Updated: Calibre Mining to acquire Fiore Gold

In another sign that it’s not just large mining companies looking at M&A deals, Calibre Mining (TSX: CXB; US-OTC: CXBMF) is buying fellow Canadian miner Fiore Gold (TSXV: F; US-OTC: FIOGF) in a deal it says will create a diversified, Americas-focused mid-tier gold producer.

Under the deal, Fiore’s shareholders will receive 10¢ in cash and 0.994 of a Calibre common share for each Fiore share they own, for an implied price of $1.80 per Fiore common share, and a 36% premium based on the 20-day volume-weighted average price of both companies.

If the deal is finalized, existing shareholders of Calibre would own about 78% of the combined company, and Fiore shareholders would own about 22%. B2Gold (TSX: BTO; NYSE-AM: BTG) would also have minority ownership, as it holds approximately 37% of outstanding Calibre common shares.

Fiore owns the producing Pan open-pit heap leach gold mine in Nevada, 28 km southeast of the town of Eureka, on the Battle Mountain – Eureka gold trend, and the adjacent, fully permitted Gold Rock project. Fiore also owns the past-producing Illipah gold project, also in Nevada’s Battle Mountain-Eureka trend. In addition, Fiore owns the Golden Eagle project, about 5 km north of the town of Republic in Washington state’s Republic-Eureka mining district.

The Fiore assets would be added to Calibre’s portfolio, which includes the Limon and Libertad gold mines in Nicaragua, and the Pavon gold project, also located in that country. Calibre acquired the two mines from B2Gold in 2019.

The deal would see the new combined company producing about 245,000 oz. gold per year, at an all-in sustaining cost of US$1,020 per ounce. The total would include about 50,000 oz. a year from Fiore’s Pan mine.

Calibre’s chairman, Blayne Johnson, believes the deal with Fiore is just the type of diversified, value-added growth the company has planned since it acquired its Nicaraguan assets from B2Gold.

“The addition of a top-tier, low-risk mining jurisdiction in Nevada creates a lower risk profile with greater asset and country diversification,” he said in a press release. “This transaction unlocks value for both Calibre and Fiore shareholders and further demonstrates Calibre’s commitment to building a quality diversified mid-tier gold producer.”

According to Fiore’s CEO, Tim Warman, there is “a great deal of common ground” between the two companies. “In the past few years, we have both overseen the successful ramp-up of our respective assets through solid operating discipline and ESG focus.”

Warman also said that Calibre and Fiore have a “shared culture of operating and fiscal integrity that creates an excellent fit” and that the deal will give his company’s existing shareholders exposure to a considerably larger and more diverse production profile.

In a research note commenting on the deal, Farooq Hamed of Raymond James described the acquisition as “pricey” but said it improves the company’s risk and production profile and adds free cash flow and cash. “Overall, we see the Fiore acquisition as a good first step in a broader roll-up strategy for Calibre as it diversifies political risk while adding a producing asset that generates free cash flow, adding net cash and a pipeline of development options.”

“With development assets including Fiore’s Gold Rock project and Calibre’s Eastern Borosi project, we believe the combined company could push towards annual production  of 300,000 oz. in the 2025 timeframe,” Hamed added. The analyst also noted that a preliminary economic assessment of Gold Rock completed last year estimated the asset could produce about 52,000 oz. gold annually over a seven-year mine life. The early stage study estimated initial capex of about $64 million. Gold Rock “provides Calibre with a mid-term, low capex development option,” Hamed continued. “The project is currently undergoing further drilling and is progressing to feasibility stage, with potential for initial production in 2024/2025.”

BMO Capital Markets analyst Brian Quast views the deal positively, saying it pulls all the right levers. In a research note, Quast says acquiring Fiore improves diversification of Calibre’s asset base, while growing the production profile and development pipeline. He expects that with the increase in gold production coming from the three operating mines, the larger combined company is expected to attract investors, which could result in the company’s valuation expanding.

With the acquisition, Calibre “expects its near-term production profile to increase to 245,000 oz. per annum at a ~$1,000 per oz. AISC,” he wrote. “This represents a 40% increase in production from the base of 2021 guidance, at a relatively flat AISC/ounce…We expect Calibre’s debt-free balance sheet ad ongoing free cash flow generation to support the development of its bolstered growth pipeline.”

Quast expects the deal to go ahead as written, though he points out that the transaction still requires the approval of at least 66 2/3 of the votes cast by Fiore’s shareholders, a majority of votes to be cast by Calibre’s shareholders, as well as the approval of the Supreme Court of British Columbia. The boards of both companies have already unanimously approved the acquisition, and are recommending that their shareholders vote in favour of the agreement. Shareholder meetings and closing of the transaction are expected in January 2022.

At presstime, Calibre was trading at $1.55 within a 52-week range of $1.26 to $2.80. The company has 339 million common shares outstanding for a market cap of about $526 million. Fiore was trading at $1.55 per share within a 52-week range of 95¢ to $1.65. Fiore has about 101 million common shares outstanding for a market cap of $156 million.

— This story was last updated on October 26.