Fiore Gold Ltd

Fiore Gold Ltd (TSXV: F) is engaged in the production of gold and mineral exploration and development of resources. Its projects include Pan Mine, Gold Rock, and Golden Eagle, all based in the United States.

Key highlights 

• Reported Solid Q2FY21 Performance: The firm generated a record quarterly revenue of USD 19.28 million in Q2 2021, owing to a 19% increase in gold output over Q1 2021, at an average realized price of USD 1,770/oz, as heap leach pH levels increased during the period. Furthermore, the company's income from operations nudged by 47% on a YoY basis to USD 5.2 million, driven by higher mine operating income on the back of increased production and relatively higher gold realization prices.

• Update on Increased production in Q3 2021: Recently, the company announced its preliminary production result for Q3 2021, where its gold production increased 8% to 11,756 ounces compared to 10,915 ounces in Q2 2021, as quarterly production trended back to historic levels. Furthermore, it sold 11,741 ounces of gold at an average realized price of USD 1,815 per ounce.

• Strong Balance Sheet: Despite a capital-intensive business model, the company is virtually debt-free with a Debt/Equity ratio of 0.03x and long-term debt to capital ratio of 1.1%, which implies negligible balance sheet risks. Further, the company has consistently deleveraged its balance sheet since December 2019, with the debt-to-equity ratio declining from 0.08x to 0.03x at the end of the Q2FY21.

• Production guidance on FY2021: The management highlighted strong production growth and expects it to be in a range of 44,000 to 47,000 ounces of gold for FY 2021 with a total cash cost per ounce in between USD 1,050-1,100. Furthermore, the company’s initial strategic goal is to create a multi-asset, 100% domestic US gold producer with 150,000 ounces in annual gold production.

Financial overview of Q2 2021 (In $000’s of USD)

Source: Company 

• In Q2 2021, the company reported revenue of USD 19.28 million from the sale of 10,884 gold ounces at an average realized gold price of USD 1,770 per ounce, against a revenue of USD 18.95 million in the previous corresponding period.
• In the reported quarter, the company’s mine operating income surged to USD 7.09 million compared to USD 5.30 million in pcp. The increase in mine operating income was mainly due to lower production cost and lower depreciation.
• Income before income tax stood at USD 5.41 million compared to USD 3.29 million in pcp.
• Net income for the period stood at USD 4.49 million against USD 2.88 million, partially offset by higher income tax.
  

Risks associated with investment

The Company’s financial performance is mostly dependent on the price of gold, which directly affects their profitability and cash flow. Any drawdown in the gold prices would impact the group’s performance.

Valuation Methodology (Illustrative): EV to Sales

Stock recommendation

In Q2 2021, the company came out with the robust performance, strong cash position and almost zero debt; all these factors give a glimpse of strong foundations led by the company to achieve higher growth in future. Furthermore, the management stated healthy production guidance for 2021 along with its strategic goal to create a multi-asset, 100% domestic US gold producer with 150,000 ounces in annual gold production, which would be a appreciable job. Moreover, the gold prices are expected to remain firm and steady in the short-term to mid-term, given the lower interest rates, resurgence of Delta variant COVID-19 cases. Therefore, based on the above rationale and valuation, we recommend a “Speculative Buy” rating on the stock at the closing price of CAD 1.06 on August 11, 2021. We have considered Northern Vertex Mining Corp, Harte Gold Corp, Dynacor Gold Mines Inc. as the peer group for the comparison.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.

Technical Analysis Summary

One-Year Technical Price Chart (as on August 11, 2021). Source: REFINITIV, Analysis by Kalkine Group

Questor Technology Inc.

Questor Technology Inc. (TSXV: QST) is an environmental cleantech company which is active in Canada, the United States, Europe and Asia. It is focused on clean air technologies that improves air quality, supports energy efficiency and greenhouse gas emission reductions.

Key Highlights 

• From modest to large scale, rewarding customer requirements:The Company's highly trained technical staff works with the customer to achieve a 99.99% combustion efficiency. The incinerators range in size from 20 mcf/d to 5,000 mcf/d and can handle small to big volumes of gas. Its incinerators are now employed in a wide range of energy infrastructure applications, including drilling, completions, production, midstream, downstream, transportation, and distribution which provides ample diversity.
  

• Enhancing regulations creates demand for the Company’s services:  The US Environmental Protection Agency (EPA) has issued new regulations targeted at decreasing harmful air pollution generated by crude oil and natural gas industry activities. As a result, California has mandated that open flaring be outlawed by 2021, and other US states are working to strengthen waste gas emission regulations. Mexico has set a target of cutting methane emissions by 75% by 2025. We believe that all these constraints provide the Company a chance to decrease venting through its clean combustion technology.

• Strong financial position: The company continues to have a good financial position, with CAD15.7 million in cash on hand, thanks to cost control and capital discipline. As the economy improves, we believe this robust balance sheet will provide as a platform for expanding into new goods and markets.
  

• Questor announces new Chief Financial Officer: Recently, the management announced that it has appointed Ms Ann-Marie Osinski as its new Chief Financial Officer and Corporate Secretary effective August 3, 2021.
  

Financial overview of Q1 2021 (Stated in Canadian dollars)

Source: Company

• In Q1 2021, the company posted lower revenue, which fell by 66% to CAD 1.5 million against CAD 4.4 million in Q1 2020. Revenue decreased primarily due to lower performance from all the segments due to lower activities in oil & gas industry.

• The company reported a gross profit of CAD 0.03 million in Q1 2021 compared to a gross profit of CAD 1.9 million in the previous corresponding period.
• The company witnessed loss before tax at CAD 1.1 million against a profit of CAD 1.6 million mainly due to net foreign exchange losses and higher amortization along higher other expenses.

• Primarily due to lower revenue and above stated reasons, the company posted a net loss of CAD 0.8 million in the reported quarter against a profit of CAD 1.2 million in pcp.

Risks associated with investments

Global slowdown in macroeconomic environment and a lower crude oil demand offtake are the key risks for the company as it can have significant decline in demand for their equipment and services.

Valuation Methodology (Illustrative): EV to Sales

Stock recommendation

COVID-19 and the macroeconomic climate continue to have a major influence on the oil and gas sector, causing output to be limited. This has had a detrimental impact on the Company's operations and financial performance. Many governmental health restrictions on economies throughout the world began to loosen in Q1 2021. In the United States, this has been especially true. Furthermore, the Company expects that a focus on ESG issues, along with a better economic outlook and higher oil and natural gas commodity prices would result in improved performance in the second half of 2021 and beyond. Therefore, based on the above rationale and valuation, we recommend a “Speculative Buy” rating on the stock at the closing price of CAD 1.80 on August 11, 2021. We have considered CES Energy Solutions Corp, Superior Drilling Products Inc, Pulse Seismic Inc, etc. as the peer group for the comparison.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.

Technical Analysis Summary

One-Year Technical Price Chart (as on August 11, 2021). Source: REFINITIV, Analysis by Kalkine Group

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

Disclaimer

The advice given by Kalkine Canada Advisory Services Inc. and provided on this website is general information only and it does not take into account your investment objectives, financial situation and the particular needs of any particular person. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. The website www.kalkine.ca is published by Kalkine Canada Advisory Services Inc. The link to our Terms & Conditions has been provided please go through them. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations later.