Going to take time to recover?Should be some additional updates Thursday. Long road to recovery and it sounds like the miners in Mexico don't care about working or may have some issues or axe to grind?
Event Primero reported Q3 adj. EPS of -$0.06 below TD and consensus of $0.01. Conference call this morning at 10:00am ET. Dial-in numbers: 888-789-9572/ 416-695-7806 (passcode 1205823).
Impact: NEGATIVE Production weaker: Production of 44.7k oz Aueq was well below our estimate of 54.0k oz, reflecting weaker than expected results at San Dimas owing to labour disruptions, lower development rates and delayed access to higher grade stopes.
Costs higher: $887/oz Aueq was 15% our estimate of $772/oz Aueq, reflecting higher costs at San Dimas. The company reported AISC of $1,350/oz.
CFPS of $0.06 was below our estimate and consensus of $0.10.
Guidance revised again; costs up, production down: Production: lowered to a range of 170k to 190k oz from 195k to 215k oz previously with production at San Dimas impacted by unexpected labour disruptions and a backlog of development, preventing access to higher grade stopes.
Costs: increased to $850-$900/oz Aueq from $775-$825/oz Aueq previously, commensurate with the lower production. AISC guidance is now $1,350 to $1,400/oz ($1,200 to $1,250/oz previously).
These revisions are the third negative guidance update this year; original guidance was for production of 260k-280k oz at costs of $570-$620/oz.
Balance sheet - liquidity is tight: Net debt of $83.0mm ($31.2mm cash against $114.1mm debt) is up from $62.5mm in Q2/16 largely reflecting negative FCF of $8.8mm and negative working capital movements of $10.7mm. Total liquidity stands at $56.2mm including $31.2mm in cash and $25.0mm in available credit. They did warn that they would likely not have enough liquidity in the event they were required to repay their revolver when in matures on May 23, 2017 (however they do anticipate renewing this facility).
Black Fox more positive: production commenced from the deep central zone at the 660 meter level with grades reconciling well with the block model. Initial mining of Block 2 at the 660 meter level produced 4,040 tonnes grading 12.1g/t.
Mexican tax dispute: management engaged in discussions with the Mexican government during Q3 and as a result has temporarily suspended its advancement of international arbitration under NAFTA. Recommendation: BUY Risk: HIGH 12-Month Target Price: C$3.25 12-Month Dividend (Est.): C$0.00 12-Month Total Return: 87.9%