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Enter Symbol
or Name
USA
CA



Primero Mining Corp
Symbol P
Shares Issued 159,978,126
Close 2014-11-05 C$ 3.60
Market Cap C$ 575,921,254
Recent Sedar Documents

Primero Mining loses $105.9-million (U.S.) in Q3

2014-11-06 07:24 ET - News Release

Mr. Joseph Conway reports

PRIMERO REPORTS THIRD QUARTER 2014 RESULTS

Primero Mining Corp. has released operational and financial results for the third quarter ended Sept. 30, 2014. All dollar amounts in this news release are expressed in United States dollars.

Third quarter highlights

On track to meet 2014 production guidance

Production increased by 42 per cent to 59,673 gold equivalent ounces, compared with 41,998 gold equivalent ounces in the same period of 2013. Year-to-date gold equivalent production totals 162,845 ounces.

In-line cash costs and all-in sustaining costs

Cash costs of $689 per gold equivalent ounce and all-in sustaining costs of $1,154 per ounce are all in line with previously reported annual guidance.

San Dimas continues to deliver

San Dimas produced 37,385 gold equivalent ounces (29,176 ounces of gold and 1.41 million ounces of silver) at $690 per gold equivalent ounce.

Black Fox shows progress

Black Fox production increased by 30 per cent over the previous quarter to 22,288 ounces of gold at 31 per cent lower cash costs of $688 per ounce.

Strong operating cash flow

Strong third quarter operating cash flow before changes in working capital was $21.7-million (14 cents per share). The company reported adjusted net income of $300,000 (nil per share) and a net loss of $105.9-million (66 cents per share) in third quarter 2014, including a goodwill impairment charge of $99.0-million relating to the Brigus acquisition.

San Dimas expansion to 3,000 tonnes per day announced

The company announced a further expansion of the San Dimas mine and mill to 3,000 tonnes per day during the quarter.

"Our third quarter results reflect our current focus on production expansion and optimization at our producing mines," stated Joseph F. Conway, president and chief executive officer. "The San Dimas mine successfully delivered at its expanded rate of 2,500 tonnes per day of ore during the third quarter. The San Dimas mill throughput was impacted slightly by power interruptions as a result of high rainfall in July. We saw important progress at the Black Fox mine during the third quarter, with 30 per cent higher production and 31 per cent lower cash costs compared with the prior quarter. Despite this improvement and in light of the impairment and lower precious metals environment we will be reducing our capital expenditures at the Black Fox mine for 2015 and will ensure it is a profitable and self-sustaining operation next year. At a corporate level we are streamlining our operations by closing our Vancouver office, incurring some one-time closure expenses during the third quarter. We enter the fourth quarter well positioned to deliver on our 2014 production guidance of 220,000 to 240,000 gold equivalent ounces, an approximately 38-per-cent increase over 2013."

San Dimas delivers on production, Black Fox shows positive progress

The company produced a total of 59,673 gold equivalent ounces in third quarter 2014, a 42-per-cent increase compared with 41,998 gold equivalent ounces in third quarter 2013. Gold and silver production was 51,464 ounces and 1.41 million ounces, respectively, in third quarter 2014 compared with 31,791 ounces and 1.62 million ounces in third quarter 2013. This resulted in year-to-date total production of 162,845 gold equivalent ounces.

The company incurred combined total cash costs per gold equivalent ounce of $689 for third quarter 2014, compared with $516 for third quarter 2013. All-in sustaining costs per ounce were $1,154 for third quarter 2014, compared with $974 in third quarter 2013. Year-to-date total cash costs per gold equivalent ounce and total all-in sustaining costs are $682 and $1,232, respectively.

San Dimas produced 37,385 gold equivalent ounces (29,176 ounces of gold and 1.41 million ounces of silver) during the third quarter of 2014, an 11-per-cent decrease from the same period in 2013. The decrease in production was mainly due to lower grades and lower recoveries when comparing the same periods. The San Dimas mine plan included lower grades in the second half of 2014 and the lower recoveries are a short-term impact of the overhaul of the leaching tanks associated with the expansion to 2,500 tonnes per day being completed, expected during the fourth quarter.

