Post GRP/Fiore Merger Update with CEO Tim Warman

Nick Hodge gets an update from CEO Tim Warman on Fiore Gold's ramp-up activities at the Pan mine in Nevada.

Fiore Gold is busy ramping up production at the Pan mine in Nevada, will soon go to work on Gold Rock, and has its eye on more acquisitions.

Nick Hodge: Hi. I'm Nick Hodge with the Outsider Club. I'm sitting down today with Tim Warman, who's the CEO of Fiore Gold (TSX-V: F)(OTC: FFRRF), which is the company formed after the recent combination of Fiore Exploration and GRP Minerals.

As members of Nick's Notebook know, we actually financed both of these companies, Fiore Exploration and GRP Minerals independently, prior to their merger, but they've now come together and Tim Warman is the CEO. Tim, I just wanted to say thanks for joining us today.

Tim Warman: Thank you, Nick.

Nick Hodge: For those of us new to the story or even for those that invested in either Fiore or GRP, can you give us just brief overview of the new entity? What happened that allowed the two companies to combine? What your mission is now?

Tim Warman: GRP, if you remember, was a private company that was formed specifically to acquire the assets of the former Midway Gold, at bankruptcy, and get those up-and-running again. They purchased probably $200,000,000 worth of assets from the bankruptcy trustee in 2016 for $5,500,000 US dollars, so a very good deal there.

They invested about $18,000,000 or $19,000,000 in getting that mine, the Pan Mine, which was the key mine for Midway, getting that back up-and-running, sorting out the problems that had really sunk Midway.

Doing some new drilling, actually quite a bit of new drilling, to get a better handle on the resource, getting SRK to completely redo the resource model and the feasibility study, and then restarting the mine with the strategy of blending ore from two different parts of the deposit in order to basically ameliorate, or overcome, the problems that had sunk Midway.

We can talk a bit more about how that ramped up and that turnaround has gone. Of course, Fiore Exploration is a company that had been put together by Frank Giustra and some of his colleagues. We were initially focused on earlier stage exploration projects in Chile and other parts of Latin America.

I think we quickly realized that we were going to need a more advanced stage project. We'd been looking for probably the better part of a year since the company was formed in 2016 for a more advanced stage project. We'd looked at a couple and then someone put us in touch with the guys at GRP.

Although it was a little bit outside of our geographic focus, which was Latin America, we just liked the project so much and liked the team at GRP that we decided to push forward on that.

I think it's worked out really well, so the new combined entity is called Fiore Gold. It really brings together the capital markets' ability of Frank Giustra and his team and, of course, the management team in Toronto at Fiore, and the technical operating team that was put together by GRP.

Nick Hodge: Let's talk about the assets that came with GRP. They've got a couple of them. There's Pan, which is in production, and that's the asset they ran into trouble with. Then, there's two other assets, one down the road in Nevada, called Gold Rock, and one in Washington State called Golden Eagle.

It's Pan you guys are currently focused on, where there's been a bit of news recently. Let's start with Pan and let me ask you, can you sum up what went wrong hat Midway wasn't able to complete the development and the ramp up of the asset there? It had something to do with the way they stacked the ore on the leach pad. They ran into some trouble.

Tim Warman: It was not that different from a lot of other new mines. They often run into a few teething problems when they start up. Of course, Midway's was exacerbated by the fact that they had a lot of debt that they'd taken on to build that mine. I think the eventual build ended up costing them a bit more than they had anticipated.

They were relatively short on cash when they finally got the mine into production. Then, they had the debt repayments to make for the construction financing. When they ran into these issues with the leach pad, they just basically had so much debt overhanging them that I think they went from pulling first gold in March of 2015, to filing for bankruptcy in June. It was a fairly quick end.

The principle issue wasn't anything terribly complicated. The Pan ore body, there's two parts to it. The North Pan and the South Pan. In the South Pan, you get material that has very, very good recoveries, very quick recoveries, but it's very clay rich.

In the North side of the deposit, there's very, very siliceous, hard rocky ore, that has very good permeability on the leach pad and allows the leach fluids to percolate through, but has slower recovery because it's much harder and more silica rich ore.

What Midway attempted to do was just go after solely the material from the South Pan deposit. When they stacked that deposit on the leach pad, it essentially formed one big, several million ton blob of clay. As you can imagine, trying to put water onto clay isn't very effective, if you want it to percolate through and dissolve the gold.

Again, when they started irrigating the leach pad with the cyanide solution, it started ponding on the surface. It wasn't infiltrating, and as a result, wasn't dissolving gold, and the mine wasn't producing gold. That's really, in a fairly simple explanation, what happened.

They also had some issues with not understanding the ore body properly and not doing proper grade control drilling, but those are really, I guess, additional problems on top of the main one, which was this clay issue.

The way that GRP and Fiore Gold has addressed that issue, is they went back in initially and dug out a lot of that clay material that was on the leach pad and mixed it with ore from the north part of the deposit, this coarse, siliceous, rocky ore.

It's exactly like, imagine if you had a garden that has very, very clay rich soil, and you would often mix sand with that clay material in order to get the water to percolate through that soil.

