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Primero Corporate Presentation October 18 2010

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    Primero Corporate Presentation October 18 2010 Primero Corporate Presentation October 18 2010 Presentation Transcript

    • The ‘New’ Americas Gold Play October 2010 TSX:P
    • Cautionary Statement TSX:P This presentation may contain “forward-looking” statements within the meaning of Canadian securities legislation and the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements relate to future events or the anticipated performance of the Company and reflect management’s expectations or beliefs regarding such future events and anticipated performance. In certain cases, forward-looking statements can be identified 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 be taken”, “occur” or “be achieved”, or the negative of these words or comparable terminology. By their very nature forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual performance of the Company to be materially different from any anticipated 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 in national and local governments in Mexico and the speculative nature of mineral exploration and development, risks associated with obtaining necessary exploitation and environmental licenses and permits, and the presence of laws that may impose restrictions on mining. A complete list of risk factors are described in the Company’s preliminary prospectus and will be detailed from time to time in the Company’s interim and annual financial statements and management’s discussion and analysis of those statements, all of which are, or will be available, for review on SEDAR at www.sedar.com. This presentation uses the terms “measured resources”, “indicated resources” and “inferred resources”. The Company advises readers that although these terms 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 mineral deposits 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 for a Preliminary Assessment as defined under NI43-101. Investors are cautioned not to assume that part or all of an inferred resource exists, or is economically or 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 any obligation to update these forward-looking statements or information to reflect changes in assumptions or circumstances other than required by applicable law. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those currently anticipated. Accordingly, readers should not place undue reliance on forward-looking statements. Unless otherwise indicated, all dollar values herein are in US$. 2
    • Investment Highlights TSX:P San Dimas Gold-Silver Mine DURANGO MEXICO 3
    • 2010 Objectives TSX:P 1 2 3 4 5 6 7 Q4 8 Q4 9 Q4 Source: Production, cash cost and resource numbers from NI 43-101 technical report 4
    • Strategy of Growth Acquisition Track Record TSX:P GROWTH TARGETED GROWTH OBJECTIVE1 2010-2011: Optimization & resource expansion LEADING MID-TIER GOLD PRODUCER 2011-2012: Potential Latin American acquisitions 400 Leading mid-tier gold producer by 2013 LATIN AMERICAN ACQUISITIONS LOW CASH COST 300 Below industry average cash costs SAN DIMAS LOW RISK OPTIMIZATION ACQUISITIONS Maintain balance sheet strength 200 EXPLORATION Un-hedged gold OPTIMIZATION Americas pro-mining jurisdictions only SAN DIMAS RESPONSIBILITY 100 (GOLD EQUIVALENT OUNCES) Sustainable growth Commitment to leading CSR programs 0 2010 2011 2012 2013 1. Production based on five year average, source NI 43-101 technical report 5
