PRIMERO UPDATE Primero Mining Corp (C:P)
Shares Issued 159,961,376
Last Close 9/12/2014 $6.19
Monday September 15 2014 - News Release
Mr. Joseph Conway reports
PRIMERO PROVIDES REVISED CORPORATE GUIDANCE AND EXPLORATION AND OPERATIONAL UPDATE FOR THE BLACK FOX COMPLEX
Primero Mining Corp. has provided an operational and exploration update on the company's recently acquired Black Fox complex as well as a revision to its corporate production and cost guidance. Based on a recent operational review, the Company expects to produce between 220,000 and 240,000 gold equivalent ounces at $675 to $725 cash costs per ounce in 2014. This represents a modest decrease in production and a modest increase in costs compared to previous estimates.
Black Fox production guidance changed moderately to between 65,000 and 75,000 ounces (original guidance; 70,000 to 80,000 ounces) at unchanged cash costs of between $850 and $900 per ounce. Black Fox all in sustaining costs increased slightly to between $1,400 and $1,450 per ounce. The Company also announced new high-grade drilling results that further expand the known mineralization at depth at Black Fox and provide additional confidence in the Grey Fox project.
"I am pleased to note that on completion of an operational review our overall company guidance has been revised only modestly. Although we were encouraged by the 29% increase in production we achieved at Black Fox during the second quarter, we elected to review our short term mine plan," said Joseph F. Conway, Chief Executive Officer. "After operating the asset for a full quarter we had gained important information that we have incorporated into the mine's plan. Following our review we remain comfortable with our optimization plan for Black Fox, but have lowered the mine's 2014 production guidance as a result of lower than planned underground throughput and lower than anticipated open-pit grades. We feel confident that with the current increase in investment in underground development, delineation and definition drilling at Black Fox, the underground throughput can be increased to our original plan of 1,000 tonnes per day by mid-2015. In addition, we are very encouraged by our continued success with exploration at Black Fox at depth and confident the Grey Fox deposit will increase its resource base by year end."
Black Fox Optimization Plan
The Company acquired the Black Fox Complex, located near Timmins, Ontario, in March 2014. The Black Fox Complex provides Primero immediate production diversification in a prospective mining friendly jurisdiction, creates critical production scale and exposes Primero shareholders to significant exploration upside potential. This also generates an opportunity to leverage the Company's technical underground mining expertise to optimize another undercapitalized underground mine, as was the case with the San Dimas operation at the time of its acquisition.
Immediately following the acquisition, Primero outlined an optimization plan for Black Fox that included increasing investment in exploration, development and underground mining equipment. The objective was to increase throughput from the higher grade underground mine and ultimately replace tonnage from the lower grade open-pit.
During the second quarter of 2014 the Company successfully increased production by 29% over the first quarter of 2014 to 17,166 ounces of gold. Primero also increased underground development by 54% in the second quarter and initiated a drilling program. The program has completed 15,500 metres of exploration and delineation drilling and 12,760 metres of definition drilling year to date.
Partially due to this increased investment, the Company was able to increase underground throughput during the second quarter by 15% to approximately 460 tonnes per day, mainly as a result of increasing the available cut and fill stopes. However, the Company had targeted 60% long-hole mining at Black Fox and only achieved 40% during the second quarter, due to a lack of underground development. After operating the mine for the entire second quarter, the Company initiated a technical review of the Black Fox short term mine plan as part of its ongoing optimization of the operation.
The technical review included an open-pit and underground mine reconciliation and review of the short-term mine plan to ensure it was aligned with the new Mineral Reserve and Mineral Resource estimation released in July 2014. The original 2014 mine plan incorporated regions on the extremities of the current Mineral Reserve, which have less information than the core of the ore-body.
The recent delineation and definition drilling results support the Company's plan of ultimately utilizing a majority of long-hole mining at Black Fox. While the Company remains confident that it will be able to increase underground throughput at Black Fox by adding additional long-hole stopes, it modified its original short term mine plan in order to build long-hole stope inventory throughout the remainder of 2014 and early 2015. The Company expects to increase underground throughput to 1,000 tonnes per day by mid-2015.
Production from the Black Fox open-pit has systematically remained below the average Mineral Reserve grade. Mining in the second quarter and the recent reconciliation of the Black Fox open-pit highlighted that the high-grade regions of the pit were not as continuous as predicted by the current block model. The Company has therefore planned a close spaced reverse circulation drilling program for the open-pit and will incorporate the results in its 2014 year-end Mineral Reserve estimation.
San Dimas
Production at San Dimas remains strong and the Company is increasing its gold production guidance to 120,000 to 130,000 ounces (original guidance; 115,000 to 125,000 ounces) in 2014. However gold equivalent guidance remains unchanged. A slight increase in cash costs at San Dimas is directly related to power costs, slightly lower realized gold/silver price ratio and the temporary cost increases, including labour, associated with long-hole development as the mine transitions to the recent 2,500 tonnes per day mill expansion.
Revised 2014 Guidance
SEE TODAY'S NEWS RELEASE