That's exactly what's happening here is you're mixing this coarse, rocky ore from the North Pan material, with this clay rich ore from the South, and blending that on the pad. They dug up a lot of the preexisting material that Midway had put on the pad and then going forward as GRP and Fiore and started mining the deposit again.

We started blending coarse North Pan ore with the clay rich South Pan ore, and blending it on the pad. That really solved all of those problems that Midway ran into. Now, the pad is operating as per its design.

Flow rates, we have a certain rate that we try to get solution applied to the pad on. If the pad is working right, the rate at which we apply that solution is exactly the rate that the water and the sun and solution trickles into the pad and then dissolves the gold, which then reports out to what's called the ADR plant. That's working really, really well right now, that blending process.

We've been ramping up the mining rate since March of 2017, under GRP. When we sat down in August, we agreed with the technical team that going forward, we were going to operate the mine for the next year at 14,000 tonnes per day. It's actually permitted for 17,000 tonnes per day, but we thought that 14,000 tonnes a day was a good rate to run it at for the first year.

We said, "Look, we want to get it ramped up. Let's not set ourselves a too difficult a task here. Let's say by January 1, 2018, we want to have this thing running at 14,000 tonnes a day." Then, the technical team turned around and we made this decision in mid-August. By September, they had the mine running at 14,000 tonnes a day. That was the press release we just put out.

Now, it looks as though in October they've again managed to hit 14,000 tonnes a day. I think it just shows the strength of the technical team that they were able to ramp up to this and beat what I had set them as a target, by at least three or four months.

Again, we're starting to produce gold. We've had a record month for ore production and a record month for gold production since we've started mining in March.

Nick Hodge: The news release said that you produced 1,602 ounces of gold in September, which was 167% increase from the month before. It's safe to say you're ramping up. Outside of that 14,000 tonne per day target, can you talk a little bit about further ramp-up and expected annual production coming from Pan?

Tim Warman: The plan for the first year is we're going to run it at a steady state, 14,000 tonnes per day. Our expectation is that we'll produce somewhere between 35,000 and 40,000 ounces of gold this year. That's with a straight run of mine. There's no crushing. There's no processing of the material after it's blasted.

It's just scooped up into the trucks, taken out to the leach pad and dumped on the leach pad and blended with bulldozers.

The one thing we are going to be trialing this year, and actually in the next coming months, is we're going to see what happens when we crush the North Pan ore. There's been some metallurgical testing that suggests that by crushing that hard, rocky North Pan ore, using a crushing system, you can increase the recoveries.

Our goal is to set up two separate leach pad cells on the new leach pad that we're building. That's something I hadn't mentioned before is, as part of the merger, we raised $17,000,000 Canadian, and one of the things that cash was going to fund, was an expansion of the leach pad.

We're, in fact, just about doubling the size of the leach pad at Pan, so that we have lots of room to continue to mine the deposit and continue to put material on the leach pad.

That new leach pad is almost done. It should be done and ready to accept ore by January. They were just finishing up putting the plastic liner on it when I was down in Nevada last week.

On that new leach pad, we're going to create two cells. They're basically going to be 10,000 tonne test cells. One cell will have run of mine ore, blended North and South Pan, just like we're doing now. The other cell will have crushed and blended ore from the North Pan.

We'll be able to compare apples-and-apples and see are we getting enough increased recovery to make it worthwhile installing a crushing system at Pan.

In order to do this, we're actually going to take advantage of a portable crusher that's currently on site to crush what's called the over liner material, which is a crushed rocky material that goes over top of the plastic liner to protect the plastic liner from the trucks that are dumping ore onto the pad. That will give us a good sense.

We think that if we get these increased recoveries, that we're expecting to get from this crushing system, we would like to work on installing a crushing system over the next 12 months with the idea that, that could possibly get us up to the 50,000 ounce gold production, without actually having to increase the ore production, and obviously, that's going to bring your cost down significantly.

Nick Hodge: Can you tell us what the current recovery is and what you would expect to get from crushing the ore first?

Tim Warman: We're estimating, and again, this is based on column tests. The mine hasn't been operating at steady state production rate yet for us to get a really good measure of recoveries, but from the metallurgical test work and from the feasibility study, we should be getting about 60% recovery based on the straight run of mine, what we're doing now.

With a leach pad, typically that recovery doesn't happen all at once. You get an initial fairly quick flush of gold out from the material, as soon as you start irrigating it. Then, the rest of the gold comes out over the next several months. It's a long tail on that gold production.

You really need to operate the mine at a nice steady production rate for at least six months, ideally a year before you really nail down exactly what your recovery is. As I say, from the mat testing and the feasibility study, we're expecting somewhere in the 60% recovery range, which is pretty good for a run of mine operation.

As for what we get with that crushing and blending scenario, I'm hoping that we can get somewhere in the 70 to 75% recovery range, but again, that's just based on some column tests that were done and extrapolating a bit, but ideally, we want to see what actually happens on the leach pad with these test cells.

Nick Hodge: It sounds like problems have been remedied at Pan and you're just looking to increase or optimize the recovery rates to take things to the next level there.

