Mr. Joseph Conway reports
PRIMERO PROVIDES REVISED CORPORATE GUIDANCE AND EXPLORATION AND OPERATIONAL UPDATE FOR THE BLACK FOX COMPLEX
Primero Mining Corp. has provided an operational and exploration update on the company's recently acquired Black Fox complex as well as a revision to its corporate production and cost guidance. Based on a recent operational review, the company expects to produce between 220,000 and 240,000 gold equivalent ounces at $675 to $725 cash costs per ounce in 2014. This represents a modest decrease in production and a modest increase in costs compared with previous estimates.
Black Fox production guidance changed moderately to between 65,000 and 75,000 ounces (original guidance: 70,000 to 80,000 ounces) at unchanged cash costs of between $850 and $900 per ounce. Black Fox all in sustaining costs increased slightly to between $1,400 and $1,450 per ounce. The company also announced new high-grade drilling results that further expand the known mineralization at depth at Black Fox and provide additional confidence in the Grey Fox project.
"I am pleased to note that on completion of an operational review our overall company guidance has been revised only modestly. Although we were encouraged by the 29-per-cent increase in production we achieved at Black Fox during the second quarter, we elected to review our short-term mine plan," said Joseph F. Conway, chief executive officer. "After operating the asset for a full quarter we had gained important information that we have incorporated into the mine's plan. Following our review we remain comfortable with our optimization plan for Black Fox, but have lowered the mine's 2014 production guidance as a result of lower than planned underground throughput and lower than anticipated open-pit grades. We feel confident that with the current increase in investment in underground development, delineation and definition drilling at Black Fox, the underground throughput can be increased to our original plan of 1,000 tonnes per day by mid-2015. In addition, we are very encouraged by our continued success with exploration at Black Fox at depth and confident the Grey Fox deposit will increase its resource base by year-end."
Black Fox optimization plan
The company acquired the Black Fox complex, located near Timmins, Ont., in March, 2014. The Black Fox complex provides Primero immediate production diversification in a prospective mining-friendly jurisdiction, creates critical production scale and exposes Primero shareholders to significant exploration upside potential. This also generates an opportunity to leverage the company's technical underground mining expertise to optimize another undercapitalized underground mine, as was the case with the San Dimas operation at the time of its acquisition.
Immediately following the acquisition, Primero outlined an optimization plan for Black Fox that included increasing investment in exploration, development and underground mining equipment. The objective was to increase throughput from the higher-grade underground mine and ultimately replace tonnage from the lower-grade open pit.
During the second quarter of 2014 the company successfully increased production by 29 per cent over the first quarter of 2014 to 17,166 ounces of gold. Primero also increased underground development by 54 per cent in the second quarter and initiated a drilling program. The program has completed 15,500 metres of exploration and delineation drilling and 12,760 metres of definition drilling year to date.
Partially due to this increased investment, the company was able to increase underground throughput during the second quarter by 15 per cent to approximately 460 tonnes per day, mainly as a result of increasing the available cut and fill stopes. However, the company had targeted 60 per cent long-hole mining at Black Fox and only achieved 40 per cent during the second quarter, due to a lack of underground development. After operating the mine for the entire second quarter, the company initiated a technical review of the Black Fox short-term mine plan as part of its continuing optimization of the operation.
The technical review included an open-pit and underground mine reconciliation and review of the short-term mine plan to ensure it was aligned with the new mineral reserve and mineral resource estimation released in July, 2014. The original 2014 mine plan incorporated regions on the extremities of the current mineral reserve, which have less information than the core of the orebody.
The recent delineation and definition drilling results support the company's plan of ultimately utilizing a majority of long-hole mining at Black Fox. While the company remains confident that it will be able to increase underground throughput at Black Fox by adding additional long-hole stopes, it modified its original short-term mine plan in order to build long-hole stope inventory throughout the remainder of 2014 and early 2015. The company expects to increase underground throughput to 1,000 tonnes per day by mid-2015.
