Yamana expands in Brazil

Spokane-based Yamana Resources (YRI-T) has paid US$20.9 million for the Fazenda Brasileiro gold mine in northeastern Brazil. The vendor is Companhia Vale do Rio Doce (RIO-N).

The funds were made possible by a $55.5-million financing that saw the junior consolidate its shares on the basis of 27.9-old-for-1-new and issue 46.25 million units priced at $1.20 apiece. A unit consists of one share and half a warrant. A full warrant allows the holder to buy a share at $1.50 per share until July 31, 2008.

Situated in Bahia state, the open-pit/underground mine has been producing bullion for 15 years and is slated to produce 112,000 oz. gold in 2003 at a cash cost of US$225 per oz.

Companhia Vale do Rio Doce (CVRD) discovered the gold-bearing region in 1972 while prospecting alluvial occurrences along the Itapicuru River. A regional geochemical survey led the company to Fazenda Brasileiro, where a quartz feldspar breccia containing disseminated pyrite and arsenopyrite returned 2 grams gold per tonne.

By 1984, Fazenda Brasileiro had become the first heap-leach operation in Brazil, and four years later underground mining began.

The deposit is in the South Mineralized zone in what is known as the Weber belt, which hosts seven major occurrences, including Fazenda Brasileiro. Mineralization consists of sets of centimetre-to-metre-scale quartz veins. The underground mineralization originally averaged 7 grams gold per tonne, based on a cutoff grade of 3 grams gold, and is processed using the carbon-in-pulp method. The open-pit portion uses a 0.7-gram gold cutoff with the weathered ore extracted via heap leaching.

The operation hosts proven and probable reserves of 1.8 million tonnes grading 3.84 grams gold per tonne underground and 630,000 tonnes of 2.14 grams gold in the open pit, for a total of 262,000 contained ounces. In addition, the operation hosts an underground measured and indicated resource of 2.26 million tonnes grading 3.93 grams gold, plus 600,000 tonnes grading 2.23 grams gold in the open-pit section, for 128,000 contained ounces.

Canto

Yamana expects gold production to average 100,000 oz over the next three years at cash cost of less than US$200 per oz. However, with only three years of reserves remaining, attention has shifted to surrounding prospects, most notably the Canto target, to the east. Canto is marked by a largely untested, 3-km-long structural zone where recent drilling hit 11 metres grading 26.84 grams gold per tonne, 5 metres grading 12.11 grams, and 4 metres grading 10.98 grams.

The deal includes 720 sq. km of exploration ground along the Rio Itapicuru greenstone belt. Fazenda Brasileiro is the largest shear-hosted gold deposit in the belt and occurs in metamorphosed supracrustal rocks. Gold mineralization was deposited mainly during late collisional tectonism some 2 billion years ago.

Yamana began targeting Brazil earlier this year when it acquired various assets from Santa Elina Mines, including the open-pit Chapada copper-gold project in the west-central state of Goias. A 1998 feasibility study for that project envisioned a 15-year mine life based on a resource of 187.3 million tonnes grading 0.39% copper and 0.31 gram gold. The deposit is defined by a flat-lying shallow tabular body capable of producing 12.7 million tonnes per year from a shallow open pit with a stripping ratio of 0.43-to-1. The study recommended a starter pit for the first five years of production and estimated grades would average 0.47% copper and 0.45 grams gold.

Fazenda Nova

In the same state, Yamana acquired the Fazenda Nova property, which hosts six shallow, blanket-like, saprolite gold deposits. The most advanced is the Lavrinha target, where previous work defined a gold-bearing zone with widths reaching up to 50 metres. The area includes an open pit from the early 1990s, where a small heap-leach operation processed the saprolite ore without the need for blasting or crushing. Yamana aims to test the mineralization below the shallow saprolite deposit for a higher-grade primary gold deposit.

Meanwhile, in neighbouring Mato Grosso state, Yamana is preparing to explore the Sao Vicente and Sao Francisco projects.

Sao Vicente produced 187,000 oz. gold before being mothballed in 1997 as a result of declining gold prices. However, results from 241 holes drilled in a 1-km-by-150-metre area now indicate a prospective a shallow deposit, and deeper holes averaging 260 metres in depth indicate the promise of a higher-grade zone farther below the surface.

At Sao Francisco, 335 previous drill holes identified a shallow zone of mineralization over an area measuring 1.8 km by 150 metres. The project is similar to Sao Vicente in that it is underlain by an insufficiently explored higher-grade gold target (identified in 19 drill holes averaging 200 metre in depth; intercepts range from 2 to 14 metres grading 1.86-58 grams gold per tonne).

Yamana has 87 million shares outstanding, or 129 million on a fully diluted basis. With the acquisition of Fazenda Brasileiro, the company is slated to produce more than 120,000 oz. gold in 2004, and more than 200,000 oz. in 2005.