Yamana Gold Provides Update on Agua Rica and Announces Construction Decision
for its Ernesto/Pau-a-Pique Project
"We have maintained our focus on consistency and reliability in operations and we have applied that focus and approach on our development stage projects," said
Agua Rica,
Yamana has continued to advance its Agua Rica project in
The Company has completed the first of several studies evaluating certain optimization initiatives over and above the evaluation of the project based on the 2006 feasibility study, all of which are expected to have a positive impact on the project. The optimization initiatives included the following:
1. New mine plan that reduces the initial overburden results in
improvements in both capital and operating costs.
2. Thickening paste disposal of tailings results in significant savings
in capital with further potential for improvements.
3. Replacement of the concentrate pipeline with trucking to an existing
rail road system results in capital cost improvements.
4. A review of the impact of higher metal prices on mineral reserves
which the Company estimates will result in higher mineral reserves
and mineable tonnes of ore.
Total mineral resources as reported in Yamana's 2008 annual report is summarized as follows:
- Measured mineral resources of 64.1 million tonnes of ore with an
average copper grade of 0.49% for a total of 700 million pounds of
copper, and an average gold grade of 0.17 g/t for a total of
361,000 ounces of gold
- Indicated mineral resources of 248.1 million tonnes of ore with an
average copper grade of 0.40% for a total of 2.2 billion pounds of
copper, and an average gold grade of 0.16 g/t for a total of
1.3 million ounces of gold
- Inferred mineral resources of 651.0 million tonnes of ore with an
average copper grade of 0.34% for a total of 4.9 billion pounds of
copper, and an average gold grade of 0.12 g/t for a total of
2.5 million ounces of gold
Total mineral reserves as reported in Yamana's 2008 annual report is summarized as follows:
- Proven mineral reserves of 347.8 million tonnes of ore with an
average copper grade of 0.57% for a total of 4.4 billion pounds of
copper, and an average gold grade of 0.25 g/t for a total of
2.8 million ounces of gold
- Probable mineral reserves of 449.9 million tonnes of ore with an
average copper grade of 0.43% for a total of 4.3 billion pounds of
copper, and an average gold grade of 0.21 g/t for a total of
3.0 million ounces of gold
The foregoing mineral reserve estimate was based on a copper price of
Based on the higher metal prices used in the optimization review, contained metal is expected to increase by at least five percent. An updated full mineral reserve estimate will be completed as part of the continued review of the project.
Based on the recently completed optimization study, Agua Rica is expected to produce approximately 12.5 million tonnes of copper/gold concentrate and 357,750 tonnes of molybdenum concentrate over a 26.5 year mine life. Estimated production and cash costs are summarized below:
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Initial 10 Years LOM
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Average annual copper production 365M lbs 282M lbs
By-product cash costs(1) per pound (net
of Molybdenum credits)* $0.50 $0.53
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Average annual gold equivalent production(2) 154,000 GEO 136,000 GEO
Co-product cash costs(1) per gold
equivalent ounce (GEO)* $370 $400
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* excluding royalties
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(1) Co-product and by-product cash costs are non-GAAP measures. A
definition is provided at the end of this press release.
(2) Yamana treats silver as a gold equivalent.
By-product cash costs per pound of copper net of all by-product credits, including gold and silver, are estimated to be approximately
As part of the new analysis, Yamana has also evaluated the capital expenditures assumed in the 2006 feasibility study and have concluded a reasonable estimate would be comparable at approximately
The new financial and economic model used by Yamana for its new base case analysis has assumed a copper price of
This study now creates the new base case for the project. Yamana has concluded that this is an exceptional stand alone project offering significant value and currently has further optimization upside options being evaluated. They include:
1. Improving the pit slopes to further optimize mine development and
reduce waste removal.
2. Optimizing the location of separate tunnels for ore and waste which
could result in savings in both capital and operating costs in
addition to providing additional flexibility to the operations.
3. Reduction in power and equipment requirements particularly with the
replacement of tailings filtration.
4. Optimizing the grinding requirements which results in increasing
plant treatment capacity without additional investment in equipment.
