Completion Of Feasibility StudyYamana Announces Completion Of Feasibility Study For Sao Vicente
TORONTO--(BUSINESS WIRE)--May 2, 2005--Yamana Gold Inc. (TSX:YRI - News; AMEX:AUY - News; LSE AIM:YAU) is pleased to announce the following:
- Completion of the feasibility study for its Sao Vicente Gold Project
- Increase in reserves of 26%
- Increase in forecast gold production of 25% to 174,380 ounces
- Stand alone mine plan for an initial four years
- Potential for further upside through mine site exploration
SAO VICENTE FEASIBILITY STUDY AND RESERVE ESTIMATE
Yamana is pleased to report on the feasibility study results for its Sao Vicente gold project in Mato Grosso State, Brazil. The feasibility study and capital and operating cost estimates were prepared by Minerconsult Engenharia Ltda ("Minerconsult") and incorporates specific data supplied by Independent Mining Consultants, Inc. ("IMC"), Kappes, Cassiday and Associates ("KCA") and Metago. The resources and reserves model was updated by Geoexplore Consultoria e Servicos ("GCS") and audited by Geosystems International ("GSI") and the mine plan was prepared by IMC.
The feasibility study was initiated and completed based on prior data and before the current exploration effort was started at Sao Vicente.
- Reserves
- Proven and probable gold reserves at Sao Vicente have increased by 26% to 202,700 ounces from the previous feasibility estimate of 161,000 ounces, summarized as follows.
---------------------------------------------------------------------
Ore Total Au Total Au Ounces
Ore Source Ktonnes (g/t) (000's)
---------------------------------------------------------------------
Open Pit Mining
Proven Mineral Reserve 3,533 1.054 119.7
Probable Mineral Reserve 2,348 1.083 81.8
---------------------------------------------------------------------
Open Pit Total 5,881 1.066 201.5
---------------------------------------------------------------------
Stockpile Reclaim (Probable) 123 0.298 1.2
---------------------------------------------------------------------
Total Mineral Reserve 6,004 1.050 202.7
---------------------------------------------------------------------
- Total measured and indicated resources at Sao Vicente, including the above reserves, total 396,000 ounces (12.46 million tonnes at 0.99g/t assuming a 0.3 g/t cutoff). Additional inferred resources amount to 0.21 million tonnes at an average grade of 0.53g/t assuming the same cutoff.
- Gold Production
- Total gold production has increased by approximately 25% from the prior feasibility study estimate to 174,380 ounces. This includes some production from existing tailings. A breakdown of the gold production is summarized as follows.
------------------------------------------------------------------
Expected
Reserve Overall Gold
Grade (oz Recovery Production
Year Ore (t) (g/t) of Au) (%) (oz)
------------------------------------------------------------------
1 1,800,000 1.273 73,360 81 59,670
------------------------------------------------------------------
2 1,800,000 1.185 68,580 81 55,550
------------------------------------------------------------------
3 1,800,000 0.852 49,310 81 39,940
------------------------------------------------------------------
4 604,000 0.573 11,130 81 9,010
------------------------------------------------------------------
Total/Average 6,004,000 1.050 202,680 81 164,170
------------------------------------------------------------------
- Additional production from tailings is summarized as follows.
------------------------------------------------------------------
Expected
Reserve Gold
Grade (oz Recovery Production
Year Tails (t) (g/t) of gold) (%) (oz)
------------------------------------------------------------------
1 252,000 0.36 2,920 70 2,040
------------------------------------------------------------------
2 252,000 0.36 2,920 70 2,040
------------------------------------------------------------------
3 252,000 0.36 2,920 70 2,040
------------------------------------------------------------------
4 504,000 0.36 5,830 70 4,080
------------------------------------------------------------------
Total/Average 1,260,000 0.36 14,580 70 10,210
------------------------------------------------------------------
- Production estimates as provided above do not incorporate the start up leach cycle which will cause production in year 1 to vary from the estimate. The guidance provided towards the end of this press release assumes lower production in 2006, although a full first year of production will be consistent with the feasibility study.
- The recoveries assumed above are an average. Recoveries will vary with grade mined and may be higher in early years and lower in the last year of production.
- Economic Parameters
- At a 5% discount rate and a US$375/oz gold price, the after-tax NPV is US$12.1 million increasing to US$18.6 million at a gold price of US$425 per ounce gold.
- After-tax internal rate of return of approximately 34.1% increases to 48.9% at US$425 per ounce gold.
- Capital Costs
- Capital expenditures are summarized as follows.
US$ million
-----------
Facilities (including equipment, materials
and earth moving) $11.23
Mine Equipment $4.82
Preproduction and Reinvestments $2.80
Contingencies $1.60
Working Capital $0.20
-----
Total $20.65
------
------
- Capital costs now also include items that enhance overall project economics, the most notable of which are the power line to connect to the national grid.
- Operating Costs
- Average LOM total operating costs, including refining and G&A, are projected to be US$3.85 per tonne of ore (main ore and old tailings) and include the following:
- mining costs of approximately US$0.66 per tonne of material or US$1.64 per tonne of ore based on an average stripping ratio of approximately 2.49 to 1;
- processing costs, including laboratory services and support, of US$1.66 per tonne of ore; and
- G&A and ongoing environmental costs of US$0.16 per tonne.
