Primero improves Q2 operating results

JOHANNESBURG (miningweekly.com) – Canadian precious metals producer Primero reported improved second-quarter operating results of 49 499 gold equivalent ounces for the quarter ended June 30, a 37% improvement over the 36 158 gold equivalent ounces produced in the first quarter of the year.

Underground production from its Canada-based Black Fox mine averaged 636 t/d, a 50% improvement over the production levels in the first quarter of the year.

The mine continued to make progress towards initial production from the Deep Central Zone, with stope production expected from this new area before the end of the third quarter of 2016 – slightly later than originally planned.

Primero reduced its 2016 production guidance to between 195 000 gold equivalent ounces and 215 000 gold equivalent ounces at total cash costs of between $775 and $825 per gold equivalent ounce, with all-in sustaining costs of between $1 200 and $1 250 per gold ounce.

Meanwhile, production at the company’s San Dimas mine, in Mexico, was impacted on by lower-than-planned grades, unexpected labour disruptions in July and a lower gold to silver ratio, as a result of minimal expected silver spot sales.

Initial orientation sampling has begun on the recently acquired Lechuguilla concession, located close to San Dimas' southern boundary, with drilling to begin later this year.

Primero CEO Ernest Mast noted that San Dimas showed solid production improvements over the first quarter of 2016, achieving average mining rates of 2 500 tons per day.

"We increased production levels in the second quarter and we are committed to bringing both of our mines up to their optimal operating rates.

“We had labour disruptions during July that impacted production and delayed some development work. As a result, we initiated a mine improvement plan focusing on technical and human resources issues,” said Mast.

Primero realised a net loss of $19.4-million and adjusted net loss of $2.4-million in the second quarter.

The company's total liquidity position at June 30 totalled $79.5-million, comprising $54.5-million in cash and $25-million available under its line of credit.

Further, Primero completed a $40-million bought deal financing during the second quarter, which positively contributed to the company’s June 30 cash position.

Primero has $50-million drawn on its revolving credit facility, which matures on May 23, 2017.

The company expects to renew this facility but, in the event that full repayment is required, cash generated by operations may not be sufficient to repay amounts outstanding under the revolving credit facility in full at maturity.