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Yamana Gold is in a downtrend
Monday, January 25, 2010
Lou Schizas
Hi,
Could you tell me what is happening with Yamana gold recently. compared to Eldorado gold and other gold companies Yamana seems to go down more. Recently there has been more selling on strength than buying. any reason why it is accelerating downwards.
Thank you,
Rafi
Hi Rafi,
Thanks for the assignment. How Yamana Gold Inc. trades compared to other gold producers can be attributed to a number of factors but one metric you should pay attention to is a stock’s beta.
Beta measures a stock’s comparable movement to the market. A stock that has a beta of 1 follows the market in lock step. The market rises by 1 per cent the stock rises by per cent. If the market falls by 1 per cent then the stock falls by 1 per cent.
A stock with a beta greater than 1 will move higher and lower than the market while a stock with a beta lower than one will not rise as much or fall as far as the market.
In your case you are comparing Yamana which has a beta of 1.01 with Eldorado which has a beta of 0.86. When the market is up 1 per cent Yamana rises slightly more than Eldorado and similarly when the market falls Yamana falls more than Eldorado.
It would be worth your time to research the beta of all the stocks that you are interested in so that you have a good grounding in how a stock responds to the market environment.
The three-year chart for YRI is worth looking at to further the analysis of how you should manage this stock. The stock has pulled back and is currently testing support on its 200 day moving average. YRI has tested support at this level before but if it doesnt hold it will then test support at $10.00.
The six month chart provides a better view of the most recent trading in the stock. The MACD provided a sell signal in December when the stock traded close to $15.00 and has yet to indicate a turn to the upside.
Until the MACD turns or we get a bounce off the 200 day moving average YRI is in a downtrend and the trend is your friend till it ends.
Happy Capitalism!
Yamana's Agua Rica has NPV of $1.2-billion (U.S.)
2010-01-26 08:56 ET - News Release
Ms. Letitia Wong reports
YAMANA GOLD PROVIDES UPDATE ON AGUA RICA AND ANNOUNCES CONSTRUCTION DECISION FOR ITS ERNESTO/PAU-A-PIQUE PROJECT
Yamana Gold Inc. has provided an update on its Agua Rica project in Argentina and a construction decision on its Ernesto/Pau-a-pique project in Brazil, based on positive feasibility study results. All amounts are expressed in U.S. dollars unless otherwise indicated.
"We have maintained our focus on consistency and reliability in operations, and we have applied that focus and approach on our development-stage projects," said Peter Marrone, Yamana's chairman and chief executive officer. "In 2009, we undertook a review of Agua Rica, and Yamana is now able to further embrace this project as a potential significant future contributor to production. Our review of Agua Rica also demonstrates that the project should provide considerable value. We are now undertaking additional optimization initiatives, providing the potential for substantial additional upside to the project. We expect significant growth from our other development-stage projects for which construction decisions have been made, which now includes Ernesto/Pau-a-pique. With our core operations, development-stage projects and exploration focus, we believe that Yamana has a unique offering of growth, sustainability and value."
Agua Rica, Argentina
Yamana has continued to advance its Agua Rica project in Argentina. Agua Rica is a large-scale copper-gold-silver-molybdenum porphyry deposit located in the mining-friendly province of Catamarca, near the producing Alumbrera mine. A feasibility study was completed in 2006 and the environmental licence was issued in 2009.
The company has completed the first of several studies evaluating certain optimization initiatives over and above the evaluation of the project based on the 2006 feasibility study, all of which are expected to have a positive impact on the project. The optimization initiatives included the following:
1. New mine plan that reduces the initial overburden results in improvements in both capital and operating costs;
2. Thickening paste disposal of tailings results in significant savings in capital, with further potential for improvements;
3. Replacement of the concentrate pipeline with trucking to an existing rail road system results in capital cost improvements;
4. A review of the impact of higher metal prices on mineral reserves, which the company estimates will result in higher mineral reserves and minable tonnes of ore.
