Primero Corporate Presentation October 18 2010

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Primero Corporate Presentation October 18 2010

  1. 1. The ‘New’ Americas Gold Play October 2010 TSX:P
  2. 2. TSX:P Cautionary Statement 2 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$.
  3. 3. TSX:P Investment Highlights 3 San Dimas Gold-Silver Mine DURANGO MEXICO
  4. 4. TSX:P 2010 Objectives Source: Production, cash cost and resource numbers from NI 43-101 technical report 1 2 3 4 5 6 7 8 9 Q4 Q4 Q4 4
  5. 5. TSX:P Strategy of Growth Acquisition Track Record GROWTH 2010-2011: Optimization & resource expansion 2011-2012: Potential Latin American acquisitions Leading mid-tier gold producer by 2013 LOW CASH COST Below industry average cash costs LOW RISK Maintain balance sheet strength Un-hedged gold Americas pro-mining jurisdictions only RESPONSIBILITY Sustainable growth Commitment to leading CSR programs TARGETED GROWTH OBJECTIVE1 51. Production based on five year average, source NI 43-101 technical report 0 100 200 300 400 2010 2011 2012 2013 SAN DIMAS OPTIMIZATION LATIN AMERICAN ACQUISITIONS LEADING MID-TIER GOLD PRODUCER SAN DIMAS (GOLD EQUIVALENT OUNCES) EXPLORATION OPTIMIZATION ACQUISITIONS
  6. 6. TSX:P Capital Structure 6 Exchange TSX:P SHARE STRUCTURE Shares outstanding Fully Diluted 88 million 117 million OWNERSHIP Management and insiders Goldcorp Institutional & float 3% 36% 61% BALANCE SHEET Cash Debt Convertible note ~$50 million $50 million1 $60 million2 (1) 5 year, 6% note repaid $5M/yr with balloon payment at end of year 5 (2) 1 year, rolling, 3% note convertible at $6 0 0.2 0.4 0.6 0.8 1 1.2 1.4 0 1 2 3 4 5 6 7 8 9 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Millions June 2, 2010 Announced San Dimas acquisition, Joe Conway appointed CEO Aug 19, 2010 Commenced trading on TSX Sep 20, 2010 Q3 Exploration Update
  7. 7. TSX:P Financial Strength Sufficient Capital to Fund Growth 7 After Tax Cumulative Cash Balance1,3 ($M) 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 from financing and exercise of warrants) Cash flow engine to fund growth ~$70 million operating cash flow/yr After Tax Operating Cash Flow1,2 ($M) ~$50 million cash Robust operating margins $900Au/ $15.00Ag $900Au/ $15.00Ag $900Au/ $15.00Ag $900Au/ $15.00Ag $900Au/ $15.00Ag $1,220Au/ $17.50Ag $1,220Au/ $17.50Ag $1,220Au/ $17.50Ag $1,220Au/ $17.50Ag $1,220Au/ $17.50Ag $- $50 $100 $150 $200 $250 $300 $350 YEAR1 YEAR2 YEAR3 YEAR4 YEAR5 Free Cash Flow Opening Cash $- $10 $20 $30 $40 $50 $60 $70 $80 $90 YEAR1 YEAR2 YEAR3 YEAR4 YEAR5 $900 Au / $15.00 Ag $1,220 Au / $17.50 Ag
  8. 8. 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 4 years First 3.5 million oz Ag plus 50% of excess sold to SLW at ~$4 50% of Ag production above 3.5 million oz sold at spot Year 5 to LOM First 6 million oz Ag plus 50% of excess sold to SLW at ~$4 50% of Ag production above 6 million oz sold at spot 5 YEAR AVERAGE ANNUAL: Amended Agreement1 Goldcorp 2009 Production1 Gold (oz) Gold Eq (Au Eq oz) Spot Silver Exposure2 (oz) 107,000 157,000 1,800,000 113,000 113,000 0 Cash Cost1 Co-product (per Au Eq oz) By-product (per oz) $337 $60 $392 $287 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 0 20 40 60 80 100 120 140 160 180 2010E 2011E 2012E 2013E 2014E Gold Eq Additional Gold Eq Gold 8 Amendment Increased Gold Equivalent Ounces1
  9. 9. TSX:P Operations
