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TORONTO (miningweekly.com) – Canadian gold producer Yamana Gold will spin out some of its noncore Brazilian assets into a new subsidiary next year, but would continue to consider strategic alternatives for these assets, including their possible outright sale.
The Toronto-based miner on Wednesday said it had already made significant progress in separating its noncore assets, including Fazenda Brasileiro, Pilar and C1 Santa Luz, as well as some related exploration concessions into a new entity called Brio Gold.
"These cornerstone assets are our best contributors to cash flow, hold most of our production and best costs, and have significant upside and potential. However, we have the potential to unlock additional value through the advancement of ongoing strategic initiatives in our secondary portfolio holding of our noncore assets," commented Yamana chairperson and CEO Peter Marrone in a statement.
A reconstituted senior management team from Augusta Resource Corp, which Hudbay Minerals in July bought out for C$555-million, under the leadership of CEO Gil Clausen would manage the new subsidiary. The team would be mandated to increase value for Yamana and its shareholders from these assets by taking over operational management, optimisation and improvement of its assets.
The company had also engaged National Bank Financial Markets and CIBC World Markets as financial advisors to assist in the process of evaluating strategic alternatives for Brio Gold.
“This approach segregates our portfolios, better focuses our efforts, reduces our overall costs and allows us in the fullness of time to evaluate how to best maximise value for our noncore portfolio,” Marrone said.
Brio Gold was expected to initially produce more than 130 000 oz/y of gold from Fazenda Brasileiro and Pilar. At C1 Santa Luz, Brio Gold management would continue the process started by Yamana to evaluate several identified metallurgical processes with the objective of improving recoveries.
C1 Santa Luz has the potential to produce more than 100 000 oz/y with a successful modification to its processing circuit, which could bring Brio Gold's expected yearly output to more than 230 000 oz.
Yamana added that both the Chapada and Jacobina mines, also located in Brazil, would continue to be managed by the existing, but significantly scaled-back management team in Brazil.
Meanwhile, Yamana had received an independent technical review consolidating previous studies on the Agua Rica polymetallic porphyry mine, in Argentina, which it would use as a basis to consider strategic alternatives, including potential joint ventures with other financial or industry participants, selling a majority interest in the project, or a possible outright sale.
Yamana Gold had reported a significant third-quarter net loss of $1.02-billion, or $1.17 a share, compared with net earnings of $43.4-million, or $0.06 a share, in the year-ago period. A significant $668-million impairment charge for its C1 Santa Luz, Ernesto/Pau-a-Pique and Pilar mines, in Brazil, weighed on the quarterly results. The company had also mothballed its C1 Santa Luz project owing to deteriorating gold prices and development challenges, cut output at the Pilar mine at the start of October and had earlier this year reduced activity at its Ernesto/Pau-a-Pique mine.
Yamana earlier this year triumphed in its joint bid for Canadian-based Osisko Mining, which currently owned the mid-sized, low-cost Canadian Malartic gold mine in Quebec. Yamana's C$3.9-billion white-knight bid for Osisko, in concert with partner Agnico-Eagle Mines, topped a bid for Osisko from another Canadian gold miner Goldcorp.
Yamana Gold’s TSX-listed stock on Wednesday morning traded higher, gaining 3.87% to change hands at C$5.10 apiece.