Total mineral resources as reported in Yamana's 2008 annual report are summarized as follows:
* Measured mineral resources of 64.1 million tonnes of ore, with an average copper grade of 0.49 per cent for a total of 700 million pounds of copper, and an average gold grade of 0.17 gram per tonne for a total of 361,000 ounces of gold;
* Indicated mineral resources of 248.1 million tonnes of ore with an average copper grade of 0.4 per cent for a total of 2.2 billion pounds of copper, and an average gold grade of 0.16 g/t for a total of 1.3 million ounces of gold;
* Inferred mineral resources of 651 million tonnes of ore with an average copper grade of 0.34 per cent for a total of 4.9 billion pounds of copper, and an average gold grade of 0.12 g/t for a total of 2.5 million ounces of gold
Total mineral reserves as reported in Yamana's 2008 annual report are summarized as follows:
* Proven mineral reserves of 347.8 million tonnes of ore with an average copper grade of 0.57 per cent for a total of 4.4 billion pounds of copper, and an average gold grade of 0.25 g/t for a total of 2.8 million ounces of gold;
* Probable mineral reserves of 449.9 million tonnes of ore with an average copper grade of 0.43 per cent for a total of 4.3 billion pounds of copper, and an average gold grade of 0.21 g/t for a total of three million ounces of gold.
The foregoing mineral reserve estimate was based on a copper price of $1.10 per pound and a gold price of $425 per ounce.
Based on the higher metal prices used in the optimization review, contained metal is expected to increase by at least 5 per cent. An updated full mineral reserve estimate will be completed as part of the continued review of the project.
Based on the recently completed optimization study, Agua Rica is expected to produce approximately 12.5 million tonnes of copper-gold concentrate and 357,750 tonnes of molybdenum concentrate over a 26.5-year mine life.
Initial 10 years Life of mine
Average annual copper production 365 million pounds 282 million pounds
Byproduct cash costs per pound (net
of molybdenum credits) $0.50 $0.53
Average annual gold-equivalent production (1) 154,000 GEO 136,000 GEO
Co-product cash costs (1) per gold-equivalent
ounce (GEO) (2) $370 $400
Notes: (1) Yamana treats silver as a gold equivalent.
(2) Excluding royalties.
Byproduct cash costs per pound of copper net of all byproduct credits, including gold and silver, are estimated to be approximately 30 cents, which makes Agua Rica one of the lowest-cost copper-gold projects in the world.
As part of the new analysis, Yamana has also evaluated the capital expenditures assumed in the 2006 feasibility study and has concluded a reasonable estimate would be comparable with approximately $2.1-billion. Higher consumable costs and capital costs assumed in the update were mitigated by improvements in the assumed foreign exchange rates.
The new financial and economic model used by Yamana for its new base-case analysis has assumed a copper price of $2.25 per pound and a gold price of $950 per ounce. On this basis, the assumed net present value would exceed $1.2-billion (based on a 7.5-per-cent discount rate), and the after-tax internal rate of return would be approximately 15 per cent. Higher price assumptions of $3.25 per pound of copper and $1,050 per ounce of gold would increase the net present value by approximately $500-million, and the after-tax internal rate of return would be approximately 24 per cent. Yamana continues to evaluate the merits of a partnership to derive value from Agua Rica. The value derived will be dependent on metal markets and general economic conditions.
This study now creates the new base case for the project. Yamana has concluded that this is an exceptional stand-alone project offering significant value, and currently has further optimization upside options being evaluated. They include:
1. Improving the pit slopes to further optimize mine development and reduce waste removal;
2. Optimizing the location of separate tunnels for ore and waste, which could result in savings in both capital and operating costs, in addition to providing additional flexibility to the operations;
3. Reduction in power and equipment requirements, particularly with the replacement of tailings filtration;
4. Optimizing the grinding requirements, which results in increasing plant treatment capacity without additional investment in equipment;
5. Recovery of the rare metal rhenium, which was not originally assumed in the 2006 feasibility study update. Initial metallurgical testing of Agua Rica's molybdenum concentrate suggests that the deposit may contain a significant amount of rhenium, which could provide significant byproduct credits. Demand for rhenium has grown significantly, and the price has increased substantially in the last few years and appears to have sustainable industrial applications. Yamana is advancing further drilling and metallurgical testing relating to the economic recovery of the metal. The possibility of achieving rhenium byproduct credits may significantly add to the economics and potential of the project.
