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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Hello, and good afternoon. We hope that you're well, and thank you for joining us today for this webinar on Fiore Gold Ltd. My name is Jacob Willoughby. I'm the Vice President of Research and Analyst at Red Cloud Securities Inc. Joining me remotely today is Tim Warman, CEO of Fiore Gold. We'll begin today's webinar with a presentation on the company by Tim, followed by a question-and-answer period. [Operator Instructions] But before we begin, I'd like to note that there may be some forward-looking statements made in this webinar, and I would direct listeners to the cautionary notes on Page 2 of Fiore's corporate presentation, just located on their website. For Red Cloud Securities Inc., I would highlight that this webinar is for information purposes only and should not be considered as solicitation to purchase or sell securities or recommendation to buy or sell securities. Also, we note that this webinar does not take into account the particular situation or needs of individual investors. Participants should rely on their own investigations and seek their own professional advice before investments. Company specific disclosures for Red Cloud are the following: In the last 12 months preceding the date of issuance of the research report or recommendation, Red Cloud Securities Inc. has been retained under a service advisory agreement by the issuer. And now I'm very happy to introduce to you Tim Warman, CEO of Fiore Gold.
Thanks, Jacob, and thanks, everyone, for taking the time to listen today. I'm Tim Warman, CEO of Fiore. I'll let you read that at your leisure if you want to download it from our website. Starting off, Fiore is a Nevada-based gold producer, developer, explorer. We have a number of very strong assets. And the goal of the company really is to become the next 150,000 to 250,000 ounce producer. And one that's in particular, focused exclusively on the United States. Right now, if you are a U.S. generalist investor looking to invest in a 100% domestic gold producer, we are surprisingly the largest one out there. Every other U.S. gold producer that's larger than us has operations elsewhere in the world. And in many times, a lot more risky jurisdictions, Papua New Guinea, West Africa. I mean you name it, Central America, South America. And I think a lot of fund managers, particularly generalists, just don't have the time or patience to do all of the research on political risk around the world. They just want to know this is in the U.S., we understand the risk profile here. And that's really the niche that we seek to fill. So looking at our assets, obviously, strong cash flow from the Pan Mine, growth organically through our Gold Rock project right next door. It's a permitted project. That will get us up over 100,000 ounces a year. And then really looking to leverage our operational excellence and experience by acquiring other producing or near-term assets. And then just as a kind of sweetener in the deal, we have a third project called Golden Eagle in Washington State. It's a 2 million-ounce M&I resource open pitable that we think is getting very little value and hasn't really been much of a focus for us now. We have some ideas on how to unlock that, I'll talk about in a few slides. As I said, though, we are 100% U.S.-based Pan and Gold Rock in Nevada and Golden Eagle in Washington State. I don't think I need to extol the virtues of Nevada as a jurisdiction, either from a political risk profile or a geological profile. I'll just touch briefly on the company's response to the COVID-19 pandemic. We've taken all the usual steps. All of our people that can work from home are working from home. One of the nice things about Pan is that it's a relatively remote mine. We don't have a camp, though, everyone drives to work from home. And so far, we've been very lucky. There's been minimal cases of COVID-19 in the county, where we are located, which is White Pine County in Northeastern Nevada. And we've really been able to manage quite well. It's had only sort of minimal impacts on production. Even in the event of worst-case scenario where we had to shut down mining operations, we'd still be producing gold for somewhere up to 1.5 years afterwards from residual leaching with a small crew on site. Nevada has declared mining an essential service. And so far, as I said, we've seen very minimal interruptions. I'll talk briefly about the Pan Mine. This is our production base. It's a typical open pit, heap leach mine, that you'll find all over Nevada. Here is an aerial shot of it from about 1.5 years ago, 2 pits, the South Pit and the North Pit, very imaginatively named. There is a major fault that runs through there called the Branham fault that controls the mineralization. And in the 2 areas along that fault where we're mining, you see the North and South Pit. The ore is very different from the 2 pits. So it has to be blended. We bring ore in together, run it through a crusher here on the leach pad, put the leach solution on and we recover gold down here in our ADR plant. It's almost exclusively a gold mine. There's no real silver or copper or anything else in there. And it's a very well-run mine. And one of the key indicators of how well-run it is, is our safety record. We have never had