  10. 10. TSX:P San Dimas Solid Platform with expansion & exploration potential 101. 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 5 YEAR AVERAGE PRODUCTION1 157,000 gold equivalent ounces 107,000 ounces 7.1 million ounces $337 per gold equivalent ounce San Dimas Gold-Silver Mine DURANGO MEXICO Mazatlan Durango 2010E PRODUCTION 106,000-112,000 gold equivalent ounces 90,000-95,000 ounces 4.5-4.7 million ounces $500-$530 per gold equivalent ounce 2009 PRODUCTION GOLD EQ 113,000 ounces GOLD 113,000 ounces SILVER 5.1 million ounces CASH COST $392 per gold equivalent ounce Ventanas Exploration Property DURANGO MEXICO SAN DIMAS Durango, Mexico OWNERSHIP 100% METALS Gold & Silver MINING Underground, cut and fill QUICK FACTS 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 RESERVES & RESOUCES (as at December 31, 2009)
  11. 11. TSX:P Established Infrastructure Recent Investments 11 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
  12. 12. TSX:P Infrastructure Optimization Building for the Future 12 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
  13. 13. TSX:P Optimization & Expansion 13 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
  14. 14. TSX:P Growth
  15. 15. TSX:P Historical Production (1990-present) New High Grade Impact? 0.00 1.00 2.00 3.00 4.00 5.00 6.00 7.00 8.00 9.00 - 20,000 40,000 60,000 80,000 100,000 120,000 140,000 160,000 180,000 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Augrade(g/t) Production(oz) Production (oz) Au grade (g/t) Central Block Discovery Additional high-grade discoveries (Roberta, Robertita & Santa Lucia veins) Acquisition of Luismin by Wheaton River Sinaloa Graben Discovery Subsequent Acquisition of San Dimas by Primero
  16. 16. TSX:P Proven 90% Resource Conversion Opportunity for Long Term Strategic Planning 161. NI 43-101 technical report 0 100,000 200,000 300,000 400,000 500,000 600,000 700,000 800,000 900,000 1,000,000 Initial 2003 2004 2005 2006 2007 2008 2009 End Reserves(ounce) San Dimas Reserve Replacement based on Au ounces (2003-2009)1 Reserve Additions Production
  17. 17. TSX:P Significant Exploration Upside Already Replaced 2010 Production 17 Estimated Proven & Probable Reserves1 Tonnes Grade (g/t) Gold Silver Gold (ounces) Silver (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 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 1. See Press Release issued on Sept. 20, 2010
  18. 18. TSX:P Exploration Success Throughout New Reserves and Higher Grade Central Block EL ABRA VERDOSA CORONADO S. ANTONIO CANDELARIA CULEBRA BLENDITA PATRICIA 5 HERMANOS EL SOL TAYOLTITA Piaxtla River GUADALUPE EL CRISTO TUNNEL ROSARIO SINALOA GRABEN TUNNEL Santa Rita mine SAN FRANCISCO Tayoltita Block LA VERDOSA RAMP N Mill Tayoltita mine Central Block mine San Antonio mine (Source: San Dimas Geological Office) San Vicente Area West Block Pilar mine Vein Fault Town Mill Tunnel done 0 1 2 km Tunnel Budget 2010 Arana Hanging Wall Ag-Au High Grade Trend LEGEND Proposed Tunnel DDH Ag g/t Au g/t m MAR-9-17 514 8.86 2.45 DDH Ag g/t Au g/t m A-25-217(1) 778 7.9 0.80 HW-4G-01B 302 8.7 0.60 DDH Ag g/t Au g/t m RO-16-02 132 3.27 1.43 RO-20-05 514 4.23 1.27 DDH Ag g/t Au g/t m SOL-9-02 549 10.67 1.81 DDH Ag g/t Au g/t m RAMP7-129W 1,115 10.30 2.75 DDH Ag g/t Au g/t m TGS-S-22 958 6.81 8.56 TGS-S-15 403 8.08 7.52 18
