Yamana hooks new partner for Santa Cruz

Spokane-based Yamana Resources (YRI-T) has found a new partner to explore its Vanguardia project in the Argentine province of Santa Cruz.

Picking up where Noranda left off, Rio Algom (ROM-T) has agreed to acquire an option to earn a half interest in Yamana’s wholly owned Santa Cruz properties by spending US$20 million on exploration over five years.

On each property, Rio must complete a feasibility study and make a production decision to increase its interest to 60%.

The Vanguardia project contains about 30 epithermal gold targets in a 85,000-ha land package. Mineralization occurs in sheeted or stockwork vein systems and hydrothermal breccias in volcanics, and as disseminations in sandstone and siltstone beds.

A 42-hole program of reverse-circulation drilling on one property, the Microonda, identified a large, altered gold-bearing volcanic horizon. The best intercept was 12 metres grading 4.74 grams gold per tonne.

Yamana acquired the Vanguardia land package in the hope of finding a gold deposit similar to the nearby Cerro Vanguardia, where reserves stand at 3.4 million oz. gold and 35 million oz. silver.

But last April, Yamana was left without a partner when Noranda terminated its option. The agreement called for Noranda to earn a 50% interest by spending $15 million over seven years.

Under the new agreement, Rio must spend US$4 million to fund exploration, including a projected 20,000 metres of drilling, in the first year. Drilling has already resumed at Microonda and at the nearby Martinetas property, where the potential for bulk-tonnage gold deposits is considered excellent.

In subsequent years, during which Yamana will remain operator, Rio must spend a minimum of US$3.5 million annually.

Once Rio makes a production decision, Yamana may continue to participate or convert its 40% participating interest to a 30% carried interest. With a carried interest, Yamana will receive 15% of distributable cash flow from the start of commercial production until Rio recovers its share of development expenses. Subsequently, Yamana will receive 30% of cash flow.

The agreement is subject to due diligence.