a lost time injury in the history of the mine, which is almost unheard of anywhere in the world. We have won the Nevada Mining Association's Safety Award for our size of mine for the past 5 years running. And really, that focus on safety, I think, just shows an overall focus on operational excellence. You can see we just released our full year financials last night after market. We have an offset fiscal year, so our fiscal year ends in September. We're now into our fiscal year '21. But you can see here, good strong growth in ounces produced from the previous year, all-in sustaining costs held relatively solidly from the previous year. But what really changed between the 2 years is operating cash flow, and that's largely because of the lift in production and also, obviously, the change in gold price this year relative to last. So you see operating cash flow, adjusted net earnings. One thing that I think is really telling for Fiore is 2020 cash flow per share of $0.24, and these are U.S. figures and adjusted earnings per share of $0.18. And if you look at what we're trading at, in U.S., we're trading about $1 a share right now. I think the multiples to EPS and to cash flow per share are still showing that we're considerably undervalued relative to our peers, many of whom don't actually generate these kind of strong cash flow numbers. Here's a look at Q4. Again, we had a very strong Q4 and I think, again, it just speaks to the excellent operating team we have at site at Pan. So we put out our guidance along with our year-end results. So for the coming year, we're guiding very similar production profiles, somewhere between 44,000 and 47,000 ounces a year. Cash costs a little higher between $1,000 and $1,100. And all-in sustaining costs at a corporate level, so all of the corporate G&A costs factored in there, in the $1,300 to $1,350 range. We're seeing costs a little higher this year at Pan, partly because we're going into a slightly higher strip ratio phase this year. We'll be at about a 1.8:1 strip this year relative to a 1.66:1 strip ratio for life of mine. And you'll see that strip ratio start to come down a bit. But we're also seeing like everybody in Nevada is some cost pressure, particularly on the wage front and all the mines in the Nevada are experiencing that right now. And yes, I want to touch on the other things. Basically, it's a pretty similar year to last. A bit more sustaining capital this year. We've got a heap leach expansion -- sorry, nonsustaining capital, rather. We've got a heap leach expansion to account for the recent extension in mine life and also doing some drilling both here and over at our Gold Rock project to advance that towards feasibility. Here's a view of the Pan Mine from above. So here's the South Pit. Here's the North Pit. And one of the things you can see here is that it's a very large land package. The black outline around it is the claim boundary around the Pan Mine itself, but it's just part of a larger claim package that covers about 200-square kilometers. And all along that, particularly along the Branham fault zone that controls mineralization, we see these red zones on the map. And those are targets that were identified by the previous owners of the project but were never drilled. And we are going to get out this current year and drill some of these targets. We've already drilled one of them called the Mustang target, which you see up there to the left of the North Pit. We had some very good hits there last year. We'll be putting more holes into that to try and bring it into the resource and reserve profile in the next time around. But I think what this shows is that we're not geologically constrained. We're not constrained by their land package. We've got plenty of room to continue to grow this mine. And I will say we've been very successful at this over the past few years. If you look at our measured and indicated resources, which you see in the orange bars on that graph on the left, and you see our P&P reserves on the blue lines, we've essentially been unchanged despite all of the mining depletion since we acquired this project in 2016 and put out the first feasibility on it in 2017. You see we've been successful in replacing almost 100% of the reserves and resources over the last 3 or 4 years. And we're pretty confident that we can continue to carry on doing that. So the Pan will continue to be that cash flow generating engine for the growth of the company for the next few years to come. So Pan is running pretty well right now. We've done some things to it like adding a crushing circuit into it. And -- but I think right now, we've got the mine running pretty well and the focus now is on organic growth, and that's our Gold Rock project. And Gold Rock is about 12 kilometers or 8 miles away from Pan as the crow flies. It was -- Pan Mine would sit just behind that range of low hills over to the left there. Over at Gold Rock, there's a small open pit mine left over from the 1980s. There was about [ 4 million or 5 million tons ] of ore mined out of that over sort of start-stop period over a couple of years. But what that open pit does is it helps us with 2 things. One is it gives us a very nice view of the ore body in 3D, and you can see it in the back wall of the pit there, that pinkish, whitish material that is the mineralized zone, and it