A full update to the 2006 feasibility study, which would include the recently completed optimization initiatives, the additional initiatives under review, and definitive mineral reserve and production estimates, will be provided as Yamana continues to work toward a formal construction decision expected before the end of 2011.
"The approach we have taken on evaluating Agua Rica is similar to Chapada in 2003," said Ludovico Costa, Yamana's president and chief operating officer. "In this project, a previous feasibility study done in 1998 was re-evaluated for improvements and new metal prices assumed, which resulted in a positive feasibility study that has been upheld by subsequent results. We are pleased to have completed this first round of optimization initiatives at Agua Rica, which confirm the exceptional value of the project and identified several initiatives that may add further value to the project. We believe that Agua Rica is a remarkable project offering robust returns and further value enhancement."
Ernesto/Pau-a-pique, Brazil
Yamana has made a formal decision for the construction of the Ernesto/Pau-a-pique project. The construction decision is based on positive feasibility study results and an expected upgrade in mineral resources as a result of deeper drilling of the ore body. The project has an initial mine life of approximately seven years, with current mineral reserves of 710,000 ounces of gold included in measured and indicated mineral resources of 854,000 ounces of gold. The company believes there is potential to extend the mine life as it continues efforts to upgrade mineral resource ounces to the proven and probable category, and expand mineral resources at Ernesto as results demonstrate the deposit is open at depth and downdip.
The company continues to progress more detailed engineering and an exploration tunnel to facilitate drilling in deeper areas where there are further resources. Yamana also continues to conduct pilot tests on metallurgy and recoveries. Permitting is under way and construction is expected to begin in mid-2010, with production commencing in late 2012.
Key parameters of the feasibility study are set out in the tables.
MINERAL RESERVES AND MINERAL RESOURCES
Mineral reserves*
Proven Probable Proven and probable
Au Ounces Au Ounces Au Ounces
Tonnes (g/t) (Au) Tonnes (g/t) (Au) Tonnes (g/t) (Au)
2,279,000 3.86 283,000 4,827,000 2.75 427,000 7,106,000 3.11 710,000
Mineral resources*
Measured Indicated Measured and indicated
Au Ounces Au Ounces Au Ounces
Tonnes (g/t) (Au) Tonnes (g/t) (Au) Tonnes (g/t) (Au)
2,239,000 4.69 338,000 5,964,000 2.69 516,000 8,203,000 3.24 854,000
* Mineral resources are inclusive of mineral reserves.
INFERRED MINERAL RESOURCES
Au Ounces
Tonnes (g/t) (Au)
4,400,000 1.79 256,000
Capital cost: approximately $116-million
Cash cost per ounce: $427
Average throughput: one million tonnes per year
Average production (per year): approximately 100,000 ounces
Initial mine life: seven years
After-tax IRR (internal rate of return): approximately 31 per cent
The internal rate of return of approximately 31 per cent is based on a gold price of $900 per ounce, and a Brazilian real of 1.8 in 2010 and two thereafter. The initial after-tax net present value is approximately $106-million and is based on a 5-per-cent discount rate. Total annual production is expected to average approximately 100,000 ounces of gold over the mine life, with the first two years of production averaging approximately 120,000 ounces, further improving project economics. The payback period for the Ernesto/Pau-a-pique project is estimated at two years. Assuming a gold price of $1,100 per ounce, the internal rate of return would increase substantially to 47 per cent, and the after-tax net present value with a 5-per-cent discount rate improves to $192-million. A sensitivity analysis on a 10-per-cent change of each variable on Ernesto/Pau-a-pique's after-tax IRR and NPV is provided in the table.
Assumptions sensitivities IRR After-tax NPV
+0% change in assumptions 31% $106-million
+10% change in gold price 38% $145-million
+10% change in Brazilian real 40% $137-million
Expected capital costs of approximately $116-million account for the appreciation of the local currency, as compared with the previous scoping study and the cost of acquiring the mine fleet, which was not included in the original estimate as contractor mining had been assumed.
Initial capex estimate $86-million
Impact of Brazilian real + $12-million
Acquisition of mine fleet + $18-million
Updated capex estimate $116-million
Cash costs are estimated at $427 per ounce and are considered highly reliable compared with estimates in the original scoping study, as they reflect Yamana's substantial operational experience in Brazil. The level of certainty of capital and operating costs has also increased with the further work completed.
