In-Depth with Fiore CEO Tim Warman

Trevor Hall Hey everybody, this is Trevor Hall. Thank you for tuning into Mining Stock Daily. It is Friday October 4th. Appreciate you tuning in. We got an in-depth interview today with the CEO of Fiore Gold, his name is Tim Warman. That's actually another interview I've had on the backlog from Beaver Creek Precious Metals Summit. Sorry for the delay in publishing the interview today--I just had some stuff to take care of here with the family. Anyway, we're going to jump into this conversation with Tim. Before we do that, I would like to thank our sponsors. That Is integra Resources, Pacific Empire Minerals, and Western Copper and Gold. Thank you so much for the support of Mining Stock Daily. So, without further ado here is my interview with Mr. Tim Warman of Fiore Gold. Take care everybody. Have a great weekend. We'll talk to you again on Monday.

Trevor Hall Welcome to the Beaver Creek Precious Metals Summit. It is day two and I'm now joined by Tim Warman, CEO of Fiore Gold which trades on the TSX Venture Exchange with the symbol F and on the OTCQB market with FIOGF. The company is producing out of the Pan Mine, it has a couple other projects in both North and South America that we'll probably mention in a little bit, specifically Golden Eagle and Gold Rock today. I will preface this interview by saying I do own a small portion of shares of Fiore Gold. Tim, thank you for joining us here on Mining Stock Daily. How is the conference going for you?

Tim Warman It's busy. It's you know, this is always a great conference and we're seeing lots of interest so I can't complain.

Trevor Hall What are some of the conversations you're having this week that investors both institutional and retail side of things are really interested to know from Fiore's perspective?

Tim Warman I think they want to see, you know how we're going to grow the company. Right now we're sort of 45,000 to 50,000 ounce producer which is probably a bit small for most investors, particularly institutional investors and I think it's been a chance to show them that you know we've got organic growth inside the company that's going to get us up over that 100,000 ounce mark, you know a 100,000 ounce-a-year production mark and that's really kind of a you know a hurdle that you need to get over before you start getting institutional interest in the company. It's been a good opportunity to kind of showcase that.

Trevor Hall Well development and construction of Pan happened in the bottom of the cycle and you get out worse as you know the things we’re producing, right? What was it like as a CEO to build and produce knowing that the market was really in the tank?

Tim Warman Yeah. I mean you know we didn't so much build because we bought the asset at a bankruptcy. So you know Midway Gold had had built the mine and was operating it briefly before they went bankrupt in 2015. We picked it up out of bankruptcy for about $5 million and really just kind of solved the problems that had plagued Midway and we had the luxury of not having any debt. Midway was quite heavily loaded with debt and I think that was part of the problem there. But some, we've really just got it turning around and you know Pan is now cash flowing. It's a--we're generating free cash flow from that mine. It's producing well and I think it's a real turnaround story and it's a bit of a testament to our operating team. I mean these guys are really good.

Trevor Hall I do want to ask you, on your financials came out I believe as last week or two weeks ago the share price took a little bit of a hit. Seems like a lot of investors were a little bit unhappy with the increased operations capital it took to run the thing. What is your response and answer to that?

Tim Warman Yeah so you know we've been guiding the market that Pan was going to go through a period of higher stripping. Life of mine strip is about 1.6 to 1, which is quite low, but now we're seeing stripping ratios in the vicinity of 2 to 1. And obviously when you're moving that extra waste material, that's a cost that doesn't come with any extra revenue and that tends to put a bit of upward cost pressure and now that is a temporary thing. Our stripping ratio is going to stay at about that 2 to 1 level for the next quarter or two and then it will start to drop off again and get into more kind of typical things we've been seeing in the past and so you know it's it didn't come as a surprise to us. But maybe you know, I think sometimes you have to be clear about that. The other thing that drove our--or it was kind of a onetime hit to our own sustaining cost for example was that you know the beginning of the year the market looked a lot less robust and we basically hadn't planned to pay bonuses to any of the staff. And so, as the market got better, our financial performance was looking a lot better. We made the decision that you know to help retain staff we going to pay a company-wide bonus to you know, particularly to our guys in Nevada at the mine site and because we hadn't planned on it before we hadn't accrued any of it. So that added to about $75 to our own sustaining cost per ounce which is a one-time thing--we accrued three quarters of bonus in a single quarter. But you know again, I think we're still pretty robust. We're still generating cash flow and you know which is I think marks us completely differently from a lot of other small producers is that we generate free cash flow.