San Dimas total cash costs on a gold equivalent and byproduct basis in the third quarter 2014 were $690 and $526 per ounce, respectively, compared with $516 and $252 per ounce, respectively, in third quarter 2013. The higher cash costs per ounce were mainly due to the 11-per-cent decrease in gold equivalent ounces produced and 19-per-cent increase in cash operating costs, mainly attributable to higher labour and contractor costs. All-in sustaining costs at San Dimas were $919 per ounce in the third quarter 2014, compared with $751 per ounce in the same period of 2013.

Black Fox produced 22,288 ounces of gold during the third quarter of 2014, a 30-per-cent increase in production compared with the previous quarter. The third quarter represented only the second full quarter for which the company owned the Black Fox mine. The company maintains its annual production guidance at Black Fox of between 65,000 and 75,000 gold ounces.

Black Fox total cash costs per gold ounce decreased by 31 per cent to $688 in third quarter 2014 from $998 in second quarter 2014, due to higher production and cost-optimization programs that Primero has introduced. The Black Fox mine incurred all-in sustaining costs per gold ounce of $1,202 in third quarter 2014, compared with $1,771 in second quarter 2014 mainly due to the same reasons. The overall strip ratio during the third quarter was 7:1, resulting in $68 per ounce of capitalized waste being included in the all-in sustaining costs.

Cash flow remains strong

Revenue in the third quarter of 2014 was $75.5-million, 40 per cent higher than the same period in 2013, as a result of selling 51,701 ounces of gold at an average realized price of $1,251 per ounce, and 1.46 million ounces of silver at an average realized price of $7.43 per ounce. Revenue was $53.8-million in the third quarter of 2013 from selling 30,261 ounces of gold at an average realized price of $1,338 per ounce, and 1.58 million ounces of silver at an average realized price of $8.42 per ounce.

Gold produced at Black Fox is subject to a gold purchase agreement and as a result 1,556 ounces were sold to Sandstorm Gold Ltd. at a fixed price of $509 per ounce in third quarter 2014. Silver produced at San Dimas is subject to a silver purchase agreement and as a result 1.17 million ounces of silver were sold to Silver Wheaton Caymans at a fixed price of $4.20 per ounce and 289,957 ounces of silver were sold at an average spot price of $20.44, compared with 1.18 million ounces at $4.16 per ounce and 395,570 ounces at an average spot price of $21.18 in third quarter 2013.

The annual silver threshold under the silver purchase agreement was reset on Aug. 6, 2014, and increased from 3.5 million ounces to six million ounces. The company anticipates that the expansion of the San Dimas mill to 3,000 tonnes per day by mid-2016 will raise its exposure to spot silver sales to beyond the level achieved in 2014, despite the higher annual silver threshold.

Operating cash flow before working capital changes in the third quarter of 2014 was $21.7-million (14 cents per share), compared with $20.9-million (18 cents per share) in the third quarter of 2013. Cash flow was impacted by a delay in Mexican VAT refund, which has historically been refunded in a four-month period, and is currently 10 months outstanding. The company is advised that delayed VAT refunds are currently pervasive in Mexico. As at Sept. 30, 2014, the company was owed $24.6-million in VAT refunds in Mexico, compared with $10.1-million at Dec. 31, 2013. The company is working with its advisers and the authorities to expedite returns of VAT refunds.

The company incurred a net loss of $105.9-million (66 cents per share) in third quarter 2014, including a goodwill impairment charge of $99.0-million relating to the Brigus acquisition, compared with net income of $10.1-million (nine cents per share) in third quarter 2013. Goodwill of $99-million arose on the Brigus acquisition, largely because the share price consideration increased from the date of announcement to the date of acquisition ($5.22 (Canadian) per share to $7.50 (Canadian) per share). An extensive valuation process on the Black Fox complex is still continuing, but work performed to date indicates the goodwill value cannot be supported and as a result the company has recorded an impairment.