carries on through both ends of the pit and for about somewhere around 18 kilometers of strike length and very little of that strike length has been drilled. And you can trace that mineralization. It's in the hinge zone of a fold, and that hinge zone shows all of the hallmarks of similar mineralizations what you see at Gold Rocks. So you will see arsenic and antimony anomalies, you will see gold and soil anomalies, you'll see the jasperoid alteration that's so characteristic of these Nevada Carlin-style gold deposits. The other thing this pit shows us is that the pit walls are extremely steep. These pit walls are standing up. Some of them, in some cases, up to around 70 degrees. And that tells us that as we move from the PEA stage, which we just completed this summer into the feasibility stage, we'll probably be able to steepen up the pit walls and reduce some of the stripping ratio from what we saw in the PEA. On this slide here, what you see is Pan up here in the left, you see Gold Rock down to the right, you see Highway 50, the main East-West highway through this part of Nevada, just the north of us there. And you can see the proximity of those 2 projects and the overall very large land package that I mentioned before, 200 square kilometers. The areas colored in red are the defined reserves and resources, both at Pan and Gold Rock. The areas in yellow are the exploration targets. And you can see the extent of those exploration targets, and I'm just going to scribble on the map here. And you can see that, that structure I mentioned just carries on in a straight-line like that. And Pan and Gold Rock are really just one small area -- or sorry, a Gold Rock the mineralization there is really just one small area along that longer trend that we've only really just started to explore. So lots of room for potential upsizing there. And one of the indications -- or one of the things that supports that idea, there's a lot of exploration potential here is when we acquired this, Kinross actually came in as about a 5% shareholder because they like the exploration potential here. Their Bald Mountain mine, which has about 2.2 million ounces of reserves, is just to the north of us, to the north of the highway there in very, very similar type geology. So Gold Rock, about 30% higher grade than Pan, 80 -- a little over 80% of it is an indicated, about 400,000 ounces and another 85,000 ounces in inferred, excellent growth potential and lots of regional exploration potential there. I mentioned the PEA that we completed earlier this year. The PEA really looks at having Gold Rock as a satellite deposit to the operating Pan Mine. You won't see a separate management team or a separate mining contractor or any of that stuff. It will be the same team that currently runs Pan so successfully. We'll be running both mines. You'll see us use a lot of the same facilities there, the same admin team, the same power line that comes in right now from the west there, it's that yellow line that comes up to Pan. We'll just tie on to that and bring power down to Gold Rock. Same access road which we've now extended down to Gold Rock. You'll see the same mining contractor. You'll have a common fleet, so you can swap equipment back and forth as needed. And hopefully, we'll be able to use some of the processing facilities up at Pan as well to save CapEx and OpEx on that. So it should bring down the overall -- particularly the overall G&A cost, site G&A costs for both projects. And the 2 projects together, operating in tandem will produce just over 100,000 ounces per year under the PEA scenario. We'd like to get that production profile a little higher in the feasibility study. But we'll see what comes out of that. The feasibility is scheduled at the moment to be done sometime towards the end of next year. So about 12 to 13 months from now. And you can see some of the PEA numbers in there, about 60,000 ounces a year and CapEx is about $65 million, and you can see some of the financial metrics there at the various gold prices. We did it at a base price of $1,400 an ounce. But obviously, at prices closer to today's gold prices, the financials look even better. And we think there's a lot of room to improve there as well through geotechnical drilling, through growing the resource. We're currently in the midst of a 100,000 foot or about 60,000 meter drill program to expand the resource, do geotechnical drilling, do metallurgical drilling there, condemnation drilling. And that will be going on over the next several months. And in fact, we just released some very good drill results, initial drill results from that resource expansion program a week or so ago. The current target -- sorry, I should say, for Gold Rock is to have that in production sometime around late 2023, early 2024 under the current schedule. One of the nice things is that it's federally permitted. So that long federal permitting process is behind us, and we really control the schedule there. I'll just talk quickly about Golden Eagle. Golden Eagle is a third project, Washington State, just outside the town of Republic Washington, a historical mining district mining there since the late 1800s, right up until 2017 when Kinross put the last 2 mines on care and maintenance in the area of Buckhorn and Kettle River Mines. It's 2 million ounces of measured and indicated, open