Shares of Primero Minerals (TSX:P) crashed 13% Thursday after a month-long strike and lower-than-anticipated gold grades at its San Dimas silver/gold mine in Mexico forced it to revise its 2011 guidance.
The Toronto-based company said it will produce 80-85,000 ounces of gold this year compared to the previous estimate of 90-100,000 ounces. The silver production target remains unchanged at 4.5 to 5 million ounces of silver.
Primero attributes the lower production to a mill workers strike in April that lasted a month, as well as lower gold grades in the Roberta and Robertita veins in the Central Block of the mine. Total cash costs therefore rose to between $610 and $630 per gold-equivalent ounce, from $550-$570/oz.
"During the mill worker strike, we continued to mine ore and had hoped to meet original guidance by processing the stockpiled ore in addition to daily production," said Joseph Conway, Primero President and CEO."While the mill exceeded nameplate capacity during the second quarter, the stockpiled ore was not assayed due to the closure of the lab during the strike and was lower grade than anticipated. This and encountering lower gold grades since the end of the second quarter has required us to revise down gold production guidance for 2011."
The workers downed tools over bonus pay structures. Primero bought the mine from Goldcorp. in 2010, and is currently the company's only producing asset.
Primero was a takeover target back in July, but the deal with Northgate Minerals (TSX:NGX) fell apart after gold and silver producer AuRico Gold Inc. (TSX:AUQ) acquired Northgate in an all-stock deal valued at $1.48 billion.