The Minnow That Swallowed The Whale Pt.II – Firesteel Resources Inc (CVE:FTR, FRA:2FN).

Palisade Research February 12, 2018
Category: Research

 

Here’s a little recap. . .

We first covered Firesteel Resources last November.

Back in June 2017 Firesteel signed a joint venture (JV) agreement with Nordic Mines AB (NOMI) to operate the Laiva Gold Mine – a fully-permitted mine located in Finland. The project has C$325 million of prior exploration and development and the mill is only two years old – and it was recently given a liquidation value of C$100 million.

Firesteel was to provide the financing and resources required to restart the mine. This included an investment of C$20 million in separate stages to acquire 60% of the JV, with the eventual option to acquire the remaining 40% for the fair market value in cash or shares.

Laiva’s previous owners had poor mining practices that resulted in a lack of metallurgy, poor grade control, and severe dilution. This all led to low mill capacity utilization and throughput, which resulted in enormous operational costs.

This problem was exaggerated by low gold prices and substantial debt loads – operations failed in just two years.

However, through the advice of their mining and geological consultants, and a turning gold market, Laiva is now poised to be a profitable gold mine.

And one with substantial exploration upside. . .

In just a couple of months after the initial agreement, Firesteel announced the signing of a definitive agreement with Pandion Mine Finance LP for a financing of US$20.6 million via a prepaid forward gold purchase agreement. The JV was closed, and Firesteel acquired 60% of the mine.

Last week, Firesteel acquired the remaining 40% by issuing NOMI 58.4 million common shares, with a deemed issue price of 9.66 cents per share – or an aggregate deemed value of $5.6 million.

While the transaction gives NOMI 40% of Firesteel’s issued and outstanding shares – the deal was accretive.

 

Firesteel’s price target increases from 33 cents to 34 cents – a 224% gain from the current price.

If all things come together, Laiva should be in production by July 1, 2018 and fully ramped up before September.

At current prices, Firesteel Resources offers shareholders substantial upside going forward – especially as I expect the price of gold to keep trending higher throughout the year. . .

By the time Laiva starts producing – they could be making much more money than the market realizes.

Palisade Global Investments Limited holds shares of Firesteel. We receive either monetary or securities compensation for our services. We stand to benefit from any volume this write-up may generate. The information contained in such write-ups is not intended as individual investment advice and is not designed to meet your personal financial situation. Information contained in this report is obtained from sources we believe to be reliable, but its accuracy cannot be guaranteed. The opinions expressed in this report are those of Palisade Global Investments and are subject to change without notice. The information in this report may become outdated and there is no obligation to update any such information. Do your own due diligence.

 

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