pitable. It is a sulfide deposit. So it's not a heap leach-type operation. The biggest issue we have with trying to move forward on Golden Eagle is that the land package is very constrained. And if we were to put an open pit around it, we would need the edges of the pit to go into the ground on either side of us, which is controlled by Hecla. We proposed to Hecla that we merge the ground with their ground and JV it and spin it out. Those discussions haven't been going particularly quickly. For whatever reason, it's difficult to get engagement from Hecla. We think it's a great idea and a win-win for both companies. I will say, in the meantime, it costs us $10,000 a year to hang on to these 2 million ounces, and there's no clock ticking, no payments, no -- of companies like Integra. Right now, I think they're sitting at -- I can't quite read my own writing there, but certainly, well north of the current sort of $140 million valuation that we're seeing for Fiore just based on the Pan Mine. So spinning that out, we think, is a win-win situation. But again, we'll try and advance this, this year, if we can get some progress with Hecla. We have a very simple capital structure, 98 million shares outstanding, about 8.7 million options and RSUs. There's no warrants. So about 107 million shares fully diluted. We have no debt. We haven't issued equity since 2017. So all of this advancement we've done with moving Pan ahead and advancing Gold Rock and getting the resource on a Golden Eagle, all of this has been done strictly with cash flow from Pan. You'll see our current cash position, CAD 31 million, USD 23 million, very strong working capital position at a market cap sitting at around $140 million and some pretty solid analyst coverage, including Jacob Willoughby here at Red Cloud. From a value proposition point, I think just about any metric you care to name, consensus P/NAV, price to cash flow, any of these EV production ounce, we're still considerably undervalued. So even though the share price has had a pretty good run. We're up probably 1.5 years ago, we were sitting at $0.40. We're sitting closer to CAD 1.50 right now. I still think the stock has a lot of room to catch up with our peers, many whom are operating in some fairly difficult jurisdictions, certainly much less desirable jurisdictions than the United States. So just to wrap up, we've always tried to sort of under promise and over perform. And I think we've delivered on that. We said we get Pan successfully ramped up and generating cash flow, and we've done that. We installed the crushing circuit, got that operating on Pan to increase our recoveries. We've grown the reserves and resources 2x now and continue to add to those resources and extend the mine life, which now runs out to 2025. We got Gold Rock permitted. We've got the PEA and the resource update out on that, and that's now into feasibility, and we got our Golden Eagle resource. And so coming up, it's going to be a very busy year over the next year. We've got all the work coming out of the Gold Rock feasibility study. So a lot of drilling, a lot of metallurgical work, a lot of other technical work that's going to drive that project ahead. We'll have resource expansion drilling continuing at both Pan and Gold Rock. In fact, the drills will be turning again very shortly at Pan to continue that resource expansion work. We'll have some regional exploration. We're actually going to get out and get some boots in the ground and look at some of these more distal targets, the big property package, and there's lots of exploration there to do. And of course, consolidation of some smaller producers. You're seeing a lot of sort of at the market consolidation done. We like that model. We like the idea of bolting together small producers. A 40,000 to 50,000 ounce single-asset producers are not really that interesting. But when they're bolted together with a strong operating management team as Fiore has, we think it makes a lot of sense and really starts to grow into that 150,000 to 250,000 ounce producer profile, particularly U.S.-based producer profile, which is what we're aiming for. And I'll just leave everybody with my favorite shot of the mine there. This is the South Pit looking North. The trucks and the loaders and the blast hole rigs and the snowy mountains of Nevada in the background. And happy to take any questions.
Great. Thanks very much, Tim. We do have a number of questions. Some of them we can get through pretty quickly because you may have actually answered them, and people missed it. So just to start with one of our participants asking what was the CapEx at Gold Eagle?
So Gold Eagle, to be honest, it was a -- we didn't do a PEA on it. We've just done a resource update. So I can't even recall what the CapEx is. In any case, it would just be a sort of thumb-suck CapEx for it. It is a longer-dated project. It's not permitted. It's in Washington State. And Washington State is not as easy to permit in as, say, Nevada, certainly. We think it's doable. It's in an old mining district. But that's really why we want to spin it out. We think it needs its own management team, its own focus to really kind of drive all that stuff and push it forward. We haven't been pushing ahead on it a lot on our own right now. It hasn't been a priority. That's been more of the focus on Nevada.
