Primero Corporate Presentation February 2011


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Primero Corporate Presentation February 2011

  1. 1. 2011 – Focused on Growth TSX:PFebruary 2011
  2. 2. Cautionary Statement TSX:PThis presentation may contain “forward-looking” statements within the meaning of Canadian securities legislation and the United States Private SecuritiesLitigation Reform Act of 1995. Forward-looking statements relate to future events or the anticipated performance of the Company and reflectmanagement’s expectations or beliefs regarding such future events and anticipated performance. In certain cases, forward-looking statements can beidentified by the use of words such as “plans”, “expects”, “is expected”, “budget”, “scheduled”, ”estimates”, ”forecasts”, ”intends”, ”anticipates” or“believes”, or variations of such words and phrases or statements that certain actions, events or results “may”, ”could”, “would”, ”might”, or “will betaken”, “occur” or “be achieved”, or the negative of these words or comparable terminology. By their very nature forward-looking statements involveknown and unknown risks, uncertainties and other factors which may cause the actual performance of the Company to be materially different from anyanticipated performance expressed or implied by the forward-looking statements. Such factors include various risks related to the Company’s operations,including, without limitation, fluctuations in spot and forward markets for gold, silver and other metals, fluctuations in currency markets, changes innational and local governments in Mexico and the speculative nature of mineral exploration and development, risks associated with obtaining necessaryexploitation and environmental licenses and permits, and the presence of laws that may impose restrictions on mining. A complete list of risk factors aredescribed in the Company’s preliminary prospectus and will be detailed from time to time in the Company’s interim and annual financial statements andmanagement’s discussion and analysis of those statements, all of which are, or will be available, for review on SEDAR at presentation uses the terms “measured resources”, “indicated resources” and “inferred resources”. The Company advises readers that although theseterms are recognized and required by Canadian regulations (under National Instrument 43-101 Standards of Disclosure for Mineral Projects (“NI43-101”)),the United States Securities and Exchange Commission does not recognize them. Readers are cautioned not to assume that any part or all of the mineraldeposits in these categories will ever be converted in to reserves. In addition, “inferred resources” have a great amount of uncertainty as to their existence,and economic and legal feasibility. It cannot be assumed that all or any part of an inferred mineral resource will ever be upgraded to a higher category.Under Canadian rules, estimates of inferred mineral resources may not form the basis of feasibility or pre-feasibility studies, or economic studies, except fora Preliminary Assessment as defined under NI43-101. Investors are cautioned not to assume that part or all of an inferred resource exists, or is economicallyor legally mineable.Although the Company has attempted to identify important factors that could cause actual performance to differ materially from that described in forward-looking statements, there may be other factors that cause its performance not to be as anticipated. The Company neither intends nor assumes anyobligation to update these forward-looking statements or information to reflect changes in assumptions or circumstances other than required by applicablelaw. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially fromthose currently anticipated. Accordingly, readers should not place undue reliance on forward-looking statements.Unless otherwise indicated, all dollar values herein are in US$. 2
  3. 3. Investment Highlights TSX:P San Dimas Gold-Silver Mine DURANGO MEXICO 3
  4. 4. 2010 Achievements TSX:P12345678 4
  5. 5. Corporate Strategy TSX:PGROWTH TARGETED GROWTH OBJECTIVE Gold Eq. ounces (000) LEADING MID-TIER Double production by 2013 400 GOLD PRODUCER 2011 gold reserves: 1 million ounces 2011 production: 15% increase LATIN AMERICAN ACQUISITIONS 300LOW COST Below industry average cash costs: trending SAN DIMAS ACQUISITIONS below $450 per ounce by 2013 OPTIMIZATION 200 EXPLORATIONLOW RISK OPTIMIZATION Maintain balance sheet strength Un-hedged gold 100 SAN DIMAS (GOLD EQUIVALENT OUNCES) Americas pro-mining jurisdictions only Commitment to leading CSR programs 0 2010 2011E 2012E 2013E 5
  6. 6. Q4 2010 Operating Results Increased Throughput TSX:P Q4 2010 2010 2011E 3 Increased Production AuEq oz 14% Gold equivalent production 110,000- 25,000 24,700 100,500 (gold equivalent ounces) 120,000 Gold production 90,000- 20,000 21,200 85,400 (ounces) 100,000 Silver production 1.21 4.53 4.5-5.0 15,000 (million ounces) Q3 2010 Q4 2010 Gold grade Reduced Costs 4.01 4.46 4.8 $ per AuEq ounce (grams per tonne) $700 Silver grade 236 244 250 (grams per tonne) 1 $10 Cash cost $643 $581 $550-$570 $600 ($ per gold equivalent ounce) 1,2 Cash cost – by-product $524 $471 $350-$370 ($ per gold ounce) $500 Q3 2010 Q4 20101. Cash cost is a non-GAAP measure.2. Cash costs (by-product) per gold ounce reported for San Dimas by Goldcorp Inc. are not comparable to Primero cash cost numbers due to certain inter-company transactions that are reversed for Goldcorp Inc.’s consolidated reporting.3. 2011 forecasts assume an average gold price of $1,400 per ounce; an average silver price of $6.63 per ounce, as according to the silver purchase agreement the first 3.5 million ounces and 50% of the excess of silver are sold at $4.04 per 6ounce and the balance is sold at spot, which is assumed to be $24 per ounce.