COSTS OF PROJECT
(dollars per ounce)
Initial cash cost estimate About $356
Impact of Brazilian Real +$50
Change in mine costs +$28
Change in plant costs Minus $20
Change in other opex +$13
Updated cash cost estimate About $427
The Ernesto/Pau-a-pique project is located in southwest Mato Grosso state, near Pontes e Lacerda in Brazil. The Pau-a-Pique deposit is approximately 62 kilometres by road south of the Ernesto deposit. The significant existing infrastructure including paved roadways supports the development of Ernesto/Pau-a-Pique as two operating mines with a common processing plant.
Ernesto/Pau-a-pique represents a modest-cost, low-capital and high-return project contributing eight to 10 per cent of overall production. Significant potential for mineral resource upgrade serves as a platform for further exploration at the Guapore belt, where Yamana has extensive exploration concessions.
Other development-stage project updates
C1 Santa Luz, Brazil
Yamana is continuing to progress development work at C1 Santa Luz:
* Permitting and start-up of mine construction are on track for mid-2010;
* Advancing metallurgical test work;
* Basic engineering to be completed mid-February.
During the permitting period, Yamana has undertaken a program to conduct pilot tests on metallurgy and recoveries, which are advancing.
Mercedes, Mexico
Yamana is continuing to progress development work at Mercedes:
* Permitting is under way and targeted to be complete mid-2010, facilitating the start-up of construction;
* Basic engineering and advanced mine development completed;
* Exploration results continue to confirm Mercedes' high geological potential;
* Work on a development ramp is progressing to confirm grade continuity and the potential to convert mineral resources to mineral reserves.
Minera Florida tailings project, Chile
Yamana is continuing to progress development work at its Minera Florida tailings project:
* Additional work completed to confirm the grade of the historical tailings;
* Basic engineering continues with production on track to commence in early 2012.
Pilar, Brazil
* Efforts continue toward an updated mineral resource estimate and basic engineering, followed by a feasibility study.
Chapada, Brazil
* Modifications to the plant to increase throughput to up to 22 million tonnes per year now in progress at a moderate capital cost of $20-million;
* Modifications include amendments to the water pumping system, increasing hydrocycloning capacity, improving the tailings pumping system and additional screening.
QDD Lower West, Argentina
* Continued drilling on the deposit is expected to increase mineral reserves, particularly in the western extension;
* A feasibility study is expected in the second half of 2010 to evaluate the possibility of accelerating production;
* Construction of an incline ramp to commence;
* Advanced metallurgical test work demonstrates the strong presence of free gold, which would allow heap-leaching through existing facilities;
* A prefeasibility study supports additional production of 80,000 to 90,000 ounces per year at Gualcamayo.
Production at Yamana is expected to ramp up substantially in 2012, as the four development-stage projects where construction decisions have been made -- C1 Santa Luz, Mercedes, Minera Florida tailings and Ernesto/Pau-a-pique -- are planned to begin production. These four projects are expected to contribute 410,000 gold-equivalent ounces annually, with production expected to be approximately 1.3 million gold-equivalent ounces in 2012, as operations commence sequentially throughout the year at each of the projects. With these new mines, an annualized production rate of approximately 1.5 million gold-equivalent ounces is expected by the beginning of 2013. Pilar/Caiamar and QDD Lower West will provide further growth for Yamana. Agua Rica is expected to be a substantial contributor to potential future production and value as the company continues to advance this project.
Quality-assurance and quality-control program
Yamana incorporates a rigorous quality-assurance and quality-control program for all of its mines and exploration projects, which conforms to industry best practices as outlined by the CSE and National Instrument 43-101. This includes the use of independent third party laboratories, and the use of professionally prepared standards and blanks, as well as analysis of sample duplicates with a second independent laboratory.
Qualified person
Evandro Cintra, PGeo, senior vice-president, technical services, for Yamana Gold, has reviewed and confirmed the data contained within this news release, and serves as the qualified person as defined in National Instrument 43-101.
We seek Safe Harbor.
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