Okay. Interesting question here from one of our participants asking if there are any known high-grade underground targets beneath Pan?
Yes. So Pan -- between Pan -- Pan, a lot of the mines in Nevada, as they've drilled deeper, have found these high-grade zones, that's typically more in the Northern part of the state, up near i-80 with a big Nevada Gold Mine mines and things like that. But we have some expert of geos working for us who know those areas quite well. And they're itching to drill some deep holes under Pan to see what's there. And we may get a chance to do that this year, just depending on all of our plans and resources and everything.
Well, like a common expression in the mining history is the gold didn't fall from the sky. So it had to come from somewhere, right?
I don't ever want to talk about a feeder zone unless I found one, though.
Okay. Fair. Another question here, just asking about Pan's processing facility, and is it set up to handle production from Gold Rock?
Yes, partly. So the idea would be that these are leach mines. So the processing facilities are pretty simple. The -- so you're going to build leach pads, we might as well build those over at Gold Rock. There's actually more room to build them over there. They're probably simpler to build. And it wouldn't pay the truck the ore over. But what we're looking at doing is putting what I called carbon columns over there. If you're not familiar with the leach process, what happens is you put a dilute cyanide and water solution onto the ore, it trickles down through, dissolves the gold out, you capture it on a plastic, big thick plastic sheet at the bottom. And then you run it over charcoal, which is basically made from coconut shells. And that charcoal is essentially activated carbon. It pulls the gold off the cyanide. And then once you've got that gold loaded up on the carbon, we call it loaded carbon, what we're looking at doing is trucking that carbon over to Pan and using the stripping circuit and the carbon regen circuit and the refinery over at Pan. We'd probably need to expand the facility over there a little bit. We might need to modify some permits over there to take in material from off-site. But I think notionally, that's a better alternative. It uses a facility that's already there.
And that's partly why the CapEx from the PEA for Gold Rock was so modest, right?
Yes, we think so. Yes. Yes. I mean it's an open pit heap leach mine. There isn't a lot. And we would use contract mining. So other than stripping and building the leach pads and ponds and things, there isn't a lot to build. There's no mill. There's no -- nothing like that.
Okay. Another question here from a participant asking if there's any drill plans for Gold Eagle in 2021?
Yes. We haven't planned for any drilling up there. Again, the focus has really been on Nevada, and we don't want to spread ourselves too thin, right?
Yes. Okay. Another question from a participant asking when you expect first gold pour at Gold Rock?
So notionally, right now, it would be in early 2024. So construction will be completed in 2023. And then we start stacking ore on the leach pads. And it always takes a little while before -- the great thing about heap leach mines is that there's always a delay between the time you put the first ore on the pads and the time you put the first gold out of them, or at least any significant amounts of gold. So -- it's usually a few months at least.
Okay. Another question from a participant asking, if you see any potential for much higher-grade ore in the Pan or Gold Rock exploration targets? Or would it be of a similar grade if it's there?
Yes. Pan so far is pretty consistent, at least what we've drilled there. We don't see any real high-grade cores there. It's actually pretty uniform. At Gold Rock, we've seen some higher-grade material in some of the drilling that we've done. We've drilled a bunch of core holes recently. Most of the drilling previously have been RC, but we've drilled some core holes. And once we get those processed, that will help us to understand the geology better there and see if any of these high-grade zones link up across any obvious structures. So I'd say that the potential there is at Gold Rock more than at Pan.
Right. Another interesting question here from participants asking what you think of the Northern Vertex merger with Eclipse?
Yes. It was an interesting one. Look, we -- it's no secret that people can probably guess that Vertex is among the projects we've looked at and that would kind of make logical sense to do a sort of consolidation in the Southwest U.S. Yes. I mean Eclipse is obviously very early pre-resource, pre-permitting, pre-anything stage project. So yes, it's more of addition of some early-stage stuff, I guess, I don't really see that it changes the production profile all that much. We're kind of more keen on building the production side of the company right now, although it's not to say we wouldn't be opportunistic and pick up a good exploration project if the opportunity presented itself so. Yes.
