Primero closes higher on expected San Dimas restart Tuesday
VANCOUVER (miningweekly.com) – The TSX-listed stock of precious metals producer Primero Mining on Monday gained as much as 13.5% as investors anticipate a restart of the flagship San Dimas mine, in Mexico.
The strike by unionised employees at San Dimas has halted mining and milling operations since February 15.
The Toronto-based miner announced after market close on April 13 that it had successfully resolved the work stoppage at San Dimas, paving the way for a phased restart of operations.
The company has reduced staffing at the mine by 17%, moved to a two-day shift schedule from three days and realigned the short-term bonus structure for the workforce. The new collective bargaining agreement runs until 2019.
“We view the news of the restart positively, but continue to be cautious on the name due to its current weak balance sheet. We would become more positive when we see a clearer path to San Dimas becoming free cash flow-positive and if Black Fox [in Ontario] can be shown to generate free cash flow on a sustainable basis,” Desjardins Capital Markets analyst Michael Parkin said in a note to clients.
Further, Primero has approved a 7.5% increase in workers’ base salaries, which are denominated in Mexican pesos. The company wanted to rework the bonus structure and move to a two-shift a day programme to improve productivity and availability at the mine, which should help the asset return to profitability.
Primero closed 10.81% higher on the TSX on Monday at C$0.82 apiece, having shed about 26% in value since the strike began.
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