Highlights:

  • Construction decision delayed in order to allow 2014 drilling and metallurgical testing programs to be completed.
  • Project advanced including land acquisition, water rights, basic engineering and permitting.
  • Higher-grade mineralization identified with the Carmen Providencia epithermal vein returning 4.6 grams per tonne ("g/t") gold equivalent over 5.8 metres (CP13-030) which is in addition to the previously released 5.4 g/t gold equivalent over 8.1 metres (CP13-027).

"Primero continues to optimize and advance its Cerro del Gallo project," stated Mr. Joseph F. Conway, Chief Executive Officer. "We remain focused on achieving an acceptable rate of return at a commodity price lower than today’s in order to minimize risk to our shareholders. The Company has now completed basic engineering, advanced land acquisition and commenced metallurgical optimization and exploration drilling. The regional exploration results announced today continue to increase our confidence in the Cerro del Gallo regional exploration upside. However, we have elected to postpone any potential construction decision at the Cerro del Gallo project until the 2014 metallurgical testing and exploration drilling programs have been completed."

The Company has currently spent $3.9 million (with a total of $5.2 million committed) of its $12.9 million 2014 Cerro del Gallo budget. The total budget includes $2.5 million for 10,000 metres of exploration drilling.

Cerro del Gallo Project Update

The Cerro del Gallo drilling and exploration program is designed to infill the central parts of the felsic intrusive of the Cerro del Gallo deposit in order to add new resources, to provide core for metallurgical and acid drainage testing and to test for mineralization beyond the Cerro del Gallo deposit regionally on the San Anton property.

The Cerro del Gallo metallurgical testwork program’s objective is to confirm and optimize the gold and silver recoveries, categorize the transition ore with increased detail and confirm leach pad stability and percolation. Results of the 2014 exploration and metallurgical programs are considered critical to any Cerro del Gallo construction decision. The initial metallurgical results are encouraging but further work is required to make a construction decision.

Approximately 40 tonnes of core samples from the 2013 Cerro del Gallo drilling program were shipped to Canada for metallurgical testing in Q1 2014. Bottle roll tests began in Q2 2014 on a variety of composites from different lithologies in the main ore body using the new cores. These tests, which will be completed in Q3 2014, will be followed by column tests using composite samples chosen from an updated block model.

To date the Company has:

  • Completed basic engineering of the leach pads, the solution and environmental ponds, the crushing, SART (sulfidization, acidification, recycling and thickening) and ADR (adsorption, desorption, recovery) plants plus site infrastructure as well as re-confirmed the heap leach facility capital cost estimate.
  • Advanced land acquisition to approximately 70% with remaining parcels of land under advanced discussions with land owners.
  • Completed all required water rights purchases.
  • Prepared permit application documentation which will be presented to the authorities when the required land has substantially been purchased.
  • Initiated stakeholder mapping and public relations efforts in local communities.

The Company has not completed any drilling (regional or near mine-site) at Cerro del Gallo to date in 2014 due to a permit reclassification delay. The 2014 Cerro del Gallo exploration program has approximately 10,000 metres of drilling planned, including infill, condemnation and regional exploration.

This delay in drilling has impacted the Company’s ability to update the Cerro del Gallo alteration model, update its Mineral Reserve and Mineral Resource estimate and complete condemnation drilling. The Company has therefore elected to postpone any decision until the 2014 drilling program and metallurgical testing programs can be completed.

The Company aims to complete the necessary metallurgical tests, the 10,000 metres of drilling, all required land purchases and submit the permit application by the end of 2014. The Company can then assess the economics of the project in order to make a potential construction decision in early 2015.

Cerro Del Gallo Drilling Results

The Company initiated an exploration program at Cerro del Gallo in late 2013, the first exploration since 2008. The program included near mine-site infill and condemnation drilling as well as regional drilling and geochemical assessment.

The Cerro del Gallo Project is located within the San Anton property, in the state of Guanajuato in central Mexico, approximately 270 km northwest of Mexico City. Approximately 80% of the 25,269 hectare San Anton property remains unexplored.

The San Anton property contains several styles of mineralization, the Cerro del Gallo porphery-style deposit, epithermal vein systems, massive sulphide mineralization and potentially skarn style of mineralization.

The Company’s regional exploration program was designed to test the numerous known surface expressions of mineralization, many of which reported significantly higher grade than the current Cerro del Gallo Mineral Reserve and Mineral Resource grade.

The Company drilled approximately 2,400 metres of diamond drilling in 2013 (assay results obtained in 2014) in the epithermal veins in four areas: Carmen Providencia, Ave de Gracia, La Paz and Espiritu Santo.

The drilling results, as shown in Table 1, confirmed mineralization, with reported intercepts between 100 metres and 200 metres below surface. Results also confirmed gold and silver mineralization along the whole Carmen Providencia – Espiritu Santo epithermal vein structure that was explored. This epithermal vein system is currently known to extend approximately 3.2 kilometres but lacks sufficient diamond drilling (previous drilling was mostly reverse circulation) and geological interpretation.

The Company is also advancing its soil geochemistry and geological mapping of the overall San Anton property. Results from old geochemical grids were merged with new soil sample results and are being used to define further 2014 drilling.

The second soil-sampling program located at the Espiritu Santo hill is ongoing. The whole soil geochemistry program in this area includes 887 samples over 224 hectares. This program partially overlaps five historic soil sampling lines and will allow comparison of results.

Surface drilling at Cerro del Gallo was conducted by Major Drilling and supervised by Primero’s exploration team. Mr. Gabriel Voicu, P. Geo., Vice President Geology and Exploration, reviewed the technical exploration information in this news release as the Qualified Person ("QP") for the purposes of National Instrument 43-101 ("NI 43-101") for the Company. All samples are 1/2 core and analyses reported herein were performed in the ISO certified independent laboratory SGS Servicios Minerales in Durango Mexico, using fire assay with atomic absorption finish or gravimetric finish for values over 10g/t gold. Intercepts cited represents true widths and drilling is generally intersecting interpreted mineralized zones at a high angle. Primero’s quality control program includes systematic insertion of blanks, standard reference material and 5% of rejects are re-assayed to ensure laboratory accuracy. Generally, in a block of twenty samples one will be a standard and one will be a blank.