November 09, 2016 06:50 ET
Primero Reports Third Quarter 2016 Results
http://www.marketwired.com/press-re...ird-quarter-2016-results-nyse-ppp-2173950.htm
TORONTO, ON--(Marketwired - November 09, 2016) - Primero Mining Corp. ("Primero" or the "Company") (TSX: P) (NYSE: PPP) today reported operating and financial results for the third quarter ended September 30, 2016.
Highlights:
Q3 2016 Operating Results: Total production of 44,684 gold equivalent ounces1, comprised of 22,162 ounces of gold and 1.37 million ounces of silver from San Dimas, and 16,230 ounces of gold from Black Fox, 10% lower than the 49,499 gold equivalent ounces produced in Q2 2016.
Q3 2016 Financial Results: The Company realized a net loss of $11.7 million ($0.06 per share) and adjusted net loss2 of $8.1 million ($0.04 per share) in Q3 2016. The Company generated third quarter operating cash flow before working capital changes of $5.5 million ($0.03 per share).
San Dimas Production Affected by Labour Disruptions, Reduced Development Rates and Low Grade: San Dimas produced 28,454 gold equivalent ounces (22,162 ounces of gold and 1.37 million ounces of silver) at total cash costs3 of $865 per gold equivalent ounce and all-in sustaining costs4 ("AISC") of $1,080 per ounce. Production during the third quarter of 2016, was affected by high unplanned worker absences and lack of achievement of mine plans, which resulted in reduced underground development rates and delayed certain ventilation improvement projects. As a result access to certain high-grade areas of the San Dimas mine was limited.
Black Fox Commenced Production from Deep Central Zone: Black Fox produced 16,230 ounces of gold in Q3 2016, a 7% increase over the 15,172 ounces produced in Q2 2016. The underground mine achieved increased production rates averaging 701 tonnes per day ("TPD"), representing a 10% improvement over Q2 2016. Production from the Deep Central Zone began in September with initial stope production from the 660 metre level resulting in the highest production month of the year at 6,744 ounces.
Deep Central Zone Continues to Deliver in November: Mining of the Black Fox Deep Central Zone re-started in late-October after backfilling and curing of 660 Block 1 which was mined in September. Production from 660 Block 2 has delivered initial positive results with long-hole stoping producing 4,040 tonnes grading 12.1 grams per tonne ("g/t") gold. Exploration drilling continues to confirm high-grade extensions of the Deep Central Zone to the west with drill hole 520-EX290-02 intercepting 87.3 g/t gold over 1.4 metres.
2016 Revised Production Guidance: Given the San Dimas third quarter results, the increased underground mine development backlog and a 10-day power outage of the Las Truchas hydroelectric facility in October, San Dimas will not be able to complete its previous 2016 mine plans. Primero has reduced its 2016 production guidance to between 170,000 and 190,000 gold equivalent ounces at total cash costs of between $850 and $900 per gold equivalent ounce with AISC of between $1,350 and $1,400 per gold ounce.
Mexican Tax Update and NAFTA Notice of Intent: During Q3 2016, Primero engaged in dialogue with the Mexican government regarding the Mexican tax authority's legal claim which seeks to retroactively nullify the Company's Advance Pricing Agreement ("APA") on silver sales, obtained in 2012. As a result, the Company has elected to temporarily suspend its advancement of international arbitration pursuant to the North American Free Trade Agreement ("NAFTA") in order to continue such dialogue.
"We are extremely disappointed with our third quarter operating results from our San Dimas mine in Mexico," stated Ernest Mast, President and Chief Executive Officer. "We had expected to maintain the production levels achieved in Q2 but were impacted by unexpected labour disruptions and reduced development rates which affected average head grades. More recently during October we experienced intermittent work stoppages that have affected mining rates and increased the development backlog which we had previously expected to resolve. In addition, there was a 10-day outage at the Las Truchas hydroelectric facility due to a weld failure in the water feed pipe, further delaying mine development works. For the fourth quarter, we now expect lower production rates and restricted access to certain high-grade areas as we work to increase mine development. As a result the Company was required to reduce its production guidance for 2016. On a positive note, the Black Fox mine successfully mined its first stope from the Deep Central Zone during the third quarter. This stope reconciled positively with our block model and delivered the high-grade material we expected. Black Fox continues to mine from the Deep Central Zone in the fourth quarter and we expect improved profitability and cash flow from this mine going forward."
In light of the challenges faced by the Company over the last six months, the Board has created an Executive Advisory Committee. This committee is providing support and advice to management as it continues dialogue with the Mexican tax authorities, reviews its silver purchase agreement structure, examines liquidity initiatives and evaluates other strategic opportunities such as the potential sale of the Cerro del Gallo development project. There can be no assurance that the Company's efforts will be successful in any of these initiatives.
Guten Morgen! 
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