Yamana beefs up Cerro Moro

Yamana Gold (YRI-T, AUY-N) is getting a firmer handle on its recently acquired Cerro Moro gold project in Argentina.

The mid-tier gold producer says that, pending a construction decision after feasibility next year, it could have a mine up and running by 2016. And while the date is a ways away, the company is gaining greater insight into the ore it could one day be processing.

Yamana released its first resource estimate on the project since acquiring it as part of its $404-million acquisition of Extorre Gold Mines in mid-2012.

At the time of the acquisition, Extorre had established indicated resources of 2.4 million tonnes grading 7.4 grams gold and 498.8 grams silver for 1.4 million oz. gold equivalent, and inferred resources of 4.8 million tonnes grading 3.5 grams gold and 172 grams silver for 1.05 million oz. gold equivalent.

Yamana has bolstered resources in the indicated category by 44%. Using a 1-gram-per-tonne cut-off, indicated resources now stand at 4.2 million tonnes grading 6.6 grams gold and 400.3 grams silver for 1.95 million oz. gold equivalent.

The uptick in indicated tonnage, however, has come at the expense of inferred resources, which fell to 3.6 million tonnes grading 1.9 grams gold and 115.9 grams silver for 490,000 oz. gold equivalent.

Yamana also said it has begun pre-development at the site in Argentina’s Santa Cruz province.

The project is being envisioned as a combined open-pit and underground operation with a 1,000-tonne-per-day throughput. Roughly 70% of that mill feed is expected to come from underground mining, with the remaining 30% coming from an open pit. Average annual production is expected to be around 200,000 oz. gold equivalent per year.

Cerro Moro is a low-sulphidation epithermal vein deposit, similar to Yamana’s El Penon mine in Chile and its Mercedes mine in Mexico, both of which are in operation.

Because of the similarity, Yamana intends to use a mining-and-processing method like the one it is using at Mercedes.
Exploration at Cerro Moro is ongoing with a $12-million, 25,000-metre program this year, focusing on expanding mineralization at the La Negrita block, located outside the current resource base.

One drill hole in January, which was intended to test the extension of anomalous mineralization from prior holes, intercepted three vein zones, and preliminary indications show that two of these occur at mineable widths with the potential for grades. Assays for the holes are pending.

Yamana expects capital expenditure for the mine to come in at around $400 million, with operating costs around $450 per oz.

A preliminary economic study released by Extorre last April outlined a project that would process 1,150 tonnes per day with production of 248,000 oz. gold equivalent per year, at cash costs of US$303 per oz. for the first five years.

In Toronto on Feb. 13 — the day the resource estimate was released — Yamana shares were off 15¢ to $15.81, on 2.2 million shares traded.