Primero Corporate Presentation December 2010


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Primero Corporate Presentation December 2010

  1. 1. The ‘New’ Americas Gold Play TSX:PDecember 2010
  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. 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 4
  5. 5. 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 5
  6. 6. Strategy of Growth Acquisition Track Record TSX:P GROWTH TARGETED GROWTH OBJECTIVE1 LEADING MID-TIER 2010-2011: Optimization & resource expansion GOLD PRODUCER 400 2011-2012: Potential Latin American acquisitions Leading mid-tier gold producer by 2013 LATIN AMERICAN ACQUISITIONS 300 LOW CASH COST SAN DIMAS Below industry average cash costs OPTIMIZATION ACQUISITIONS 200 LOW RISK EXPLORATION 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 2011 2012 20131. San Dimas production based on five year average, source NI 43-101 technical report 6
  7. 7. Capital Structure TSX:PExchange TSX:P Share Performance Since Acquisition Volume (M) Relative Change P-T Vol P-T Close TSX GOLD INDEXSHARE STRUCTURE 1.8 25%Shares outstanding 88 million 1.6 20%Fully Diluted 117 million 1.4 15%OWNERSHIP 1.2Management and insiders 3% 1 10%Goldcorp 36% 0.8Institutional & float 61% 5% 0.6 0%BALANCE SHEET 0.4Cash ~$55 million -5% 0.2Debt $50 million1Convertible note $60 million2 0 -10% August September October November (1) 5 year, 6% note repaid $5M/yr with balloon payment at end of year 5 (2) 1 year, rolling, 3% note convertible at CDN$6 7
  8. 8. Financial Strength Sufficient Capital to Fund Growth TSX:P Cash flow engine to fund growth ~$55 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 YEAR51. 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 notes3. 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 8 from financing and exercise of warrants)
  9. 9. Improved Silver Stream Increased Revenue, Reduced Costs First 4 years First 3.5 million oz Ag produced plus 50% of additional sold to SLW at ~$4/oz Remaining ounces sold by Primero at spot Goldcorp supplements SLW with additional 1.5 million ounces Ag Year 5 to LOM Initial silver hurdle rises to 6 million ounces Independent Research Shows New Agreement Increases Silver Revenue and 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 9
  10. 10. Operations TSX:P
  11. 11. San DimasSolid Platform with expansion & exploration potential TSX:P QUICK FACTS VentanasSAN DIMAS Durango, Mexico Exploration Property DURANGO MEXICOOWNERSHIP 100%METALS Gold & Silver San DimasMINING Underground, cut and fill Gold-Silver Mine DURANGO MEXICO RESERVES & RESOUCES (as at December 31, 2009) Mazatlan DurangoProven & Probable ReservesTonnes (millions) Grade (g/t) Silver (g/t) Gold (Moz) Silver (Moz)5.6 4.8 339 0.9 60.9Inferred 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 PRODUCTION1GOLD EQ 133,900 ounces 99,000-103,000 gold equivalent ounces 157,000 gold equivalent ouncesGOLD 113,000 ounces 84,000-87,000 ounces 107,000 ouncesSILVER 5.1 million ounces 4.4-4.55 million ounces 7.1 million ouncesCASH COST $392 per gold equivalent ounce2 $550-$570 per gold equivalent ounce $337 per gold equivalent ounce1. 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 112. Estimate, calculated using Goldcorp reported figures.
