Yamana Gold: Gualcamayo operational results and Cerro Moro construction development

Yamana Gold announced the operational and financial results of the first quarter of 2017. In that context, the Canadian company believes that Gualcamayo mine (located in San Juan province) is well positioned to meet its production target in 2017.

At Gualcamayo, grade was higher than expected, which compensated for lower throughput due to maintenance activities in the quarter, and had a positive impact on the cost profile. The Company continues to develop the recently discovered oxides deposits around the main pit, as well as exploring for oxide deposits within the Gualcamayo district, with the objective of extending the mine life of the current facilities.

The increase in production for the first quarter of 2017 over the first quarter of 2016 is the result of a 21% increase in grade, partially offset by the aforementioned lower throughput and lower recovery.

In the first quarter of 2017, Gualcamayo produced 37,728 ounces of gold, compared to 36,603 ounces of gold in the same quarter of 2016. Co-product cash costs were $810 per ounce of gold produced in the first quarter of 2017, compared to $799 per ounce of gold produced in the first quarter of 2016. AISC per ounce of gold produced was $841 in the first quarter of 2017, compared to $810 per ounces of gold produced in the same quarter of 2016.


Cerro Moro (Santa Cruz province)

Meanwhile, Cerro Moro -a high-grade gold and silver deposit located in Santa Cruz province- is currently in construction and development. First production is expected in early 2018. The Cerro Moro ore body contains a number of high-grade epithermal gold and silver deposits, some of which will be mined via open-pit and some via underground mining. The feasibility study is based on an initial 6.5-year mine life at a throughput of 1,000 tonnes per day. The concentrator will consist of a standard crushing, grinding and flotation circuit with a counter current decantation («CCD») and a Merrill Crowe circuit included.

The 2016 work program included the ramp-up of site construction activities; the continuation of detailed engineering; and the advancement of underground mining in order to gain a better understanding of in-situ mining conditions. In addition to the above, a substantial infill drilling program was run in 2016 to confirm previously determined indicated mineral resources with tighter spaced drilling. The infill program was successful in confirming those mineral resources and has the impact of de-risking the project and the startup risk of the mine. On the exploration front, the Company believes that the project offers significant opportunities for the conversion of mineral resources into mineral reserves and for further discoveries on the property, which will serve to materially improve the returns from this high-grade project.

The 2017 work plan includes an increase in the rate of underground mining relative to 2016 such that during the last quarter of the year ore will be mined to feed the stockpile ahead of the plant start-up in the first quarter of 2018. In support of the increased rate of mining and in preparation of full start-up, the Cerro Moro management and operations team has started recruiting the future operations team and will initiate training during the course of the year. Mechanical completion of the process plant and mine infrastructure is scheduled for the fourth quarter of 2017 in preparation for the start of commissioning in early 2018.

Current progress at Cerro Moro is as follows:

  • 219 metres of underground development were completed in the first quarter of 2017, compared to 120 metres in the same quarter of the prior year, advancing and preparing the underground mine for operation.
  • Ramp-up of site construction, primarily driven through the concrete work and leach tank erection, was advanced ahead of schedule with bulk earthworks being completed.
  • Detailed engineering advanced slightly ahead of the baseline plan. The advanced level of engineering design completion prior to the start of large scale construction activities that have begun in 2017 serves to de-risk the project schedule and increase the confidence in the total project cost.
  • Contracts for structural steel erection, mechanical erection, and tailings dam construction were awarded and the associated contractors have mobilized to site.
  • The ball and sag mills are now at site, and the stockpile continues to be built up.
  • Spending for the project in the first quarter was $34.5 million of a total of $178 million planned for the year. A total of $233 million of planned spend is expected to occur between 2017 and 2018, supporting the previously reported execution schedule and budget.

The updated mine plan shows partial production in 2018 of gold and silver at feed grades of 11 g/t, and 650 g/t respectively, and reflects the impact of the 3-month ramp-up during the second quarter of 2018. The 2019 gold production is estimated to be approximately 130,000 ounces at an average feed grade of 11 grams per tonne, and the silver production to be approximately 9,900,000 ounces at an average feed grade of 920 g/t. The average AISC for the period from 2018 to 2019 is expected to be below $600 per ounce of gold produced and below $9.00 per ounce of silver produced, with co-product cash costs for the same period expected to be below $500 per ounce of gold produced and below $7.50 per ounce of silver produced.


Exploration activities

Gualcamayo mine

The 2017 approved Gualcamayo budget of $8.0 million is allocated to the completion of a near mine exploration and infill program that will discover and convert to reserves at least 125,000 ounces of oxide gold mineral resources during the year. The long term goals are to execute a district and property wide program of systematic mapping, sampling and ultimately drilling newly developed targets to define 250,000 new potential and/or inferred gold ounces. Achieving these goals will help to stabilize gold production of 150,000 ounces for the next three years and will test the district for new oxide near surface deposits that can rapidly be put into production.

Cerro Moro

The 2017 approved Cerro Moro budget of $8.0 million marks the first year of a four year, $30 million program, to add one million ounces of mineral resource inventory to the Cerro Moro ledger. During 2017, the Company will continue to infill drill the core Escondida mineral shoots to expand the mineral resource base with 12,000 metres of drilling. The Company will concurrently map, sample and develop targets on in the near mine concessions and drill up to 14,000 metres of drilling. An additional 9,000 metres is budgeted to follow-up targets identified for further testing.

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