    • Capital Structure TSX:P Exchange TSX:P 9 1.4 Millions 8 SHARE STRUCTURE 1.2 Sep 20, 2010 Shares outstanding 88 million 7 Q3 Exploration June 2, 2010 Update Fully Diluted 117 million Announced San Dimas 1 6 acquisition, Joe Conway appointed CEO OWNERSHIP 5 0.8 Management and insiders 3% Aug 19, 2010 Goldcorp 36% 4 Commenced trading on TSX 0.6 Institutional & float 61% 3 0.4 2 BALANCE SHEET Cash ~$50 million 1 0.2 Debt $50 million1 0 0 Convertible note $60 million2 Jan Feb Mar Apr May Jun Jul Aug Sep Oct (1) 5 year, 6% note repaid $5M/yr with balloon payment at end of year 5 (2) 1 year, rolling, 3% note convertible at $6 6
    • Financial Strength Sufficient Capital to Fund Growth TSX:P Cash flow engine to fund growth ~$50 million cash ~$70 million operating cash flow/yr Robust operating margins After Tax Operating Cash Flow1,2 ($M) After Tax Cumulative Cash Balance1,3 ($M) $90 $900 Au / $15.00 Ag $1,220 Au / $17.50 Ag $350 Free Cash Flow Opening Cash $80 $300 $70 $250 $60 $50 $200 $40 $150 $30 $100 $20 $1,220 Au / $1,220 Au / $1,220 Au / $1,220 Au / $1,220 Au / $17.50 Ag $17.50 Ag $17.50 Ag $17.50 Ag $17.50 Ag $50 $15.00 Ag $15.00 Ag $15.00 Ag $15.00 Ag $15.00 Ag $900 Au / $900 Au / $900 Au / $900 Au / $900 Au / $10 $- $- YEAR1 YEAR2 YEAR3 YEAR4 YEAR5 YEAR1 YEAR2 YEAR3 YEAR4 YEAR5 1. Years are anniversary of Aug 6, 2010, Includes Silver Wheaton contract impact, resulting in an effective tax rate of approximately 55% 2. Includes interest expense on the Goldcorp promissory and convertables notes 3. Free cash flow includes interest expense on the Goldcorp secured promissory and convertible notes and principal repayment on the Goldcorp secured promissory note (principal on convertible note is paid through excess cash 7 from financing and exercise of warrants)
    • Improved Cash Flow Amended Silver Agreement Old Agreement To 25 Years All silver sold at ~$4 for 25 years (19 years remaining) Amended Agreement First 3.5 million oz Ag plus 50% of excess sold to SLW at ~$4 First 4 years 50% of Ag production above 3.5 million oz sold at spot First 6 million oz Ag plus 50% of excess sold to SLW at ~$4 Year 5 to LOM 50% of Ag production above 6 million oz sold at spot Amendment Increased Gold Equivalent Ounces1 Amended Goldcorp 180 Gold Eq Additional Gold Eq Gold 5 YEAR AVERAGE ANNUAL: Agreement1 2009 160 Production1 140 Gold (oz) 107,000 113,000 120 Gold Eq (Au Eq oz) 157,000 113,000 100 Spot Silver Exposure2 (oz) 1,800,000 0 80 Cash Cost1 60 40 Co-product (per Au Eq oz) $337 $392 20 By-product (per oz) $60 $287 0 2010E 2011E 2012E 2013E 2014E 1. Average annual production and cash cost for next 5 years, gold equivalent based on $900/oz gold and $15/oz silver 2. Attributable to Primero under amended silver purchase agreement and based on NI 43-101 report Source: NI 43-101 technical report and Goldcorp public reports 8
    • Operations TSX:P
