Artifex Folios

Primero Mining is one of our commodity-based holdings that provides exposure to both silver and gold through a well-managed mining operation. We have held it in our Value Equity portfolio since December of 2011 and our Alternative Portfolio since August of 2012. I first discovered it through an independent premium research service that we subscribe to.

Primero is a Canadian company that mines both gold and silver that is primarily produced via their San Dimas mine in Mexico. San Dimas is a very productive mine. Additionally, when we purchased the shares, there was the possibility of a favorable tax ruling from the Mexican government, which has ultimately developed.

I have liked this company for our purposes primarily because:

1. There have been catalysts that could propel the share price higher regardless of the direction of the popular indices.

2. It provides exposure to silver and gold, which serve as an inflation hedge.

3. It appears to be an undiscovered, well-managed company.

The announcement today seems to bear this out. Some of the highlights:

• Record Revenues and Operating Cash Flow: Annual 2012 revenues increased by 17% over 2011 and operating cash flows⁽¹⁾ increased by 14% over 2011;
• Record Annual Production: Strong fourth quarter production contributed to record annual production of 111,132 gold equivalent ounces⁽²⁾, within the Company’s increased guidance range⁽²⁾;
• Excellent Cost Control: The Company lowered full year cash costs⁽³⁾ compared to 2011;
• Strong Balance Sheet: Grew cash position to $139.2 million at December 31, 2012 while significantly reducing its debt;
• Positive Exploration Results: Discovered two new high-grade veins in 2012 and increased mid-year gold reserves and resources;
• Positive Tax Ruling: Substantially increasing the Company’s cash flow;
• Increased Silver Sales At Spot: Increased silver sales at spot prices in 2012 by 40% over 2011;
• San Dimas Expansion Announced: Expansion expected to increase production by approximately 60% and reduces cash costs, with a potential further expansion possible;
• Cerro Del Gallo Acquisition Announced: Expected to increase medium-term production to over 250,000 gold equivalent ounces per year and more than triples the Company’s resource base⁽⁴⁾.

You can read the full report here:

Primero Reports Fourth Quarter and Full Year 2012 Results; Generates Record Revenues and Operating Cash Flow and Significant Free Cash Flow¹

Our rates of return since adding the position are as follows:

AFG Alternative portfolio: PPP +18.61%

AFG Value Equity portfolio: PPP +74.93%

We intend to hold this position in both models for the time being.