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XMFSinchiruna (26.52)

Your First Reaction to Primero Mining



June 04, 2010 – Comments (19) | RELATED TICKERS: GG , SLW

I have an article forthcoming that details Goldcorp's landmark transaction to spin-off the San Dimas gold mine in Mexico into a new incarnation of Mala Noche Resources that will be renamed Primero Mining.

I know what I think of the deal, but I'm curious to know what you all are thinking of it.

If any of you have questions about it, either before you read my article or afterward, please don't hesitate to ask. I have reviewed every angle of this complex transaction, and am prepared to help you understand it better.

I will post a link to the article here when it is published.

Here is Goldcorp's press release.

Here is Mala noche's press release.

Here is Silver Wheaton's press release.


19 Comments – Post Your Own

#1) On June 04, 2010 at 10:17 AM, catoismymotor (< 20) wrote:


Thanks for the SLW link. I happened to read it last night. To me this news is pretty darn exciting.


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#2) On June 04, 2010 at 10:36 AM, XMFSinchiruna (26.52) wrote:

On an unrelated topic, here's a quick update to my thoughts on the near-term outlook for gold and silver.

You may recall on May 18 I posted my outlook from the moment gold notably retreated from recent highs. I identified $1,215 as a key pivot point, which it certainly proved to be through multiple trading sessions, both on the way up and on the way down.

I also indicated that I was an active buyer in the $1,180 range, and indeed I turned a handsome profit on a couple of plays into that re-test of resistence in the $1,220s at the beginning of this week. For all the requisite caveats about trading in gold and silver companies versus the long-term investment focus that I wholeheartedly recommend, please read that prior post. Trading in these shares remains solely a hobby that I undertake with a minute fraction of my overall precious metals allocation.

Looking forward, $1,215 remains that key pivot point between near-term strength to challenge resistence between there and a fresh nominal high on the one hand, and near-term weakness on the other hand that would set up another retest of $1,180 support. There will be strong buying interest waiting there, but the degree of the Euro's weakness relative to the dollar will ultimate shape whether seeling interest overwhelms buyers at that stage to set up a possible re-test of $1,150. I still see solid chances for gold to lean more towards near-term strength than weakness, and would not be at all surprised to see it bounce off any point in that $1,150 to $1,180 range into a convincing breakout through $1,250 and quickly towards $1,400-$1,500 by the end of the summer. If $1,150 were to break down, then we would likely be in for some more range-bound action throughout the $1,100s for a few more weeks at least ... before building the necessary strength to break out.

These are just my stream of consciousness ramblings ... take them for what they're worth. I can't predict how gold will trade today or tomorrow, but I can help to identify key price points that inform the interpretation of that action as it unfolds.


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#3) On June 04, 2010 at 10:49 AM, outoffocus (22.78) wrote:

Your ramblings are very valuable.

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#4) On June 04, 2010 at 11:05 AM, silverminer (30.06) wrote:

MAG Silver keeps finding plenty of molybdenum alongside the growing gold deposit at Pozo Seco. Growth in assets outside of Fresnillo's sphere of influence is critical to the explorer's ability to ward off unwelcome advances by Fresnillo.

"The recent drilling continues to firm up and expand the stand-alone moly-gold mineralization at Pozo Seco and results from the holes that have been completed in the Pozo Seco Deep zone appear to confirm that this is a fluid upwelling area with significant thickness and grade," said MAG CEO, Dan MacInnis. "The fact that our 1.1 kilometre step-out hole cut multiple mineralized veins with a more proximal mineralization style, suggests we're on the right track."

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#5) On June 04, 2010 at 5:14 PM, XMFSinchiruna (26.52) wrote:

Here's the article on the Primero deal ... enjoy.


"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."

"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."

"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."

"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."


