Via Outsider Club:
Nick Hodge talks to Fiore Exploration CEO Tim Warman about its Pampas El Penon gold project in Chile, its proximity to Yamana’s Augusta Victoria, and upcoming catalysts for the company.
Nick Hodge: Hi, this is Nick Hodge, the Editor of Nick’s Notebook. I’m talking today with Tim Warman of Fiore Exploration (TSX-V: F)(OTC: FIORF). This is a company we financed back in September at C$0.55. They are currently exploring the Pampas El Penon project in Chile for gold. It’s located near Yamana’s Flagship El Penon Gold-Silver Mine Augusta Victoria. Tim, thanks a lot for joining us today.
Tim Warman: Well thanks Nick. It’s good to chat with you.
Nick Hodge: Tim, just a little bit on your background here. You were involved with junior mining companies, exploration companies that discovered 30 million ounces of gold over the past decade, and you’re also the VP of Corporate Development at Aurelian Resource, which sold for, I believe it was C$1.2 billion Canadian to Kinross, so you have a bit of background in the space there, quite good background actually. Can you just talk for a second on how you plan to apply that to the Fiore situation.
Tim Warman: Yeah, absolutely. I’ve worked for a number of very successful companies over the past several years. Aurelian Resources, obviously, with the Fruta del Norte deposit in Ecuador that now Lundin Gold is putting into production. I was also involved with the Dalradian Resources, with their Curraghinalt deposit in Northern Ireland, but really the bulk of my background has been in Latin America. That’s really where my strength and my expertise lies, is looking at projects in Latin America, and particularly in places like Chile, which is really known more its copper deposits, rather than its gold deposits.
Right now there’s not a lot of people exploring really anywhere in the world, but in particular Latin America. That really leaves a niche available for people who know the country, who know how to work there, who know the deposits, and have a sense for where the potential lies there.
Nick Hodge: Let’s talk about the potential. You mentioned that Chile is known more for copper, and it certainly is, as the world’s larger copper producer and exporter, but its really up and coming for gold, something like the 14th largest gold producer in the world. What do you see there in addition to your neighbor there, the El Penon Project? Talk maybe a little bit about that project, and then what you see in the geology there.
Tim Warman: El Penon is a gold mine, and a big gold mine, in the middle of copper country. It’s been operating since about 2000, so it’s a long-lived mine. It’s a very low cost mine. It’s really a flagship mine. It’s something like 18% of their production comes out of there. About 225,000 ounces of gold, and quite a large amount of silver as well. It’s actually a significant silver producer. The area immediately around that has not been extensively explored. There’s a lot of cover in the area. There is not a lot of bed rock available. Where there is bedrock available, we’re seeing the same kind of geology that’s associated with the mineralized veins at El Penon. We’re seeing these younger dikes and domes that have intruded the older volcanic rocks.
Typically where they’ve intruded along the margins is where you get these veins. We’re seeing that kind of thing on our properties. We picked up subsequently a couple of other properties immediately around El Penon with similar style of geology. Elsewhere in Chile obviously you’ve got the Maricunga Belt. The Maricunga Belt has a number of mines, but they tend to be fairly low grade projects. What’s been discovered recently up in the north end of the Maricunga are some higher grade deposits, including a project that Gold Fields has called Solares Norte, where instead of using your typical sub one gram Maricunga Belt grade, you’re getting +3 grams in oxide. There’s a lot of new areas opening up there. Again, not a lot of people focus on exploration there.
Nick Hodge: Well let’s talk about the land package that you have. You mentioned Yamana has a huge mine producing something lake a quarter million ounces of gold a year, and over 7.5 billion ounces of silver. You’re the next door neighbor, and you pick up some additional asset from SQM, I believe it is. Talk about the land package you have there for a second, before we get into the exploration.
Tim Warman: Yeah, so El Penon’s kind of an interesting mine, because it’s actually made up of three different mine complexes that all feed into a single mill. Down in the south, there’s the main El Penon mine that’s been operating since 2000. Off to the west, they have a mine called Fortuna, which again, provides ore to the main El Penon mill. Then up in the north, there’s this Pampas Augusta Victoria mine. It’s a combination open and underground mine. Again, it provides ore feed down to the main mill, at the El Penon mill.
Those mines are spread out over about 30 kilometers of the Chilean countryside, which is really the Atacama Desert. We have ground up around the Pampas Augusta Victoria mine up in the north. That’s where we’re currently drilling right now, what we call our Pampas El Penon project. We have projects on the west side and on the north side. We just picked up a couple of small concessions just south of it. We really have that producing mines surrounded on three sides.
In addition, down in the south, just south of the main El Penon mine, we picked up another project called the Cerro Tostado. Tostado is an interesting one. It’s had a little bit of exploration done on it by a company called Sociedad Quimica Y Minera de Chile (NYSE: SQM), who we’ve optioned the ground from. SQM is a fertilizer company and a chemical company. Until recently, it didn’t have any real metals exploration expertise in-house. We think there’s a lot of interesting stuff there to follow up on. It’s really just “closology.” If you think about the three components of the Yamana mine, it’s spread over 30 kilometers, it’s not just tucked in one little area. There’s good potential to be had all around there.
