Joe Conway - President and CEO of Primero (who also grew IAMGOLD from $50 million to $6 billion)

Joe Conway - President and CEO of Primero (who also grew IAMGOLD from $50 million to $6 billion)

Primero Mining Corp (TSX:P) provides an update on the proceedings at the Cerro del Gallo Au-Ag project in Mexico.

Primero acquired the Cerro del Gallo project in May 2013 from Cerro Resources NL in a share/cash/spin-out deal that saw Primero retaining a 69.2% interest in the project; offering Cerro Resources shareholders 0.023 Primero shares and shares in a spinco that would keep Cerro Resources other assets and $4 million cash.

Primero are following the trend to cut costs and reduce capital expenditures in this ‘low’ gold price environment (I put low in quotations for our readers who remember when gold was a mere $250/oz).  With this lower spend; Primero still expects to make a construction decision on this project by Q4/2013 which could see the project go into production by mid-2015 at a rate of 95,000 ounces of gold per year.

Primero also added some depth to its lineup with Mr. Louis Toner being hired as VP, Project Development and Construction and who may see Cerro del Gallo be his first ‘at bat’ for Primero.

CEO Joe Conway et al are still trying to figure out what to do with the project - whether to develop a heap leach only operation, a heap leach to CIL facility or a CIL only facility.

The company still needs to acquire more land (which is always a sticky situation with a high-profile foreign mining company) and until they acquire all the land they do not expect to be fully permitted.  They claim they have acquired 41% of the required 363 hectares for Phase I (heap leach) of which 100% of the pit is included.

“Don’t worry guys, we own the pit”.  What about the leach pads, waste dump, processing facility, camp, etc…that’s all part of the other 59% of the land they require.

That is concerning given the changing climate in LatAm and the sometimes unreasonable land owners that are intelligent to know that they have a company by the b_lls.

Having said that, the risk/reward on Primero shares is interesting. If the gold price picks up again then Primero shares should outperform given the company's low cost, low risk asset base, and strong, well known management team.

More: Primero Mining Corp.