YAMANA GOLD INC. (TSX:YRI) (NYSE:AUY) is pleased to announce the results of the pre-feasibility study on the Agua Rica project in the Catamarca Province of Argentina.
Pre-Feasibility Study Highlights
The positive PFS results follow the March 7, 2019, announcement of a definitive integration plan between Yamana, Glencore International AG, and Newmont Goldcorp Corporation, which contemplates the development and operation of the Agua Rica project using the infrastructure and facilities of Minera Alumbrera Ltd. realizing important synergies, lowering initial capital required, and reducing the environmental footprint.
(All amounts are expressed in United States Dollars unless otherwise indicated.)
The integration plan generates significant synergies and lowers execution risk by bringing together the extensive mineral resource of Agua Rica with the existing infrastructure of Alumbrera to create a unique, high quality, and low risk brownfield project that the Parties believe will bring significant value to shareholders and local communities and stakeholders. This unique and innovative project will serve to position Catamarca as a focal point for development in northwestern Argentina.
The Parties are pleased to have collectively advanced the integration of Agua Rica and Alumbrera and now to have advanced the PFS under the oversight and with the support of a technical committee comprised of their respective representatives. The Parties also recognize and appreciate the collaboration of the national government of Argentina and provincial government of Catamarca, along with several state-owned entities, which led to the integration plan thereby supporting advancing the project with the PFS.
Based on mineral reserves updated as at June 30, 2019, the PFS estimates a mine life of 28 years with average annual production over the first 10 years of approximately 533 million pounds of copper equivalent(1) including 107,000 ounces of gold and contributions of molybdenum and silver. Costs are expected to fall well within the lower half of the cost curve, with average cash costs over the first 10 years estimated at $1.29 per pound and competitive AISC(2) of $1.52 per pound for the same period.
The initial capital cost estimate of $2.4 billion realizes significant synergies from using the infrastructure and facilities of Alumbrera. The project is expected to generate strong economic returns with an after-tax NPV at an 8% discount rate (a discount rate that is consistent with other investments in country and the brown fields nature of the project) of $1.935 billion, and an after-tax IRR of 19.7%, assuming a copper price of $3.00 per pound (“base case”). Opportunities to further improve the economics will be evaluated in a value-seeking study scheduled for 2019 and the full feasibility study expected by 2020.
Parameter | Base Case | Comparison to RPM 2014 Study(5) |
||
Life of Mine (years) | 28 | Increased | ||
Contained copper equivalent production (pounds)(1) | ||||
First 10 full years (millions) | 533 | Increased | ||
Life of Mine (millions) | 452 | Increased | ||
Throughput (tonnes per day, “tpd”) | 110,000 | – | ||
Strip ratio (tonnes waste: tonnes ore) | ||||
First 10 full years | 2.43 | Improved | ||
Life of Mine | 1.66 | Improved | ||
Costs per tonne of ore processed (Life of Mine) | ||||
Mining | $ | 4.87 | – | |
Process Plant | $ | 5.53 | – | |
G&A | $ | 0.87 | – | |
Others (including freight and royalties) | $ | 2.05 | – | |
Total Operating Cost | $ | 13.32 | Improved | |
Cash costs(2) (per pound) | ||||
First 10 full years | $ | 1.29 | – | |
Life of Mine | $ | 1.34 | – | |
AISC(2) (per pound) | ||||
First 10 full years | $ | 1.52 | – | |
Life of Mine | $ | 1.54 | – | |
Capital Costs | ||||
Initial Capex (millions) | $ | 2,386 | – | |
Sustaining Capex (millions) | $ | 1,537 | – | |
Concentrate Grade (Life of Mine) | ||||
Copper | 25.2 | % | – | |
Gold | 4.5 g/t | – | ||
Silver | 74.7 g/t | – | ||
Molybdenum | 50.0 | % | – | |
NPV(3,4) (millions) | $ | 1,935 | Improved | |
After-Tax IRR(3) | 19.7 | % | Improved | |
Annual EBITDA(2) | ||||
First 10 full years (millions) | $ | 773 | Increased | |
Life of Mine (millions) | $ | 610 | Increased |
Sensitivities to copper price are presented in the table below with each $0.25 increase per pound of copper equating to a more than $500 million increase in NPV versus the base case. The strong financial projections of the base case, the project resilience to lower copper prices, and its leverage to higher metal prices, in addition to the potential for optimizations of the project in the next stages of design, present an opportunity for the Parties to realize significant value from this high quality project.