Right. Another question here, asking if Golden Eagle has any kind of smaller or higher grade core to it?
Yes. So Golden Eagle is interesting. It's a lot like the way Osisko, the original Osisko looked at Malartic. It was an old high-grade underground mining camp where they went in and said, look, is there a possibility to do an open pit, lower grade, kind of more bulk tonnage-type operation. And that's really the same as at Golden Eagle. These were all high-grade underground mines, narrow vein kind of stuff. So yes, there is higher grade zones underground. And a lot of the drilling focused on those. So yes, I mean, I think, again, we've only done a resource on it. We haven't tried to do mine sequencing or mine planning or any of that kind of stuff. We more just wanted to get the potential of that project out there in front of the market and in front of investors so that they could see what it was. And yes, there's a lot of work still to do on it to identify, is there a kind of early-stage, high-grade zone you could pick up just to help the cash flow and improve the economics on it as you mine it.
Great. Okay. Another question here. Just wondering if you're actually seeing any serious acquisition opportunities? Or do you feel like that you've looked at everything and you're kind of good for now?
No, we're still looking very hard at opportunities. We're focused on the U.S. My sort of thesis on this is that the more different it looks than Pan and the more -- the further away it is, the better it's got to be. So another open pit heap leach opportunity in the Southwest U.S., I would jump at an underground silver mine in Peru, probably not interested. So somewhere in that continuum, I think we'll find something. But it is proving to be harder than I thought it was going to be, to be honest.
Yes. Sort of like back in the day when HudBay went from underground zinc miner to massive open -- in Canada and the U.S. to a massive open pit copper miner in Peru, right?
Yes. Yes.
There's a bit of a change in focus and strategy there. I don't like to complement people, especially on a webinar, but there is somebody here who want to say that you're doing an excellent job and great work and both on the project and marketing.
Well, thanks. That's -- I'd say that's largely down to my team.
Okay. Interesting question here from a participant asking if in your discussions with Hecla, was there any idea ever of maybe doing an asset swap?
Yes. No, we haven't even got that far, to be honest. We approached the idea. We -- I've had a conversation with Phil Baker, their CEO. I've talked to their corp dev people. I've talked to their COO. And it's all, yes, we think it's good idea. Yes. No, absolutely, we should keep talking about it, and it just never gets beyond that stage. So it's a bit frustrating.
Okay. Another question here. Interesting one as well, saying that in the presentation mentioned that they can see that ore is blended from the north and south at Pan and just wondering if one pit could has a longer mine life than the other and how recoveries might be affected if you weren't able to blend the 2 pits?
That's a good question. So in fact, that's actually -- it goes back to the early days of Pan. It was built by Midway Gold. And Midway for a number of reasons, decided to only mine from what's called the South Pit, which has -- or that's very amenable to leaching without crushing because they were going to put the crushing circuit in at a later stage but what they found was they mined about [ 4 million tons ] of that South Pan ore and put it on the leach pads before they could start irrigating it. And when they did start to try irrigating it, it turned out they had [ 4 million tons ] of clay on the leach pad, and clay doesn't leach very well in a big lump on the leach pad. So we had to -- I mean that's what essentially drove them into bankruptcy and why we were able to pick up that asset and the other 2 for $5 million back in 2016. But we had to do a lot of work remediating that. That involved blending in the North Pan ore, which is the very hard rocky ore that needs to be crushed. And we originally ran it as run-of-mine where we just blended the 2 ores on the leach pad without crushing. We sacrificed a bit of recovery, but we've got percolation through the leach pad, and that's the key to getting gold out. We've since installed a crushing circuit that sort of gives us much better recovery from that North Pan ore. But yes, that blend is key. And fortunately, for us, the 2 pits are relatively well balanced. And that's largely through our own activities because we basically said, look, there's no point in finding a whole lot of clay ore if we don't have that rocky ore to blend it. So let's focus on building up the inventory of rocky ore first, and then we can go hunting on, which was why almost all the drilling has been done around the North Pit, and we still haven't done much drilling at all around the South Pit, although that will change in the coming year.
