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The ‘New’ Americas Gold Play DENVER GOLD FORUM September 2010 TSX:P
Transcript
Page 1: Primero Presentation

The ‘New’ Americas Gold PlayDENVER GOLD FORUM September 2010

TSX:P

Page 2: Primero Presentation

TSX:PCautionary Statement

2

This 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 www.sedar.com.

This 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$.

Page 3: Primero Presentation

TSX:PInvestment Highlights

3

Page 4: Primero Presentation

TSX:PCapital Structure

4

Cash ~$50 million

Debt $50 million1

Convertible note $60 million

Shares outstanding 88 million

Fully diluted 117 million

Warrants outstanding 22 million

Options outstanding 8 million

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January February March April May June July August September

Volume (m)Price (C$)

June 2, 2010Announced San Dimas

acquisition,

Aug 6, 2010Completion of

San Dimas acquisition

Jul 8, 2010Announced revisedTerms of offering andSan Dimas acquisition

Aug 19, 2010Commencedtrading on TSX

(1) 5 year, 6% note repaid $5M/yr with balloon payment at end of year 5

Page 5: Primero Presentation

TSX:P

Strategy of GrowthAcquisition 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)

EXPLORATIONOPTIMIZATION

ACQUISITIONS

Page 6: Primero Presentation

TSX:P

Financial StrengthSufficient Capital to Fund Growth

6

After Tax Cumulative Cash Balance1,3 ($M)

1. 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

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

$9

00

Au

/

$1

5.0

0 A

g

$9

00

Au

/

$1

5.0

0 A

g

$9

00

Au

/

$1

5.0

0 A

g

$9

00

Au

/

$1

5.0

0 A

g

$9

00

Au

/

$1

5.0

0 A

g

$1

,22

0 A

u /

$1

7.5

0 A

g

$1

,22

0 A

u /

$1

7.5

0 A

g

$1

,22

0 A

u /

$1

7.5

0 A

g

$1

,22

0 A

u /

$1

7.5

0 A

g

$1

,22

0 A

u /

$1

7.5

0 A

g

$-

$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

Page 7: Primero Presentation

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 yearsFirst 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 LOMFirst 6 million oz Ag plus 50% of excess sold to SLW at ~$4

50% of Ag production above 6 million oz sold at spot

7Source: Technical Report , Company data and Goldcorp public reports1 Gold equivalent based on $900/oz gold and $15/oz silver

0

20

40

60

80

100

120

140

160

180

2010E 2011E 2012E 2013E 2014E

Amended Silver Agreement Affect on GEO

Additional

GEO

Gold

Production

Five year average annual :Amended

Agreement1

Goldcorp2009

ProductionGold (oz)

Gold Eq (Eq Au oz)

Spot Silver Exposure2 (oz)

107,000157,000

1,800,000

113,000 113,000

0

Cash Cost1

Co-product (per Eq oz)

By-product (per oz)

$337$60

$392$287

Page 8: Primero Presentation

TSX:P

San DimasSolid Platform with expansion & exploration potential

8

World-class gold-silver mine plus 227km2 of exploration concessions in epithermal district

250 year history with historical production estimated at 11 million ounces of gold and over 582 million ounces silver

1. Average annual production and cash cost for next 5 years, gold equivalent based on $900/oz gold and $15/oz silver2. Attributable to Primero under amended silver purchase agreement and based on NI 43-101 reportSource: NI 43-101 technical report

Mazatlan

San Dimas

Durango

P&P Reserves (at Dec 31 2009)

Gold Silver

Contained (M oz) 0.9 61

Grade (g/t) 4.8 339

Inferred Resources(at Dec 31 2009)

Gold Silver

Contained (M oz) 1.6 155

Grade (g/t) 3.3 317

Production (k oz/yr)Estimated 5 year average.

107

Est. LOM (years) 25+-

1

2

3

4

5

6

7

8

9

0

20

40

60

80

100

120

140

160

180

2003 2004 2005 2006 2007 2008 2009

Au

gra

de

(g/t)

Au

Pro

du

cti

on

(k

oz)

Au Production (LHS) Au Grade (RHS)

San Dimas Historical Gold Production

Page 9: Primero Presentation

TSX:P

San Dimas2010 Guidance

9

Goldcorp Inc. Primero Mining Corp.

