Stockchase Opinions

Charles Oliver, HBSc CFA Primero Mining Corp P-T TOP PICK Oct 30, 2012

Management has unlocked a huge amount of value in this asset. Trading at about 7X cash flow. Expanding production. Has great potential to become a dividend player. Could see this $10 or higher in 12 months.

$7.390

Stock price when the opinion was issued

Mining
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TOP PICK

Run by one of the better CEOs in the industry. In the process of acquiring an Ontario gold producer. Production will be 250 oz per year. It will get onto the radar of others who have not looked at them in the past. Lots of free cash flow. 5% yield with potential to grow over time. Ontario and Mexico are two of the best jurisdictions in the world. Thinks there is potential for a re-rating.

COMMENT

(Market Call Minute.) Great company. Phenomenal management.

PAST TOP PICK

(A Top Pick Jan 30/14. Down 39.06%.) Sold his holdings as part of his reduction in gold. Had a pretty healthy capital loss, so he utilized that to offset some of the big gains on the other side. The stock performance was not just about gold, but some of their activities. This is still a name that he would add to at the right time if he wanted a little more gold exposure.

PAST TOP PICK

(A Top Pick Jan 30/14. Down 32.58%.) Chose this on the basis that it had a nice stable mine in Mexico, sub-$1,000 all-in costs, good free cash flow generator and did an acquisition in Ontario. Was under capitalized and is going to take a little longer with possibly a little more capital than was initially expected. He is looking for an entry point on this, and for a couple of more quarters of no surprises.

DON'T BUY

There is not too much company specific. It is trading in line with gold generally.

TOP PICK

A gold producer out of Mexico. 250,000 ounces a year. Costs are about $1,000 all in, so you have a good margin of a couple of hundred dollars an ounce. That generates free cash flow which is the main driver. Sees free cash flow of around 6%-7%, coming mainly from the San Dimas mine in Mexico. What is really compelling, which is lost on a lot of investors, is the wealth creation potential from that mine. A new discovery called Jessica has 2X the grade in gold and 4X the silver grade, and is not far from their existing mine.

PAST TOP PICK

(A Top Pick June 17/15. Down 45.95%.) A gold/silver producer in Mexico. A difficult story. Great cash costs and you have a fantastic mine, but they made an acquisition in the Black Fox mine in Ontario, which has not worked out as expected. Also. there has been a CEO transition that was unexpected. More importantly there has been a tax agreement in Mexico and the Government said they had to pay a tax on silver on the spot market, not on what they actually received. Feels the risk/reward is favourable.

WATCH

There is a Mexican tax issue, but he is not concerned. Thinks it will be solved by negotiation or arbitration. He is concerned about the operating results and the general administrative expense relative to operating revenues. Doesn’t see himself becoming a holder of this stock.

COMMENT

This is a stock that he would never tell somebody not to play it. He likes mining and he likes gold going forward. If that has any correlation to the stock at all, and it does have any push at all, you could be a buyer here, but he wouldn’t put all his money in. This is going to take time and/or results to get it moving.

COMMENT

Doesn’t think there is anything particularly wrong with this from an asset perspective. It just its small size. It has reasonable levels of debt. In this kind of environment, you want to be a little more choosy. He would rate this as a Hold or more possibly a Sell.