  12. 12. Established Infrastructure TSX:PRECENT INVESTMENTS: MILL EXPANDED 2002: 1,400 tpd to 2,100 tpd NEW DRY TAILINGS SYSTEM 2,700 tpd going to 3,000 tpd HYDRO PLANT 7MW reduced cost from $0.11 per kWh to $0.015 Expanding to 14MW 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 MATCH LEACHING CAPACITYMill: 2,100 tpd, Leach: 2,500 tpdPOTENTIAL EXPANSION BEYOND 2,500 tpd2011 review 13
  14. 14. Growth TSX:P
  15. 15. Historical Production1 New High Grade Impact…. TSX:P 250 9 Sinaloa Graben Discovery Production (Au Eq) Grade Au Subsequent Acquisition of San Dimas by Primero 8 200 7 Central Block DiscoveryGold Equivalent Production (koz) Acquisition of San Dimas by Wheaton River 6 150 Gold Grade (g/t) 5 4 100 3 2 50 1 0 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 1. Gold equivalent ounces calculated on silver price received ie spot price from 1998-2004, silver stream agreement price of ~$4/oz from 2005-2009. 15
  16. 16. Significant Exploration Upside TSX:POver 100 known veins in district225 km2 land packageNew high-grade zone called Sinaloa Graben discovered in 2009Sinaloa Graben million ounce resource potential (only 27koz at Dec. 31, 2009) 16
  17. 17. Reserve Growth Already Replaced 2010 Production TSX:P 2010 exploration budget of $13.5 million, 38,000 metres Additional 83,000 ounces of gold & 5.3 million ounces of silver Intercepts well above reserve grade Est. Additional Grade (g/t) Gold Silver Tonnes Reserves at Aug 31, 20101 Gold Silver (ounces) (million ounces) Exploration Drilling 219,302 5.1 348 36,000 2.5 Exploration Drifting 199,948 7.2 439 47,000 2.8 Total New Reserves 419,250 6.1 391 83,000 5.31. See Press Release issued on Sept. 20, 2010 17
  18. 18. San Dimas High Grade Sinaloa Graben TSX:P DDH Ag g/t Au g/t mRO-16-02 132RO-20-05 514 3.27 4.23 1.43 1.27 SAN FRANCISCO N Tayoltita Central Block Block CULEBRA Arana CANDELARIA Hanging Wall San Vicente Tayoltita DDH Ag g/t Au g/t m Area mine A-25-217(1) 778 7.9 0.80 Central HW-4G-01B 302 8.7 0.60 Block mine BLENDITA CORONADO PATRICIADDH Ag g/t Au g/t m Santa RitaMAR-9-17 514 8.86 2.45 Pilar mine mine 5 HERMANOS LEGEND DDH Ag g/t Au g/t m S. ANTONIO EL SOLSOL-9-02 549 10.67 1.81 Mill Ag-Au High West Block GUADALUPE Grade Trend TAYOLTITA Proposed Tunnel San Antonio Tunnel Budget 2010 mine Tunnel done EL CRISTO TUNNEL ROSARIO Vein SINALOA GRABEN TUNNELDDH Ag g/t Au g/t m FaultTGS-S-22 958 6.81 8.56 EL ABRA TownTGS-S-15 403 8.08 7.52 LA VERDOSA RAMP Mill DDH Ag g/t Au g/t m VERDOSA 0 1 2 kmRAMP7-129W 1,115 10.30 2.75 Piaxtla River (Source: San Dimas Geological Office) 18
  19. 19. One Prolific Vein Many More to Explore TSX:PRobertita-Nancy Vein Robertita-Nancy Vein ExplorationDrilling Mined Ore35,887m (as at Sep 2010) Diamond Drill HolesHistoric ProductionTons k Au (koz) Ag (Moz) 487 177 11.0ReservesTons k Au (koz) Ag (Moz) 868 243 12.5ResourcesTons k Au (koz) Ag (Moz) 364 114 6.0 19
  20. 20. The Value Proposition
  21. 21. Unlocking Value TSX:P 2011E Gold Eq Production (000 oz)1 2011E Cash Cost ($/Au Eq oz)1,2 Market Capitalization ($B)1 500 $4.0 $800 450 $3.5 $7002011 Gold Eq Production (000 oz) 400 Market Capitalization (US$B) $600 $3.0 350 US$/Au Eq oz $500 $2.5 $429 300 250 $400 $2.0 200 $300 $1.5 142 150 $200 $1.0 100 $0.5 $100 $0.5 50 0 $0 $0.0 Primero Primero Lake Shore Golden Star Aurizon B2Gold* Kirkland* Kirkland* B2Gold* Lake Shore Aurizon New Gold Alamos Golden Star New Gold Alamos Gammon Northgate* Northgate* Jaguar* Minefinders Jaguar* Minefinders Gammon Alamos Aurizon Jaguar* Primero New Gold Gammon Minefinders Northgate* B2Gold* Lake Shore Kirkland* Golden Star 1. Estimates based on BMO Capital Markets research (except for names noted with “*” which are based on company reports and street estimates); BMO prices: Gold Price: 2011: $1,350, 2012: $1,300, 2013: $1,150, 2014: $1,000, LT: $1,000; Silver Price: 2011: $23.00, 2012: $21.00, 2013: $17.75, 2014: $15.50, LT: $15.00. 2. Cash cost based on total cash cost per gold equivalent ounce 21 Note: As of Nov 15, 2010
  22. 22. 2010 Objectives & Catalysts TSX:P1234567 Q48 Q49 Q1 22
  23. 23. APPENDICES
  24. 24. District Wide Upside – Long Section TSX:P 2010 2010 Priority 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 24
  25. 25. 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 25
  26. 26. Arana Hanging WallHigh Grade, Narrower Widths Tayoltita Mine - San Luis Vein San LuisSW Shaft NE Arana Krs Kpr Hanging Wall Kpa Camichin1000 m San Luis Rhyolite Ore body Diorite Intrusive500 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 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