Reported Jun 30, 2010

Unaudited Jul 1, 2010 to Aug

5, 2010

Estimated Aug 6, 2010 to Dec 31, 2010

Estimated Full Year 2010

Gold produced (ounces)

45,800 7,700 37,000-42,000 90,000-95,000

Silver produced(1)

(ounces)2,315,500 429,900 1,755,000-1,955,000

4,500,000-4,700,000

Total cash costs(2)

(per gold equivalent ounce)$529(3) $655 $450 - $480 $500 - $530

Total cash costs(2) - by-product(per gold ounce)

$411 $555 $330 - $360 $390 - $420

Capital expenditures (US$ millions)

10 4 12 26

1) Refer to slide 7 for silver purchase agreement details2) Cash costs are a non-GAAP performance measure3) Calculated from Goldcorp Inc.’s Second Quarter 2010 ReportMaterial assumptions used to forecast total cash costs(1) for 2010 include: $1,200 per ounce for gold; by-product silver price of $4.04 per ounce; an oil price of $95 per barrel and foreign exchange rates of 1.03 Canadian dollars and 12.63 Mexican pesos to the US dollar.

Page 10: Primero Presentation

TSX:POptimization

Page 11: Primero Presentation

TSX:P

Established InfrastructureBuilding for the Future

11

Mill capacity 2,100 tpd - expansion potential

Tailings filtering plant capacity 2,100 tpd

RECENT INVESTMENTS

New tailings pumping system

Tunnels connecting Central Block to Sinaloa Graben

Las Truchas Hydro Plant

CURRENT PROJECTS

Tailings Filter 3

Waste Rock Impoundment

New Sub Station

1. Source NI 43-101 technical report

Page 12: Primero Presentation

TSX:P

Infrastructure Projects Tailings Filter 3

100% filtering capacity

Eliminates wet tailings

Allows process plant flexibility

12

Page 13: Primero Presentation

TSX:P

Infrastructure Projects New Waste Rock Impoundment

3 million m3 Capacity

Proper disposal for waste rock

San Luis bridge: safer, all seasons access

Cementery

Wall protection(250 m)

Access road

Slope

Cut Slope

SlopeSlope

13

Page 14: Primero Presentation

TSX:P

Clean, low cost energy

7.3MW of installed capacity

Truchas avg cost: $0.015 per kw/hr

CFE general Grid avg cost: $0.11 per kw/hr

Provides 76% of San Dimas energy demand

Savings of ~$4.8M per year

Saves 23,500 tonnes of CO2 greenhouse gas

Power line prepared for 14 MW

2011: Stage 2 - additional 7MW

Infrastructure ProjectsLas Truchas Hydro Plant

14

Page 15: Primero Presentation

TSX:P

Optimization ReviewExpansion Opportunity

15

Mine planning:

• Ensure sufficient production headings

• Strategic tunnel planning

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

Complete technical review in 2010

Page 16: Primero Presentation

TSX:PGrowth

Page 17: Primero Presentation

TSX:PLong History of Reserve Growth

17

5

3

1

1

3

5

7

Au

Eq (

Mo

z)

San Dimas Historical Reserve Growth and Cumulative Production1

Reserve (Beg. of Year) Add'l Resource (Beg. of Year) Cumulative Production

1 Shows San Dimas total gold equivalent ounces, part of which is under a silver purchase agreement as detailed in slide 7

Page 18: Primero Presentation

TSX:P

Proven 90% Resource ConversionOpportunity for Long Term Strategic Planning

181. 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

San Dimas Reserve Replacement based on Au ounces (2003-2009)1

Reserve Additions Production

million tonnes

Gold (g/t)

Silver (g/t)

Gold (Moz)

Silver (Moz)

5.6 4.8 339 0.9 60.9

Proven & Probable Reserves (as at Dec. 31, 2009)

million tonnes

Gold (g/t)

Silver (g/t)

Gold (Moz)

Silver (Moz)

15.2 3.3 317 1.6 154.6

Inferred Resources (as at Dec. 31, 2009)(exclusive of reserves)

Page 19: Primero Presentation

TSX:P

Significant Exploration UpsideA Key Focus

More than 100 known veins in district

Significant new high-grade veins in the Sinaloa Graben

Sinaloa Graben million ounce resource potential (only 27koz at Dec. 31, 2009)

Additional discoveries likely and will add to current reserves

Likely lead to increased 2011 exploration budget

19

Page 20: Primero Presentation

TSX:P

Sinaloa GrabenHigher Grade & Thickness

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 Ritamine

SAN FRANCISCO

TayoltitaBlock

LA VERDOSARAMP

N

Mill

Tayoltitamine

Central Block mine

San Antonio mine

(Source: San Dimas Geological Office)