If you don't mind, I'm going to switch gears just a bit and talk about another asset you have just down the road a bit from Pan, and that's an asset called Gold Rock. I was doing a bit of researching, I think you had an article about Fiore in the Northern Miner recently.

You indicated that Gold Rock, again, just down the road from Pan, could eventually get up to 50,000 to 70,000 ounces of gold production annually. Can you talk a little bit about what has you so excited about Gold Rock and what a potential timeline for that might be?

Tim Warman: Gold Rock is a really neat project. If you remember, when we did this financing as part of the transaction, the business combination between GRP and Fiore Exploration, Kinross Gold actually came in and took 9.9% of the combined company as part of that transaction.

What really brought them into the deal was the geology at Gold Rock. Gold Rock is only about eight miles east of the Pan deposit, but it's slightly different geology. It's another Carlin-style deposit, but the geology is ...

Basically, what you're looking at there is a folded-and-faulted limestone unit called the Joanna Limestone. That Joanna Limestone, that structure, that folded, faulted horizon, runs right across that property for about 10 kilometers of strike length.

At the very center of that, you have an old open pit mine that was operated in the late 1990s by Echo Bay. Of course, the late 1990s is when the gold price was heading down towards $250 an ounce. The Bre-X scandal happened. It was really a bad time to be trying to mine, particularly a low grade, Carlin- style deposit.

That mine, I think, wound up in about 1998, but what it gives us is there's a small open pit there. We get a really nice view of the geology in three dimensions. We can see how that geology carries on, right across the whole property. On surface, we can trace the fingerprint of that deposit. We see the geochemistry. We see the pathfinder elements in the soils. We see the gold in soils.

We see the right alteration type, which is what's called this silicified limestone that in Nevada, they call Jasperoid. It's a very distinct reddish color. We see all of these indicators that there's good potential for identifying more mineralization along that long trend.

Again, if you take that same trend and continue about 80 kilometers to the north, you go into Kinross’ Bald Mountain Mine. Bald Mountain has about 2.2 million ounces of proven and probable reserves right now.

Again, this analogy with Bald Mountain is, I think, what got Kinross involved, and the fact that Kinross exploration team is going to be meeting with our exploration team on site to look at Gold Rock, and then go up and look at Bald Mountain, I think, sometime later this month. They're quite interested in offering not just financial support, but also some technical advice as well.

Anyway, the plan is, we're going to be starting to drill at Gold Rock early in the new year. We're going to wait until the worst part of the winter is over because we have an access road that we have to keep open.

We also have to replace a water well that was put in when the old open pit mine was done in the late '90s. That well is no longer usable. We're going to have to drill a new well there. That'll cost us around $40,000 or $50,000 to put that in. That will provide water for the drilling program.

We'll probably drill that water well this fall and then start drilling in the early spring once the weather warms up a little bit. That'll save us a lot of money just in terms of logistics and snowplowing and fighting the weather.

Nick Hodge: I think Bald Mountain is a great analog to the Gold Rock project. As you say, they have over a 2,000,000 ounce resource. That makes Gold Rock high prospective in my mind and obviously, in Kinross' mind as well to come in and take 9.9% of the deal. That's a quality shareholder to have and, as you indicated, that's a partner that's been operating in the area that you can lean on for advice.

That's all good stuff. Tim, I think the last question I have for you is, there's been some talk of maybe potential further acquisitions or consolidations in the Nevada area. Can you speak to that a little bit and leave our readers with maybe what the six to 12 month plan is for Fiore Gold?

Tim Warman: Absolutely. Our goal ultimately is to get to that 150,000 ounce a year production range, which is what we think is a real sweet spot for investors. It's a lot more interesting than what we are now, which is a 40,000 ounce producer.

Really, the way we plan to get there is to increase production from Pan a bit. To get Gold Rock into production over the next couple of years, and then we want to start, well, not then, now. We're already looking quite actively for some acquisitions in Nevada and the surrounding states.

We're really looking for things that are somewhat similar to Pan. Smaller projects that are capable of producing that 40,000 to 70,000 ounce range. Things that don't really make sense in a standalone company, but make a lot of sense once you start putting three or four of these things together and start again, getting up into that 150,000 to 175,000 ounce a year production range.

Again, we think a combined entity with a lot of these or several of these smaller deposits in it is a lot more attractive than again a small single standalone operation. We've been talking with a number of companies, I think, who share that vision, who are interested in becoming part of this larger consolidated entity.

In fact, I'll be meeting with a couple of the CEOs of those companies next week when I'm at the Precious Metals Conference in Zurich.

Nick Hodge: Tim, it's a solid plan. I've been to Pan. I've had boots-on-the-ground there. I think it's a quality project that is now reaching optimization. I think between yourself and Frank Giustra and people like Ken Brunk, you've got quite a team there assembled to continue doing what you're doing and also potentially consolidate the area.

I look forward to continue following your efforts as you ramp up the Fiore Gold story. I just want to thank you again for coming on the program. Again, everyone, that's Tim Warman, from Fiore Gold, that trades under ticker F on the TSXV or FFRRF over-the-counter. Tim, thanks again. I appreciate the update.

Tim Warman: Thanks, Nick.

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