Right. Right. Okay. Now here's a question asking about if gold pour from Gold Rock doesn't happen until '24, what are the milestones that are going to go on in '21 and '22 and '23?
Yes. It's a very good question. So feasibility is going to take until the end of next year. We'll have a lot of the information in hand before that. But there's a lot of drilling to be done. There's about 200,000 feet of drilling that's got to be done. There's column testing. There's all this met work, none of which can be really sped up. It takes time to do, particularly at the pace of the assay labs are turning around data for us right now. And so once all that gets done, the design work gets done, the feasibility study, then we can make a go, no-go decision. And then after that, you really got to get into the detailed design, the actual -- how are you -- in great detail, are you going to build these facilities. And there's also state permitting to be done. We've left about a year to do state permitting in that process. And that's pretty well in hand. Nevada is a fairly straightforward place to do state permitting. You've also got to finance the mine. We're going to have some kind of a debt-equity combination to finance it, even though we're generating pretty good cash flow. It's not enough to build a whole mine. And then really construction, you've got probably a 12- to 18-month construction window in there with procurement and everything else. And that all kind of runs together and culminates in loading first ore on the pad, sometime in late 2023. So around this time in 2023. So there's a lot of work that goes into building a mine. It's not just going in and start digging.
There is. And there are very few things in the mining industry that go well when you try and do them quickly.
Yes, yes.
Okay. Another question here from a participant asking, would you only consider M&A opportunities in the U.S.? Or would you look at other countries, obviously, with good jurisdictions?
Yes. We'd probably look in Canada. I think from a U.S. investor point of view, there isn't a huge political risk differential between Canada and the U.S. in terms of mining. Would we go to Mexico? Maybe. I've worked in Mexico before. I used to run Boliden's exploration programs in Mexico. Everybody that operates in Mexico says they're in the safe part of Mexico, which I guess is all of Mexico. So yes, I think we just have to balance it out. If it were an amazing opportunity, we just couldn't pass it up, then maybe we go, but I think we'll stick to the safe jurisdiction thesis for now.
Yes. Okay. That's most of our participant questions. So I had a couple of questions that came up in seeing your presentation. You mentioned an opportunity to go to 17,000 tons a day on throughput. How would you go above that? What would be needed for that?
Yes. So I mean the mine -- so right now, Pan runs at about 14,000 tons per day of throughput. We're permitted to go to 17,000 tons a day without any permit modifications at all. What would probably be needed are some modifications to the crusher. That's really our bottleneck right now is getting material through the crusher, especially when it's wet and the ore gets sticky and hangs up on everything and causes no end of headaches for our operators. But I think we would go to a different feeder on the crusher. That's probably about $1 million worth of adoptions to the crushing circuit. And beyond that, that's about it. It's really -- and of course, we might have to add a few trucks, but that's really easy because we use a contract miner. So it's just a matter of them bringing in more trucks and operators.
Yes. And it's not like you have a ginormous open pit. It's actually kind of a cute little pit.
Yes. Yes. My -- we have 100-ton haul trucks down there. And I mean they look big when you're standing beside them. But my wife who look -- who works for Barrick, first time I showed her a picture, she said, oh, look at the cute little trucks.
Right. Okay. And the other thing I was maybe wondering if you could talk about a bit was the room to improve Gold Rock. Now I have some ideas about that, but maybe some of our participants would like to hear about that.