5. Recovery of the rare metal rhenium, which was not originally assumed
in the 2006 feasibility study update. Initial metallurgical testing
of Agua Rica's molybdenum concentrate suggests that the deposit may
contain a significant amount of rhenium, which could provide
significant by-product credits. Demand for rhenium has grown
significantly and the price has increased substantially in the last
few years and appears to have sustainable industrial applications.
Yamana is advancing further drilling and metallurgical testing
relating to the economic recovery of the metal. The possibility of
achieving rhenium by-product credits may significantly add to the
economics and potential of the project.
A full update to the 2006 feasibility study, which would include the recently completed optimization initiatives, the additional initiatives under review and definitive mineral reserve and production estimates, will be provided as Yamana continues to work toward a formal construction decision expected before the end of 2011.
"The approach we have taken on evaluating Agua Rica is similar to Chapada in 2003," said Ludovico Costa, Yamana's president and chief operating officer. "In this project, a previous feasibility study done in 1998 was re-evaluated for improvements and new metal prices assumed which resulted in a positive feasibility study that has been upheld by subsequent results. We are pleased to have completed this first round of optimization initiatives at Agua Rica which confirm the exceptional value of the project and identified several initiatives that may add further value to the project. We believe that Agua Rica is a remarkable project offering robust returns and further value enhancement."
Ernesto/Pau-a-pique,
Yamana has made a formal decision for the construction of the Ernesto/Pau-a-pique project. The construction decision is based on positive feasibility study results and an expected upgrade in mineral resources as a result of deeper drilling of the ore body. The project has an initial mine life of approximately seven years with current mineral reserves of 710,000 ounces of gold included in measured and indicated mineral resources of 854,000 ounces of gold. The Company believes there is potential to extend the mine life as it continues efforts to upgrade mineral resource ounces to the proven and probable category and expand mineral resources at Ernesto as results demonstrate the deposit is open at depth and down dip.
The Company continues to progress more detailed engineering and an exploration tunnel to facilitate drilling in deeper areas where there are further resources. Yamana also continues to conduct pilot tests on metallurgy and recoveries. Permitting is underway and construction is expected to begin in mid-2010 with production commencing in late 2012.
Key parameters of the feasibility study include:
Mineral reserves and mineral resources:
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Mineral Reserves*
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Proven Probable Proven & Probable
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Au Oz Au Oz Au Oz
Tonnes (g/t) (Au) Tonnes (g/t) (Au) Tonnes (g/t) (Au)
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2,279,000 3.86 283,000 4,827,000 2.75 427,000 7,106,000 3.11 710,000
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Mineral Resources*
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Measured Indicated Measured & Indicated
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Au Oz Au Oz Au Oz
Tonnes (g/t) (Au) Tonnes (g/t) (Au) Tonnes (g/t) (Au)
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2,239,000 4.69 338,000 5,964,000 2.69 516,000 8,203,000 3.24 854,000
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Inferred Mineral Resources
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Au Oz
Tonnes (g/t) (Au)
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4,400,000 1.79 256,000
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* Mineral resources are inclusive of mineral reserves
Capital cost: approximately $116 million
Cash cost per ounce(1): $427
Average throughput: 1.0 million tonnes per year
Average production (per year): approximately 100,000 ounces
Initial mine life: 7 years
After-tax IRR: approximately 31%
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(1) Co-product and by-product cash costs are non-GAAP measures. A
definition is provided at the end of this press release.
(2) Yamana treats silver as a gold equivalent.
The internal rate of return of approximately 31% is based on a gold price of
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Assumptions sensitivities IRR After-tax NPV
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+0% change in assumptions 31% $106 million
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+10% change in gold price 38% $145 million
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+10% change in Brazilian Real 40% $137 million
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Expected capital costs of approximately
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Initial capex estimate $86 million
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Impact of Brazilian Real + $12 million
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Acquisition of mine fleet + $18 million
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Updated capex estimate $116 million
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Cash costs are estimated at
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($ per ounce)
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Initial cash cost estimate Approx. $356
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Impact of Brazilian Real +$50
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Change in mine costs +$28
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Change in plant costs -$20
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Change in other opex +$13
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Updated cash cost estimate Approx. $427
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The Ernesto/Pau-a-pique project is located in southwest Mato Grosso state, near Pontes e Lacerda in
Ernesto/Pau-a-pique represents a modest cost, low capital and high return project contributing 8 to 10% to overall production. Significant potential for mineral resource upgrade serves as a platform for further exploration at the Guapore belt where Yamana has extensive exploration concessions.