San Vicente Area

West Block

Pilarmine

Vein

Fault

Town

Mill

Tunnel done

0 1 2 km

Tunnel Budget 2010

AranaHanging Wall

Ag-Au High Grade Trend

LEGEND

Proposed Tunnel

DDH TGS-S-22

958 g/t Ag

6.81 g/t Au

8.56m

DDH TGS-S-15

403 g/t Ag

8.08 g/t Au

7.52m

Page 21: Primero Presentation

TSX:P

2010 Exploration SuccessAlready Replaced 2010 Production

21

Estimated Proven & Probable Reserves

TonnesGrade (g/t)

Gold SilverGold

(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

2010 exploration budget of $13.5 million

Total 2010 exploration drilling - 38,000 metres

28,000 metres completed to date

Already nearly replaced estimated 2010 production:

additional 83,000 ounces of gold & 5.3 ounces of silver

Intercepts well above reserve grade

Page 22: Primero Presentation

TSX:P

Central BlockHigher Grade and New Reserves

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 Ritamine

SAN FRANCISCO

TayoltitaBlock

LA VERDOSARAMP

N

Mill

Tayoltitamine

Central Block mine

San Antonio mine

(Source: San Dimas Geological Office)

San Vicente Area

West Block

Pilarmine

Vein

Fault

Town

Mill

Tunnel done

0 1 2 km

Tunnel Budget 2010

AranaHanging Wall

Ag-Au High Grade Trend

LEGEND

Proposed Tunnel

DDH Ag g/t Au g/t mMAR-9-17 514 8.86 2.45

DDH Ag g/t Au g/t mA-25-217(1) 778 7.9 0.80HW-4G-01B 302 8.7 0.60

DDH Ag g/t Au g/t mRO-16-02 132 3.27 1.43RO-20-05 514 4.23 1.27

DDH Ag g/t Au g/t mSOL-9-02 549 10.67 1.81

DDH Ag g/t Au g/t mRAMP 7-129W 1,115 10.30 2.75

Page 23: Primero Presentation

The Value Proposition

Page 24: Primero Presentation

TSX:PUnlocking Value

24

2010E Gold Eq Production (000 oz)1 2010E 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: $1,200, 2012: $1,100, 2013: $1,000, 2014: $900, LT: $900; Silver Price: 2010: $18.80, 2011: $19.00, 2012: $18.00, 2013: $17.00, 2014: $16.00, LT: $16.00; Assumes Primero 2010E gold equivalent production using full year silver credit. Represents annualized amount.

2. Cash cost based on total cash cost per gold equivalent ounceNote: As of Sept. 2, 2010

$0

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Page 25: Primero Presentation

TSX:PP/NAV Multiples

P/NAV Multiples (5% $900 Au/ $16 Ag)1,2

251. 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: $1,200, 2012: $1,100,

2013: $1,000, 2014: $900, LT: $900; Silver Price: 2010: $18.80, 2011: $19.00, 2012: $18.00, 2013: $17.00, 2014: $16.00, LT: $16.002. Primero NAV calculation assumes non-NI 43-101 resources upsideNote: As of Sept. 2, 2010

1.1

4x

Jr. Average: 1.40x

Inter. Average: 2.11x

-

0.5x

1.0x

1.5x

2.0x

2.5x

3.0x

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Junior Intermediate Senior

Page 26: Primero Presentation

TSX:PCash Flow Multiples

Cash Flow Multiples (2010)1,2

26

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: $1,200, 2012: $1,100, 2013: $1,000, 2014: $900, LT: $900; Silver Price: 2010: $18.80, 2011: $19.00, 2012: $18.00, 2013: $17.00, 2014: $16.00, LT: $16.00

2. Operating cash flow includes interest payments on Goldcorp noteNote: As of Sept. 2, 2010

6.4

x

Jr. Average: 15.9x

Inter. Average: 18.8x

-

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Page 27: Primero Presentation

TSX:PWhy Primero Mining?

27

Established Mexican operation

107,000 oz Au, 7.1 M oz Ag (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 $337/oz cash cost (2010-2014 average)

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

Page 28: Primero Presentation

PRIMERO MINING CORP.Richmond Adelaide Centre120 Adelaide Street West, Suite 1202Toronto, ON M5H 1T1T 416 814 3160 F 416 814 3170TF 877 619 3160Email: [email protected]

INVESTOR RELATIONSTamara BrownVice President, Investor RelationsT 416 814 [email protected]

The ‘New’ Americas Gold Play


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