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Yamana heads back to drawing board as C1 Santa Luz is shuttered

10th September 2014

By: Henry Lazenby

Creamer Media Deputy Editor: North America

  

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TORONTO (miningweekly.com) – Yamana Gold on Wednesday said it would return to the drawing board and evaluate other gold extraction methods after the carbon-in-leach (CIL) circuit at C1 Santa Luz, in eastern Brazil, failed to achieve its designed recoveries owing to several factors.

The TSX- and NYSE-listed gold producer noted that C1 Santa Luz had been on a gradual ramp-up process and evaluation over the past year to determine its continued viability in light of certain operational challenges and a decline in metal prices last year.

Toronto-listed Yamana explained that during this time it had been working on improving the recovery rate at the CIL circuit, which had, to date, been lower than designed. The company was, in particular, dealing with a significant carbon content in the ore, which had the effect of suppressing gold recoveries.

“After careful and extensive review, and having allowed sufficient time for optimisation efforts, the company has concluded that the optimal plan for C1 Santa Luz will be to temporarily suspend ramp-up activities and put the project on care and maintenance while several identified alternative metallurgical processes are evaluated,” Yamana stated.

The company stressed that by deferring production, it would preserve the combined reserves of 1.3-million ounces of gold until it could profitably mine the deposit and recover gold using one of the metallurgical processes identified by the evaluation process.

Yamana pointed out that it was working with employees, labour unions, contractors and various levels of government to reduce the impact on local communities and remained confident that once the metallurgical recovery evaluation process was complete, C1 Santa Luz would become a sustainable operation providing long-term benefits to local communities.

The company had undertaken to complete the evaluation of the alternative metallurgical recovery processes before the end of 2015.

While the company would continue to evaluate its full-year production guidance in light of its C1 Santa Luz decision, output would be “modestly affected, if at all”, as C1 Santa Luz was expected to slightly contribute to production and any variance should be offset by management’s refocused efforts on improving and increasing output from the company's cornerstone operations.

The impact on costs and cash flow was expected to be positive as C1 Santa Luz was not expected to contribute positively to costs or cash flow and with the refocused management efforts, further cost improvements were in progress.

Meanwhile, Yamana reported that at its Pilar mine, also located in eastern Brazil, it had made significant improvements to reduce dilution and improve grade reconciliation. During this ramp-up period that had started last year July, the company introduced lower-profile equipment to better manage gold vein widths and reduce dilution, completed a significant in-fill programme to improve grade reconciliation and continued development of Caiamar, which is a satellite deposit with a better orebody orientation and grades.

Yamana reported that plant recoveries were at design levels and gold output had increased each month this year and was expected to rise significantly quarter-over-quarter in the third and fourth quarters.

A cost reduction programme had also been implemented to reduce all-in sustaining costs.

“Overall, Pilar remains on track for commercial production before the end of this year,” the company said.

Yamana added that it would evaluate its decision to declare commercial production after the operation had achieved expected production and cost improvements in the third quarter, and as output and costs improved in the fourth quarter. Planned output from Pilar for the full year was expected to be about 58 000 oz.

Pilar has a combined proven and probable reserve of 1.4-million ounces.

Yamana said its other operations and cornerstone operations, in particular, continued to meet or exceed output and cash-flow expectations.

The company achieved record monthly production for August of over 137 000 gold equivalent ounces (GEOs), mostly resulting from significant improvements and increased production levels from Chapada, El Penon, Canadian Malartic, Minera Florida , Mercedes, Jacobina and Gualcamayo, where the QDD Lower West underground operation was contributing to higher grades and increased output.

The company reaffirmed its expected full-year guidance for more than 1.42-million GEOs at all-in sustaining cash costs between $825/GEO and $875/GEO.

Yamana added that it was looking forward to increased output at or below these costs as its operations improved over the coming years. A significant operational boon would be when output from the development-stage Cerro Moro project, in Argentina - a high-grade, low-cost, gold/silver project - kicks in during 2016.

Currently, predevelopment work, advanced engineering and optimisation reviews were being completed with the goal of finalising a formal construction and development decision this year.

Yamana’s TSX-listed stock fell C$0.04 a share on Wednesday to close at C$8 apiece.

Edited by Creamer Media Reporter

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