Fair Market Value... ...is now 24 cents. Still overpriced. Disappointing outcome since last year's thwarted takeover.
TD still likes it though:
Primero Mining Corp.
(P-T) C$3.39
Operations Bouncing Back from Strike; Tax Ruling the Main
Focus
Event
Primero reported its Q3/11 results.
Impact
NEUTRAL
– The quarter was in line with expectations with gold and silver
production of 19,500 oz and 1.1m oz, respectively, albeit at slightly higher
cash costs of $641/oz Aueq. Operating earnings of
.06 were above our
estimate of
.03 and in line with consensus of
.06. The difference
compared with our estimate was due to lower than expected taxes.
Full-year guidance was maintained at 80,000-85,000 oz gold or (100,000-
110,000 oz Aueq) at by-product cash costs of $340-360/oz.
Improved results are expected in Q4, with grades expected to rebound from a decrease
in Q3. Gold and silver grades dipped to 3.35g/t and 195g/t, respectively, well
below reserve grades of 4.69g/t and 332g/t. This was the impetus behind the
guidance cut in September. The company is employing a program of closer
drill spacing for better grade control going forward. The company also noted
that it is hitting significantly higher grades in drilling below the Roberta and
Robertita veins, which are currently being mined and where grades have
fallen short of expectations.
Advanced tax ruling process to take 12-14 months.
The company expects a favourable outcome as per opinions from its professional advisors
who have pegged the chance of success at greater than 70%. As we have previously
discussed, we believe that a positive ruling would be a significant positive forthe stock;
but even with the tax burden, which is fully reflected in our NAV,we believe Primero
remains significantly undervalued. During the ruling process, the company will report
revenues and taxes based on realized silver prices. For consistency purposes we have done
the same, resulting in an increase in our Q4/11 and 2012 EPS and CFPS estimates.
We maintain a BUY recommendation and $6.00 target price.