Alert: Primero Mining to Launch This Week
August 02, 2010
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I corresponded with former IAMGOLD CEO and incoming Primero Mining CEO Joe Conway today, and discovered that they expect Primero Mining shares to begin trading on the Toronto Stock Exchange this week under the very memorable ticker symbol: "P".
He expects shares to price in the range of C$5.00 to C$5.50 per share for an initial market cap of around C$450-$500 (his best guess ... subject to change).
Now for the sad news: at least for now, there will be no U.S. listing for these shares. They will trade solely on the TSX, and the company will not offer a sponsored pink sheet listing (though that doesn't mean one won't turn up). I expressed my disappointment regarding the resulting difficulty that U.S. investors may have in participating in this incredible growth opportunity, and he indicated that they will revisit the idea later in the year.
For anyone who doesn't recognize the name of Primero Mining, this is the new company engineered by a dream-team of industry executives from Silver Wheaton, Goldcorp, and elsewhere ... created atop a rock-solid foundation of Goldcorp's recently divested San Dimas mine.
Please see my article about the company here for further information.
http://www.fool.com/investing/small-cap/2010/06/04/an-amazing-day-for-a-bad-night.aspx
The deal of the decade
This transaction is a first-rate steal for Primero, which for $500 million will acquire a fully operational mine with more than $2.1 billion worth of proven and probable gold and silver reserves at present market prices. Permitting a competitive cost structure that saw 2009 production of 113,000 ounces of gold at total cash costs of just $287 per ounce, the ore grades for both gold and silver at San Dimas are simply phenomenal. But that's just a fraction of the story. You see, San Dimas has a history of production going back to 1757, and as Goldcorp explains:
The long history of continuous mining at San Dimas and the known occurrence of the mineral veins have overridden the need to prove up reserves for many years ahead. Consequently, the true potential of the deposits are neither fully realized nor reflected in the stated reserves and resources.
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An executive dream team
Completing the overnight transformation, Primero Mining will be led by incoming president and CEO Joseph Conway … who enjoyed noteworthy success in transforming IAMGOLD (NYSE: IAG) into one of the leading growth stories of the mid-tier gold producers. Topping off this influx of proven management, Eduardo Luna will oversee San Dimas operations as executive VP and president of the Primero's Mexico subsidiary. Not only did Luna execute an impressive production expansion at San Dimas over the course of 16 years as president of the Luismin operations (which Goldcorp acquired in 2005), but he has also served as chairman of my top equity pick in the entire precious metals sector: Silver Wheaton (NYSE: SLW). Wade Nesmith, Mala Noche's Founder and CEO (and still a founding director at Silver Wheaton) will shift to the chairman's seat.
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The value proposition
Going back to our discussion of San Dimas reserves above, Goldcorp's willingness to essentially guarantee 220 million ounces of payable silver production stands as a strong testament to the wide divide between San Dimas' stated mineable reserves of 60.9 million ounces and the far-greater production potential anticipated by the mine's operators. If the market fails to account for that divide in its initial pricing of Primero shares, this could inject a strong value component into what is already shaping up as a compelling growth stock.
Bred for growth
Peering further down the road, I see a Primero utilizing this imaginative transformation as a catapult into further acquisitive growth in the manner of New Gold (AMEX: NGD) and Eldorado Gold (NYSE: EGO) before it. Don't expect those deals to follow immediately since the company will first focus upon optimizing the San Dimas operation through 2011 -- but strong cash flow from San Dimas is likely to open up multiple opportunities for expansion by 2012. Primero has already signaled a Latin American focus for future acquisitions, which leads this Fool to ponder potential pairings with perpetually undervalued producers like Gammon Gold (NYSE: GRS) and Minefinders (AMEX: MFN).
However Primero's promising future plays out, this new miner's first step into immediate production is the greatest leap I have ever witnessed from a small and little-known entity. With such an auspicious beginning, Fools are strongly encouraged to track the progress of this miner right from the primero moment.
If your broker grants direct access to TSX-listed stocks, you can count your blessings ... because this is one stock I scores of investors would love to own if they could.
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