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Primero td mining presentation january 25, 2012 final

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  1. 1. TSX:P | NYSE:PPP
  2. 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 reflectmanagements 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 orbelieves, 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 Companys 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 Companys annual information form and will be detailed from time to time in the Companys continuous disclosure, all of which are, or willbe 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$. TSX:P | NYSE:PPP 2
  3. 3. Long-Life, High-Grade Gold-Silver Producer Strong Management & Board Solid Capital Structure to fund growth Cdn$280 million market capitalization Attractive Valuation San Dimas Gold-Silver Mine DURANGO MEXICOCorporateAugust 2010January 2012 Acquired San Dimas Strengthened Balance Sheet Increased throughputHistoryfrom Goldcorp Listed on TSX:P, NYSE:PPP Exploration successTSX:P | NYSE:PPP 3
  4. 4. Solid Production Platform in Mining Friendly Jurisdiction Rich History Produced over 11 million ounces of gold and 590 million ounces of silver. Average grade of 5.1 grams per tonne over last 40 years. Significant Potential Over 100 known veins, very few fully explored. High-grade central corridor open along strike and at depth. History of 90% resource to reserve conversion. Solid Production Platform Solid production platform to build a diversified intermediate producer. Focused on doubling production through optimization and expansion.TSX:P | NYSE:PPP 4
  5. 5. Increasing ThroughputMaximize Throughput (tonnes per day) 8% Ensure daily throughput at capacity (2,100 tpd)2,000 8% Focus on mill expansionControl Costs Reduce costs per tonne1,500 Improve productivity per man shift2010 20112012EOptimize GradeReducing Costs($ per ounce by-product) Estimation review underway $500$87 $44- Control mining dilution$450$74 $400Accelerate Mine Development$350 $300 Increase number of mining faces$250 Complete lateral haulage connections between $2002010 20112012Ecurrent mining and exploration areas TSX:P | NYSE:PPP5
  6. 6. Objective is to Become an Intermediate Gold Producer (~ 400,000 AuEq oz) San Dimas Expansion (to ~200,000 AuEq oz) Growth Strategy Focused on significant high-grade discovery LEADING MID-TIER Focused on accelerating mine development GOLD PRODUCER Targeting mill expansion to 2,500+ tpd AMERICAS ACQUISITIONS ACQUISITIONS AcquisitionsACQUISITIONS Diversify asset base SAN DIMAS ACQUISITIONSOPTIMIZATION Create a portfolio of early and advanced stage projects OPTIMIZATION EXPLORATION Competitive Advantage Utilize capital structureSAN DIMAS PLATFORM Leverage board and strategic partnersTSX:P | NYSE:PPP6
  7. 7. TSX:P ExchangesNYSE:PPP Balance Sheet at Sept 30, 2011 Cash1 $107 million Promissory note3 $50 millionSolid Cash Balance Convertible note4$60 million Ownership Goldcorp 36% Management & insiders~3% Institutional & float ~61%Strong Operating Cash Flow Capital Structure Shares outstanding 88 million Fully Diluted 117 millionRepaymentMarket Cap. At January 18, 2012 Cdn$280 millionper year 1. $30 million of convertible note paid on October 19, 2011, $5 million of promissory note wasConservative Level of Debt 2.paid on December 31,2011.Estimated 2011 and 2012 average after-tax cash flow based on a gold price of $1,600/oz andspot silver $30/oz, see Jan 17, 2012 Press Release. 3. Goldcorp: 5 year, 6% note repaid $5M/yr with balloon payment at end of 2015. 4. Goldcorp: 1 year, 3% note maturing August 6, 2012, convertible at any time at CDN$6 or onmaturity at the greater of CDN$3.74 or 90% of the 5 day VWAP before the maturity date.TSX:P | NYSE:PPP7
  8. 8. Increasing Earnings(US$ thousands, except per share 1 Adjusted EPS ($ per share)amounts)Q3 2011Q3 2010 $0.10Revenues 46,07918,853$-Earnings from Mine Operations22,170 895 $(0.10)Net income (loss)35,066 (35,630) $(0.20)EPS ($ per share)0.40 (0.68) Q1 2011Q2 2011 Q3 2011 Increasing Cash FlowAdjusted net income (loss) 5,716(12,210) Op CF before changes in working capital ($ per share)Adjusted EPS ($ per share) 0.06 (0.23) $0.50Operating cash flows before$0.30 50,549 (27)changes in working capital $0.10CFPS ($ per share) 0.57 $(0.10)1. Primero acquired the San Dimas mine on August 6, 2010, operating it for 55 out of 92 days in Q3 2010. Q1 2011Q2 2011 Q3 2011TSX:P | NYSE:PPP 8
  9. 9. Increasing Throughput(tonnes per day)2012E20118%Mill Throughput 2,0501,9502,0008%(tonnes per day)1Gold equivalent production 100,000-110,000 102,200(gold equivalent ounces)Gold production80,000-90,000 79,600(ounces)1,500Silver production 2010 20112012E4.50-5.004.60(million ounces)Gold grade 3.7 3.85 Reducing Costs(grams per tonne) ($ per ounce by-product)Silver grade225 229 $500$87(grams per tonne)$450 $44-74 2 $400Cash cost $630-660$640($ per gold equivalent ounce)$350 2 $300Cash cost by-product$310-340$384($ per gold ounce) $250 $2001 . Gold equivalent ounces include silver ounces converted to a gold equivalent based on estimated average realized 2010 20112012E commodity prices of $1,600 per ounce of gold and $9.41 per ounce of silver.2. Cash cost is a non-GAAP measure. Refer to the 2011 MD&A for a reconciliation of cash costs to operating expenses. TSX:P | NYSE:PPP9
