A Lousy 2011 for Primero Mining

As 2011 comes to a close, it's a great time to look back at what happened to the stocks that interest you. By making sure you know the important things that a company accomplished -- as well as the setbacks it experienced -- you can make a better decision about whether it's a smart investment for your portfolio.

Today, let's take a look at Primero Mining (NYSE: PPP  ) . If you just look at gold prices, you'd think that 2011 was another decent year, albeit with gold closing well below its summer highs. But many gold miners, including Primero, took huge hits this year. Below, I'll take a closer look at the events that moved shares of Primero Mining this year.

Stats on Primero Mining

Year-to-Date Stock Return (34.2%)
Market Cap $272 million
Total Revenue, Trailing 12 Months $162 million
1-Year Revenue Growth 761%
Net Income, Trailing 12 Months $34.9 million
CAPS Rating *****

Source: S&P Capital IQ. NM = not meaningful due to negative earnings.

Why'd Primero Mining lose its shine in 2011?
Primero came into the year with big potential. Spun off from Goldcorp (NYSE: GG  ) in 2010, Primero mines both gold and silver, and with its San Dimas mine in Mexico, Primero already has strong production. Although the company has a commitment to sell some of its silver production to streaming company Silver Wheaton (NYSE: SLW  ) , Primero typically produces more than the required amount of silver each year and gets to enjoy market prices on the remainder.

Primero was on the cusp of a huge strategic move when it put together a merger with Northgate Minerals. But AuRico Gold (NYSE: AUQ  ) scuttled the deal by making its own move for Northgate. Although Primero earned a break-up fee, the stock performed badly in the wake of the news, and you can expect the company to keep searching for strategic partners going forward.

One big problem for Primero comes from taxation. Mexico taxes Primero's silver production based on spot prices, even though it receives only a small fraction of that amount from Silver Wheaton under their streaming contract.

Like companies such as Thompson Creek Metals (NYSE: TC  ) and Great Panther Silver (AMEX: GPL  ) , Primero represents a turnaround play in the making. But with Goldcorp remaining a 36% shareholder and with a strong CEO at the helm, Primero has plenty of potential for investors to get back in the black in 2012.

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Click here to add Primero Mining to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.

Fool contributor Dan Caplinger doesn't own shares of the companies mentioned. The Motley Fool owns shares of Primero Mining. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool has a disclosure policy.

Read/Post Comments (1) | Recommend This Article (4)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 29, 2012, at 10:22 AM, skypilot2005 wrote:

    Primero Reports 2011 Operating Results; Provides 2012 Outlook; and Plans Resource Estimation Review to Improve Predictability


    The Top 10 Gold Stocks for 2012, Part 2

    By Christopher Barker

    December 30, 2011


    Scott Wright, Zeal Reports (12/30/11) "Primero Mining Corp. gained a spectacular project in the prolific San Dimas mine and control over a district that has produced over 11 Moz gold and 500 Moz silver. . .with remaining resources of 2.9 Moz gold and 24.2 Moz silver, along with huge upside exploration potential, the company's exciting new project has an incredibly bright future. . .a major expansion in production by 2013, to annual volumes of about 135 Koz gold and 8+ Moz silver. . .would make San Dimas a higher-end junior-level gold mine, and one of the top silver mines in the world. Guiding these growth plans is about as good of a management team as you'll find. . .Primero has methodically plotted a course that should deliver huge production growth in the next couple of years."

    Sky Pilot

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