Brigus Gold Fighting An Uphill Battle

| About: Primero Mining (PPP)

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Brigus Gold (BRD) is a Canadian gold miner operating the Black Fox mine in the Timmins district. The company has published results for Q3/2013 and we decided to have a closer look after interest in this company had been re-kindled following recent impressive drill results.

Here is a summary of our observations.


The company produced 27,174 ounces of gold in the third quarter, a 39% increase year-on-year. The original guidance of 77,000 - 85,000 ounces had already been increased to 95,000 - 105,000 ounces and the strong results reported for the third quarter have validated the move.

The company reports cash costs of $617/oz and All-In Sustaining Costs, or AISC, of $992/oz. These cost numbers represent a significant improvement year-on-year as well as compared to the second quarter.

Capital spending at the Black Fox mine has been reduced considerably for the present year and is set to halve in 2014. Other cost cutting measures are also taking effect and are showing in the results reported for the third quarter.

Financial Results

Revenues of $36.9M generated $3.36M in Income from operations taking into account $2.6M in impairments. The bottom line is what we call a red zero (or a loss of $0.4M).

Current Assets only just outweigh Current Liabilities giving a current ratio of 1.03 and working capital of only a little over $1M. We consider this situation bordering on the worrisome, but manageable as long as the gold price remains at least at the present level. Current debt is listed as $16M and the cash balance is given as $21M. These numbers will certainly deserve attention in coming quarters.

In addition to the short term debt the company also carries $66.8M of long-term debt on its books resulting in total debt of $83M and a debt-to-equity ratio of 0.34. Long term debt has been reduced from $93.2M at the start of the year and consists of Senior unsecured convertible debentures, Senior secured notes and lease liabilities.

In the past quarter the company repaid $4.9M of its debt and paid $1.8M in interest.

So far total liabilities have been reduced by $23.7M this year and shareholder equity has been increased by $11.2M.


Brigus Gold has recorded a strong quarter in operational terms and has reported encouraging exploration results. However, the company has not recorded any earnings per share despite these encouraging results from operations and the associated cash flow.

Brigus Gold is trading at a market capitalization of $150M and an estimated enterprise value of $212M at the time of writing which is well below the book value of $244M. The company has a relatively high debt load and we presume that this debt might be the reason for the tentative market valuation.

Current performance seems sufficient to manage the debt obligations; and turning recent exploration success into dollars will certainly help to de-stress the balance sheet over time.

We remain curiously interested in this company, and hope that operating cash flows can be turned into earnings and a stronger balance sheet in due time.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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