Calibre Mining Corp. (TSX: CXB) and Fiore Gold Ltd. (TSXV: F) recently announced the signing of a formal agreement in which Calibre would purchase all of Fiore's issued and outstanding ordinary shares. The transaction will result in the formation of a diverse, rising mid-tier gold producer centered on the Americas, with annual gold output of about 245,000 ozs.

Key highlights 

• Calibre will purchase a 100% stake in Fiore's operational Pan Gold Mine ("Pan Mine"), the neighboring advanced-stage Gold Rock Project ("Gold Rock"), and the previously producing Illipah Gold Project in Nevada, as well as the Golden Eagle project in Washington State.

• With annual gold output of roughly 245,000 ozs and an AISC of USD 1,020 per ounce, the combination will establish a diverse, Americas-focused, expanding mid-tier gold producer.

Transaction Details 

• Fiore shareholders will receive 0.994 of a Calibre common shares and CAD 0.10 in cash for its each common share held as part of the deal.
• Based on the closing prices of Calibre and Fiore common shares on October 22, 2021, the consideration amounts to CAD 1.80 per Fiore common share, a 44% premium, a significant plus.
• Existing shareholders of Calibre and Fiore will own approximately 78% and 22% of the combined company, respectively.
• Both shareholders' meetings and closing of the Transaction are expected in January 2022.

Recommendation

The deal, we think, will result in the formation of a diversified, Americas-focused, expanding mid-tier gold producer with annual gold output of about 245,000 ozs. The merged business will have extensive technical skills to capitalize on a pipeline of development and exploration possibilities across a wider portfolio. Furthermore, a strong balance sheet will support the expansion strategy, with a combined cash position of USD 96 million and no bank debt (as on September 30, 2021). Fiore shareholders will receive 0.994 of a Calibre common share and CAD 0.10 in cash for each Fiore common share retained, implying a total consideration of CAD1.80 per Fiore common share. As a consequence, we believe that both parties will benefit from this arrangement. Hence, based on the rationales and synergies described above we propose a “Sell” rating at the closing price of CAD 1.54 as on 26 Oct 2021.

One-Year Technical Price Chart (as on October 26, 2021). Source: REFINITIV, Analysis by Kalkine Group

*The reference data in this report has been partly sourced from REFINITIV.

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