Adjusted net income was $300,000 (nil per share) for third quarter 2014, which excludes the impact of the $99.0-million impairment related to the Brigus acquisition, foreign exchange rate changes on deferred tax balances, office closure costs and transaction costs, compared with adjusted net income of $11.0-million (nine cents per share) for the same period in 2013, which excluded the impact of foreign exchange rate changes on deferred tax balances and transaction costs. The third quarter 2014 adjusted net income includes $15.3-million (10 cents per share) more in depreciation and depletion expense than the third quarter of 2013, mainly as a result of the addition of Black Fox.

Revenue for the nine months ended Sept. 30, 2014, was $203.4-million as a result of selling 130,880 ounces of gold at an average realized price of $1,266 per ounce, and 4.39 million ounces of silver at an average realized price of $8.61 per ounce. Revenue was $152.6-million for the same period in 2013 from selling 80,689 ounces of gold at an average realized price of $1,445 per ounce and 4.48 million ounces of silver at an average realized price of $8.03 per ounce.

Operating cash flow before working capital changes for the nine months ended Sept. 30, 2014, was $53.9-million (36 cents per share), compared with $56.9-million (54 cents per share) in the same period of 2013, primarily as a result of higher sales volumes being offset by lower commodity prices, higher operating expenses and higher shares outstanding primarily as a result of the Brigus transaction.

The company generated a net loss of $114.4-million (76 cents per share) for the nine months ended Sept. 30, 2014, compared with net income of $31.6-million (30 cents per share) for the nine months ended Sept. 30, 2013. An impairment charge in third quarter 2014 related to the Brigus acquisition plus higher sales volumes were offset by lower commodity prices and higher operating expenses and depreciation and depletion. The adjusted net loss, which primarily excludes the goodwill impairments charge, transaction costs associated with the Brigus transaction, the impact of foreign exchange changes on deferred tax balances and the Vancouver office closure costs, was $1.6-million (one cent per share) for the nine months ended Sept. 30, 2014, compared with adjusted net income of $37.1-million (35 cents per share) for the same period in 2013 which primarily excluded the accrual for historical social security premiums and the impact of foreign exchange changes on deferred tax balances.

Liquidity position

The company's current liquidity position is $67.1-million, comprising cash of $22.1-million at Sept. 30, 2014, and $45.0-million being the undrawn portion of the company's credit facility. The cash balance of $22.1-million does not include restricted cash of $18.3-million (closure bond for Black Fox) and reflects the delayed Mexican VAT refunds in Mexico. The company's cash position is down from the June 30, 2014, balance of $44.2-million mainly as a result of lower commodity prices and investing $30.1-million in capital and exploration expenditures.

The company expects to be able to meet all of its commitments and fulfill its exploration and capital expenditure plans for 2014 from its cash balances, operating cash flows and credit facility. Management's goal is to maintain a strong balance sheet and have sufficient liquidity to finance the company's continuing operations and growth plans.

Outlook maintained for 2014

Primero maintains its 2014 production guidance of between 220,000 and 240,000 gold equivalent ounces at cash costs between $675 and $725 per gold equivalent ounce.

                                        OUTLOOK 2014

                                       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
(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

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 (Canadian) and 13 Mexican pesos to the U.S. dollar.

San Dimas expansion to 3,000-tonne-per-day construction decision

The company has been committed to expanding and optimizing the San Dimas operation since its acquisition in 2010. The company increased production by over 40 per cent to the end of 2013 as a result of optimization, reserve and resource growth and the implementation of long-hole mining.

The company completed phase one of the expansion of San Dimas mill to 2,500 tonnes per day during the first quarter of 2014, which is expected to result in a further 15-per-cent growth in production in 2014.

The company announced on Aug. 7, 2014, that it had approved the second phase of the San Dimas expansion to 3,000 tonnes per day. The preliminary scoping study completed by the company shows an attractive aftertax internal rate of return and a payback period of less than 12 months after project completion.