Production from the Black Fox open-pit has systematically remained below the average mineral reserve grade. Mining in the second quarter and the recent reconciliation of the Black Fox open pit highlighted that the high-grade regions of the pit were not as continuous as predicted by the current block model. The company has therefore planned a close-spaced reverse circulation drilling program for the open pit and will incorporate the results in its 2014 year-end mineral reserve estimation.
San Dimas
Production at San Dimas remains strong and the company is increasing its gold production guidance to 120,000 to 130,000 ounces (original guidance: 115,000 to 125,000 ounces) in 2014. However gold equivalent guidance remains unchanged. A slight increase in cash costs at San Dimas is directly related to power costs, slightly lower realized gold/silver price ratio and the temporary cost increases, including labour, associated with long-hole development as the mine transitions to the recent 2,500-tonne-per-day mill expansion.
PRIMERO'S REVISED 2014 TOTAL PRODUCTION OUTLOOK
Black Fox San Dimas Total
Attributable gold equivalent
production (gold equivalent
ounces) 65,000-75,000 155,000-165,000 220,000-240,000
Gold production (ounces) 65,000-75,000 120,000-130,000 185,000-205,000
Silver production(1) (million
ounces) 6.1-6.3 6.1-6.3
Total cash costs (per
gold equivalent ounce) $850-$900 $600-$650 $675-$725
All-in sustaining costs
(per gold ounce) $1,400-$1,450 $750-$800 $1,175-$1,225
(1) According to the silver purchase agreement between the company and
Silver Wheaton Corp., until Aug. 6, 2014, Primero will deliver to Silver
Wheaton a yearly amount equal to the first 3.5 million ounces of silver
produced at San Dimas and 50 per cent of any excess at $4.16 per ounce
(increasing by 1 per cent per year). Thereafter Primero will deliver to
Silver Wheaton a yearly amount equal to the first six million ounces of
silver produced at San Dimas and 50 per cent of any excess at $4.20 per
ounce (increasing by 1 per cent per year). The company will receive silver
spot prices only after the annual threshold amount has been delivered.
Material assumptions used to forecast total cash costs for the third and fourth quarters of 2014 include: an average gold price of $1,200 per ounce; an average silver price of $7.96 per ounce (calculated using the silver purchase agreement contract price of $4.16 per ounce and assuming excess silver beyond contract requirements is sold at an average silver price of $21 per ounce); and foreign exchange rates of $1.07 and 13 Mexican pesos to $1 (U.S.).
Drill results continue to expand Black Fox mineralization at depth
Today Primero announces results from additional high-grade intercepts in the lower central, lower east and Tamarack zones at Black Fox. Results in the lower central zone expand the known mineralization and provide reassurance that mineralization is continuous between the current mineral reserves and previously drilled mineralization at a depth of approximately 720 metres. In October, 2013, two high-grade gold intercepts in the lower central zone of the Black Fox deposit were announced. These drill holes were located approximately 720 metres below surface, or approximately 240 metres below the lowest current mineral reserves. In July, 2014, the company announced a further six holes that expanded this known area of mineralization at depth in the lower central zone and also identified a new area of mineralization in the lower west zone. The lower central zone remains a focus for the remainder of the company's 2014 exploration program as better drilling angles are now available from the new 520-metre level exploration drift. The recent results suggest the potential of a high-grade corridor present from the existing infrastructure to at least 250 metres below. With further positive infill drilling this high-grade corridor could significantly impact 2015 production at Black Fox, currently estimated to be 80,000 to 100,000 ounces.
The upper east and Tamarack zones were drilled for the first time since 2013. Drill results close to existing infrastructure, approximately 90 metres east of current mineral reserves confirm that the orebody remains open to the east. The lower east and Tamarack zones are both regions believed to be of high exploration potential and will continue to be drilled in the remainder of 2014.
The company began a surface drilling exploration program in the third quarter of 2014. For the first time since 2010 this drilling program will test for potential east and west extensions of the open pit, with the objective of extending the open-pit mine life. Drilling in the upper east and upper west zones near the current open-pit infrastructure returned encouraging results. The Black Fox orebody currently extends approximately 500 metres below surface in the east and west zones. Mineral deposits in the region, along the Destor Porcupine fault, often extend to depths of up to 1,500 metres. The Black Fox orebody currently remains open laterally and at depth and the company's objective is to systematically test the extension of the current zones.
