The Globe and Mail reports in its Tuesday, Jan. 19, edition that Sentry Select Precious Metals Growth manager Kevin MacLean sees opportunity in Iamgold and other gold miners. The Globe's Shirley Won writes in the Number Cruncher column that Mr. MacLean invests in companies that have what he calls a "high wealth-creation yield."
He says, "These are companies that are adding to their reserves and resources at very meaningful rates relative to the size of the company, and have a high cash-flow yield." He shies away from miners during the construction phase because of concerns about things going wrong. Mr. MacLean sees gold rallying for the next few years.
Yamana produces 1.2 million gold equivalent oz in 2009
2010-01-12 16:41 ET - News Release
Ms. Letitia Wong reports
YAMANA GOLD PROVIDES 2010 AND 2011 OPERATING OUTLOOK
Yamana Gold Inc. has released its operating outlook including production, cash costs and capital expenditure guidance for 2010 and 2011. All amounts are expressed in U.S. dollars unless otherwise indicated.
"Our objective has been to create consistency and reliability in our operations with a sustainable production platform of approximately 1.1 million gold equivalent ounces at consistent cash costs," said Peter Marrone, Yamana's chairman and chief executive officer. "Our outlook for the next few years maintains that objective. Going forward, our development stage and exploration projects, in addition to further value-enhancing opportunities, will provide Yamana with a superior organic growth profile and value proposition."
2010 and 2011 operating outlook
Production from continuing operations is expected to be in the range of 1.03 million to 1,145,000 gold equivalent ounces (GEO) in 2010 and 1,045,000 to 1.15 million GEO in 2011, representing an overall increase of up to 12 per cent in production from continuing operations in 2009. Production from discontinued operations is expected to be approximately 40,000 GEO in the first quarter of 2010, which is not included in the estimated production ranges set forth above. No further production from discontinued operations is expected after the first quarter of 2010.
Estimated gold and copper production on a mine-by-mine basis for 2010 and 2011 is detailed in an attached table.
GOLD AND COPPER PRODUCTION ESTIMATES Gold production estimates (GEO) 2010E 2011E Chapada 140,000-155,000 135,000-145,000 El Penon (GEO) 400,000-420,000 410,000-430,000 Gualcamayo 165,000-180,000 165,000-180,000 Jacobina 105,000-125,000 110,000-130,000 Minera Florida (GEO) 100,000-125,000 110,000-130,000 Fazenda Brasileiro 70,000-85,000 70,000-85,000 Alumbrera (12.5%) 50,000-55,000 45,000-50,000 ------------------- ------------------- Total GEO(1) 1,030,000-1,145,000 1,045,000-1,150,000 =================== =================== Copper (lb) (Chapada) 150 million to 135 million to 160 million 145 million (1) GEO calculations are based on an assumed gold-to-silver ratio of 55:1 which is a long-term historical average. Silver production of approximately 10 million ounces for 2010 and 2011 is treated as a gold equivalent on this basis.
Growth is expected to ramp up substantially in 2012 as four development-stage projects including C1 Santa Luz, Mercedes and Minera Florida tailings project, where construction decisions have already been made, in addition to Ernesto/Pau-a-pique, where a feasibility study is pending, are expected to begin production. These four projects are expected to contribute an additional approximately 390,000 GEO annually. Production in 2012 is expected to be approximately 1.3 million GEO as these projects commence operations and begin to ramp up, with production by the end of 2012 expected to be at a planned annual run rate of approximately 1.5 million GEO, which represents a 46-per-cent increase in production from 2009.
A summary of expected gold production on a year by year basis is shown in an attached table.
EXPENDED GOLD PRODUCTION Year Production (GEO) 2010 Approx. 1.1 million 2011 Approx. 1.1 million 2012 Approx. 1.3 million 2013 Approx. 1.5 million
These estimates do not include any additional production from Agua Rica or new discoveries at El Penon, where updates are expected in the first quarter of 2010, or QDD Lower West, where an update is expected in the second half of 2010.
Byproduct cash costs from continuing operations (excluding Alumbrera) are expected to be below $200 per GEO in each of 2010 and 2011 based on assumed metal prices set forth. Co-product cash costs from continuing operations (excluding Alumbrera) are expected to be in the range of $360 to $400 per GEO in 2010 and $370 to $400 per GEO in 2011. Co-product cash costs per pound of copper at Chapada are expected to be $1 to $1.10 in 2010 and $1.10 to $1.20 in 2011.
Estimated cash costs for gold on a mine-by-mine basis for 2010 and 2011 are detailed in an attached table.
ESTIMATED CASH COSTS Co-product cash cost estimates per GEO 2010E 2011E Chapada $280-$300 $320-$350 El Penon (per GEO) $350-$390 $340-$360 Gualcamayo $340-$380 $350-$390 Jacobina $500-$525 $500-$550 Minera Florida (per GEO) $350-$390 $340-$370 Fazenda Brasileiro $500-$550 $500-$550 ---------- ---------- Byproduct cash costs Below $200 Below $200
Chapada, Brazil
Production at Chapada is expected to be in the range of 140,000 to 155,000 ounces of gold per year in 2010 and 135,000 to 145,000 ounces of gold in 2011. Co-product cash costs are expected to be $280 to $300 per ounce in 2010 and $320 to $350 per ounce in 2011. Yamana has begun with plant optimizations scheduled to increase throughput to up to 22 million tonnes per year before 2012.