Annual production after project completion is expected to increase by more than 25 per cent over 2014 levels to approximately 215,000 gold equivalent ounces. Cash costs are also expected to drop by approximately $50 per ounce from current levels. Another important feature of the expansion to 3,000 tonnes per day is that it increases the company's exposure to spot silver sales as it coincides with the increase in the annual silver threshold of the San Dimas silver purchase agreement.

As a part of the continuing optimization of San Dimas the company is currently trialing the implementation of two 12-hour shifts, seven days per week at the San Dimas mine, representing a significant opportunity to improve productivity from the current three eight-hour shifts, 5.5 days per week. It is also working on increasing the number of drill blasts per shift, which has historically been at one to 1.5 blasts per shift, with an objective to increase to two or more blasts per shift in the near term.

The company is also in the process of completing internal tunnels that connect the existing main mining area (Central block) with the new high-grade area of mineralization (Sinaloa Graben). These tunnels will allow for shortened hauling routes, reducing costs and improving productivity. The company has also been reducing the number of trucks, by upsizing trucks from 20-to-30-tonne capacity.

Conference call and webcast details

The company's senior management will host a conference call today, Thursday, Nov. 6, 2014, at 10 a.m. Eastern Time to discuss the second quarter operating and financial results.

This release should be read in conjunction with Primero's third quarter 2014 financial statements and MD&A (management's discussion and analysis) report on the company's website in the financial reports section under investors, or on the SEDAR website.

Participants may join the call by dialling North America toll-free 1-866-229-4144 or 1-416-216-4169 for calls outside Canada and the U.S. and entering the participant pass code 7187630 followed by the number sign.

A recorded playback of the call will be available until, Friday, Feb. 5, 2015, by dialling North America toll-free 1-888-843-7419 or 1-630-652-3042 for calls outside Canada and the U.S. and entering the callback pass code 7187630 followed by the number sign.

 
                   SUMMARIZED FINANCIAL AND OPERATING RESULTS  
              (In thousands, except per share and per ounce amounts)
                                          
                                       Three months ended            Nine months ended
                                                Sept. 30,                    Sept. 30,
                                         2014        2013          2014           2013
Key performance data
Tonnes of ore milled                  442,739     199,812     1,110,083        585,304
Produced
Gold equivalent (ounces)               59,673      41,998       162,845        108,743
Gold (ounces)                          51,464      31,791       133,803         82,886
Silver (million ounces)                  1.41        1.62          4.40           4.45
Sold
Gold equivalent (ounces)               60,209      40,210       160,249        106,239
Gold (ounces)                          51,701      30,261       130,880         80,689
Silver (million ounces)                  1.46        1.58          4.39           4.48
Average realized prices
Gold ($/ounce)                         $1,251      $1,338        $1,266         $1,445
Silver ($/ounce)                         7.43        8.42          8.61           8.03
Average gold London PM fix              1,282       1,326         1,288          1,456
Total cash costs (per gold
ounce)
Gold equivalent basis                     689         516           682            580
Byproduct basis                           596         252           546            330
All-in sustaining costs (per
gold ounce)                             1,154         974         1,232            955
Financial data
Revenues                               75,503      53,793       203,441        152,589
Earnings from mine operations           6,184      22,960        34,125         62,259
Net (loss) income                   (105,904)      10,080     (114,420)         31,645
Adjusted net income (loss)                259      10,959       (1,572)         37,098
Basic (loss) income per share          (0.66)        0.09        (0.76)           0.30
Diluted (loss) income per share        (0.66)        0.09        (0.76)           0.30
Adjusted net income (loss) per
share                                    0.00        0.09        (0.01)           0.35
Operating cash flows before
working capital changes                21,704      20,926        53,855         56,935
Assets
Mining interests                      963,944     612,798       963,944        612,798
Total assets                        1,092,367     783,883     1,092,367        783,883
Liabilities
Long-term liabilities                 184,540      49,392       184,540         49,392
Total liabilities                     240,539      87,724       240,539         87,724
Equity                                851,828     696,159       851,828        696,159

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