- LOM cash operating costs including sales royalty tax are projected to be US$160 per ounce gold.
- Recent increases in crushing costs and prices for heap leach liners may increase these costs slightly.
- The exchange rate assumed in the feasibility study was $R3:US$1. In the event that the exchange rate remains around $R2.6:US$1, estimated cash costs per ounce will increase by approximately 10% to 15% to a range of US$175 to $185 per ounce.
- Operating Parameters and Mining Plan
- Up to 1.8 million tonnes of main ore material will be mined annually to produce a total of 6.0 million tonnes of main ore at an average grade of 1.05 g/t Au, and up to 0.5 million tonnes of tailings will be processed annually to produce a total of 1.26 million tonnes of tails at a grade of 0.36g/t Au.
- Projected total recoveries average 81% for main ore and 70% for tailings.
- The mine will be operated by Yamana on an owner-operator basis.
- Existing Infrastructure
- Access is available by state and internal roads and by air at an onsite air strip.
- Access road being improved to Sao Francisco Mine at 50Km distance.
- Buildings including shops, warehouses, offices and a sample preparation and process control laboratory.
- Homes, dormitories, a school, a maintenance garage, laboratory and other basic facilities at Sao Vicente project.
- Pilot processing plant is to be built on site in mid 2005. Neighbouring Sao Francisco currently has two of such pilot plants.
- Water is readily available from nearby sources.
- General Overview
- This positive feasibility study is an update to a prior preliminary study completed by Watts, Griffis and McOuat Limited in July, 2003.
- Financial assumptions include a foreign exchange rate of 3.0 Reals per 1.0 United States dollar.
- The feasibility study supports the conclusion that Sao Vicente can be constructed as a stand alone project. The initial plan for Sao Vicente contemplated treating Sao Vicente and Sao Francisco on a combined basis. Total production between Sao Francisco and Sao Vicente is now projected to be 990,000 ounces of gold.
- The feasibility economic analysis incorporates an effective tax rate of approximately 15.3% for the life of the project. Tax incentives that are in place in the State of Mato Grosso and conventional tax and corporate structures commonly available to mining companies in Brazil reduce the overall tax rate to this level.
- The feasibility study was prepared by Minerconsult under the direction of Olimpio Ribeiro Salgado, Professional Engineer. The reserves and resources model was audited by GSI under the direction of Mario Rossi. The mining plan and capital and operating cost estimates for mining were prepared by, and the NI 43-101 Report is being prepared by IMC under the direction of Michael Hester. Both Mr. Rossi and Mr. Hester are Independent Qualified Persons as defined by National Instrument 43-101.
CONSTRUCTION DECISION
The Sao Vicente feasibility study was initiated prior to the current exploration effort at Sao Vicente. The objective was to provide a supplement to the Sao Francisco feasibility study (released in November 2004) and determine whether or not Sao Vicente should be treated on a combined basis with Sao Francisco as originally contemplated or built as a stand alone operation.
Given positive results to date from continuing exploration, Yamana has decided to defer a formal construction decision pending further exploration results expected by July 2005. With further exploration successes, the possibility exists for an enhanced operation combining open pit and underground mining. Yamana expects that a further update on a construction decision for Sao Vicente would be made this summer at which time Yamana will either decide to proceed with the mine plan as outlined in this feasibility study or update the mine plan to incorporate a bigger open pit as well as an underground operation.
GUIDANCE UPDATE
In a press release dated January 6, 2005, Yamana provided production guidance excluding Sao Vicente. With the addition of Sao Vicente, based on the results of the feasibility study, 2006 and 2007 production estimates would be as follows:
2006E 2007E
----------- -----------
Gold Production Estimates 290-320,000 430-457,000
Average Projected Total Cash Cost $185-$195 $165-$180
These production and cash cost levels assume the construction of Sao Vicente in the latter half of 2005 with production starting in early 2006. However, as noted above, the decision to proceed with Sao Vicente will not be made until this summer and with further exploration successes an update to the feasibility study would likely be required thereby deferring construction to the end of the year or into 2006.
GENERAL COMMENTS
Commenting on the foregoing, Peter Marrone, the President and Chief Executive Officer, stated, "We are pleased with the positive results of the feasibility study for Sao Vicente. This project has a robust after-tax IRR of 34% at a modest gold price of US$375 per ounce. While Yamana had undertaken this feasibility study it continued with an exploration campaign whose results suggest the potential for a considerable larger operation. We will defer a formal production decision for Sao Vicente until this exploration effort is completed. With construction now well underway on Sao Francisco and Chapada and production from our two mines, Fazenda Brasileiro and Fazenda Nova, our planned gold production will significantly increase in 2005 and over the following two years, added to which will be copper production starting in 2007. In addition, we are committed to an extensive exploration program on our more than 900,000 hectares of highly prospective mineral concessions in Brazil."
Yamana is a Canadian gold producer with significant gold production, gold and copper-gold development stage properties, exploration properties and land positions in all major mineral areas in Brazil. Yamana expects to produce gold at intermediate company production levels by 2006 in addition to significant copper production by 2007. Yamana also holds gold exploration properties in Argentina. Company management plans to build on this base by targeting other gold consolidation opportunities in Brazil and elsewhere in Latin America.