    • San Dimas Solid Platform with expansion & exploration potential TSX:P QUICK FACTS Ventanas SAN DIMAS Durango, Mexico Exploration Property DURANGO MEXICO OWNERSHIP 100% METALS Gold & Silver San Dimas MINING Underground, cut and fill Gold-Silver Mine DURANGO MEXICO RESERVES & RESOUCES (as at December 31, 2009) Mazatlan Durango Proven & Probable Reserves Tonnes (millions) Grade (g/t) Silver (g/t) Gold (Moz) Silver (Moz) 5.6 4.8 339 0.9 60.9 Inferred Resources (exclusive of reserves) Tonnes (millions) Grade (g/t) Silver (g/t) Gold (Moz) Silver (Moz) 15.2 3.3 317 1.6 154.6 2009 PRODUCTION 2010E PRODUCTION 5 YEAR AVERAGE PRODUCTION1 GOLD EQ 113,000 ounces 106,000-112,000 gold equivalent ounces 157,000 gold equivalent ounces GOLD 113,000 ounces 90,000-95,000 ounces 107,000 ounces SILVER 5.1 million ounces 4.5-4.7 million ounces 7.1 million ounces CASH COST $392 per gold equivalent ounce $500-$530 per gold equivalent ounce $337 per gold equivalent ounce 1. Average annual production and cash cost for next 5 years, gold equivalent based on $900/oz gold and $15/oz silver Source: NI 43-101 technical report 10
    • Established Infrastructure Recent Investments TSX:P ESTABLISHED INFRASTRUCTURE Mill capacity 2,100 tpd - expansion potential Dry tailings filter plant, capacity 2,100 tpd RECENT INVESTMENTS New dry tailings pumping system Tunnels connecting Central Block and Sinaloa Graben:  Improved access Hydro Plant:  Reduced cost from $0.11 to $0.015 per kWh  Approx. $5 million annual savings 11
    • Infrastructure Optimization Building for the Future TSX:P TAILINGS FILTER 3 Eliminates wet tailings Allows process plant flexibility WASTE ROCK IMPOUNDMENT 3 million m3 Capacity Proper disposal for waste rock San Luis bridge: safer, all seasons access NEW SUB STATION Additional 7 MW of capacity Supports future growth 12
    • Optimization & Expansion TSX:P INCREASE MINE DEVELOPMENT Improved operational throughput Exploration flexibility OPERATE MILL AT DESIGN CAPACITY Current:~1,900 tpd, Design: 2,100 tpd MATCH MILLING TO LEACHING CAPACITY Mill: 2,100 tpd, Leach: 2,500 tpd 13
    • Growth TSX:P
    • Historical Production (1990-present) New High Grade Impact? TSX:P Sinaloa Graben Discovery Subsequent Acquisition of San Dimas by Primero 180,000 9.00 160,000 8.00 Central Block Discovery 140,000 Additional high-grade discoveries 7.00 (Roberta, Robertita & Santa Lucia veins) Acquisition of Luismin by Wheaton River 120,000 6.00 Production (oz) Au grade (g/t) 100,000 5.00 80,000 4.00 60,000 3.00 40,000 2.00 20,000 1.00 - 0.00 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Production (oz) Au grade (g/t)
    • Proven 90% Resource Conversion Opportunity for Long Term Strategic Planning TSX:P San Dimas Reserve Replacement based on Au ounces (2003-2009)1 1,000,000 Reserve Additions Production 900,000 800,000 700,000 600,000 Reserves (ounce) 500,000 400,000 300,000 200,000 100,000 0 Initial 2003 2004 2005 2006 2007 2008 2009 End 1. NI 43-101 technical report 16
    • Significant Exploration Upside Already Replaced 2010 Production TSX:P More than 100 known veins in district Drilling in late 2009 identified new high-grade veins in the Sinaloa Graben Sinaloa Graben million ounce resource potential (only 27koz at Dec. 31, 2009) 2010 exploration budget of $13.5 million, 38,000 metres Additional 83,000 ounces of gold & 5.3 ounces of silver already announced Intercepts well above reserve grade Estimated Proven & Grade (g/t) Gold Silver Tonnes Probable Reserves1 Gold Silver (ounces) (million ounces) Exploration Drilling 219,302 5.1 348 36,000 2.5 Exploration Drifting 199,948 7.2 439 47,000 2.8 Total New Reserves 419,250 6.1 391 83,000 5.3 1. See Press Release issued on Sept. 20, 2010 17
