TORONTO (miningweekly.com) – Precious Metals producer Primero on Thursday announced that it had approved the second-phase expansion of its San Dimas gold/silver mine, in Mexico, that would raise mine output to between 210 000 oz and 220 000 oz of gold equivalent in 2016.

The Toronto-based miner had chosen a staged approach to the full expansion and after successfully completing the first phase, had now approved the capital to increase the mill throughput to 3 000 t/d.

Construction of the mill expansion was expected to start during the first quarter of 2015 and to be complete during the second quarter of 2016.

The $26-million expansion would increase output by more than 25% over 2014 levels to about 215 000 oz of gold equivalent and cash costs were expected to drop by about $50/oz from current levels to about $530/oz of gold equivalent, or $300/oz of gold on a by-product basis.

Primero, which operates the San Dimas mine, in Mexico, and the recently acquired Black Fox mine, in Ontario, also on Thursday reported disappointing results for the three months ended June 30, saying the company generated net income of $572 000, or nil a share, compared with net income of $4.2-million, or $0.04 a share, in the comparable period last year.

Excluding special items, which mainly accounted for transaction costs and the impact of foreign exchange rate changes on deferred tax balances, adjusted net income was $1.1-million, or $0.01 a share, compared with $17-million, or $0.16 a share, for the same period in 2013.

Wall Street analysts had on average expected adjusted profit of $0.04 a share on revenue of $88.48-million.

During the quarter, revenues increased almost 52% to $79.7-million as a result of selling 48 596 oz of gold (up 89% year-on-year) at an average realised price of $1 264/oz and 1.58-million ounces of silver (up 11%) at an average realised price of $11.56/oz. This compared with revenue of $52.5-million in the second quarter of 2013, with the acquisition of Black Fox mine on March 5, accounting for $20.9-million of the increase.

Revenues at San Dimas were $6.3-million higher in the period, owing to a 23% increase in gold sales volumes and a 27% increase in silver spot sales, partially offset by an 8% decrease in average realised gold prices.

Gold output at Black Fox, which it bought in a $220-million takeover of rival Brigus Gold in March, was subject to a gold purchase agreement and, as a result, 1 334 oz were sold to Sandstorm Gold at a fixed price of $509/oz. Silver produced at San Dimas was subject to a silver purchase agreement and, as a result, 818 573 oz of silver were sold to Silver Wheaton at a fixed price of $4.16/oz and 760 603 oz of silver were sold at an average spot price of $19.52/oz compared with 603 476 oz at an average price of $21.88/oz in the comparable period.

“We have begun the process of investing in and optimising the operation [Black Fox] and are encouraged by the 29% increase in gold production this quarter over last quarter, although the grades mined were below expectation and the current low level of long-hole mining needs to be addressed. We understand what needs to be achieved and look forward to continuing to deliver improving results from Black Fox throughout the year,” CEO Joseph Conway said.

Primero’s NYSE-listed shares closed down 3.59% at $7.52 on Thursday, having gained 67% in value from the start of the year.