  7. 7. Strong Financial Position Solid Platform for Growth TSX:P $55 Cash Exchange TSX:P BALANCE SHEET at Sept 30, 2010 million Balance Cash $55 million Promissory note1 $50 million Convertible note2 $60 million $50-70 Strong OWNERSHIP million Operating Cash Flow Goldcorp 36% Management & insiders ~3% Institutional & float ~61% $5 Prudent million CAPITAL STRUCTURE repayment per Level Of Debt Shares outstanding 88 million year Fully Diluted 117 million(1) Goldcorp: 5 year, 6% note repaid $5M/yr with balloon payment at end of year 5 7(2) Goldcorp: 1 year, rolling, 3% note convertible at CDN$6
  8. 8. Improved Silver Agreement Increased Revenue, Reduced Costs Term Production 25 yearsOld Agreement 100% of silver production at $4 (19 remaining)Revised Agreement Life of Mine First 4 years: First 3.5 million ounces plus 50% of excess sold at $4 plus Goldcorp supplements Silver Wheaton with additional 1.5 million ounces 50% of production above 3.5 million sold by Primero at spot Year 5 and beyond: First 6.0 million ounces plus 50% of excess sold at $4 50% of production above 6.0 million ounces sold by Primero at spot Increases Revenue1 Decreases Cash Costs11. BMO Capital Markets Research. Gold Prices 2010: $1,188, 2011: $1,300, 2012:$1,250, 2013:$1,150, Silver Prices: 2010: $18.50, 2011:$ 21.00, 2012:$20.00, 2013:$17.00 8
  9. 9. Improved Silver Agreement Quarterly Volatility, Tax Impact Remain Quarterly Volatility Quarterly Variation In Revenues1 Agreement structure causes quarterly earnings volatility Silver threshold based on anniversary of August 6, not calendar year Tax Impact Primero pays tax on silver at spot price:  Gold price inc. 10%, op. cash flow inc. ~8%; Silver:Gold Ratio  Silver price dec. 10%, op. cash flow dec. ~3-4%;  Gold and Silver price inc. 10%, op. cash flow inc.~6%; High correlation between gold & silver 96% over 10 years, 60% over 30 years Opportunity to Further Improve Increase San Dimas production 30 year historical silver:gold ratio 55:1 Consensus: 60:1 in 2011E, 55:1 in 2014E Investigate all appropriate tax planning Conclusion: Remote prospect of alternatives silver:gold ratio dramatically impacting Acquisition of additional operations fundamental valuation1. UBS Research, December 2010. Assumes flat gold ($1,400/oz) and silver ($30/oz) 9
  10. 10. San Dimas TSX:P
  11. 11. San DimasSolid Platform with expansion & exploration potential TSX:P LOCATION Durango, Mexico Ventanas Exploration Property DURANGO MEXICO OWNERSHIP 100% METALS Gold & Silver San Dimas Gold-Silver Mine MINING Underground, cut and fill DURANGO MEXICO PROVEN & PROBABLE RESERVES (as at December 31, 2010) Durango Tonnes (millions) Gold (g/t) Silver (g/t) Gold (Moz) Silver (Moz) Mazatlan 5.9 4.7 332 0.9 62.9 INFERRED RESOURCES (exclusive of reserves) Tonnes (millions) Gold (g/t) Silver (g/t) Gold (Moz) Silver (Moz) 16.9 3.7 330 2.0 178.81,000 Proven & Probable Gold Reserves (thousand ounces) SINALOA GRABEN 800 600 CENTRAL BLOCK 400 200 OTHER TAYOLTITA 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011E 11
  12. 12. San Dimas Cash Flow Funded Growth TSX:P 200 Estimated Gold Equivalent Production1 (thousand gold equivalent ounces) 180 160 Sinaloa Graben 140 120 100 80 Central Block 60 40 Sta. Lucia 20 Sta. Rita Tayoltita 0 2010 2011E 2012E 2013E1. Forecast production figures were calculated using the following metal prices:2011: gold $1,400 per ounce; silver $24 per ounce; silver price received from Silver Wheaton $4.04 per ounce. 2012: gold $1,450 per ounce; silver $25 per ounce; silver price received from Silver Wheaton $4.08 per ounce.2013: gold $1,270 per ounce; silver $21 per ounce; silver price received from Silver Wheaton $4.12 per ounce. 12