 Trevor Hall Do you foresee those operating costs to decrease at all in the next quarterly financials?

Tim Warman Yeah no I think I think we're still seeing that higher strip ratio and we're also bringing in the crushing circuit which is--you know we ran Pan for the last two years as a run of mine operation. Well always said we're going to put in a crushing circuit out of cash flow which we did, and a small equipment lease facility but of course you know with a heap leach mine, the day you buy that crusher and start it up, you've got increased costs but it takes time for that goal to get through the solution they get through the leach pad. And so there's always a lag between you know between your increased operating costs from operating the crusher you'd actually seen the increased revenue. So, no I think this quarter we may still see higher costs but that should start to tail off as we, you know the impact of that as we start to see the increased production from the crushing circuit.

 Trevor Hall Well it's one of those risks that you take on when you actually have a business instead of just a company right you have cash flow and so you accrue those costs and some quarters are going to be higher than others. But you know I've had multiple conversations with a number of CEOs over the last couple of days about the difference between a company and a business. And basically, the business has cash flow, companies don't. And so, I think it's--you know despite some of those operational challenges you do have cash flow which a lot of these Juniors can't say.

Tim Warman Yeah, you know and we've got a healthy balance sheet. We've got $10 million in cash. We've got a healthy working capital balance and you know we've been investing in the business. And I think I think it's important. You know when you invest in the business your costs go up a bit temporarily but it's for the long-term improvement of the business. We'll be seeing more gold ounces this year, this coming year. And you know I think it's the smart way to run the business.

Trevor Hall Any debt on the books?

Tim Warman No, we have no debt other than an equipment finance facility, about $2 million that's really just tied to the crusher. It's not an asset-based debt.

Trevor Hall So you announced some explore--some drilling. Well I don't think it was exploration drilling, it was a step-out it wasn't it?

 Tim Warman Yeah. So, you know Pan--we've really got Pan kind of fine-tuned and running as we like it and now the focus is really shifting over to our Gold Rock Property which is right next door. It's on the same concession packages about eight miles away and Gold Rock is--we just got the permits for it, the federal permits to build a mine there last year. And we've been drilling on there for the last couple of months to try and grow the resource base. Right now the resource sits at about all in inferred and indicated together run about 400,000 ounces we want to grow that global resource up to around 500,000 ounces to support the PEA that we'll be doing by the year end and that'll really start to kind of put some valuation I think around Gold Rock and get people--give people a chance to see you know what that looks like economically. And you know our plan is to try and push Gold Rock ahead to production within the next couple of years and Gold Rock, again conceptually if all goes well should produce something like 50,000 to 70,000 ounces a year. Combine that with 40,000 to 50,000 ounces out of Pan and you're looking at you know organic growth to over 100,000 ounces a year which I think is really a step change for us. And so those drill results at Gold Rock were step-outs from the existing resource. Some of them were infill results from existing resource, really just trying to firm up that resource ahead of the PEA.

Trevor Hall And what are some shareholders--what's shareholder conversation like with Gold Rock now that maybe is--any concern or excitement or what's the conversation like?

Tim Warman Yeah, I think people are getting excited about it. I mean if you think about it you know there there's not a lot of small producers with fully permitted or at least fully federally permitted growth projects out there and I think people are starting to appreciate that, that they know it's a fairly rare commodity right now. And I think they like the idea of you know being able--and keep in mind we haven't raised equity since we picked up these assets two years ago. We've been able to fund all this growth internally. We've been able to fund the exploration the PEA over at Gold Rock, internally we're going to be doing more drilling to extend the mine life of Pan, again funded internally. So it's you know--I think shoulders like that. I think they just like the basic competence of being able to run a business and make money at it. 

Trevor Hall Well and you're kind of in a unique situation because you pass an explorer company and you're not Newmont-Barrick which is basically taking over the whole state in Nevada, you're right there in between as a smaller company. What are some of the good things you can leverage in that position but also what are the challenges of that position?

Tim Warman Yeah, I mean you know there's a lot of competition for people in Nevada right now. It's a busy place, we've got new mines coming online, we've got you know expansions going on in various places and so you know as a smaller company sometimes you have to be a bit more creative in order to retain and attract staff. But we've been pretty successful at that. It's given us a lot of leverage in the sense that you know we can go after projects that you know are going to make a difference to a Barrick or Newmont or you know even a Kinross, or you know companies like that. You know that there's ones out there that we think we can run quite competently. And I think there's a lot of opportunity there. 

