Primero hits lowered 2016 guidance, concern over cash position grows

TORONTO (miningweekly.com) – Precious metals producer Primero Mining has met its revised lower guidance of 170 000 gold-equivalent ounces (GEOs) to 190 000 GEOs for 2016, producing 176 139 GEOs in the 12-month period.

Industry-benchmark comparable all-in sustaining costs (AISC) came in at $1 326/oz, beating the revised guidance for AISC of $1 350/oz to $1 400/oz.

Full-year output comprised 156 052 oz of gold and 5.3-million ounces of silver produced from the San Dimas mine, in Mexico, and Black Fox, in Ontario.

San Dimas produced 113 968 GEOs for the full year, comprising 93 881 oz of gold and 5.3-million ounces of silver, at total cash costs of $856/GEO and AISC of $1 117/oz gold.

Black Fox produced 62 171 oz of gold in 2016 at total cash costs of $881/oz and AISC of $1 291/oz. Primero reported that the underground mine achieved increased production rates averaging 641 t/d, representing a 66% improvement over 2015. Production from the Deep Central zone has ramped up since initial stoping activities started in September, and mining is now progressing on three levels in four working faces delivering 800 t/d of ore production in fourth quarter.

Primero did not provide detailed 2017 guidance, stating only that it expects production levels to be flat in 2017 over 2016 levels, but at lower costs, which it expects will result in improved cash flows this year.

Primero’s total liquidity position at December 31, totalled $45-million, comprising about $20-million in cash and $25-million available under its line of credit. Primero advised that it has been in discussions with lenders to refinance or extend its line of credit facility, which matures in May. The company also amended its financial covenants associated with its line of credit during the fourth quarter.

Analysts have speculated that Primero has a strained liquidity outlook that could force it to raise capital in the current quarter, adding to the company’s risk profile.

Primero plans to release its fourth-quarter and full-year 2016 financial results before the market opens on Wednesday, March 15.