El Penon, Chile
Production at El Penon is expected to be in the range of 400,000 to 420,000 GEO in 2010 with production in the first quarter of 2010 expected to be lower than production in the fourth quarter of 2009, but higher than levels in the first quarter of 2009. Production is anticipated to ramp up quarter over quarter in 2010 similar to the trend in 2009. Grade is also expected to improve throughout 2010 with a significant increase expected in the fourth quarter of 2010 and into 2011 as the development of Bonanza is completed and begins to contribute to production. Production at El Penon in 2011 is expected to be 410,000 to 430,000 GEO.
Exploration results to date at Bonanza have been better than expected and continuing exploration efforts in 2010 will focus on extending the known deposits, infill drilling to upgrade certain inferred mineral resources, continuing with efforts at new discoveries and a broader regional exploration program.
Cash costs are expected to average between $350 and $390 per GEO in 2010. Cash costs are expected to be higher in the first quarter of 2010 and to decline throughout the year as production ramps up.
In the fourth quarter of 2009, the company began a transition to owner mining at El Penon. This is expected to modestly impact production and cash costs in the fourth quarter of 2009 and the first quarter of 2010 as the transition to owner mining is completed. Cash costs and production are then expected to improve going forward.
Yamana had contemplated transitioning to owner mining for some time as all other mines operated by Yamana are owner mined. Cash costs are expected to decline substantially in the fourth quarter of 2010 and cash costs in 2011 are expected to average between $340 and $360 per GEO as Bonanza begins to contribute to production and the longer-term benefits of owner mining are realized.
Gualcamayo, Argentina
Production at Gualcamayo is expected to be in the range of 165,000 to 180,000 ounces of gold in each of 2010 and 2011. Going forward, the company believes sustainable production at Gualcamayo will be approximately 180,000 ounces. Production in 2010 and 2011 is expected to come solely from the main QDD open-pit deposit. Further production increases are expected to come from Yamana's continued plans to increase throughput to 1,500 tonnes per hour and processing ore from AIM and QDD Lower West. The expansion to 1,500 tonnes per hour is planned to be completed by the end of 2010.
Metallurgical testwork continues at the AIM deposit to create more reliability and certainty in the ore metallurgy. In addition, QDD Lower West feasibility study results are expected in the second half of 2010.
The company is currently also conducting metallurgical testwork at Salamanca, which is the newest discovery at Gualcamayo. Positive drill results in 2009 support Yamana's view that Salamanca may represent an important source of further gold ounces for Gualcamayo. Drilling continues in 2010 with the objective of providing a mineral resource estimate for Salamanca in the first half of 2010.
Cash costs at Gualcamayo are expected to be in the range of $340 to $380 per ounce in 2010 and $350 and $390 per ounce in 2011.
Jacobina, Brazil
Production at Jacobina is expected to be in the range of 105,000 to 125,000 ounces of gold in 2010 increasing to 110,000 to 130,000 ounces in 2011. Yamana expects to process ore at 6,000 tonnes per day in 2010, consistent with the fourth quarter of 2009 and at the increased rate of 6,200 tonnes per day by early 2011. Yamana continues with drilling to increase certainty of grade and better layout of the drilling stopes.
The company remains focused on improving dilution and recovery as well as exploring, discovering and developing higher-grade areas including Canavieiras. Jacobina will have a period of lower grades in 2010 and 2011 as compared with 2009. Production in these years is expected to come mostly from Joao Belo with modest contributions from Basal.
Positive drill results continue to confirm the high grade at Canavieiras and the significant sample results at Moro do Vento show the potential for new inferred mineral resource ounces.
Exploration upside is in areas with grade higher than the current mine grade. With the new discovery of Serra da Lagartixa in 2009, exploration efforts in 2010 will be focused on near-mine drilling in this target and more aggressively pursuing higher-grade areas of mineralization for future mining.
Cash costs in 2010 are expected to be $500 to $525 per ounce of gold and $500 to $550 per ounce of gold in 2011.
Minera Florida, Chile
Production at Minera Florida is expected to be in the range of 100,000 to 125,000 GEO in 2010, an increase of up to 35 per cent from 2009 production levels reflecting the first full year of production following the expansion. Production in 2011 is expected to be 110,000 to 130,000 GEO. Cash costs are expected to be $350 to $390 per GEO in 2010 and $340 to $370 per GEO in 2011.
Fazenda Brasileiro, Brazil
Production at Fazenda Brasileiro is expected to be 70,000 to 85,000 ounces of gold for each of 2010 and 2011. Cash costs are expected to be $500 to $550 per ounce for each of 2010 and 2011. As Fazenda Brasileiro reaches the end of its known mine life based on mineral reserves, exploration efforts continue to focus on two newly discovered areas, CLX2 and Lagoa do Gato, which Yamana believes represent significant potential to increase the mine life. Yamana's exploration focus at Fazenda Brasileiro has been the replacement of mineral reserves and mineral resources and the company intends to continue these efforts to meaningfully increase mineral reserves and mineral resources in these new areas.