  13. 13. Optimization & Expansion TSX:PINCREASE MINE DEVELOPMENTKey to production growthOPERATE MILL AT DESIGN CAPACITYCurrent:1,600-1,800 tpd, Design: 2,100 tpdEXPAND MILL TO 2,500 TPD BY 2013Mill: 2,100 tpd, Leach: 2,500 tpdPOTENTIAL EXPANSION BEYOND 2,500 tpd2011 review 13
  14. 14. 2011 - Focused on Growth TSX:P 3 2010 2011E Production: 15% increase Gold equivalent production 110,000 100,500 (gold equivalent ounces) -120,000 Targeting gold reserves: 1 million oz Gold production 90,000- 85,400 Targeting throughput of 1,900 tpd (ounces) 100,000 Silver production 4.53 4.5-5.0 (million ounces) Grades expected to increase Gold grade 4.46 4.8 (grams per tonne) Development up 50%: Silver grade 244 250  $11.4 million or 8,900 metres (grams per tonne) 1 Cash cost – gold equivalent $550- Exploration doubled to $12 million: ($ per gold equivalent ounce) $581 $570  54,000 metres diamond drilling – 30% more Cash cost 1,2 – by-product $350- than 2010 levels $471 ($ per gold ounce) $370  3,800 metres exploration drifting – Ten-fold increase over 2010 levels Capital Expenditures $26 $311. Cash cost is a non-GAAP measure.2. Cash costs (by-product) per gold ounce reported for San Dimas by Goldcorp Inc. are not comparable to Primero cash cost numbers due to certain inter-company transactions that are reversed for Goldcorp Inc.’s consolidated reporting.3. 2011 forecasts assume an average gold price of $1,400 per ounce; an average silver price of $6.63 per ounce, as according to the silver purchase agreement the first 3.5 million ounces and 50% of the excess of silver are sold at $4.04 per 14ounce and the balance is sold at spot, which is assumed to be $24 per ounce.
  15. 15. Sinaloa Graben Key to Growth TSX:P Sinaloa Graben million ounce resource potential  90% of resources added in 2010 from Sinaloa Graben (340,000 ounces) Higher Grade:  Average reserve grades of 4.8 g/t Au, 339 g/t Ag  Sinaloa Graben results show ~6.0 – 10.0 g/t Wider:  Current average mining width ~1.5m  Sinaloa Graben results show ~3.0 – 8.0m 2011 Target:  Approach Roberta, Robertita (main production veins in adjacent Central Block)  Significantly increase Sinaloa Graben reserves and resources 15
  16. 16. 2011 Main Development & Targets TSX:P 1,000 m Roberta 14-920 Marinas 15-185SG TunnelRoberta 2011vein Budget Project VeinEl Pilar 7-790 SG Aranza vein Fault Santa Lucia 1-017 Sinaloa Graben 7-488 16
  17. 17. San Dimas Higher Grade Sinaloa Graben DDH Ag g/t Au g/t mRO-16-02 132RO-20-05 514 3.27 4.23 1.43 1.27 SAN FRANCISO N Central Block CULEBRA Arana 7 CANDELARIA Hanging Wall Tayoltita DDH Ag g/t Au g/t m A-25-217(1) 778 7.9 0.80DDH Ag g/t Au g/t m HW-4G-01B 302 8.7 0.60MAR-9-17 514 8.86 2.45 6 BLENDITA DDH Ag g/t Au g/t m CORONADO PATRICIASOL-9-02 549 10.67 1.81 5 Santa Rita 3 4 mine 5 HERMANOS LEGEND DDH Ag g/t Au g/t m EL SOLPIL 7-01 508 16.0 2.90 Ag-Au High S. ANTONIO 2 Mill West MINE Grade Trend Block 1 TAYOLTITA Proposed Tunnel San Antonio TOWN mine Tunnel Budget 2011DDH Ag g/t Au g/t m Tunnel doneTGS-S-22 958 6.81 8.56 VeinTGS-S-15 403 8.08 7.52 Fault Dev Ag g/t Au g/t m TownRAMP7-129W 1,115 10.30 2.75RAMP8-129E 2,054 22.8 3.20 MillRAMP8-129E 1,449 14.0 4.20 VERDOSA 0 1 2 km Piaxtla River (Source: San Dimas Geological Office) 17
  18. 18. The Value Proposition
