 5 quarters of consecutive production, under Fiore, it would seem that all the major problems (caused by Midway) have been solved.

This story really boils down to a case where the previous owner made a big muddy mess of the place.  Fiore bought the asset out of bankruptcy for pennies on the dollar, learned from Midway’s mistakes, then got the heap leach operation turned around after much effort.  Fiore’s installing a primary crushing circuit that’s supposed to cut costs and increase production this year (from all-in costs that were already under $1,200 an ounce).  Aside from some serious way out of left field negative surprise on the operations front, Fiore’s financials should be showing robust year-over-year improvement in 2020.

Negative surprises are always possible in mining, but heap leaches tend to be consistent in terms of grade, tonnage, and recovery, after everything is figured out. And Fiore seems to have the Pan mine figured out.

Fiore is valued at approximately $1,000 per ounce of production.  Ex-cash and working capital F is trading at less than 3 x operating cash flow based on a reasonable estimate of that they should earn this year. Looking around the industry, that’s pretty cheap. Then when you start looking at other explorers in Nevada, I won’t name names, that have way less in terms of both exploration potential and aren’t anywhere close to production, yet have market caps of $20, $30, $50 million, even $100’s of millions, Fiore really starts to stand out even further as a deal.

Content F is a legitimate “value” stock, as is, Gold Rock is where the “growth” and G in GARP comes from.

In Summary: Those who own F, those who own F and want to buy more, and those who have yet to initiate a position should all be pleasantly surprised it’s still available for less than 60 cents.  The stock is cheap, it’s a legit value, compared to Fiore’s peer group on most metrics.  However, the federally permitted Gold Rock mining project (permits in place = speed!), presents a growth path whereby Fiore could become a 100,000+ ounce producer.  By the way, grades at Gold Rock are estimated to be 60% higher than what they’re mining at Pan (60% higher! so consider today’s profitability and how it can be magnified via Gold prices and/or grades).  Quite a luxury to be able to sit back and acquire F at these prices, knowing all the things we already know.