Primero Mining eyeing further credit extension
Primero Mining may be unable to meet a looming debt payment despite asset sales.
It remains uncertain whether the company will have sufficient funds to repay the full outstanding debt under a US$75mn revolving credit facility (RCF) which matures on November 23, the company said in its Q3 results.
Primero may seek to further extend the maturity of the RCF to give the company time to complete a strategic solution, it said. The facility has already been extended for six months.
ASSET SALES
Primero has begun to reduce debt with funds raised by asset sales.
The company, which had fully drawn the US$75mn facility at end-Q3, paid down US$25mn in October raised from the sale of its Black Fox mine in Canada.
Primero has retained US$2.50mn from the sale to cover transaction costs. Once these are settled, the remaining cash will also be used to reduce the RCF.
A further US$5mn in restricted cash in the Black Fox deal, pledged toward environmental closure liabilities, will be applied to the RCF.
Primero announced the planned sale of its Cerro del Gallo gold-silver project in Mexico to Argonaut Gold for US$15mn in cash, which will be used to reduce debt when the deal concludes, expected to take place during November.
BLACK HOLE
Total proceeds from the Black Fox and Cerro del Gallo sales, coupled with US$22mn held in cash at end-October, leaves a shortfall of about US$5m in the total US$75mn repayment.
Talks are ongoing regarding the possible sale of Primero's flagship San Dimas gold-silver mine in Mexico.
Wheaton Precious Metals, which receives the bulk of silver output from San Dimas through a streaming agreement, has offered to extend a guarantee to Primero's lenders under the RCF.
SAN DIMAS RAMP-UP
A ramp-up of operations at San Dimas, following a two-month strike which ended in April, continued during Q3, with underground mining rates increasing each month during the quarter, and reaching the target of nearly 2,000t/d in September.
The ramp-up was significantly delayed by equipment reliability issues and periods of inactivity during July during negotiations with unions over an annual profit-sharing bonus for workers.
RESULTS
San Dimas produced 17,070oz gold and 1.05Moz silver in Q3, down from 22,162oz and 1.37Moz, respectively, in the same quarter of 2016. All-in sustaining costs were US$1,117/oz gold, up from US$1,080/oz.
Primero recorded a Q3 net loss of US$7.6mn, compared to a US$11.7mn net loss in the same quarter last year.
Revenue fell to US$23.6mn from US$36.6mn, mainly due to Black Fox being classified as a discontinued operation. Adjusted net income was US$1.8mn, compared to a US$7.9mn adjusted net loss in 3Q16.
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