Yes. So there's a couple of things there. One of them is that I mentioned the -- how steep those existing pit walls are. And that's kind of key because those pit -- that pit stood up since the late '80s. Nothing's happened with it at all. And it's not failed, it's not cracked. It's not -- there's really nothing -- there's a little bit of natural sluffing of small fragments off it that are on the couch benches. But we've opened up that pit and gone back into it. And what that tells you is that the assumptions that we made from a geotechnical perspective in designing the conceptual pits for the PEA, we're probably pretty conservative. We didn't have any geotech information at all. We hadn't drilled any geotech holes. There wasn't any information available from back when that mine was in operation in the '80s. So we've got a number of geotech holes planned. Where, in fact, we're logging geotechnically with specialist contractors, all of the core holes we're drilling there to add to that geotech database. And we think we're going to be able to steepen up those pit walls from what was in the PEA design. And that really has an amazingly strong impact on the stripping ratio and on the -- because if you -- and also on the CapEx because the CapEx, almost 1/4 of that CapEx is capitalized pre stripping. So stripping that has to be done before we start mining. And if we can get that strip ratio down as well. It impacts both the CapEx and the OpEx. It means you've got to build smaller waste dumps. You've got to move less waste rock, all kinds of benefits. So that's probably the biggest one. Growing the deposit, getting the throughput up. A lot of those costs are fixed costs. So you want to apply them against a larger ounce production base. And then looking at some -- optimizing some mining techniques and then the process flow sheet as well. We went with a -- what's called a vat leach scenario for the PEA. That was largely because we've got a little bit of ore in there that has high reagent consumptions. And the vat leach scenario seem to make more sense. As we do more work on it, it looks like that, that ore that has high reagent consumption is actually a pretty small fraction of the overall ore, and we could probably just segregate it and not worry about it. You go back to a heap leach scenario. So -- and we think there's a whole bunch of areas there to optimize.
Yes. I certainly agree with all of those. It looks like my question about the 17,000 tons a day spurred a question from a participant asking, of course, when can you do that? And would it equate to growth in production? Obviously, it's not for this coming year because you've already given guidance.
Yes. Yes. It's -- it would take a bit of lead time. One of the key things would be how do we replace the feeder on the crusher without stopping the crusher for too long and interrupting our production. We can go back to run a mine, but again, we lose grade on that, and we just haven't done the cost-benefit analysis on it that we need to do. We got a -- we hired a new Director of Technical Services, again, away from Barrick. He joined us earlier this year, and he's a metallurgist by training. So he's going to be doing a lot of that cost-benefit trade-off right now, but he's been focused on a few other things for the moment. But yes, it would probably take 8 to 10 months to do that from the time we did the work, ordered it, got the lead time, got it built and then figured out a way to quickly swap it out for the existing feed circuit on the crusher. And obviously, it's a -- it's an increased throughput, so you'd get increased gold production out of it. But we just don't care quantifying that.
Yes. Another question popping up here. Interesting, asking me if you're keeping in touch with your neighbors and what they are doing and what kind of early-stage project is -- or would be a good addition to the company, if you don't find something that's in production that you could acquire?
Yes. Yes, we absolutely keep touch on -- keep tabs on what's going on there. Our VPX lives in Elko. So he's going in the state...
The metropolis of Elko?
What's that?
The metropolis of Elko.
The metropolis of Elko. 20,000 people, I think, in Elko. Yes. But -- So I mean it's a center of mining in Nevada. And so he's in constant contact with all that's going on in Nevada. We talk to -- we know all the companies that are around. We talk to McEwen. We talked to -- we've actually done visits back and forth, just informally with McEwen Mining's Gold Bar Mine. We're watching what's happening with Matt Lennox-King's company, the name slipped my mind, Contact. In the Green Springs project, very similar geology to our Gold Rock project. And just really all the exploration projects that are going on there. So yes, we keep pretty close tabs on Nevada in general.
And one of the nice things about visiting neighbors that had some of our operations is you can learn different tricks and things that can help by doing that.
Yes, absolutely. We've come away from sites going. We need to do that as soon as we get back to Pan. We need to start doing that. So yes, it's great. It's great. Everybody -- we're good operators, but there's always people out there who have thought of something that we haven't thought of. So...
Yes. Yes. Okay. That was a lot of questions. That was fantastic. I want to thank our participants for that. To be honest, sometimes it's just me asking questions, which is okay, but I think it's better if it comes from our participants because then I know that it's something that they want to hear instead of something that I might want to hear. But I'd like to thank you, Tim, for being with us again. Congratulations on a fantastic year. This is our last webinar at Red Cloud for the year. So thanks, everyone, for tuning in for as many as you did. We're going to continue to try and bring you these very informative and important access to companies for the future. And I hope everyone has a wonderful break. If you have a holiday, I hope you get to be with your friends and family, while not disobeying the protocols that we all need to follow at the time being. And I'll wrap that up there and just say happy holidays to everybody from all of us at Red Cloud, and thanks for participating.
Thanks, Jacob.