BLACK FOX MINE RECENT DRILLING HIGHLIGHTS
From To Core width Metal factor
Hole (m) (m) (m) Gold grade (g/t) (grade by width)
14BF-541 209.5 213.0 3.5 5.3 18.6
14BF-551 301.0 305.8 4.8 33.4 159.6
345-EX46A-W 212.5 216.0 3.5 5.2 25.0
345-EX47-W 194.0 210.0 16.0 5.8 93.7
including 194.0 195.2 1.2 29.2 35.1
including 204.5 210.0 5.5 10.5 57.7
530-EX01-EB 223.0 249.0 26.0 7.8 202.8
including 223.0 230.0 7.0 12.4 86.8
including 240.0 249.0 9.0 11.6 104.4
530-EX04-E 196.0 199.0 3.0 8.2 24.6
470-EX06-E 168.0 172.8 4.8 4.0 19.2
470-EX09-E 333.0 335.0 2.0 8.3 16.7
490-EX34-E 99.4 105.4 6.0 9.4 56.1
including 103.6 105.4 1.8 29.6 53.4
490-EX38-E 142.0 147.0 6.0 18.6 111.5
Note: All assays are capped at 300 grams per tonne gold, average gold grades
over core length widths.
Grey Fox drill results continue to enhance project potential
Today Primero also announces recent drilling results from the Grey Fox property, located four kilometres southeast of the Black Fox mine. The Grey Fox property contains a number of mineralized zones (Contact, 147, Grey Fox South, Whisky Jack and Gibson zones), which all occur within close proximity of each other. These zones could provide Primero with near-term production growth opportunities due to their close proximity to the Black Fox mine.
The company remains confident that the Grey Fox resource base will increase by year-end. Following the completion of the 2014 drill program, the company will begin a scoping study to review both underground and open-pit mining scenarios. The study is expected to be complete in 2015 and permitting could be initiated in the same period.
Results from continuing drilling continue to infill and expand the Contact zone and Grey Fox South areas of the property. The current drilling program is focused on joining the Grey Fox South and 147 zone and expanding the Contact zone to the north by infilling the gap between the Whiskey Jack zone and Contact zone.
Primero also recently commenced exploration drilling on the Black Fox complex's Pike River property. The Pike River property extends from the Black Fox mine site in the north to the Grey Fox property in the south. The Pike River property hosts the Gibson deposit from which Noranda Inc. mined approximately 13,000 tonnes at 27 grams per tonne in the late 1980s. While the level of drilling is limited to date, the early results are encouraging.
The 2014 Pike River exploration program was designed to test geophysical targets identified from airborne magnetometer surveys and ground geophysics data conducted in 2010. Results from the first three drill holes have intersected mineralization, including drill hole PR14-002 returning 5.5 grams per tonne over five metres, within quartz breccia material similar to that at Grey Fox.
GREY FOX PROPERTY RECENT DRILLING HIGHLIGHTS
From To Width Gold grade Mineralized Metal factor
Hole (m) (m) (m) (g/t) zone (grade by width)
GF13-813 26.0 34.0 8.0 5.7 Contact zone 45.8
GF13-815 84.0 93.0 9.0 6.1 Contact zone 55.2
GF14-869 251.9 258.0 6.1 25.4 Contact zone 154.6
GF14-871 544.0 548.0 4.0 8.5 Contact zone 34.0
GF14-877 273.4 296.0 22.6 3.8 Contact zone 84.8
GF14-852 155.0 168.0 13.0 11.4 Grey Fox South 148.5
GF14-856 203.0 206.3 3.3 4.2 Grey Fox South 13.8
GF14-865 75.0 85.0 10.0 3.2 Grey Fox South 32.4
294.0 317.0 23.0 12.4 Grey Fox South 285.7
GF14-866 185.0 189.0 4.0 3.4 Grey Fox South 13.6
329.0 337.0 8.0 9.8 Grey Fox South 78.6
420.0 427.5 7.5 2.8 Grey Fox South 21.2
GF14-874 56.0 65.0 9.0 9.3 Grey Fox South 83.9
PR14-002 244.0 249.0 5.0 5.5 Pike River -- 27.6
regional
Note: All assays are capped at 100 grams per tonne gold, average gold grades
over core length widths.