OTHER DEVELOPMENT STAGE PROJECT UPDATE
C1
Yamana is continuing to progress development work at C1 Santa Luz:
- Permitting and the start-up of mine construction are on track for
mid-2010
- Advancing metallurgical testwork
- Basic engineering to be completed mid-February.
During the permitting period, Yamana has undertaken a program to conduct pilot tests on metallurgy and recoveries which are advancing.
Mercedes,
Yamana is continuing to progress development work at Mercedes:
- Permitting is underway and targeted to be complete mid-2010
facilitating the start-up of construction
- Basic engineering and advanced mine development completed
- Exploration results continue to confirm Mercedes' high geological
potential
- Work on a development ramp is progressing to confirm grade continuity
and the potential to convert mineral resources to mineral reserves.
Minera Florida Tailings Project,
Yamana is continuing to progress development work at its Minera Florida tailings project:
- Additional work completed to confirm the grade of the historical
tailings
- Basic engineering continues with production on track to commence in
early 2012.
Pilar,
- Efforts continue toward an updated mineral resource estimate and
basic engineering, followed by a feasibility study
Chapada,
- Modifications to the plant to increase throughput to up to 22 million
tonnes per year now in progress at a moderate capital cost of
$20 million
- Modifications include amendments to the water pumping system,
increasing hydrocycloning capacity, improving the tailings pumping
system and additional screening.
QDD Lower West,
- Continued drilling on the deposit is expected to increase mineral
reserves, particularly in the western extension
- A feasibility study is expected in the second half of 2010 to
evaluate the possibility of accelerating production
- Construction of an incline ramp to commence
- Advanced metallurgical testwork demonstrates the strong presence of
free gold which would allow heap-leaching through existing facilities
- A pre-feasibility study supports additional production of
80-90,000 ounces per year at Gualcamayo.
Production at Yamana is expected to ramp up substantially in 2012 as the four development stage projects where construction decisions have been made, C1
Quality Assurance and Quality Control
Yamana incorporates a rigorous Quality Assurance and Quality Control program for all of its mines and exploration projects which conforms to industry Best Practices as outlined by the CSE and National Instrument 43-101. This includes the use of independent third party laboratories and the use of professionally prepared standards and blanks and analysis of sample duplicates with a second independent laboratory.
Qualified Person
Evandro Cintra, P.Geo., Senior Vice President, Technical Services for Yamana Gold Inc. has reviewed and confirmed the data contained within this news release and serves as the Qualified Person as defined in National Instrument 43-101.
About Yamana
Yamana is a Canadian-based gold producer with significant gold production, gold development stage properties, exploration properties, and land positions in
NON-GAAP MEASURES
The Company believes that in addition to conventional measures prepared in accordance with Canadian GAAP, the Company and certain investors and analysts use certain other non-GAAP financial measures to evaluate the Company's performance including its ability to generate cash flow and profits from its operations. The Company has included certain non-GAAP measures throughout this document. When reference is made to "cash costs" in this document, the Company is referring to co-product cash costs. Cash costs on a co-product basis are computed by allocating operating cash costs separately to metals (copper and gold) based on an estimated or assumed ratio. Cash costs on a by-product basis are computed by deducting copper by product revenues from the calculation of cash costs of production per GEO. Non-GAAP measures do not have any standardized meaning prescribed under Canadian GAAP, and therefore they may not be comparable to similar measures employed by other companies. The data is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with Canadian GAAP.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS: This news release contains certain "forward-looking statements" within the meaning of the
CAUTIONARY NOTE TO U.S. INVESTORS CONCERNING ESTIMATES OF MEASURED, INDICATED AND INFERRED MINERAL RESOURCES
This news release uses the terms "Measured", "Indicated" and "Inferred" Mineral Resources.
For further information: Letitia Wong, Director, Investor Relations, (416) 815-0220, Email: [email protected]; MEDIA INQUIRIES: Mansfield Communications Inc., Hugh Mansfield, (416) 599-0024
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