Nick Hodge: Well the reason we made the investment is because one, the exploration potential; two, some of the founders, Frank Giustra and such. We’re really interested in the exploration. As I understand it, you guys have reverse circulation (RC) drills going now. Can you talk about how many drills are going, what the program looks like in terms of how many holes you’re gonna drill, where they’re being drilled, and when we can expect results.
Tim Warman: The program currently going is an 8,000 meter RC drill program. Right now we’re only working with one rig, because RC is really quick to drill. We have no problem getting holes done with that. We’re about halfway through, maybe a little over halfway through that program. I think we’ve got something like 5,000 meters drilled out of the 8,000. The goal there is really to try and identify these epithermal structures on our property that are paralleling the ones right across the border on the Yamana’s El Penon mine. Once we’ve identified those structures and traced them out for a distance, we’ll probably get in with a second phase after Christmas and really start drilling those at a more close spacing, and possibly bring in a diamond rig as well to get a little more detailed information on them.
As I say, this is the first phase and we’re about half way through it. I’m hoping to start getting assay results back in the next couple of weeks. We’ve been drilling since late October, to that’s about 4 1/2 maybe five weeks, which is about a typical turn around from drilling to assay results. Any day now, we should start getting the first assay results back from those holes. Of course, as I said, this is phase one. We should wrap it up before Christmas, and then we’ll take a few days to interpret the results and then get back in with phase two after Christmas.
Nick Hodge: Well we’re certainly waiting with bated breath for the results. As I said, one of the reasons we invested in Fiore to begin with. How about as far as the cash position is concerned. You guys raised what was it, about $5 million, and then another $10 million or $11 million dollars last September I believe it was. Where’s the cash position stand now in the share account?
Tim Warman: We’ve just got a little over 100 million shares outstanding, and cash position in the last filing we did was about $13.5 million dollars. We’re not burning through cash fairly quickly. We’ve got a fairly low G-and-A. I’m the only employee. Everybody else works as as-needed consultants. We share consultants with other companies to save cost. The drilling program in total is going to cost us around C$1.6 million, maybe C$1.8 million. We’ve got plenty of resources left to go to the phase two program, to look at acquisitions, to look at starting to drill on some other programs. Pampas El Penon isn’t the only program we’re working on right now. We’ve got mag survey currently underway on the Cerro Tostado project, and we’re going to get guys in there mapping and sampling to start lining up drill targets for next year there, as well.
Nick Hodge: How about the potential for additional acquisitions, or options on packages?
Tim Warman: We’re in discussions on another couple of other projects. We’ve got Cerro Tostado as our first acquisition. We’re looking at a couple of others. In fact, I just got back from a 10-day trip to Latin America last night. Looking at, again, some more very, very promising projects. There’s a lot of stuff out there. One of the nice things about having myself and our team, that have spent a lot of time working in Latin America, is we know the projects that are down there, so that when somebody takes a pig that’s been offered for the last 10 years, and slaps another coat of lipstick on it, and tries to sell it. We know to avoid those ones, but we also know when we something new, or see something interesting that hasn’t been out there in the market before, and we’re able to move on it quickly.
The other nice thing is that having a relatively well cashed up junior, is we’re able to go in and do deals without having to tell the guys, look, it’s conditional on us going back to Toronto or Vancouver and raising another $5 million or $6 million. We can say, look we’ll commit to the deal. We can spend the exploration money, and advance this quickly. I think that really makes us a bit of a partner of choice.
Nick Hodge: Are you looking in Chile or are you looking in other jurisdictions as well?
Tim Warman: We’re looking in pretty much anywhere in Latin America. There’s obviously some countries that have a higher hurdle rate. You need a better project to make a success of it. There’s a few countries we just wouldn’t go to at all. I think there’s a lot of Latin America that’s available right now and accessible for mining.
Nick Hodge: Tim, last question. That $13.5 million, was that US or Canadian?
Tim Warman: That was Canadian.
Nick Hodge: The point I wanted to make there was, is I looked at stock today, trading with around a C$36 million market cap, a third of that is that is backed C$13.5 million by cash. Really in the market, the exploration potential of the assets you have is not being fairly awarded, especially given the assets that are close to the land packages that you have. I would just like your opinion on that.
Tim Warman: I mean, like everybody, it’s a bit of a tough market for gold over the last few weeks. Like everyone else, we’re getting caught up in that. I think on these exploration projects if anything, now is probably a good time of A, to buy the stocks, and also B, for us to be looking at properties, because we don’t ever want to be a one project company, and Pampas El Penon is really just our stepping stone and our first project to build this company up, and in a way the bit of the downdraft in gold has helped us in terms of when we’re negotiating for projects, it means that they’re cheaper. It also means that the cost of operating them in terms of drilling costs, availability of geologists, that sort of thing has also come down. I think we’re benefiting from that.
Nick Hodge: Yeah, I agree. Just look at last year, you always have tax loss selling at the end of the year. Look what gold and related equities did at the beginning of 2016. I think we could be set up nicely for that again next year. Really looking forward to the drilling results upcoming.
Tim Warman: Yeah, as are we. We’re quite keen to see those first assays.
Nick Hodge: Tim, thanks a lot for taking the time to keep us updated on Fiore and the exploration that’s going on down there.
Tim Warman: Thank you Nick.
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