May 17, 2011 / 12:10 PM / in 6 years

UPDATE 1-Primero reports quarterly loss; tax hit weighs

* Says Q1 results hurt by adverse tax ruling

* Reports Q1 loss of $0.09 per share (Figures in U.S. dollars, unless noted)

TORONTO, May 17 (Reuters) - Gold miner Primero Mining (P.TO) reported a first-quarter loss on Tuesday, as gains from the surge in bullion prices were more than offset by an adverse tax ruling.

Toronto-based Primero reported a quarterly loss of $7.8 million, or 9 cents a share. That compares with a profit of $7 million, or 8 cents, in the quarter ended Dec. 31.

Primero’s only producing asset is the San Dimas gold-silver mine in Mexico, prior to acquiring the mine from Goldcorp (G.TO) in August 2010 the company did not have any producing mines and hence did not realize any revenue or earnings from mine operations.

The company sells the bulk of the silver produced from San Dimas to Silver Wheaton SLW.TO under agreements it inherited with the acquisition of the mine. Silver Wheaton buys the silver output at well below market prices, in exchange for financing it initially provided to fund the development of the mine.

However, the price of silver spiked roughly 60 percent in the first four months of this year and touched an all-time high of $49.51 an ounce in late April, although the price of spot silver XAG= has since retreated significantly it continues to trade well above historical levels.

This spike in the price of silver resulted in tax hit that hurt results in the quarter. Primero said it is taking steps to mitigate this tax imbalance.

The company said it has purchased call options to improve its leverage to silver and protect it against the adverse tax impact of a rising silver price as a result of the purchase agreement with Silver Wheaton.

Primero also said it has made an application to list its common shares on the New York Stock Exchange, in order to improve accessibility and liquidity of the company’s shares.

The company said it plans to produce 90,000 to 100,000 ounces of gold and 4.5 million to 5 million ounces of silver from San Dimas in 2011. (Reporting by Euan Rocha)

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