Fully funded growth
Capital expenditures for 2010 and 2011 are expected to be approximately $515-million and $455-million, respectively. This includes sustaining capital expenditures of $230-million in 2010, which includes the purchase of machinery and equipment as Yamana transitions to owner mining at El Penon (representing approximately $60-million). Sustaining capital expenditures in 2011 are expected to be $155-million. The majority of the expansionary capital costs for the two years are allocated to the development of Yamana's growth projects, C1 Santa Luz, Mercedes, the Minera Florida tailings project and Ernesto/Pau-a-pique (feasibility study to follow in January, 2010), all of which are expected to begin production in 2012.
With approximately $600-million of available cash and immediate and undrawn credit available in addition to expected robust cash flow, Yamana is fully financed for its growth.
Yamana continues to focus on exploration with an exploration budget in 2010 of between $75-million to $80-million (approximately half of which is capitalized). Yamana's 2010 exploration program will focus on increasing mineral reserves and mineral resources while continuing with its near-mine exploration program and its efforts to look for new opportunities and on the ground purchases elsewhere in the Americas. The company is focused on developing its future based on its exploration successes and organic growth.
Assumptions
Assumptions for metal prices and exchange rates are as shown in an attached table.
ASSUMPTIONS 2010 2011 Gold (US$/oz) 1,050 1,050 Silver (US$/oz) 18.80 18.80 Copper (US$/lb) 2.75 2.75 Zinc (US$/lb) 1.00 1.00 BRL real/US$ 1.80 1.80 ARG peso/US$ 4.00 4.25 CLP peso/US$ 500 500
Fourth-quarter and 2009 operational update
Yamana provided the following operational update for the fourth quarter and full year of 2009. Total production during the fourth quarter of 2009 continued to increase to a record level of approximately 325,300 GEO of which approximately 289,600 GEO was from continuing operations, representing an increase of 8 per cent from the third quarter of 2009. Production at Gualcamayo continued to ramp up to 59,000 ounces in the fourth quarter of 2009 and continues to meet and exceed expectations. At El Penon, Yamana has undergone a transition to owner mining in the quarter, which will modestly and temporarily cause a decrease in production and increase in costs affecting the fourth quarter of 2009 and the first quarter of 2010. Production in December at El Penon with the completion of the plant upgrade, although during this owner-mining transition period, was in excess of 44,000 GEO and over 109,000 GEO for the quarter. For the full year ended Dec. 31, 2009, total production for Yamana was approximately 1,201,200 GEO, of which approximately 1,026,000 GEO was from continuing operations.
Production on a mine-by-mine basis for the fourth quarter of 2009 and for the full year is summarized in an attached table.
PRODUCTION (GEO) Q4 2009 2009 Chapada 42,200 156,200 El Penon (GEO) 109,900 394,400 Gualcamayo 59,000 143,400 Jacobina 24,800 110,500 Minera Florida (GEO) 24,700 92,400 Fazenda Brasileiro 17,500 76,400 Alumbrera (12.5%) 11,500 52,700 ------- --------- Total production from continuing operations 289,600 1,026,000 Discontinued operations 35,700 175,200 ------- --------- Total production 325,300 1,201,200
In the fourth quarter of 2009 and for the full year of 2009, every ounce of gold from continuing operations (excluding Alumbrera) was produced at below $100 per GEO and below $190 per GEO, respectively, after byproduct credits, realizing a significant margin to the gold price. Cash costs on a co-product basis from continuing operations (excluding Alumbrera) for the fourth quarter of 2009 and for the full year of 2009 were $360 per GEO, in line with original guidance of $345 to $375 per GEO.
Financial results
Yamana will release its full fourth-quarter financial results including mineral reserve and mineral resource data after the close of business on March 3, 2010. A conference call will follow on March 4, 2010, at 11 a.m. Eastern Time.
Conference call information
Toll-free (North America): 1-888-231-8191
International: 647-427-7450
Participant audio webcast: Yaman's website
Conference call replay
Toll-free replay call (North America): 800-642-1687, passcode 46908469
Replay call: 416-849-0833, passcode 46908469
The conference call replay will be available from 2 p.m. Eastern Time on March 4, 2010, until 11:59 p.m. Eastern Time on March 18, 2010.
For further information on the conference call or audio webcast, please contact the investor relations department or visit Yamana's website,
Upcoming events
This news release is a part of a series of announcements and will be followed by results from the Ernesto/Pau-a-pique feasibility study and an update on Agua Rica. The following summarizes the upcoming events:
- Ernesto/Pau-a-pique feasibility study: January, 2010;
- Update on Agua Rica: first-quarter 2010;
- Update on El Penon exploration: first-quarter 2010;
- Update to Yamana's mineral reserves and mineral resources: first-quarter 2010;
- Pilar feasibility study: mid-2010;
- Caiamar mineral resource estimate: mid-2010;
- Salamanca mineral resource estimate: first-half 2010.
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