The ‘New’ Americas Gold Play January 2011 TSX:P
The ‘New’ Americas Gold Play January 2011
TSX:P
TSX:P Cautionary Statement
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This presentation may contain “forward-looking” statements within the meaning of Canadian securities legislation and the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements relate to future events or the anticipated performance of the Company and reflect management’s expectations or beliefs regarding such future events and anticipated performance. In certain cases, forward-looking statements can be identified 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 be taken”, “occur” or “be achieved”, or the negative of these words or comparable terminology. By their very nature forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual performance of the Company to be materially different from any anticipated 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 in national and local governments in Mexico and the speculative nature of mineral exploration and development, risks associated with obtaining necessary exploitation and environmental licenses and permits, and the presence of laws that may impose restrictions on mining. A complete list of risk factors are described in the Company’s preliminary prospectus and will be detailed from time to time in the Company’s interim and annual financial statements and management’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 these terms 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 mineral deposits 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 for a Preliminary Assessment as defined under NI43-101. Investors are cautioned not to assume that part or all of an inferred resource exists, or is economically or 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 any obligation to update these forward-looking statements or information to reflect changes in assumptions or circumstances other than required by applicable law. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those 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 Investment Highlights
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San Dimas Gold-Silver Mine
DURANGO MEXICO
TSX:P
0
100
200
300
400
2010 2011E 2012E 2013E
Corporate Strategy Disciplined Growth
GROWTH
2011-2012: Optimization & 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
Commitment to leading CSR programs
TARGETED GROWTH OBJECTIVE
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SAN DIMAS OPTIMIZATION
LATIN AMERICAN ACQUISITIONS
LEADING MID-TIER GOLD PRODUCER
SAN DIMAS (GOLD EQUIVALENT OUNCES)
EXPLORATION
OPTIMIZATION
ACQUISITIONS
Gold Eq. ounces (000)
TSX:P
San Dimas Solid Platform with expansion & exploration potential
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San Dimas Gold-Silver Mine
DURANGO MEXICO
Mazatlan Durango
2011E PRODUCTION
110,000-120,000 gold equivalent ounces
90,000-100,000 ounces
4.5-5.0 million ounces
$550-$570 per gold equivalent ounce
2010 PRODUCTION
GOLD EQ 100,500 gold equivalent ounces
GOLD 85,400 ounces
SILVER 4.5 million ounces
CASH COST $581 per gold equivalent ounce
Ventanas Exploration Property
DURANGO MEXICO
SAN DIMAS Durango, Mexico
OWNERSHIP 100%
METALS Gold & Silver
MINING Underground, cut and fill
QUICK FACTS
Proven & Probable Reserves
Tonnes (millions) Grade (g/t) Silver (g/t) Gold (Moz) Silver (Moz)
5.6 4.8 339 0.9 60.9
Inferred Resources (exclusive of reserves)
Tonnes (millions) Grade (g/t) Silver (g/t) Gold (Moz) Silver (Moz)
15.2 3.3 317 1.6 154.6
RESERVES & RESOUCES (as at December 31, 2009)
TSX:P
Operating Results Ownership Transition Complete
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Q4 2010 Q4 2009 2010 2009 2011E
Gold equivalent production (gold equivalent ounces)
24,700 35,500 100,500 133,900 110,000-120,000
Gold production (ounces)
21,200 30,800 85,400 113,000 90,000-100,000
Silver production (million ounces)
1.21 1.27 4.53 5.09 4.5-5.0
Gold grade (grams per tonne)
4.01 5.89 4.46 5.36 4.8
Silver grade (grams per tonne)
236 251 244 249 250
Cash cost1
– gold equivalent ($ per gold equivalent ounce)
$643 $411 $581 $407 $550-$570
Cash cost1 – by-product
($ per gold ounce) $524 $307 $471 $301 $350-$370
1. Cash cost is a non-GAAP measure. 2. Cash costs (by-product) per gold ounce reported for San Dimas by Goldcorp Inc. for year and three months ending Dec 31, 2009 were $287 and $272 respectively and are not comparable to Primero cash cost numbers due to certain inter-company transactions that are reversed for Goldcorp Inc.’s consolidated reporting.