Copper Price (per pound) (1) | $ | 2.50 | $ | 2.75 | $3.00 (4) | $ | 3.25 | $ | 3.50 | ||||||
Based on Reserves (100% basis) | |||||||||||||||
NPV(2) (millions) | $ | 901 | $ | 1,421 | $ | 1,935 | $ | 2,446 | $ | 2,955 | |||||
After-Tax IRR (%) | 13.8 | % | 16.9 | % | 19.7 | % | 22.5 | % | 25.1 | % | |||||
Annual EBITDA(3) (millions) | |||||||||||||||
First five full years | $ | 689 | $ | 803 | $ | 918 | $ | 1,033 | $ | 1,148 | |||||
First 10 full years | $ | 568 | $ | 670 | $ | 773 | $ | 875 | $ | 977 | |||||
Life of Mine | $ | 442 | $ | 526 | $ | 610 | $ | 694 | $ | 778 |
The PFS assumes a throughput rate of 110,000 tpd with scenarios considering a higher throughput rate to be evaluated in the value-seeking study and subsequent full feasibility study. Preliminary evaluations have indicated the potential for significant upside to the project economics from increases to throughput with existing mineral reserves to 115,000 tpd, which would improve NPV to over $145 million and require only a marginal increase to initial capital.
The PFS significantly advances Agua Rica and underscores Agua Rica as a long-life, low-cost project with robust economics and significant upside potential. Opportunities to realize further upside include converting economic-grade inferred mineral resources within the pit and expanding throughput scenarios to increase metal production and returns, among others.
The Parties have undertaken considerable preliminary work to ensure the highest standards of environmental protection. The environmental design criteria have been defined using the best practices of the mining industry, international guidelines, legal requirements, and corporate policies with the sole objective to prevent or minimize impacts to the environment, while embracing the unique characteristics of the region.
About the Agua Rica – Alumbrera Integrated Project
Agua Rica is a large-scale copper, gold, silver, and molybdenum deposit located in the Catamarca Province, Argentina, 25 kilometres north of Andalgalá. The project has proven and probable mineral reserves of 11.8 billion pounds of copper and 7.4 million ounces of gold contained in 1.104 million tonnes of ore. Mineral resources include 260,000 tonnes of measured and indicated mineral resources, containing more than 1.6 billion pounds of copper and 954,000 ounces of gold. Additionally, inferred mineral resources of 743,000 tonnes represent significant upside potential to further define an increase to mineral reserves and life of mine.
The PFS for the integrated project considers the Agua Rica deposit will be mined via a conventional high tonnage truck and shovel open pit operation. Average life of mine material moved is expected to be approximately 108 million tonnes per year, with ore feed of 40 million tonnes per year and average life of mine strip ratio of 1.66.
Ore extracted from the mine will be transported from the open pit by truck to the primary crusher area and then transported via a conventional conveyor to the existing Alumbrera processing plant. To route the overland conveyor system, approximately 5.2 kilometres of tunnel development will be required. The conveyor extends 35 kilometres to the Alumbrera process plant, where it will feed the existing stacker conveyor via a new transfer station.
Relatively modest modifications to the circuit are needed to process the Agua Rica ore in order to produce copper and by-products concentrate, which will then be transported to the port for commercialization. An in-situ blending strategy has been defined to manage the concentrate quality over certain years of the mine life, which will allow the project to achieve the desired targets. Further optimizations to this strategy will be studied in the next design phase.
The mineral reserves pit contains 160 million tonnes of inferred mineral resources classified as waste in the base case. The majority of this material is not scheduled to be mined until late in the mine life and could displace lower grade material within the pit, representing an immediate opportunity to improve the base case by increasing average annual production if the inferred mineral resources can be converted to mineral reserves.
The high quality and well-preserved existing infrastructure of Alumbrera is fully utilized in the integration. Tailings storage facility, power supply, water supply, ancillary buildings, and logistical installations, among other infrastructure, are all included. This significantly reduces the environmental footprint of the project. Given the level of progress achieved in the PFS, the Parties have begun the process to prepare the Environmental Impact Assessment for the integrated project, as well as continuing engagement with local stakeholders and local communities.
The Company plans to commence a review of strategic and value-creating alternatives in the interests of advancing the project to development. This review may be commenced as soon as this year and continue through the period that a full feasibility study is advanced. Any additional upside opportunities for the project that will be considered as part of the feasibility study will be taken into account as part of this review. The project represents exceptional value across many fronts already, which is expected to improve with the upside opportunities.
The Parties will continue to work in close consultation with local communities, governments, and Catamarca authorities to ensure project design adheres to strict permitting standards that reduce Agua Rica’s environmental footprint. In addition, the project will implement the Mining Association of Canada’s Towards Sustainable Mining Protocols, a rigorous performance management system that helps mining companies evaluate and manage their environmental and social responsibilities. Agua Rica also plans to renew its ISO 14001 and OSHAS 18001 certifications and continue to engage extensively with local communities and promote diversity and shared values in the region.
Other News – Early Results of Previously Announced Cash Tender Offer of Notes
The Company reported today that it has received $462,420,000 of notes tendered under its note purchase offering, which now allocates in full the cash reserved toward its debt reduction plan. This well positions the Company toward achieving its goal of meaningfully retiring outstanding debt and thereby significantly improving its financial position in order to pursue organic growth and value creating opportunities including the opportunity that the integrated Agua Rica project represents.