  19. 19. Re-rating Opportunity TSX:P Primero Share Price Performance80% Primero Gold Silver60% Silver up 52% or $9.7040%20% Gold up 11% or $129 0% P down 22%-20% 30% from peak-40% August September October November December January $1 ($10) increase in Silver (Gold flat), decreases op. cash flow ~$700k ($7.4MM) $10 ($100) increase in Gold (Silver flat), increases op. cash flow by ~$700k ($7.1MM) From Aug 6 to today Silver increased by ~$10 and Gold increased by ~$130 This increased 2011E op. cash flow by ~$2MM - yet Primero share price decreased 22% 1. Estimates based on Company data. Gold Price: 2011: $1,400; Silver Price: 2011: $24.00 Note: As of Jan 10, 2011 19
  20. 20. Superior Production & CFPS Growth TSX:P 2010 to 2013E Production Growth1 2010 to 2013E CFPS Growth 2 160% 450% 140% 400% 120% 350% 300% 100% 250% 80% 200% 60% 150% 40% 100% 20% 50% 0% 0% Jaguar Jaguar Gammon Alamos Alamos Gammon Primero Primero New Gold New Gold Minefinders Minefinders1. Estimates based on street estimates (Primero based on company reports);2. BMO Capital Markets Research (Jaguar based on consensus), January 31, 2011. 20 Note: As of Jan 31, 2011
  21. 21. 2011 Objectives TSX:P12345678 21
  22. 22. APPENDICES
  23. 23. Transaction Overview TSX:P1. $510 million structured as: $216 million in cash $184 million in shares of Primero (~36% ownership) $50 million 5-year 6% note ($5 million annually plus final balloon payment at the end of year 5) $60 million 1-year 3% note convertible at C$6.00 per share 23
  24. 24. Strong Management & Board TSX:PWade Nesmith | Executive Chairman Robert A. Quartermain Founder of Mala Noche Former President, Silver Standard Director of Vista Gold Corp. and Canplats Resources Founding and current director of Silver Wheaton, Chairman of Geovic Mining and Grant Edey Selwyn Resources Director of Breakwater Resources and former director of Queenstake Resources, Santa Cruz Gold Former CFO, IAMGOLDJoseph F. Conway | President & C.E.O. Former CEO, President and Director of Timo Jauristo IAMGOLD from 2003 to 2010 EVP, Corporate Development, Goldcorp Rohan HazeltonEduardo Luna | President, Mexico VP, Finance, Goldcorp Former Chairman and CEO of Silver Wheaton, David Demers Executive VP of Goldcorp and Luismin S.A. de Founder, CEO and Director Westport Innovations C.V. (San Dimas) and President of Mexican Director of Cummins Westport and Juniper Engines Mining Chamber and the Silver Institute Michael Riley Chartered accountant with more than 26 years of accounting experience Audit committee chair B.C. Lottery Corporation and Seacliff Construction 24
  25. 25. District Wide Upside – Long Section TSX:P 2011 PrioritySW NE San Antonio Sinaloa Graben Central Block Tayoltita Block Arana West Block Castellana and3,000 m. Block Robertas Hanging Wall 3,000 m.2,000 m. 2,000 m.1,000 m. 1,000 m. Source: San Dimas Geology Office Mineralization – Ore Bodies Extension of the Favorable Horizon 0 1 2 Favorable Horizon Potential K I L O M E T E R S 25
  26. 26. Sinaloa GrabenHigher Grade and Wider Widths Sinaloa Graben Tunnel: Julieta - Sinaloa Norte vein (San Salvador system) Sinaloa Mine Sinaloa Graben San Salvador ( Central Block ) (San Antonio Area) 7-660 L NE SW Ag g/t Au g/t m 189 3.13 1.24 1,000 m 1,000 m 500 m 500 m San Luis Tunnel Elev San Luis Tunnel Santa Anita Tunnel 0m 0m DDH TGS-S-22 DDH TGS S-15 DDH TGS 7-17 Sinaloa Norte Intercept Sinaloa Norte intercept Julieta intercept Ag g/t Au g/t m Ag g/t Au g/t m Ag g/t Au g/t m 958 6.81 8.56m 403 8.08 7.52 481 3.73 2.22 0 500 1000 Explanation Drilling Plan 2010 Proven Ore Drifting Plan M E T E R S Probable Ore Drifting Plan 2010 Probable Ore by Drilling Drifting Done 26
  27. 27. PRIMERO MINING CORP.Richmond Adelaide Centre120 Adelaide Street West, Suite 1202Toronto, ON M5H 1T1T 416 814 3160 F 416 814 3170TF 877 619 3160Email: info@primeromining.comINVESTOR RELATIONSTamara BrownVice President, Investor RelationsT 416 814 The ‘New’ Americas Gold Play