McEwen picks up Primero’s Black Fox mine

VANCOUVER (miningweekly.com) – TSX- and NYSE-listed McEwen Mining has agreed to buy precious metals producer Primero Mining’s Black Fox mine and complex for $35-million, expanding the junior miner’s production footprint in Canada.

“Buying the Black Fox complex provides fantastic synergies with our recently acquired Timmins deposits. Our objective is to build a long-term production platform with a robust pipeline of production, development and exploration assets, all feeding into a single processing facility,” chief owner and chairperson Rob McEwen said in a news release on Thursday.

McEwen said the acquisition, which immediately adds 50 000 oz to 60 000 oz to the company’s production profile, marks the beginning of a new growth chapter for the company.

The Black Fox processing facility also has excess capacity and the assets include two future development opportunities, and excellent exploration potential, the celebrity gold bug stated.

“Combined with our existing portfolio of Timmins deposits, I believe this is a logical and potent combination.”

Primero president and CEO Joseph Conway said the divestiture is consistent with the company’s strategic review process to maximise value for shareholders, and Primero expects to use the proceeds from the transaction to reduce the company's total debt position.

Primero said in May that it might consider care and maintenance for Black Fox if cash flow projections indicated a non-profitable outlook.

Black Fox outperformed during the second quarter ended June 30, as underground grades trended higher than expected. Black Fox produced 20 731 oz of gold in the period, compared with 15 172 oz in the same period of 2016, and 14 413 oz in the first quarter.

Underground mining was mainly focused on production from the Deep Central zone, with underground gold grades averaging 7.09 g/t and an average mining rate of 747 t/d of high-grade ore. All-in sustaining costs were $827/oz in the second quarter – a significant drop from $1 362/oz realised in the same period a year earlier.

The mine generated positive cash flows during the second quarter, and remains on track to achieve 2017 production guidance.

The transaction is subject to customary closing conditions and is expected to close in the current quarter.

Scotiabank acted as financial adviser to Primero.

Earlier this year, McEwen acquired Lexam VG Gold under a plan of arrangement in an all-scrip deal valued at about $54-million. The deal gave it a foothold in the prolific gold camp of Timmins, Ontario, where it acquired several advanced exploration projects.