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McEwen to plant flag on Timmins gold mine in October

McEwen Mining's acquisition of Black Fox to be finalized early next month
Primero Black Fox gold pour

Primero Mining expects the sale of its Black Fox gold mine in Timmins to McEwen Mining to close during the first week of October.

The company anticipates producing between 50,000 and 60,000 ounces of gold in 2017 with all-in sustaining costs of between $1,150 and $1,250 per ounce.

At the time of closing the transaction, Primero said Black Fox will have delivered approximately 50,000 ounces attributable to Primero this year.

McEwen Mining announced in August it was acquiring Black Fox in a $35-million deal.

Down south, Primero is still struggling with production at its San Dimas Mine in Mexico after restarting operations this year.

The gold production guidance has been lowered to between 75,000 ounces and 85,000 ounces with all-in sustaining costs increasing to $1,050 to $1,150 per gold ounce.

The company is facing cash constraints which reduced both development and exploration spending at San Dimas.

Primero said it will continue to operate in cash conservation mode while discussions continue to either sell the mine or renegotiate its silver stream.

The mining company had $12 million in cash at the end of August 31 and has fully-drawn its $75 million revolving credit facility.

The money from the sale of Black Fox is earmarked to pay down its debt.

"We remain very cognizant of the challenges facing us and remain committed to our Primero stakeholders in working to achieve resolution," said interim president-CEO Joseph F. Conway in a Sept. 21 news release.

"We continue to advance our strategic process and our objective is to obtain a fair distribution of value for Primero stakeholders. At the same time, we are working on possible alternatives to refinance or repay our revolving credit facility due in November and see the sale of the Black Fox asset as a critical step towards meeting this near-term hurdle."

McEwen Mining announced earlier that it has struck an underwriting agreement to raise $40.5 million in capital for the acquisition of the Black Fox and Grey Fox mining properties outside of Timmins.