Yamana Gold plans to sell its interest in the Mercedes mine in Sonora, Mexico, to Premier Gold Mines in a cash and equity deal valued at $140 million ($122.5 million in cash and $17.5 million in Premier shares). Yamana 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 when the Mercedes has produced 450,000 ounces (oz) of gold. Yamana said the NSR allows it to retain an economic interest in the potential for exploration success and ultimately mine life extension that exists at Mercedes, which is its sole operating mine in Mexico.
With the previously announced decision to recommission the Santa Luz project in Brazil, Yamana has identified an opportunity to replace gold production from Mercedes beginning in 2018. Production in the first full year from Santa Luz is expected to be more than 130,000 oz of gold, with an estimated average annual production of approximately 114,000 oz of gold over the first seven years.
“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,” said Peter Marrone, chairman and CEO of Yamana. “In addition, we have identified an opportunity within our portfolio, that being Santa Luz, for the replacement of the gold production that will be foregone from Mercedes. Santa Luz has a very modest capital cost, an expected mine life of more than 10 years, and is in a jurisdiction in which we have a significant presence.”
Santa Luz has proven and probable mineral reserves of 1.2 million oz of gold —26.7 million metric tons (mt) at 1.42 g/mt. The updated mill has an expected overall recovery rate of approximately 84%. The average life of mine all-in sustaining cost (AISC) are estimated to be $846/oz.
“A development schedule is now under way with a plan to be in production in 2018,” Marrone said.
Santa Luz is currently on care and maintenance having operated modestly in 2014. The current effective plant capacity is 2 million mt/y. Yamana plans to increase plant capacity to 2.7 million mt/y. The new flowsheet is a “whole ore leach” of the total plant feed of carbonaceous and non-carbonaceous mineral types mined and processed separately as much as practical. This accommodates the variability in the “preg-robbing” organic carbon concentrations in the plant feed. A significant amount of testwork has been completed in the last year, Marrone explained, increasing the confidence in being able to verify and readily separate the dacitic and carbonaceous ores as well as deliver the ores to the mill to allow for an efficient production schedule.
The updated processing route, as a result of extensive metallurgical testing, incorporates adding kerosene to the mills and also implements a kerosene removal step ahead of the leaching circuit, to blank naturally occurring “preg-robbing” carbon before the gold mineral is leached in cyanide and adsorbed onto activated carbon in a Carbon-in-Leach (CIL) circuit. The design allows for various addition points and dosages of kerosene (SAG mill and vertimill), to accommodate varying concentrations of organic carbon.
The expected plant modifications ($42.3 million) to the existing circuit require the installation of a vertimill, a kerosene removal tank and regeneration kiln, six leaching tanks, a detoxification circuit, additional carbon regeneration capacity (reactivation furnace), and two additional elution columns. The company will also invest $8 million to improve the tailings dam. The total capital cost for the re-commissioning of Santa Luz is expected to be $84.2 million.
