Yamana looks into selling sulphuric acid

If you asked Peter Marrone about the challenges he was facing two years ago he wouldve given you a much longer list than today.

The chairman and CEO of Yamana Gold (YRI-T, AUY-N, YAU-L) says bringing two large-scale gold mines into production required its fair share of coordination.

Two years ago we embarked on a path of building an operations team and a construction team and building these mines and running them that was difficult, Marrone says.

Yamana reached commercial production at its Sao Francisco open-pit gravity heap leach gold mine in Mato Grosso state, Brazil in August 2006. Production this year is estimated at 120,000 to 130,000 oz. gold

Last November, the company started up operations at its Chapada open-pit copper-gold mine and mill in Goias state, Brazil. Yamana reached commercial status by February 2007 and aims to produce 180,000 to 205,000 oz. gold and 130 to 145 million lbs. of copper this year.

Weve gone from virtually no production to 280,000 oz. gold last year, to about 600,000 oz. gold this year, more than 800,000 next year to one million oz. gold in 2009, plus copper, Marrone says.

But now that the technical, operations and management teams are in place, Marrone says the pressure is off a bit.

Its significantly less of a challenge today than it was two years ago, he says.

That being said, Yamanas mine building experience has been quite trouble-free.

The Chapada mine reached production six months ahead of schedule and the company is benefiting from coarse gold discovered in low-grade and waste areas of the Sao Francisco mine.

In the first quarter this year we produced almost all gold recovery from marginal ore that we had to move to get to the high grade ore, Marrone says of Sao Francisco. Areas we thought were waste were mineralized and areas we thought were low grade were much higher.

A recently completed scoping study on Chapada showed the potential to recover 320,000 oz. of gold and 94 million lbs. of copper from the pyrite concentrate taken from the tailings.

Whats more interesting is the potential to produce about 560,00 tonnes of sulphuric acid per year as a byproduct, which Marrone says could add an additional $50,000 in cash flow at Chapada.

A $70 per tonne price was used for the scoping study, though sulphuric acid was around $90 per tonne at the time of the study.

Sulphuric acid is used in nickel leaching and Marrone has counted two nickel projects near Chapada that should reach production within the next few years. He also has identified fertilizer businesses as potential buyers of sulphuric acid.

Building a plant would cost nearly $200 million.

I dont believe well build a plant, Marrone says. I would prefer to take a royalty and leave it to someone else to build the plant.

Yamana has yet to complete a feasibility study.

Up next for Yamana is an expansion of operations at its Jacobina underground mine, which is expected to reach a yearly production rate of 150,000 oz. gold per year by the end of 2007 and 200,000 oz. gold per year by late 2008.

The company also plans to complete a feasibility study for its Gualcamayo property in Argentina.