Surface drilling was conducted by Norex Drilling supervised by Primero's exploration team. Gabriel Voicu, PGeo, vice-president, geology and exploration, reviewed the technical exploration information in this news release as the qualified person for the purposes of National Instrument 43-101 for the company. All samples are one-half core and analyses reported herein were performed by the independent laboratories Polymet Labs of Cobalt, Ont., which is ISO 9001:2000-certified in North America using standard fire assay procedures, or AGAT Laboratories of Mississauga, Ont., which is ISO 9001/IEC17025, using fire assay with ICP-OES finish or using gravimetric finish for values over 10 grams per tonne gold. Intercepts cited do not necessarily represent true widths, however drilling is generally intersecting interpreted mineralized zones at a high angle. Primero's quality control program includes systematic insertion of blanks, standard reference material and duplicates to ensure laboratory accuracy. Generally, in a block of 20 samples one will be a duplicate, one will be a standard and one will be a blank.
Technical information and qualified person notes
The scientific and technical information regarding exploration results contained herein is based on information prepared by or under the supervision of Mr. Voicu. Mr. Voicu has reviewed and approved the contents of this news release.
DRILL RESULTS FROM BLACK FOX
From To Width Gold grade Metal factor
Hole (m) (m) (m) (g/t) (grade by width)
14BF-541 209.5 213.0 3.5 5.3 18.6
14BF-551 301.0 305.8 4.8 33.2 159.6
345-EX46A-W 212.5 216.0 3.5 5.2 25.0
345-EX47-W 194.0 210.0 16.0 5.8 93.7
including 194.0 195.2 1.2 29.2 35.1
including 204.5 210.0 5.5 10.5 57.7
530-EX01-EB 223.0 249.0 26.0 7.8 202.8
including 223.0 230.0 7.0 12.4 86.8
including 240.0 249.0 9.0 11.6 104.4
530-EX04-E 196.0 199.0 3.0 8.2 24.6
470-EX06-E 168.0 172.8 4.8 4.0 19.2
470-EX09-E 333.0 335.0 2.0 8.3 16.7
490-EX34-E 99.4 105.4 6.0 9.4 56.1
including 103.6 105.4 1.8 29.6 53.4
490-EX38-E 142.0 147.0 6.0 18.6 111.5
DRILL RESULTS FROM GREY FOX AND PIKE RIVER PROPERTIES
Gold
From To Width grade Mineralized Metal factor
Hole (m) (m) (m) (g/t) zone (grade by width)
GF13-780 400.0 402.0 2.0 9.6 147 zone 19.2
GF13-783 391.0 394.0 3.0 22.3 147 zone 66.9
GF14-844 122.3 133.9 11.7 3.4 Contact zone 40.1
including 132.0 133.9 1.9 16.3 Contact zone 31.0
144.0 146.0 2.0 8.2 Contact zone 16.5
GF14-854 194.0 198.0 4.0 3.0 Contact zone 11.8
366.0 370.0 4.0 2.8 Contact zone 11.4
GF14-861 592.3 310.6 18.3 3.3 Contact zone 60.6
678.7 690.7 12.0 3.0 Contact zone 35.5
708.6 715.2 6.6 2.5 Contact zone 16.6
GF14-868 666.4 670.7 4.3 4.0 Contact zone 17.2
