MINING MARKETS & INVESTMENT NEWS – INVESTMENT COMMENTARY — Yamama gets nod for aggressive work in Argentina

Argentina is an exploration hot spot, with a growing number of companies searching for gold and copper-gold mineralization, as well as less traditional types of deposits.

Among the more established companies in the South American country is Yamana Resources (YRI-T), which is receiving renewed attention from mining analysts because of its portfolio of properties in Santa Cruz province. The junior owns 20 properties in the Deseado Massif (a geologically prospective plateau), all of which are easily accessible and at a low elevation, covering several high-grade, gold-silver targets.

Glenn Brown and Andrew Muir, analysts with Canaccord Capital, recently completed a study of southern Argentina’s ancient volcanic terrains, as well as several of the region’s more active projects.

“We believe Yamana is at the forefront of geologic thought on the district,” they write in a research report. “The company’s projects have matured to an advanced stage and at a time when the market is rewarding discoveries elsewhere in Argentina. With over 20,000 metres of drilling budgeted, this could be Yamana’s year.”

Accordingly, the analysts rate Yamana “a speculative buy,” with an 8-month target price of $3. The junior currently trades at about $1.10, within a 52-week range of $2.25 to 55 cents. About 27.6 million shares are outstanding, with 41.6 million fully diluted. The analysts note that although Yamana has an outstanding convertible debenture that will convert to about 13 million shares, “even with this dilution, we believe that its market capitalization does not reflect the merits at the Bacon, Lejano and other properties in the Deseado Massif.”

The major impetus for current exploration in the Massif is the Cerro Vanguardia mine, which began production earlier this fall at an annual rate of 170,000 oz. gold and 1.7 million oz. silver. The mine is owned by a joint venture headed by Minorco. The open-pit reserve comprises 17 separate vein structures over a combined length of 100 km.

For more than seven years, Yamana has been exploring properties in the Massif on the basis of satellite imagery (which have targeted regional alteration zones), prospecting and mapping.

Yamana is drilling its wholly owned Bacon property, where last year it discovered a high-grade, precious metals shoot in the northern portion. One of the more spectacular intersections from previous work was hole 16, which hit 24 metres (true thickness) of 664 grams silver and 0.68 gram gold per tonne, including 6 metres of 2,579 grams silver and 2.62 grams gold. The Canaccord analysts say the project shows some similarities to the gold-silver veins at Midas, Nev.

Earlier this fall, drilling began at Yamana’s Lejano property, where, previously, the company defined polymetallic mineralization with high silver values. The analysts describe the style of mineralization as “similar to the chimney-manto-breccia deposits found in Mexico,” with the caveat that the upper oxide zone (rich in manganese and a mixture of metals) “could have a complex metallurgy.”

To date, the company has outlined a mineralized core zone of 4 metres (true thickness) averaging 550 grams silver, 1.56 grams gold and 6.1% lead, encased by lower-grade disseminated mineralization. The lower-grade deposit averages 20-22 metres thick, with an average grade of about 200 grams silver, 0.5 gram gold and 2.5% lead. Reconnaissance exploration has resulted in the discovery of numerous other targets at Lejano.

Brown and Muir visited Yamana’s Ciclon West property, an early-stage project 20 km northwest of Lejano. Drilling is expected to test a stockwork system of mineralized veins where limited samples returned values in the range of 50-1,000 grams silver, 0.1-5.6 grams gold and up to 3% lead. The analysts note that the outcrops of veins cover a broad area, with a strike distance of at least 2 km.

Yamana also is active in neighboring Chile, where a series of 14 porphyry copper prospects are being drilled.

The analysts also give Yamana a nod for its professional management team and “excellent record of disclosure through model press releases.” Looking ahead, they state that Argentina’s Santa Cruz district, “with geology and mineralization similar to Nevada,” could become the next global hot spot for mineral discoveries.

“With several years of experience, Yamana is in a key position to spearhead development in this area,” they conclude.