Primero stock rises as Q4 results beat forecasts

VANCOUVER (miningweekly.com) – Precious metals producer Primero Mining’s TSX- and NYSE-listed stocks put in a strong performance Wednesday, after the company reported fourth-quarter earnings that beat analyst estimates, despite reporting a headline loss.

Toronto-based Primero’s NYSE-listed shares closed up 8.13%, and gained a further 5.58% in after-market trading on Wednesday to change hands at $0.61 a share.

The company, with operating mines in Mexico and Canada, reported an adjusted net loss of $1.8-million, or $0.01 a share, for the three months ended December 31, compared with an adjusted loss of $38 000, or nil per share in the comparable period of 2015. This beat average analyst forecasts of an adjusted loss of $0.04 a share.

The adjusted earnings exclude a $228-million impairment charge, with $111-million incurred at San Dimas, in Mexico, and $117-million at the Black Fox mine, in Ontario. The impairment at San Dimas was driven by the reduction in reserves, as well as a higher assumed discount rate in valuing the future expected cash flows.

The Black Fox impairment was also owing to a reduction in reserves and the resulting shorter mine life. In 2015, Primero booked an $82-million impairment charge on Black Fox.

Primero reported that a strike at San Dimas, which had halted mining and milling operations since February 15, is ongoing while negotiations with the union continue. The company is looking to reduce the total workforce to increase the profitability of the operation. It is also focused on aligning the short-term bonus structure with overall mine performance and profitability, and to transition to a more continuous operating shift schedule.

Primero generated $52.2-million of revenue in the fourth quarter, down 27% year-on-year, owing to fewer gold-equivalent ounces sold, which was partially offset by a higher realised gold price. The company sold 43 925 oz of gold at an average realised price of $1 182/oz in the quarter, and 1.58-million ounces of silver at an average realised price of $4.34/oz. Sales in the year-earlier period totalled 57 770 oz of gold at an average realised price of $1 081/oz, and 2.1-million ounces of silver at an average realised price of $4.24/oz.

The company produced 45 794 gold-equivalent ounces during the fourth quarter, at total cash costs of $777/oz of gold equivalent (up 27% year-on-year) and all-in sustaining costs of $1 159/oz (up 18%).

Primero expects production levels to be flat in 2017 over 2016, but at lower costs.

Primero's NYSE-listed stock has lost 70% in value in the past 12 months, dogged by operational challenges at San Dimas, a tax dispute with Mexican authorities and concerns regarding the company's liquidity position.