715.0 722.0 7.0 2.7 Contact zone 18.6
GF14-869 251.9 258.0 6.1 25.4 Contact zone 154.6
282.0 294.0 12.0 1.4 Contact zone 16.2
GF14-870 455.0 458.0 3.0 8.0 Contact zone 24.0
GF14-871 179.0 181.0 2.0 51.0 Contact zone 102.1
306.0 309.0 3.0 6.1 Contact zone 18.4
315.0 318.0 3.0 5.4 Contact zone 16.1
544.0 548.0 4.0 8.5 Contact zone 34.0
GF14-873 488.0 489.0 1.0 13.3 Contact zone 13.3
GF14-875 146.0 148.0 2.0 16.9 Contact zone 33.8
GF14-876 75.0 88.0 13.0 1.7 Contact zone 21.8
130.0 131.0 1.0 28.7 Contact zone 28.7
152.0 154.0 2.0 17.6 Contact zone 35.1
GF14-877 273.4 296.0 22.6 3.8 Contact zone 84.8
GF14-880 57.0 58.0 1.0 12.4 Contact zone 12.4
67.0 77.0 10.0 2.1 Contact zone 20.8
GF14-883 113.0 117.0 4.0 40.4 Contact zone 161.6
GF14-885 110.0 127.0 17.0 3.5 Contact zone 60.3
GF14-887 214.0 218.0 4.0 5.5 Contact zone 22.1
278.5 289.0 10.5 1.6 Contact zone 17.0
GF14-889 32.0 34.0 2.0 15.8 Contact zone 31.5
367.8 373.0 5.2 2.1 Contact zone 10.9
415.0 420.0 5.0 7.1 Contact zone 35.5
including 415.0 416.0 1.0 26.1 Contact zone 26.1
GF14-841 145.2 154.0 8.9 1.7 Grey Fox South 15.1
GF14-842 211.0 221.6 10.6 3.0 Grey Fox South 31.4
GF14-847 61.0 62.0 1.0 10.2 Grey Fox South 10.2
GF14-849 211.0 214.7 3.7 2.8 Grey Fox South 10.3
GF14-852 95.0 97.0 2.0 27.0 Grey Fox South 53.9
155.0 168.0 13.0 11.4 Grey Fox South 148.5
including 159.0 163.0 4.0 25.0 Grey Fox South 99.8
and 166.0 167.0 1.0 21.4 Grey Fox South 21.4
GF14-852 177.0 188.0 11.0 2.0 Grey Fox South 21.6
GF14-856 74.0 75.0 1.0 11.7 Grey Fox South 11.7
203.0 206.3 3.3 4.2 Grey Fox South 13.8
313.0 318.0 5.0 2.9 Grey Fox South 14.3
338.0 357.0 19.0 6.5 Grey Fox South 124.1
GF14-858 101.0 116.0 15.0 1.9 Grey Fox South 27.9
271.0 273.0 2.0 7.7 Grey Fox South 15.4
75.0 85.0 10.0 3.2 Grey Fox South 32.4
168.0 174.0 6.0 2.2 Grey Fox South 12.9
294.0 317.0 23.0 12.4 Grey Fox South 285.7
GF14-866 185.0 189.0 4.0 3.4 Grey Fox South 13.6
272.0 281.0 9.0 2.2 Grey Fox South 19.4
329.0 337.0 8.0 9.8 Grey Fox South 78.6
420.0 427.5 7.5 2.8 Grey Fox South 21.2
GF14-872 52.0 82.0 30.0 1.3 Grey Fox South 38.1
100.0 110.0 10.0 1.2 Grey Fox South 11.5
132.8 136.8 4.0 4.6 Grey Fox South 18.6
GF14-874 56.0 65.0 9.0 9.3 Grey Fox South 83.9
PR14-001 300.00 301.00 1.00 1.33 Pike River -- 1.3
regional
PR14-002 82.00 83.00 1.00 1.38 Pike River -- 1.4
regional
107.00 108.00 1.00 1.35 Pike River -- 1.4
regional
244.00 249.00 5.00 5.52 Pike River -- 27.6
regional
PR14-003 146.00 147.00 1.00 3.06 Pike River -- 3.1
regional
150.00 151.00 1.00 1.37 Pike River - 1.4
regional
156.00 157.00 1.00 1.02 Pike River - 1.0
regional
PR14-005 105.00 1074.00 2.00 1.21 Pike River -- 2.4
regional
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