  19. 19. Sinaloa Graben Tunnel: Julieta - Sinaloa Norte vein (San Salvador system) 19 San Luis Tunnel Drifting Plan Drilling Plan 2010 Drifting Plan 2010 Drifting Done Sinaloa Graben Higher Grade and Wider Widths SW NE 1,000 m Sinaloa Mine (San Antonio Area) Sinaloa Graben San Salvador ( Central Block ) San Luis Tunnel Elev Santa Anita Tunnel 0 500 1000 M E T E R S 7-660 L Ag g/t Au g/t m 189 3.13 1.24 DDH TGS S-15 Sinaloa Norte intercept Ag g/t Au g/t m 403 8.08 7.52 Proven Ore Probable Ore Probable Ore by Drilling Explanation DDH TGS-S-22 Sinaloa Norte Intercept Ag g/t Au g/t m 958 6.81 8.56m 0 m 500 m 0 m 500 m 1,000 m DDH TGS 7-17 Julieta intercept Ag g/t Au g/t m 481 3.73 2.22
  20. 20. Tayoltita Mine - San Luis Vein 20 SW NE 500 m 1000 m San Luis Shaft San Luis Ore body Tayoltita Tunnel 0 250 500 M E T E R S Kpa Kpr Piaxtla Intrusive Diorite Intrusive Level 25 Krs Camichin Rhyolite (Source: San Dimas Geological Office Arana Hanging Wall Arana Hanging Wall High Grade, Narrower Widths DDH A-25-217(1) Arana Hanging Wall Ag (g/t) Au (g/t) m 778 7.9 0.8 DDH HW-4G-01B Arana Hanging Wall Ag (g/t) Au (g/t) m 302 8.7 0.6 Historic Production Tonnes (M) Gold (Moz) Silver (Moz) 1.8 0.680 37.6
  21. 21. TSX:P One Prolific Vein Many More to Explore 21 Robertita-Nancy Vein Drilling 35,887m (as at Sep 2010) Historic Production Tons k Au (koz) Ag (Moz) 487 177 11.0 Resources Tons k Au (koz) Ag (Moz) 364 114 6.0 Reserves Tons k Au (koz) Ag (Moz) 868 243 12.5 Diamond Drill Holes Mined Ore Robertita-Nancy Vein Exploration
  22. 22. The Value Proposition
  23. 23. TSX:P Unlocking Value 23 2011E Gold Eq Production (000 oz)1 2011E Cash Cost ($/Au Eq oz)1,2 Market Capitalization ($B)1 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 Note: As of Oct 15, 2010 $0.5 $0.0 $0.5 $1.0 $1.5 $2.0 $2.5 $3.0 NewGold Alamos GoldenStar LakeShore Aurizon* Gammon Northgate Kirkland* Jaguar* B2Gold Minefinders Primero MarketCapitalization(US$B) 143 0 50 100 150 200 250 300 350 400 NewGold GoldenStar Gammon Jaguar* Northgate Aurizon* Alamos B2Gold Minefinders Primero LakeShore Kirkland* GoldEqProduction(000oz) $366 $0 $100 $200 $300 $400 $500 $600 $700 $800 GoldenStar Kirkland* Northgate Jaguar* B2Gold Minefinders Aurizon* LakeShore Gammon NewGold Alamos Primero US$/AuEqoz
  24. 24. TSX:P P/NAV Multiples P/NAV Multiples (5% $900 Au/ $16 Ag)1,2 24 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 1.04x Jr. Average: 1.23x Inter. Average: 1.82x - 0.5x 1.0x 1.5x 2.0x 2.5x Kirkland* Minefinders Northgate Jaguar* Primero B2Gold Aurizon* Gammon NewGold LakeShore GoldenStar Alamos Yamana IAMGOLD Randgold Agnico Eldorado Kinross Barrick Goldcorp Junior Intermediate Senior
  25. 25. TSX:P Cash Flow Multiples Cash Flow Multiples (2011)1,2 25 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 7.0x Jr. Average: 10.6x Inter. Average: 12.0x - 2x 4x 6x 8x 10x 12x 14x 16x 18x 20x Gammon GoldenStar Primero Jaguar* NewGold Kirkland* B2Gold Aurizon* Northgate LakeShore LakeShore Alamos Yamana IAMGOLD Agnico Eldorado Randgold Barrick Kinross Goldcorp Junior Intermediate Senior
  26. 26. TSX:P Why Primero Mining? 26 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
  27. 27. APPENDICES
  28. 28. TSX:P Experienced Management 28 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
  29. 29. TSX:P District Wide Upside – Long Section Favorable Horizon Mineralization – Ore Bodies Extension of the Favorable Horizon Potential SW NE 0 1 2 K I L O M E T E R S San Antonio West Block Central Block Castellana and Robertas Tayoltita Block Arana Hanging Wall3,000 m. 2,000 m. 1,000 m. 3,000 m. 2,000 m. 1,000 m. Sinaloa Graben Block Source: San Dimas Geology Office 2010 Priority 2010 Priority 29
  30. 30. 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

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