Vancouver Armed with a $55.5 million financing, Spokane-based Yamana Resources (YRI-T) has handed over US$20.9 million for Companhia Vale do Rio Doce‘s (RIO-N) only gold mine; the Fazenda Brasileiro operation in Brazil’s Bahia state.
The junior raised the needed funds by consolidating its shares on a 27.86 old for one new and issuing 46.25 million units priced at $1.20 each. A unit holds one share and half a warrant. A full warrant allows the holders to purchase a share at $1.50 per share until July 31, 2008.
Located in the northeast part of the country, the combined open pit-underground mine has been cranking out bullion for 15 years and is slated to produce 112,000 oz of gold at cash costs of US$225 per oz this year.
Companhia Vale do Rio Doce (CVRD) discovered the gold-bearing region back in 1972 while prospecting alluvial occurrences along the Itapicuru River. Subsequently, a regional geochemical program led the world’s largest iron ore producer to Fazenda Brasileiro, where a quartz feldspar breccia containing disseminated pyrite and arsenopyrite returned 2 grams gold per tonne.
By 1984, Fazenda Brasileiro became the first ever heap leach operation in Brazil and in 1988 underground mining had commenced.
The deposit lies in the South Mineralized zone in what is known as the Weber belt, which hosts seven major occurrences including the Fazenda Brasileiro. Mineralization consists of sets of cm-to-metre scale quartz veins. The underground mineralization originally averaged 7 grams gold using a 3-gram gold cut off and is processed using the carbon-in-pulp method. The open pit portion uses a 0.7-gram gold cut off with the weathered ore being extracted through heap leaching.
The operation currently hosts proven and probable reserves of 1.77 million tonnes grading 3.84 grams gold per tonne in the underground portion and 630,000 tonnes averaging 2.14 grams gold in the open pit section for a total of 262,000 contained oz. In addition, the operation hosts an underground measured and indicated resources of 2.26 million tonnes grading 3.93 grams gold, plus 600,000 tonnes grading 2.23 grams gold in the open pit section, for 128,000 oz of contained gold.
Yamana expects gold production to average 100,000 oz over the next three years at cash cost of less than US$200 per oz. However, with only 3-years of reserves remaining, the main focus for Yamana is the promising exploration prospects surrounding the mine, most notably the Canto target just east of the operation. Canto is marked by a largely untested 3-km long structural zone, where recent drilling hit 11 metres grading 26.84 grams gold, 5 metros averaging 12.11 grams gold and 4 metros grading 10.98 grams gold.
The deal includes 72,000 ha of exploration ground along the Rio Itapicuru greenstone belt. Fazenda Brasileiro is the largest shear-hosted gold deposit in the belt, occurring in metamorphosed supracrustal rocks. Gold mineralization was deposited mainly during late collisional tectonism some 2 billion years ago.
Yamana started focusing in on Brazil earlier this year by snapping up various assets from Brazil’s Santa Elina Mines, including the open-pit Chapada copper-gold project in Goias state, in the centre-west region of the country. A 1998 feasibility study for the project envisioned a 15 year mine life based on a resource of 187.3 million tonnes grading 0.39% copper and 0.31 grams gold.
The deposit is defined by a flat-lying shallow tabular body capable of producing 12.7 million tonnes ore per year from a shallow open pit with a strip ratio of 0.43:1. The feasibility study recommended a starter pit for the first five years of production with grades expected to average 0.47% copper and 0.45 grams gold.
Staying in Goias state, the deal also included the Fazenda Nova property, which hosts six shallow blanket-like saprolite gold deposits. The most advanced is the Lavrinha target where previous work defined a gold bearing zone over a 3-by-1.5 km zone with widths reaching up to 50 metres. The area includes an open pit from the early-1990s where a small heap leach operation processed the saprolite ore without the need for blasting or crushing. Yamana aims to test the mineralization below the shallow saprolite deposit for a higher-grade primary gold deposit.
Moving over to the western part of Mato Grosso state, Yamana is looking at doing some exploration work on the Sao Vicente and Sao Francisco projects.
Sao Vicente is a former operating mine that produced 187,000 oz of gold before being mothballed in 1997 due to declining gold prices. Some 241-drill holes punched over a 1-km-by-150-metre area indicate the prospects for a shallow deposit. Deeper drill holes averaging 260 metres in depth indicate the promise of a higher-grade zone at depth.
At Sao Francisco, 50 km away, 335 previous drill holes identified a shallow zone of mineralization over a 1.8-km-by-150 metre area. Similar to Sao Vicente, this deposit is also underlain by an insufficiently explored deeper higher grade gold target identified in 19 drill holes averaging 200 meters depth intercepts range from 2 to 14 meters with grades from 1.86 to 58.0 g/t Au.
After the consolidation, the acquisitions and the financing, Yamana has some 87 million shares outstanding, 129 million on a fully diluted basis.
With the acquisition of Fazenda Brasileiro, Yamana is slated to produce more than 120,000 oz. of gold in 2004, increasing to over 200,000 oz. in 2005.
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