Yamana Gold Provides an Update on Its Phase 2 Jacobina Expansion Including a 31% Increase in Production, Significant 10-Year Free Cash Flow Generation and Robust Project Economics with Low Capital of $57 Million
TORONTO, May 06, 2020 (GLOBE NEWSWIRE) — YAMANA GOLD INC. (TSX:YRI; NYSE:AUY) (“Yamana” or “the Company”) is pleased to provide an update on the Phase 2 expansion of its Jacobina mine. The Phase 2 expansion strategically positions Jacobina to generate further value bringing forward cash flows and increasing its leverage to gold prices, while taking advantage of its exceptional geological potential, both near mine and regionally, supported by the operation’s impressive track record of discovery and conversion of mineral resources to mineral reserves, which continue to show positive results in 2020.
Jacobina Phase 2 Expansion Highlights The Phase 2 pre-feasibility study (“PFS”) case (“PFS Case”) is based on the mine’s current mineral reserves and includes a life of mine (“LOM”) of 11.5-years from the beginning of 2020. It outlines an after-tax net present value (“NPV”)(1,2) of $777 million, assuming a $1,250 per ounce gold price, and an NPV(1,2) of $1.23 billion at $1,550 per ounce gold.An extended mine plan (“Extended Case”) has been developed that considers the addition of 9.5 million tonnes of plant feed with an average grade of 2.40 grams of gold per tonne (“g/t”), assuming the successful conversion of mineral resources. In this Extended Case scenario, the Phase 2 mine life increases to 14.5 years and outlines an NPV(1,2) of $993 million, assuming a $1,250 per ounce gold price, and an NPV(1,2) of $1.54 billion at $1,550 per ounce gold.The low-risk Phase 2 expansion is expected to generate cash flows in the first 10 years after completion of $1.42 billion in the PFS Case at a gold price of $1,550 per ounce, and $1.78 billion in the Extended Case scenario at a $1,550 gold price. Assumes a conservative Brazilian Real (“BRL”) to US dollar (“USD”) exchange rate of 4.0:1.Average gold production increases to 230,000 ounces per year at an average feed grade of 2.40 g/t of gold, representing a 31% production increase compared to the Phase 1 running rate of 175,000 ounces per year.At the new production rate, the cost structure improves as fixed costs are spread over more units, delivering an average LOM unit operating cost(2) of $37.50 per tonne fed, average LOM cash costs(2,3) of $532 per ounce, and all-in sustaining costs (“AISC”)(2,3) of $727 per ounce, cementing Jacobina’s position as a low-cost underground mining operation. Assumes a conservative BRL/USD exchange rate of 4.0:1.Modest capital cost estimated at $57 million using the same exchange rate of 4.0:1, which would not begin until 2021, and largely consists of modifications to the processing plant as well as underground development acceleration. Plant modifications include the replacement of the existing tertiary crusher with a larger capacity crusher, the addition of a third ball mill, and the addition of a new silo.Assuming a BRL/USD exchange rate of 5.0:1, average LOM cash costs(3) improve by 18% to $438 per ounce and LOM AISC(3) improve by 16% to $609 per ounce, and the project capital cost declines 19% to $46 million.Further optimization opportunities are advancing in parallel, aimed at improving mining recovery, reducing costs, and converting mineral resources to mineral reserves. Immediate value increases are delivered by the spot foreign exchange rate of BRL/USD of 5.6:1 compared to 4.0:1 assumed in the PFS, and current spot gold prices.Phase 2 completion would occur in early 2023 with the timeline dependent on the feasibility study. The completion of the feasibility study is currently planned for mid-2021, with the permitting process already ongoing and expected to be approved by late 2021.The feasibility study will look to further improve operating costs and also take into account the actual realized potential under the Phase 1 optimization to determine the true potential of Phase 2. The Company may choose to normalize operations under Phase 1 for a period of time to determine the true realizable throughput under this phase before proceeding with Phase 2.Exploration at Jacobina is focused on identifying areas of higher grade mineralization and converting those areas to measured and indicated mineral resources both near the mine infrastructure and in the district. The results to date underline the potential of the Jacobina mine to both expand the total mineral reserve base and to potentially provide higher grade mill feed in the early years of the Phase 2 expansion. The Company is planning an exploration update for Jacobina and El Peñón later in May.The Phase 2 ExpansionThe Phase 2 expansion project reaffirms the Jacobina mine as a low-cost, long-life asset with significant value. Phase 2 outlines an increase in throughput to 8,500 tonnes per day (“tpd”), which is expected to be achieved through the installation of an additional grinding line and incremental upgrades to the crushing and gravity circuits. Total project capital costs are estimated at $57 million, of which $35 million is related to the processing plant (including a 35% contingency), $14 million for underground mining, and $8 million for infrastructure. The project’s modest capital cost is expected to be invested incrementally and would allow the project to be funded by Jacobina’s cash flow.The current mining equipment fleet and underground infrastructure is able to support most of the additional production requirements for the Phase 2 expansion, including electrical substations and pumping stations. However, the acquisition of certain infrastructure will be brought forward to support the increased production rate. Ventilation infrastructure will be upgraded to provide adequate airflow for the additional working areas and increased equipment fleet. Total underground development is unchanged from the Phase 1 case, but the peak development rate is planned to increase from approximately 16 kilometres per year to 19 kilometres per year to support the higher production rate.At the plant, crushing capacity will be increased by replacing an HP 500 tertiary crusher with a larger HP 800 crusher. In addition, a third ball mill, with a nominal capacity of 195 tonnes per hour, will be added to the plant to bring grinding capacity to required levels. Further, a new 6,000-tonne capacity silo, similar in size to the operation’s existing silos, will be installed to serve the new ball mill. The new grinding line will also have a new gravimetric concentration system.Phase 2 Economic DetailsThe Phase 2 expansion would ramp up annual gold production to 230,000 ounces by 2023 at average feed grades of 2.40 g/t of gold. The PFS Case scenario, which is based on current mineral reserves only, delivers an NPV(1) of $777 million over an 11.5-year mine life using a conservative gold price assumption of $1,250 per ounce, and a BRL/USD exchange rate of 4.0:1, or $1.43 billion at $1,550 per ounce and 5.0:1 BRL/USD.Under the Extended Case, which includes 9.5 million tonnes of additional plant feed with an average feed grade of 2.40 g/t of gold, LOM increases to 14.5 years at 8,500 tpd. Under this scenario, the after-tax NPV(1) increases to $993 million assuming a $1,250 per ounce gold price and a BRL/USD exchange rate of 4.0:1, and to $1.78 billion at a gold price of $1,550 per ounce and 5.0:1 BRL/USD.While the PFS shows scenarios of mine lives of 11.5 and 14.5 years, Jacobina has a long track record of increasing mine life, and the Company expects mine life to exceed these levels.The magnitude of change in the NPV of Jacobina under the Phase 2 expansion is a significant step in the improvement of an already long-life, high-NPV asset in Yamana’s portfolio. The long-term strategic benefit to an expansion at Jacobina exists in the flexibility to bring cash flows forward and increase the mine’s leverage to gold prices, while quickly delivering additional value from the impressive mineral inventory and exploration potential at the immediate mine and in the surrounding mining concessions, as is demonstrated by the Company’s successful history of increasing mineral resources and mineral reserves, which continues to be demonstrated in 2020.Table 1: Jacobina Phase 2 by the Numbers