  10. 10. Portion of Silver Sales Subject to Silver Purchase AgreementPrimero sells 50% of annual production above 3.5 million ounces at spot Remainder sold at ~$4 per ounce under silver purchase agreement Threshold increases to 6.0 million ounces in 2015Reducing tax impact Advance tax ruling commenced, seeking taxes be based on realized revenue Silver call options used to limit tax impact, silver call options at strike $49/ozto cover 30% of expected sales under purchase agreement (to cover tax liability) Increase San Dimas production and diversify asset base TSX:P | NYSE:PPP 10
  11. 11. TSX:P | NYSE:PPP
  12. 12. San Dimas Proven & Probable Gold Reserves 1,000Thousands Ounces900800700600500400300200100- TSX:P | NYSE:PPP 12
  13. 13. Increased Exploration Linked to Reserve Increases San Dimas Gold Reserve Replacement (2003-2010) 1,000,000 900,000 800,000 700,000 600,000Ounces 500,000 400,000 300,000 200,000 100,0000 Initial 200320042005 2006 2007 2008 2009 2010 End Reserve Additions ProductionTSX:P | NYSE:PPP13
  14. 14. New Discoveries Linked to Highest Grade San Dimas Historical Grades 14 800 Tayoltita Central BlockSinaloa Graben700 12600 10500Silver Grade (g/t)Gold Grade (g/t)84006Average Silver Grade 353 g/t300 Average Gold Grade 5.1 g/t42002100 Gold GradeSilver Grade0 01965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 TSX:P | NYSE:PPP 14
  15. 15. Large Grade Variability with Historical Estimation Method Estimation method under review Improved grade reconciliation required for effective mine planning Improved grade reconciliation will lead to an efficient expansion plan Improved grade reconciliation expected to result in improved exploration successSan Dimas Difference Between Predicted and Actual Grade80%60%40%20% 0%-20%Gold GradeSilver Grade-40%2001 2002 2003 2004 2005 2006 2007 2008 200920102011 TSX:P | NYSE:PPP15
  16. 16. West Block2012 EXPLORATION Sinaloa Graben Central BlockTayoltita Block Arana San Antonio Mined 1987-20022012 EXPLORATION Mined 2002-CurrentMined 1975-2002Hanging WallSWNE3,000 m. 3,000 m. g/t average gradeg/t average grade2,000 m. 2,000 m. m average widthm average width1,000 m.1,000 m. Source: San Dimas Geology OfficeMineralization Ore Bodies Extension of the Favorable Horizon 012Favorable HorizonExploration PotentialK I L O M E T E R S 1. Average Sinaloa Graben reserve grade reported in 2010 Reserve and Resource Statement 2. Indicative of exploration results to date TSX:P | NYSE:PPP 16
  17. 17. Focused Exploration ProgramTAYOLTITABLOCKARANAHANGINGCENTRAL WALL BLOCKTAYOLTITA MINESINALOA Mined 1975 - 2002GRABEN BLOCKWESTBLOCKCENTRAL MINEMined 2002 - Present SAN ANTONIO MINE Mined 1987 - 2002TSX:P | NYSE:PPP 17
  18. 18. 2012 Program Designed to Target Vein Extensions from Existing Mines CENTRALBLOCKSINALOA Length Width Silver Gold 2012GRABENTargetDrift(m) (g/t) BLOCK1. Aranza 7-129W 79 2.25435.2 2WEST CENTRAL BLOCK Mined 2002 - Present Elia 8-285W 2212.8 1,49115.9 BLOCK Elia 8-359W 69 2.26688.162012 52. Rob 21-822E 1673.0686 13.84TargetDrill HoleSAN ANTONIO3. TGS-S-228.569586.8 Mined 1987 - 2002 TGS-S-157.524038.134. PIL 7-012.90508 16.015. SOL-9-021.81549 10.676. MAR-9-172.45514 8.86 TSX:P | NYSE:PPP18
  19. 19. 2012 Exploration ProgramDevelopment drifting key to expansion 22,000 metres drifting and raiseIncreased delineation drilling Exploration drilling remains aggressive 36,000 metres delineation drilling 30,000 metres diamond drilling DTSX:P | NYSE:PPP 19
  20. 20. Testing for Second Boiling ZoneHistorical Geological Model Recognized One Boiling Zone 150-200 metres highGeology Consistent with Second Potential Boiling Zone Running parallel and below firstTSX:P | NYSE:PPP 20
  21. 21. Mill Expansion Depends of Mine DevelopmentMill Crushing Capacity is 2,100 tpdMill Leaching Capacity is already 2,500 tpdThird Ball Mill On-Site Engineering design commenced Targeting expansion decision by 2013Tailings Filter Expansion Completed Capacity 3,300 tpdTSX:P | NYSE:PPP 21
  22. 22. Health and Safety World class health and safety policies Won First Aid competition at 2010 National Mining Rescue ContestEnvironment Certified as Clean Industry by the Procuraduria Federalde Proteccion al Ambiente (Mexican EPA) Hydroelectric Plant supplies majority of mines powerCommunity Renowned community development programs Promote education: sponsored 47 high school graduates in 2010 Local employment and procurement TSX:P | NYSE:PPP 22
  23. 23. Long-Life, High-Grade AssetProven Management & BoardStrong Capital Structure to Fund GrowthSignificant Exploration PotentialAttractive ValuationTSX:P | NYSE:PPP 23
  24. 24. TSX:P | NYSE:PPP
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