Yamana primed for growth

Known as a high-concept, grassroots gold explorer in the 1990s, Yamana Gold (YRI-T) has re-invented itself in the last few years and re-emerged as a substantial gold miner with five significant gold assets in Brazil.

This year, from three mines (Fazenda Brasileiro, Fazenda Nova, and Sao Francisco), Yamana expects to produce 145,000-160,000 oz. gold at an average, total cash cost of US$215-230 per oz., assuming that construction of the new Sao Francisco mine is completed as scheduled in September 2005.

Yamana unveiled a bankable feasibility study for Sao Francisco and made a positive production decision on the mine in November 2004 (T.N.M., Dec. 10-16/04).

Situated close to the Bolivian border in Mato Grosso state, Sao Francisco hosts just more than 1 million oz. gold in a reserve of 47.8 million tonnes grading 0.68 gram gold per tonne. The mine is expected to pour an average of 108,666 oz. gold per year over 7.5 years.

Fazenda Brasileiro and Fazenda Nova are expected to continue to produce at annual rates of 90,000-100,000 oz. and 30,000-37,0000 oz., respectively, over the next three years.

A fourth mine, named Chapada, is tentatively scheduled to come online in 2007 at an annual rate of about 135,000 oz. gold, which would propel Yamana’s total production in 2007 to an impressive 375,000-400,000 oz. at a total cash cost of US$175-185 per oz.

Yamana’s fifth key gold asset, Sao Vicente, has not been included in the above production forecast as the project is currently being subjected to a updated feasibility study, the results of which should be made public in February.

Sao Vicente is 50 km away from Sao Francisco, and Yamana is exploring ways to develop the two mines on a combined basis using shared infrastructure and equipment, though Sao Vicente could be a stand-alone mine if reserves are boosted substantially.

Including output from Sao Vicente, Yamana could see its output in 2007 exceed 410,000 oz. gold and 100 million lbs. copper.

Yamana notes that production estimates for Fazenda Brasileiro do not incorporate the possibility for increased production in 2006 resulting from access to the higher grade E-Deep area. Mining of lower-grade material at Fazenda Brasileiro will continue throughout 2005 and part of 2006 to permit access to higher grade lower areas at E-Deep.

Fazenda Nova began producing gold in late 2004, and Yamana continues to tweak the mine’s heap-leaching facilities.

Yamana’s cash balance at the end of 2004 was $90 million, and the company has also negotiated a US$100-million loan to finance construction of Chapada.

Construction and procurement contracts for Chapada are “on track,” says Yamana, with mine fleet and equipment, clearing and grubbing and engineering contracts having been awarded.

Yamana hasn’t abandoned its exploration roots, and has committed US$14 million this year, most of which will be directed towards grassroots work on the Itapicuru greenstone belt north of Fazenda Brasileiro and on the Santa Elina gold belt primarily in areas between Sao Francisco and Sao Vicente.

The company has doubled its mineral concessions and mining rights on the Itapicuru greenstone belt to 150,000 hectares, and holds another 700,000 hectares of mineral concessions and mining rights on the Santa Elina belt.

Yamana also holds gold exploration properties in Argentina.