Trevor Hall What's this company look like at the end of this bull cycle. You know if gold moves up to whatever it wants to be, but we start moving back down which it's going to happen because it's cyclical. What is Fiore going to be at that point?

Tim Warman I think we want to just be you know what we are now except on a larger scale. We want to be a profitable producer and we want to build the business, you know. I mean we don't do our budgeting at $1500 gold. You know we do it-- think this year we're doing it at $1300 gold and so you know anything above that is great, it's gravy. But we designed the business to run at a kind of long-term gold price and not just something that only works when gold is screaming.

Trevor Hall You've been through a lot of cycles in your career. Where are we at in this one and your thoughts?

Tim Warman I don't know. It's really unusual. You know I mean I started in the business in the late 80s and you know I've listened to you know time and again to kind of young fund managers tell me all this time is different. You know it's not going to go down it's going to stay up and you know it's going to go down. You know it's going to come back up again. Where are we right now? I don't know it's a little different this time. Gold's had a really quick run which has been unusual, and I think people are kind of waiting to see is it going to stick there. You know how long it has to stick for. I don't know.

Trevor Hall Well you've proven that you can run a mine at $1250 gold so that's good. How challenging was that for you at that stage as a CEO like knowing gold was in a pretty tough spot and every company was just really struggling?

Tim Warman Yeah it was--you know there was a there was a lot of nights where I was awake at 3 o'clock in the morning, you know thinking about work and what we're going to do. But you know we've got a good team and fundamentally just kind of have to trust them and you know they know what they're doing and that they can run it profitably and that's worked out you know and obviously the gold prices helped us. But you know we can make money. You know we were making you know generating good cash flow at you know gold prices below $1300. So, I think you know--I wake up at 3:00 a.m. a lot less now.

Trevor Hall (Laughter) That's good. I've heard a lot of people waking up at 3:00 a.m. this week because they're not used to the altitude. So at least you're getting some sleep. Tim, what else do we need to talk about that you want to be sure shareholders are aware of?

Tim Warman Well you know we've got one other interesting thing that's kind of been sitting on the back burner is a project that we have up in Washington state called Golden Eagle and it's got a historical resource from 2009 that was done when gold was $750 that it's about 1.8 million ounces at 1.7 g/t. So it's a little higher-grade, it's refractory but we're looking to consolidate that package up there because you know we like it. It's a cheap project to hold. It's big. And I think I think if we can consolidate it with some of the ground around it you know we could be looking at a multimillion-ounce asset. You know in the U.S., sure it's in Washington state but I mean 10 years ago if you told people that Idaho was going to be a great place to build a mine, they would've laughed at you. So, you know we're hoping to have some developments on that report in the next little while. And again, just advancing Gold Rock and carrying on with Pan.

Trevor Hall And where's that located in Washington?

Tim Warman It's in the Eureka area in in the Republic Mining district and it's a historic mining district that produced about 4 million ounces over the years. Kinross actually just closed the last two mines there quite recently--the Buckhorn and Kettle River mines. Their ore was exhausted, but you know it's an interesting place and it's got it's got quite a mining history.

Trevor Hall So what can we expect to hear from that--is there some geophysical work going on, some drilling? What's happening?

Tim Warman I think what we're planning to do right now is really just consolidate the land package. Our own land package is quite small, we're surrounded by ground controlled by one of the larger producers, but we think we've you know we're confident that we can do a deal with them to kind of consolidate that area. It's known core for them and that opens up a lot of interesting possibilities.

Trevor Hall Before we leave--any updates you want to share about Cerro Tostado or Rio Loa out in South America?

Tim Warman Yeah, those two projects are kind of legacy projects there. They’re earlier stage exploration projects, not really core for us right now just looking for a home them.

Trevor Hall Any conversations about those projects by other companies?

Tim Warman We've had a few sort of expressions of interest but still early stages.

Trevor Hall So those are projects you would get off the books if you had a good opportunity.

Tim Warman Exactly.

Trevor Hall Tim thank you so much. I really appreciate it. And keep up the good work and keep producing some gold. All right. Thank you so much. That's Tim Warman CEO of Fiore Gold, which trades on the Toronto Venture Exchange with the letter F and on the OTC markets with FIOGF.

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