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#6) On June 04, 2010 at 7:46 PM, mhy729 (30.31) wrote:

Great work!...thanks for sharing with us.  Incidentally, I like the old name Mala Noche, but yeah perhaps it isn't so appropriate.  For those interested Mala Noche Resources currently trades on the TSX exchange (Canadian) as MLA and appears to be on the pink sheets as MNOCF.  Trading is very thin though.

And Sinchi, I have discovered what your name means!  Cool choice.  B)

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#7) On June 04, 2010 at 7:57 PM, 100ozRound (28.57) wrote:

Do you know if they will be listed on a US exchange?

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#8) On June 04, 2010 at 10:04 PM, mhy729 (30.31) wrote:

Good question.  Considering that Great Panther Silver is still an OTC stock (GPRLF) at a market cap of 82.9m, I would guess that Mala Noche/Primero (MNOCF currently at market cap 12.5m) will stay on the pink sheets for now.

(all mkt cap data from OTC quotes made available at Scottrade)

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#9) On June 05, 2010 at 11:59 AM, XMFSinchiruna (26.52) wrote:


That is the right question, to be sure. I have read 100% of the public record on this transaction, and there's been no mention of that detail. I suspect they are making those calculations at present.

I suspect they'll launch these new shares on the AMEX or the NYSE. They've drafted this conpany as the new premier growth vehicle in the junior-to-mid-tier gold space, so they are clearly going to want to maximize access and liquidity.


Mala Noche's market cap may have been $14m pre-announcement, but these new shares will debut with a market cap in the $100s of millions.


This is the most exciting transaction I've seen in the gold industry in many years.

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#10) On June 05, 2010 at 4:08 PM, 100ozRound (28.57) wrote:

I just read the article and Rec'd it.  Exciting stuff.

Will you keep us posted as the events unravel?

Thanks for all your hard work Sinch!

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#11) On June 05, 2010 at 5:35 PM, silvermind (< 20) wrote:

As is my habit I just Rec'd your post.  It appears Mala Noche trading was halted on June 1 and it will reappear soon as Primero - but when?

I am a novice investior --- If we can purchase Primero through US Companies such as Etrade why is it important for a stock to be listed on an American exchange?


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#12) On June 05, 2010 at 5:39 PM, silvermind (< 20) wrote:


 As I have said in a past post, Management is just as important in my evaluation of a company as resources.  This couldn't be better!


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#13) On June 05, 2010 at 6:21 PM, XMFSinchiruna (26.52) wrote:


Yup ... certainly an executive dream team.

I certainly think it would be benficial for Primero to trade on a U.S. exchange in order to reach its full potential. U.S. investors form a very major component of gold mining stock demand, and in my estimation most investors won't even delve in to the Pink Sheets.

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#14) On June 05, 2010 at 6:26 PM, silvermind (< 20) wrote:

Okay - so no negative US tax implications if Primero stock isn't purchased through a US exchange?

When would you expect the Primero Mining IPO?

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#15) On June 05, 2010 at 8:04 PM, XMFSinchiruna (26.52) wrote:


soon  :)  They've not indicated a timeframe, but this will move quickly.

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#16) On June 06, 2010 at 7:54 AM, mhy729 (30.31) wrote:


Thanks for correcting my mistake.  *pulls foot from mouth*

As always, greatly appreciate your dedicated research and insight.

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#17) On June 12, 2010 at 5:09 PM, cladd (< 20) wrote:

Golcorp has also done a smaller deal with Newstrike Capital for the Ana Paula properties in the prolific Guerrero goldbelt.  Newstrike is controlled by the Lundin family and Goldcorp acquired the company whom Newstrike management previously worked for and rolled it into the operations of Luisman.

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#18) On June 12, 2010 at 6:27 PM, silvermind (< 20) wrote:


Interesting deal.  Thanks for the headsup.   Newstrike hasn't had any income for 3 years has it?  


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#19) On June 14, 2010 at 7:11 PM, wolf411 (40.63) wrote:

Primero showed up today on the new issue page at TD Waterhouse, priced at $6.00 CDN.  It may also be available from some other Canadian brokers.

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