    • Exploration Success Throughout New Reserves and Higher Grade TSX:P DDH Ag g/t Au g/t m RO-16-02 132 RO-20-05 514 3.27 4.23 1.43 1.27 SAN FRANCISCO N Tayoltita Central Block Block CULEBRA Arana CANDELARIA Hanging Wall San Vicente Tayoltita DDH Ag g/t Au g/t m Area mine A-25-217(1) 778 7.9 0.80 Central HW-4G-01B 302 8.7 0.60 Block mine BLENDITA CORONADO PATRICIA DDH Ag g/t Au g/t m Santa Rita MAR-9-17 514 8.86 2.45 Pilar mine mine 5 HERMANOS LEGEND DDH Ag g/t Au g/t m S. ANTONIO EL SOL SOL-9-02 549 10.67 1.81 Mill Ag-Au High West Block GUADALUPE Grade Trend TAYOLTITA Proposed Tunnel San Antonio Tunnel Budget 2010 mine Tunnel done EL CRISTO TUNNEL ROSARIO Vein SINALOA GRABEN TUNNEL DDH Ag g/t Au g/t m Fault TGS-S-22 958 6.81 8.56 EL ABRA Town TGS-S-15 403 8.08 7.52 LA VERDOSA RAMP Mill DDH Ag g/t Au g/t m VERDOSA 0 1 2 km RAMP7-129W 1,115 10.30 2.75 Piaxtla River (Source: San Dimas Geological Office) 18
    • Sinaloa Graben Higher 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 19
    • Arana Hanging Wall High Grade, Narrower Widths Tayoltita Mine - San Luis Vein San Luis SW Shaft NE Arana Krs Kpr Hanging Wall Kpa Camichin 1000 m San Luis Rhyolite Ore body Diorite Intrusive 500 m Level 25 Piaxtla Intrusive Tayoltita Tunnel (Source: San Dimas Geological Office 0 250 500 Historic Production M E T E R S DDH A-25-217(1) DDH HW-4G-01B Arana Hanging Wall Arana Hanging Wall Tonnes (M) Gold (Moz) Silver (Moz) Ag (g/t) Au (g/t) m Ag (g/t) Au (g/t) m 778 7.9 0.8 302 8.7 0.6 1.8 0.680 37.6 20
    • One Prolific Vein Many More to Explore TSX:P Robertita-Nancy Vein Robertita-Nancy Vein Exploration Drilling Mined Ore 35,887m (as at Sep 2010) Diamond Drill Holes Historic Production Tons k Au (koz) Ag (Moz) 487 177 11.0 Reserves Tons k Au (koz) Ag (Moz) 868 243 12.5 Resources Tons k Au (koz) Ag (Moz) 364 114 6.0 21
    • The Value Proposition
    • Unlocking Value TSX:P 2011E Gold Eq Production (000 oz)1 2011E Cash Cost ($/Au Eq oz)1,2 Market Capitalization ($B)1 400 $800 $3.0 350 $700 $2.5 $600 Market Capitalization (US$B) 300 Gold Eq Production (000 oz) $2.0 $500 US$/Au Eq oz 250 $366 200 $400 $1.5 143 150 $300 $1.0 100 $200 $0.5 $0.5 50 $100 0 $0 $0.0 Minefinders Northgate Primero Alamos Golden Star Lake Shore New Gold Aurizon* Gammon B2Gold Kirkland* Jaguar* Alamos B2Gold Primero Gammon Minefinders Aurizon* New Gold Lake Shore Golden Star Jaguar* Northgate Kirkland* B2Gold Alamos Gammon Primero Minefinders Aurizon* Lake Shore New Gold Northgate Jaguar* Golden Star Kirkland* 1. Estimates based on Canaccord Genuity research (except for names noted with “*” which are based on company reports and street estimates); Canaccord Genuity prices: Gold Price: 2010: $1,215, 2011: $1,400, 2012: $1,300, 2013: $1,200, 2014: $1,100, LT: $950; Silver Price: 2010: $19.05, 2011: $23.50, 2012: $22.50, 2013: $21.50, 2014: $20.00, LT: $18.25. 2. Cash cost based on total cash cost per gold equivalent ounce 23 Note: As of Oct 15, 2010