TSX:P
Strong Financial Position Solid Platform for Growth
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(US$ million) September 30, 2010
Cash $55 million
Promissory note (5yr, 6%, $5M annual payment plus balloon in year 5) $50 million
Convertible note (1yr rolling, 3%, convertible at $6) $60 million
Long term debt $110 million
Common shares outstanding 88 million
Common shares, fully diluted 117 million
Share Performance Volume (M) Relative Change
-30%
-20%
-10%
0%
10%
20%
30%
-
1
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5
6
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August September October November December January
Volume Primero TSX Gold Index
Improved Silver Agreement Increased Revenue, Reduced Costs
1. 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 8
Increases Revenue1 Decreases Cash Costs1
Term Production
Old Agreement 25 years
(19 remaining) 100% of silver production at $4
Revised Agreement Life of Mine First 4 years: First 3.5 million ounces plus 50% of excess sold at $4 plus Goldcorp supplements Silver Wheaton with additional 1.5 million ounces 50% of production above 3.5 million sold by Primero at spot Year 5 and beyond: First 6.0 million ounces plus 50% of excess sold at $4
50% of production above 6.0 million ounces sold by Primero at spot
Improved Silver Agreement Quarterly Volatility, Tax Impact Remain
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QUARTERLY VOLATILITY
Agreement structure causes quarterly earnings volatility
Silver threshold based on anniversary of August 6, not calendar year
TAX IMPACT
Primero pays tax on silver at spot price:
10% increase in Gold price increases operating cash flow by ~8%;
10% increase in Silver price decreases operating cash flow by ~3-4%;
10% increase in Gold and Silver price increases operating cash flow by ~6%;
SILVER:GOLD RATIO
High correlation between gold & silver 96% over 10 years, 60% over 30 years
30 year historical silver:gold ratio 55:1 Consensus: 60:1 in 2011E, 55:1 in 2014E
Conclusion: Remote prospect of silver:gold ratio dramatically impacting fundamental valuation
VOLATILE QUARTERLY SILVER PRICE RECEIVED1
1. 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
Improved Silver Agreement Opportunities for Further Improvement
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Increase San Dimas production
Investigate all appropriate tax planning alternatives
Acquisition of additional operations:
Reduce tax impact
Smooth quarterly earnings
TSX:P
Operations
TSX:P
Central Block Discovery
Acquisition of San Dimas by Wheaton River
12 1. Gold equivalent ounces calculated on silver price received ie spot price from 1998-2004 and silver stream agreement price of ~$4/oz from 2005-2010
Sinaloa Graben Discovery
Subsequent Acquisition of San Dimas by Primero
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1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Gold Equivalent Production
Historical Production1 Impact of High Grade
Gold Equivalent Production
(000 gold equivalent ounces)
Gold Grade
(g/t)
TSX:P History of Reserve Growth1
13 1. Gold equivalent ounces calculated on silver price received ie spot price from 1998-2004 and silver stream agreement price of ~$4/oz from 2005-2010
Silver Wheaton Silver Purchase Agreement
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1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Proven & Probable Reserves (thousands of ounces)
Gold Equivalent Gold
TSX:P Established Infrastructure
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RECENT 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
Potentially expanding to 14MW
TSX:P
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INCREASE MINE DEVELOPMENT
Key to production growth
OPERATE MILL AT DESIGN CAPACITY
Current:1,600-1,800 tpd, Design: 2,100 tpd
EXPAND MILL TO 2,500 TPD BY 2013
Mill: 2,100 tpd, Leach: 2,500 tpd
POTENTIAL EXPANSION BEYOND 2,500 tpd
2011 review
Optimization & Expansion
TSX:P
Growth
TSX:P Significant Exploration Upside
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Over 100 known veins in district
225 km2 land package
New high-grade zone called Sinaloa Graben discovered in 2009
Aggressive 2011 exploration budget:
$12 million
54,000 metres diamond drilling – 30% more than 2010 levels
3,800 metres exploration drifting – 11 times 2010 levels
TSX:P Sinaloa Graben Key to Growth
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Sinaloa Graben million ounce resource potential
Only 27,000 ounces included in Reserves at Dec. 31, 2009
Higher Grade:
Average reserve grades of 4.8 g/t Au, 339 g/t Ag
Sinaloa Graben results show ~6.0 – 10.0 g/t
