Primero rises despite reserves dropping 5%

TORONTO (miningweekly.com) – Precious metals producer Primero Mining has high-graded its Black Fox mine, located in the Timmins gold camp of Northern Ontario, resulting in a 5% decrease in the company’s consolidated reserve statement as at the end of 2015, compared with a year earlier.

NYSE- and TSX-listed Primero advised on Wednesday that it had applied an increased cutoff grade to Black Fox reserves to account for expected operating expenditures and required sustaining costs that led to the removal of marginal, high all-in-cost ounces from the mine plan.

Based on assumed gold prices of $1 200/oz and $18/oz for silver in 2015, unchanged from 2014, the company applied a higher cutoff grade at Black Fox of 4.44 g/t, compared with 3.7 g/t in 2014.

Contained gold ounces declined from 1.9-million ounces in 2014, to 1.8-million ounces in 2015, while contained silver increased from 65.8-million ounces in 2014, to 70.5-million ounces in 2015.

Primero had increased the total mineral resources across its assets, as total measured and indicated resources stood at 3.1-million ounces of gold and 88.3-million ounces of silver. Inferred resources stood at 1.2-million ounces of gold and 77.1-million ounces of silver.

Primero’s San Dimas mine, in Mexico, managed to replace proven and probable mineral reserves in 2015, despite mining depletion and the removal of unmineable high-grade pillars. This resulted in increased tonnage at a reduced grade.

Potentially offsetting the reduced reserves at Black Fox was an initial resource announcement of Black Fox’s Froome zone, where Primero had outlined an indicated resource of 43 000 oz of gold and inferred resources of 129 000 oz of gold.

Primero stated that its exploration team continued to delineate and expand the Froome zone, demonstrating high potential for further growth. Highlights from recent drilling, excluded from the initial resource calculation, included 4.8 g/t gold over 46 m true width (16PR-G065), 4.7 g/t gold over 45.9 m true width (16PR-G066), and 8.6 g/t gold over 24.2 m true width (16PR-G072).

The company would examine accessing the deposit through an underground drift from the Black Fox mine located 800 m away and, following an internal scoping study, could see initial production in the second quarter of 2017.

Primero on Wednesday gained 12.5% on the NYSE to $2.07 a share, having lost 19% since the start of the year.