    • P/NAV Multiples TSX:P P/NAV Multiples (5% $900 Au/ $16 Ag)1,2 2.5x 2.0x Inter. Average: 1.82x 1.5x Jr. Average: 1.23x 1.0x 1.04x 0.5x - Gammon Agnico Northgate Golden Star New Gold Goldcorp Kinross Yamana Jaguar* Primero Alamos B2Gold Aurizon* IAMGOLD Barrick Minefinders Randgold Kirkland* Eldorado Lake Shore Junior Intermediate Senior 1. Estimates based on Canaccord Genuity research (except for names noted with “*” which are based on company reports and street estimates); Canaccord Genuity prices: Gold Price: 2010: $1,215, 2011: $1,400, 2012: $1,300, 2013: $1,200, 2014: $1,100, LT: $950; Silver Price: 2010: $19.05, 2011: $23.50, 2012: $22.50, 2013: $21.50, 2014: $20.00, LT: $18.25 2. Primero NAV calculation assumes non-NI 43-101 resources upside Note: As of Oct 15, 2010 24
    • Cash Flow Multiples TSX:P Cash Flow Multiples (2011)1,2 20x 18x 16x 14x Inter. Average: 12.0x 12x Jr. Average: 10.6x 10x 8x 6x 7.0x 4x 2x - Agnico Golden Star Northgate New Gold B2Gold Gammon Kinross Primero Alamos Yamana IAMGOLD Goldcorp Jaguar* Aurizon* Barrick Kirkland* Eldorado Randgold Lake Shore Lake Shore Junior Intermediate Senior 1. Estimates based on Canaccord Genuity research (except for names noted with “*” which are based on company reports and street estimates); Canaccord Genuity prices: Gold Price: 2010: $1,215, 2011: $1,400, 2012: $1,300, 2013: $1,200, 2014: $1,100, LT: $950; Silver Price: 2010: $19.05, 2011: $23.50, 2012: $22.50, 2013: $21.50, 2014: $20.00, LT: $18.25 2. Operating cash flow includes interest payments on Goldcorp note Note: As of Oct 15, 2010 25
    • Why Primero Mining? TSX:P Established Mexican operations 157,000 gold equivalent ounces (2010-2014 average) Significant cash flow Market preferred geography Proven management & board Acquisition & operations track record Long life, low cost production P&P reserves of 860,000 oz Au and 61 M oz Ag Total resources of 2.5 M oz Au and 216 M oz Ag Industry low cash cost profile Ideal growth platform Well positioned to quickly become a leading mid-tier gold producer Attractive valuation – re-rating opportunity Potential re-rating as Primero trades at a discount to peers on all significant value metrics Source: Production, cash cost and resource numbers from NI 43-101 technical report 26
    • APPENDICES
    • Experienced Management TSX:P Wade Nesmith | Executive Chairman Founder of Mala Noche and CEO since incorporation Former President of Westport Innovations (Europe) Founding and current director of Silver Wheaton, Chairman of each of Geovic Mining and Selwyn Resources Joseph F. Conway | President and C.E.O. Former CEO, President and Director of IAMGOLD from 2003 to 2010 Grew IAMGOLD from a $50 million royalty company to a $6 billion intermediate gold producer with a sector leading growth profile Eduardo Luna | President, Mexico Former Chairman and CEO of Silver Wheaton, Executive VP of Goldcorp and Luismin S.A. de C.V. (San Dimas) and President of Mexican Mining Chamber and the Silver Institute Chairman of the Advisory Board of the Faculty of Mines at the University of Guanajuato and of the Mineral Resources Council in Mexico 28
    • District Wide Upside – Long Section TSX:P 2010 2010 Priority Priority SW NE San Antonio Sinaloa Graben Central Block Tayoltita Block Arana West Block Castellana and 3,000 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 29
    • PRIMERO MINING CORP. Richmond Adelaide Centre 120 Adelaide Street West, Suite 1202 Toronto, ON M5H 1T1 T 416 814 3160 F 416 814 3170 TF 877 619 3160 Email: info@primeromining.com INVESTOR RELATIONS Tamara Brown Vice President, Investor Relations T 416 814 3168 tbrown@primeromining.com The ‘New’ Americas Gold Play