Primero rallies despite cost concern; lowers guidance

VANCOUVER (miningweekly.com) – The New York-listed stock of Canadian precious metals producer Primero Mining has rallied by some 18% Wednesday morning after the company reported first-quarter operating and financial results, and provided 2017 guidance for the first time this year.

The company’s flagship San Dimas mine, in Mexico, produced 123 000 oz of gold equivalent (GEO), impacted in the quarter by a 45-day shutdown on the back of a labour strike at site that was resolved on April 13, after which the company initiated a phased restart of the operation.

At the Black Fox mine, in Ontario, output totalled 14 413 oz oz of gold at all-in sustaining costs (AISC) of $1 233/oz, compared with the previous quarter's production of 17 512 oz at $1 101/oz.

“Our next focus is resetting the San Dimas operation and bringing the mine back to profitability so it can once again deliver on its world-class potential,” interim president and CEO Joseph Conway stated.

With San Dimas restarting, the company has now provided initial 2017 company-wide guidance, calling for 125 000 oz to 150 000 oz of gold and 4.5-million to 5.5-million ounces of silver, for total GEO output of 140 000 to 170 000 GEO.

Total cash costs and AISC are guided to total $700/GEO to$850/GEO and $1 200/oz to $1 400/oz, respectively, which at spot gold prices will likely show a need to draw on the balance sheet to cover corporate costs such as mining taxes and interest charges, among others.

Primero stated that it might consider care and maintenance for Black Fox, in Ontario, if cash flow projections indicate a non-profitable outlook.

The company reported headline earnings of nil per share, comfortably beating average analyst forecasts for losing $0.05 a share. Net income totalled $13.5-million, or $0.07 a share in the quarter, compared with a net loss of $13.2-million, or $0.08 a share in the comparable period a year earlier.

Primero generated $37.7-million of revenue, 25% lower than in the first quarter of 2016, as a result selling 29% less GEOs, and partially offset by a 2% higher average realised gold price.

Primero’s NYSE-listed stock rallied more than 18% Wednesday morning to an intraday high of $0.72 a share, before falling back to a level around $0.67 apiece early in the afternoon session.