/
Analysis

Latin America Strategy Continues to Pay Off

Wed, 10/21/2015 - 19:33

Canadian company Yamana Gold (Yamana) opened its doors in 2003 and has already reached annual sales of US$1.7 billion, positioning it among the ten largest gold mining companies in the world. With its importance in the mining industry now set, the company is looking to secure its presence in Latin America by operating in countries with a notable mining tradition. Between 2005 and 2007, Yamana acquired several mining properties across the region through the purchase of other gold companies, such as Viceroy, Desert Sun, RNC Gold, Northern Orion, and Meridian Gold. At the end of 2014, the company had eight producing mines, namely Chapada, Jacobina, Fazenda Brasileiro, and Pilar in Brazil, El Peñón and Minera Florida in Chile, Gualcamayo in Argentina, and Mercedes in Mexico. In addition, Yamana has 12.5% equity interests in the Alumbrera mine in Argentina and owns various advanced, near development, and exploration properties in Brazil, Chile, Argentina, Mexico, and Colombia. 2014 saw a major move by Yamana. Along with Agnico Eagle, it created the Canadian Malartic Partnership by buying issued and outstanding common shares of Osisko Mining Corporation. The partnership’s operations in Canada’s largest gold mine are expected to produce between 510,000-530,000oz.

Having invested US$190 million in Mercedes’ development, Yamana had to be certain of the value of this property. An early sense of security was derived from the fact that Sonora is a strong mining state, offers many competitive advantages to mining companies, and its state government is committed to attracting investment and creating employment. The construction of the site began in 2010, employing 1,000 workers from Cucupre and other surrounding towns. Once the prefeasibility studies had demonstrated the technical and economic viability of Mercedes, exploration and underground production activities started at the site in late 2011. Gold and silver production exceeded expectations in the first year and is destined to continue doing so as the development of the mine continues at great speed. The plant has a current capacity of 1,500 t/d, and incorporates agitated leaching, counter current decantation, and the Merrill-Crowe process. In 2013, proven gold and silver reserves in the Mercedes mine were estimated at 845,000oz and 8.4 million ounces respectively. Probable reserves were estimated at 357,000oz of gold and 4.4 million ounces of silver.

In 2013, the company focused on growing its mineral resource base, resulting in a 10% increase in measured and indicated mineral resources. The success of these exploration activities incited Yamana Mining to continue its exploration program, investing US$70 million in 2014 for this purpose. Its Mexican operation surpassed its global average, with resources at the Mercedes mine increasing by 26% in the same year. The exploration program in this mine was concentrated on upgrading mineral resources, discovering new deposits, and finding extensions of known ore bodies along the Mercedes-Barrancas-Marianas trend. The company has now made significant advances in its objective to complete at least 18,500m of surface and underground drilling, developing underground drill stations and surface reconnaissance, and carrying out development work targeted at the district. The 2014 program at Mercedes was focused on the extension of known mineral zones near the Corona de Oro system. The company tested for new mineral zones along the greater Mercedes Structural corridor through a surface based and underground station drilling program. Yamana also invested in drilling in the Diluvio deposit in order to gain a better understanding of high grade and disseminated domains.

Infill drilling of Breccia Hill has intersected high grade intercepts similar to shoots at Corona de Oro. These include drill cores with as much as 35 g/t of gold equivalent through an intersect of a meter and 15.9 g/t in 18m. At Diluvio, infill holes have intersected broad and attractive zones of low to high grade mineralization. One of the mine’s latest discoveries was at the Lagunas Norte vein, located in the Barrancas zone. Although this vein was not contemplated in Mercedes’ original plan, Yamana indicates Lagunas Norte has a significant potential for increasing production. The positive results from exploration activities at Mercedes also include the discovery of a new mineral zone located between the Barrancas and Lagunas deposits, known as the GAP deposit. The GAP zone was discovered along the Mercedes-Marianas structure, supporting the exploration potential in the asset. Drilling at the GAP zone is yielding positive results, although these need further examination to fully determine if the structures are linked. Some early results from drilling at GAP show as much as 10.2m drill cores with 20.8 g/t of gold equivalent. Due to these positive results, additional funding was allocated to support further drill testing of these zones in 2014.

In December 2014, the company also announced new findings at mines in Chile and Brazil. At its El Peñón mine in Chile, the new Ventura vein was discovered running parallel to an existing bonanza, and is expected to be quickly put into production. Meanwhile, the new Sucupira discovery at the Chapada mine in Brazil turned up the best results of any hole ever drilled at the mine, supporting that the district has far greater mineralization than previously thought. Overall, whether in Mexico, Brazil, or Chile, Yamana’s Latin America strategy seems to be paying off.