Primero to restart talks to end San Dimas strike

Primero Mining will restart talks this week with union officials aimed at ending the month-long strike at its San Dimas gold-silver mine in Mexico.

The Toronto-based company will return to the negotiating table Thursday, COO Damien Marantelli told an earnings call.

Operations were halted at the Durango state mine in February when about 1,000 workers aligned to the national mining-metallurgy union (SNTMMSSRM) downed tools after collective contract negotiations broke down.

Primero is not seeking to cut worker compensation but has begun a process of trimming the headcount in order to boost productivity and return to positive cash flow, it said at the time.

"We have seen movement toward the critical items we need to achieve to return San Dimas to profits," Marantelli said.

"The difference between the two positions was quite distant. We have started to move that closer together, although significant change is needed."

OPERATIONS

Production and costs were negatively impacted at the mine by factors including worker absences in 2016, which hampered development, leading to mine plans not being delivered on.

Gold production fell to 93,881oz from 151,355oz in 2015, with cash costs up to US$856/oz from US$559/oz.

The company plans to simplify mining operations once the strike is lifted, Marantelli said. Previously, 28 veins were being mined and not all of them were profitable.

"We're constraining ourselves going forward into a much more centralized location of more profitable areas of the mine," he told the call.

"Progressively as we go forward we will start to reintroduce some of those veins we leave out as they become profitable through productivity and operational resets and cost reductions."

Primero is continuing dialog with a number of departments within Mexico's government in order to resolve a dispute with tax authority SAT over taxes paid on silver production included in a streaming agreement with Silver Wheaton, interim CEO Joseph Conway added.

IMPAIRMENTS

Primero reported a US$234mn net loss for 2016, including US$189mn of post-tax impairment charges at San Dimas, Black Fox in Canada and the Cerro del Gallo gold project in Mexico. In 2015 the company posted a loss of US$107mn.

Revenue was US$219mn, down from US$291mn, on lower gold and silver volumes sold. Companywide all-in sustaining costs increased to US$1,333/oz gold from US$960/oz.