Mineral Reserve Statement, Agua Rica Project
Proven Mineral Reserves | Probable Mineral Reserves | Total Proven & Probable | |||||||
Tonnes | Grade | Contained | Tonnes | Grade | Contained | Tonnes | Grade | Contained | |
(000’s) | (g/t) | oz. (000’s) | (000’s) | (g/t) | oz. (000’s) | (000’s) | (g/t) | oz. (000’s) | |
Gold | 587,200 | 0.25 | 4,720 | 517,600 | 0.16 | 2,663 | 1,104,800 | 0.21 | 7,382 |
Silver | 587,200 | 3.02 | 57,014 | 517,600 | 2.63 | 43,766 | 1,104,800 | 2.84 | 100,781 |
Tonnes | Grade | Contained | Tonnes | Grade | Contained | Tonnes | Grade | Contained | |
(000’s) | (%) | lbs (mm) | (000’s) | (%) | lbs (mm) | (000’s) | (%) | lbs (mm) | |
Copper | 587,200 | 0.57 | 4,779 | 517,600 | 0.43 | 4,450 | 1,104,800 | 0.48 | 11,829 |
Molybdenum | 587,200 | 0.03 | 279 | 517,600 | 0.03 | 342 | 1,104,800 | 0.03 | 731 |
Mineral Resource Statement, Agua Rica Project
Measured Mineral Resources | Indicated Mineral Resources | Total Measured & Indicated | |||||||
Tonnes | Grade | Contained | Tonnes | Grade | Contained | Tonnes | Grade | Contained | |
(000’s) | (g/t) | oz. (000’s) | (000’s) | (g/t) | oz. (000’s) | (000’s) | (g/t) | oz. (000’s) | |
Gold | 53,600 | 0.13 | 224 | 206,300 | 0.11 | 730 | 259,900 | 0.11 | 954 |
Silver | 53,600 | 1.55 | 2,671 | 206,300 | 1.80 | 12,337 | 259,900 | 1.80 | 15,008 |
Tonnes | Grade | Contained | Tonnes | Grade | Contained | Tonnes | Grade | Contained | |
(000’s) | (%) | lbs (mm) | (000’s) | (%) | lbs (mm) | (000’s) | (%) | lbs (mm) | |
Copper | 53,600 | 0.22 | 260 | 206,300 | 0.30 | 1,364 | 259,900 | 0.28 | 1,624 |
Molybdenum | 53,600 | 0.02 | 24 | 206,300 | 0.03 | 136 | 259,900 | 0.03 | 160 |
Inferred Mineral Resources | |||
Tonnes | Grade | Contained | |
(000’s) | (g/t) | oz. (000’s) | |
Gold | 742,900 | 0.09 | 2,150 |
Silver | 742,900 | 1.62 | 38,693 |
Tonnes | Grade | Contained | |
(000’s) | (%) | lbs (mm) | |
Copper | 742,900 | 0.23 | 3,767 |
Molybdenum | 742,900 | 0.03 | 491 |
Mineral Reserve and Mineral Resource Reporting Notes
Mineral Reserves | Mineral Resources |
Open pit mineral reserves are reported at a variable cut off value, which averages $8.42/t. The cut off value is based on metal assumptions of $3.00/lb for copper, $1,250/oz for gold, $18.00/oz for silver, and $11.00/lb for molybdenum. A life of mine average open pit costs of $1.72/t moved, processing and G&A cost of $6.70/t of run of mine processed. The strip ratio of the mineral reserves is 1.66 with overall slope angles varying from 39 to 45 degrees depending on the geotechnical sector. | Mineral resources are constrained by an optimized pit shell based on a metal assumption of $4.00/lb for copper, $1,600/oz for gold, $24.00/oz for silver, and $11.00/lb for molybdenum. Open pit mineral resources are reported at a variable cut off value, which averages $8.42/t with overall slope angles varying from 39 to 45 degrees depending on the geotechnical sector. |
Qualified Persons
Scientific and technical information contained in this news release has been reviewed and approved by Anthony Maycock, P. Eng, of MM Consultores Limitada, who is a “Qualified Person” as defined by Canadian Securities Administrators’ National Instrument 43-101 – Standards of Disclosure for Mineral Projects.
About Yamana
Yamana is a Canadian-based gold, silver and copper producer with a significant portfolio comprised of operating mines, development stage projects, and exploration and mineral properties throughout the Americas, mainly in Canada, Brazil, Chile and Argentina. Yamana plans to continue to build on this base through expansion and optimization initiatives at existing operating mines, development of new mines, the advancement of its exploration properties and, at times, by targeting other consolidation opportunities with a primary focus in the Americas.
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