Wider:
Current average mining width ~1.5m
Sinaloa Graben results show ~3.0 – 8.0m
2011 Target:
Drift through Roberta, Robertita (main production veins in adjacent Central Block)
Significantly increase Sinaloa Graben reserves and resources
VERDOSA
CORONADO
CANDELARIA
CULEBRA
BLENDITA
PATRICIA
5 HERMANOS
EL SOL
TAYOLTITA TOWN
Piaxtla River
Santa Rita mine
SAN FRANCISO
Tayoltita Mine
N
Mill
San Antonio mine
(Source: San Dimas Geological Office)
West Block
S. ANTONIO MINE
Vein
Fault
Town
Mill
Tunnel done
0 1 2 km
Tunnel Budget 2011
Arana Hanging Wall
Ag-Au High Grade Trend
LEGEND
Proposed Tunnel
DDH Ag g/t Au g/t m RO-16-02 132 3.27 1.43 RO-20-05 514 4.23 1.27
DDH Ag g/t Au g/t m MAR-9-17 514 8.86 2.45
DDH Ag g/t Au g/t m SOL-9-02 549 10.67 1.81
DDH Ag g/t Au g/t m A-25-217(1) 778 7.9 0.80 HW-4G-01B 302 8.7 0.60
Dev Ag g/t Au g/t m RAMP7-129W 1,115 10.30 2.75
DDH Ag g/t Au g/t m TGS-S-22 958 6.81 8.56 TGS-S-15 403 8.08 7.52
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DDH Ag g/t Au g/t m PIL 7-01 508 16.0 2.90
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3 4 5
6
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San Dimas Higher Grade Sinaloa Graben
The Value Proposition
TSX:P Unlocking Value
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BMO 2011E Production & Cash Cost (000 AuEqoz & $/AuEqoz)1
Market Capitalization ($B)
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. Cash cost based on total cash cost per gold equivalent ounce
2. Consensus data source Thomson One. Note: As of Jan 10, 2011
$0.4
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$1.5
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$2.5
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2010 to 2012 CFPS Growth (Consensus %)2
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TSX:P 2011 Objectives
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APPENDICES
TSX:P Transaction Overview
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1. $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
TSX:P Strong Management & Board
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Wade Nesmith | Executive Chairman
Founder of Mala Noche
Founding and current director of Silver Wheaton, Chairman of Geovic Mining and Selwyn Resources
Joseph F. Conway | President & C.E.O.
Former CEO, President and Director of IAMGOLD from 2003 to 2010
Eduardo Luna | President, Mexico
Former Chairman and CEO of Silver Wheaton, Executive VP of Goldcorp and Luismin S.A. de C.V. (San Dimas) and President of Mexican Mining Chamber and the Silver Institute
Robert A. Quartermain Former President, Silver Standard
Director of Vista Gold Corp. and Canplats Resources
Grant Edey Director of Breakwater Resources and former director of Queenstake Resources, Santa Cruz Gold
Former CFO, IAMGOLD
Timo Jauristo EVP, Corporate Development, Goldcorp
Rohan Hazelton VP, Finance, Goldcorp
David Demers Founder, CEO and Director Westport Innovations
Director of Cummins Westport and Juniper Engines
Michael Riley Chartered accountant with more than 26 years of accounting experience
Audit committee chair B.C. Lottery Corporation and Seacliff Construction
TSX:P District Wide Upside – Long Section
Favorable Horizon
Mineralization – Ore Bodies Extension of the Favorable Horizon Potential
SW NE
0 1 2
K I L O M E T E R S
San Antonio West Block
Central Block Castellana and
Robertas
Tayoltita Block Arana Hanging Wall 3,000 m.
2,000 m.
1,000 m.
3,000 m.
2,000 m.
1,000 m.
Sinaloa Graben Block
Source: San Dimas Geology Office
2011 Priority
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Sinaloa Graben Tunnel: Julieta - Sinaloa Norte vein (San Salvador system)
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San Luis Tunnel
Drifting Plan
Drilling Plan 2010
Drifting Plan 2010
Drifting Done
Sinaloa Graben Higher Grade and Wider Widths
SW NE
1,000 m
Sinaloa Mine (San Antonio Area)
Sinaloa Graben San Salvador ( Central Block )
San Luis Tunnel Elev
Santa Anita Tunnel
0 500 1000
M E T E R S
7-660 L Ag g/t Au g/t m 189 3.13 1.24
DDH TGS S-15 Sinaloa Norte intercept
Ag g/t Au g/t m 403 8.08 7.52
Proven Ore
Probable Ore
Probable Ore by Drilling
Explanation
DDH TGS-S-22 Sinaloa Norte Intercept Ag g/t Au g/t m 958 6.81 8.56m
0 m
500 m
0 m
500 m
1,000 m
DDH TGS 7-17 Julieta intercept
Ag g/t Au g/t m 481 3.73 2.22
PRIMERO MINING CORP. Richmond Adelaide Centre 120 Adelaide Street West, Suite 1202 Toronto, ON M5H 1T1 T 416 814 3160 F 416 814 3170 TF 877 619 3160 Email: [email protected]
INVESTOR RELATIONS Tamara Brown Vice President, Investor Relations T 416 814 3168 [email protected]
The ‘New’ Americas Gold Play