A strategic transaction to reduce the Company's net debt position
TORONTO, ONTARIO--(Marketwired - July 28, 2016) - YAMANA GOLD INC. (TSX:YRI)(NYSE:AUY) ("Yamana" or "the
Company") is pleased to announce that it has entered into a definitive Share Purchase Agreement (the "Agreement") to sell
100% of its interest in the Mercedes mine in Sonora, Mexico to Premier Gold Mines Limited ("Premier") (herein referred to as the
"Transaction"). Pursuant to the Agreement, Yamana will receive consideration in the form of cash and equity securities, the
value of which was $140 million at the time of negotiations. Total cash and equity securities consideration is summarized as
follows:
- Cash consideration of $122.5 million;
- Approximately 6 million Premier common shares; and
- Approximately 3 million Premier common share purchase warrants (exercisable at C$4.75 per common share for 24 months from
the closing of the Transaction).
The Company expects to use the proceeds from the Transaction to reduce the Company's net debt position.
In addition, the Company will receive a 1% net smelter return ("NSR"), to become payable commencing on the earlier of six
years from closing of the Transaction and the date upon which cumulative production of 450,000 ounces of gold equivalent from
Mercedes has been achieved. The NSR allows Yamana to retain an economic interest in the potential for exploration success and
ultimately mine life extension that exists at Mercedes, which is the Company's sole operating mine in Mexico.
With the previously announced decision to recommission the Company's C1 Santa Luz project in Brazil ("C1 Santa Luz"), the
Company has identified an internal opportunity to replace gold production from Mercedes beginning in 2018. As per the
details provided in the C1 Santa Luz announcement just released, production in the first full year from C1 Santa Luz is expected
to be more than 130,000 ounces of gold, with an estimated average annual production of approximately 114,000 ounces of gold over
the first seven years. The updated Mineral Reserve and Mineral Resource estimate for C1 Santa Luz shows an increase of
approximately 21% in overall Mineral Resources, inclusive of Mineral Reserves but excluding Inferred Mineral Resources, compared
to the 2015 preliminary economic assessment. The Company expects cash flows from the assets in its Brio Gold Division,
including Riacho dos Machados, to fund the recommissioning of C1 Santa Luz.
The Transaction, which is subject to customary regulatory and anti-trust approvals and other customary closing conditions, is
expected to close by September 30, 2016.
(All amounts are expressed in United States dollars unless otherwise indicated.)
Peter Marrone, Chairman and Chief Executive Officer of Yamana, commented as follows: "We are pleased to enter into this
transaction with Premier Gold. The proceeds will allow us to accelerate our debt reduction initiatives and thereby
significantly reduce our net debt while modestly impacting our consolidated production and cash flow. In
addition, we have identified an opportunity within our portfolio, that being C1 Santa Luz, for the replacement
of the gold production that will be foregone from Mercedes. C1 Santa Luz has a very modest capital cost, expected
average annual production of 114,000 ounces of gold at comparable cost to Mercedes, an expected mine life of more than
10 years, and is in a jurisdiction in which we have a significant presence. This sale is one of a number of
strategic initiatives we have advanced to improve our net debt position while ensuring we are positioned to deliver
value creation over the longer term."
About Yamana
Yamana is a Canadian-based gold producer with significant gold production, gold development stage properties, exploration
properties, and land positions throughout the Americas including Brazil, Argentina, Chile, Mexico and Canada. Yamana plans to
continue to build on this base through existing operating mine expansions, throughput increases, development of new mines, the
advancement of its exploration properties and, at times, by targeting other gold consolidation opportunities with a primary focus
in the Americas.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS: This news release contains or incorporates by reference
"forward-looking statements" and "forward-looking information" under applicable Canadian securities legislation within the
meaning of the United States Private Securities Litigation Reform Act of 1995. Forward-looking information includes, but is not
limited to information with respect to the Company's strategy, plans or future financial or operating performance.
Forward-looking statements are characterized by words such as "plan," "expect", "budget", "target", "project", "intend",
"believe", "anticipate", "estimate" and other similar words, or statements that certain events or conditions "may" or "will"
occur. Forward-looking statements are based on the opinions, assumptions and estimates of management considered reasonable at the
date the statements are made, and are inherently subject to a variety of risks and uncertainties and other known and unknown
factors that could cause actual events or results to differ materially from those projected in the forward-looking
statements. These factors include the Company's expectations in connection with the satisfaction of all closing conditions,
the completion of the Transaction, the expected use of proceeds discussed herein, the reduction of the Company's net debt
position and delivering value creation over the long term, as well as those risk factors discussed or referred to herein and in
the Company's Annual Information Form filed with the securities regulatory authorities in all provinces of Canada and available
at www.sedar.com, and the Company's Annual Report on Form 40-F filed with
the United States Securities and Exchange Commission. Although the Company has attempted to identify important factors that
could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may
be other factors that cause actions, events or results not to be anticipated, estimated or intended. There can be no
assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially
from those anticipated in such statements. The Company undertakes no obligation to update forward-looking statements if
circumstances or management's estimates, assumptions or opinions should change, except as required by applicable law. The reader
is cautioned not to place undue reliance on forward-looking statements. The forward-looking information contained herein is
presented for the purpose of assisting investors in understanding the Company's expected plans and objectives in connection with
the Transaction and may not be appropriate for other purposes.