Primero Mining Corp. New Ordinary Shares' CEO Discusses Q3 2011 Results - Earnings Call Transcript
November 10, 2012 1:40 AM ET
Primero Mining Corp. New Ordinary Shares (PPP)
Q3 2012 Earnings Call
November 9, 2012 11:00 am ET
Joseph F. Conway – President and Chief Executive Officer
Renaud Adams – Chief Operating Officer
Steven Butler – Canaccord Genuity
Hello and welcome to today’s Primero Mining Third Quarter 2012 Results Conference Call. We have just a few announcements before we begin. (Operator Instructions)
I will now turn the call over to Mr. Joseph Conway, President and CEO. Please go ahead.
Joseph F. Conway
Thank you, operator, and those of you on the line and on the web, thank you for participating in our third quarter conference call. As we’ve been following this company you will probably recognize that since June 30, this company has effectively been transformed largely to the benefit of a positive tax ruling and announcement of the significant expansion, as well as increased reserves.
And all of that, most of that has been at least partially reflected in our share price, where we’ve gone from $2.52 million to roughly $7 million in that same period of time. In addition, we continue to improve our balance sheet through debt repayment and increased cash availability. And I will say that we’re generally with our year-to-date results we are pleased, but certain aspects of our operating results during the quarter were lower than expected. Due to a number of events that occurred during the quarter, fortunately, we remedied all of these technical issues and remain very confident that media over guidance for the whole year.
You’ll note that there is a cautionary statement in front of this presentation and that some of the comments that we will make here will be forward-looking and as I ask you to review these cautionary statements at your leisure.
In terms of participation, I’ll read through the presentation, but my colleagues Renaud and David will be available for questions during the question period. In terms of third quarter results highlights certainly started off with strong throughput particularly from the mill, we are up about 10% on a year-to-date basis relative to where we were in 2011.
As in Q3 and Q2 of every year, we do enjoy spot sales and our sales during Q3 of this year were effectively the same as they were in 2011. Our cash position did continue to increase and we have a very strong balance sheet for company of our size and capitalization. You will note that later on in the presentation, the significant increase in our reserves and resources which we announced in early August.
You will also note that we did repay a $30 million convertible debenture in August via the issuance of about 8 million shares. Since that time, our Goldcorp who was the beneficiary of those subsequently sold those in a secondary offering in a relatively lower month or so ago. Subsequent quarter two very positive results occurred, certainly the tax ruling which we will go into a little bit of detail in a moment, and also the expansion also we are going to in a moment. But I want to make sure, people are very clear despite the challenges of Q3, we are very much on track to meet our revised positive guidance that we did put out as part of our second results earlier on this year.
In terms of our objectives going forward, we continue to be focused on becoming an intermediate player, but we also recognize that we have to deliver on a number of fronts, operational financial results, expansion and optimization of our existing operation and other operations as we forward, increased reserves and resources through exploration and accretive acquisitions, and we must get all of those factors in terms of creating long-term success for this company and superior financial returns for our shareholders.
Let’s look at our capital structure for a moment. Just to remind everyone, we have a market capitalization of above roughly $700 million and yet we have a $133 million in cash and on a net cash basis over $80 million, or roughly $80 million. In terms of our operating cash flow of about $120 million is after tax, I want to remind people as well as it is based on consensus prices on a five-year average. If you are bullish as we are here at Primero in terms of commodity prices that $120 million could grow substantially. And in terms of our debt, we have about roughly $45 million of debt. But bear in mind, bulk of that is due at the end of 2015 of the $30 million balloon payment.
So we have sufficient capital from cash flow and our balance sheet to grow our business pretty effectively. In terms of financial results as well, we did have to do a restatement of our financials for 2010, 2011 and up to June 30, due to a change in methodology between GAAP and IFRS, which is another alternative reporting system. And this all relates to foreign exchange with respect to deferred taxes and liabilities.
In effect if your functional currency as in U.S. dollar, it’s different from the currency in which you derive your income, you must reflect temporary changes in the value of the asset base as a relative currency fluctuation. So that does create a lot of volatility in terms of our foreign exchange rates on a quarterly basis both positive and negative. This is something that the company has no control up. I would point out it has no impact in terms of our cash flow and taxes. And consistent with many other companies, this impact has removed in terms of computing our adjusted net income.
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