Peter Marrone, govt chairman and founding father of Yamana Gold (TSX: YRI; NYSE: AUY; LSE: AUY), shared his views on the corporate’s ‘generational’ technique and belongings — mines with a number of a long time of mine life — in a keynote interview at The Northern Miner’s International Mining Symposium on September 24.
Marrone, who arrange the corporate in 2003, famous that Yamana, which has 5 producing mines unfold throughout Argentina, Chile, Brazil and Canada, has proportionally extra generational mines than lots of its friends and the variety of generational mines its portfolio is disproportionate to its measurement.
“Generational signifies that we’re there for an prolonged interval time,” he mentioned. “Nothing is ever good operating a mine. There are all the time hiccups. And so the longer the lifetime of the asset, the extra we are able to ship returns and the extra we are able to take in ‘briar patches.’”
“It provides us the luxurious—it affords us the consolation, of with the ability to say that we’ve got a de-risked firm as a result of we don’t have to fret about shopping for one thing, we don’t have to fret about creating one thing new. We don’t have to fret about one thing coming to the top of its mine life. And God forbid ought to there be a briar patch interval, we are able to take in that briar patch interval and transfer on from there.”
Marrone famous that of Yamana’s 5 working mines — Cerro Moro in Argentina, El Penon and Minera Florida in northern Chile, Jacobina in Brazil, and the Canadian Malartic mine in Canada, which it co-owns with Agnico Eagle Mines (TSX: AEM; NYSE: AEM), three are generational: Canadian Malartic, Jacobina and El Penon.
Canadian Malartic, by which Yamana acquired a 50% stake in 2014, entered manufacturing as an open pit operation in 2011, and can stay in manufacturing till a minimum of 2040 based mostly on the underground mine now in improvement, Marrone mentioned.
“It’s Canada’s largest open pit mine and can proceed to be there for a lot of, a few years to come back,” he mentioned. “We come to the top of the mine life in late 2027 or early 2028. However what’s occurred since 2014 is we’ve made three discoveries underground, that cumulatively come to only over 14 million ounces at a median grade of two.5 grams per tonne. These are huge ore our bodies.”
Yamana and associate Agnico Eagle made a building resolution on the underground mine at Malartic in February. Yamana’s portion of the capex is about $650 million, which shall be spent over a roughly seven-year horizon as that venture comes into manufacturing, Marrone mentioned. The underground mine, some areas of which shall be accessed by ramp and a few by shaft, is predicted to be in full manufacturing from 2029 till a minimum of 2039, and produce about 500,000 to 600,000 oz. gold a yr.
A lot of Yamana’s portion of the capex shall be funded by money stream. “It doesn’t price us very a lot — within the vary of $60 to $80 million per yr — for the event of a mine that shall be producing 550,000 ounces per yr and that can lengthen a minimum of till 2040 and certain considerably longer than that.”
Marrone additionally identified that not solely will the underground mine at Malartic rank as Canada’s largest underground mine as soon as in manufacturing, nevertheless it additionally shall be extremely automated, with electric-powered cell tools together with vans, scoops, trams, long-haul drill rigs that may be remotely operated from floor on a 24-hour foundation, which suggests extra flexibility and fewer downtime. Different expertise corresponding to on demand air flow and state-of-the-art analytics are additionally being checked out.
There’s additionally upside on the underground parts of Malartic, and Marrone famous that they “haven’t touched the underside of the mineralization but” and they’re already at a depth of about 1.5 kilometres.
Yamana’s Jacobina mine in Brazil, one other money stream generator and generational mine, has greater than doubled annual manufacturing since 2014 from 75,000 oz. gold to almost 180,000 oz., and the corporate is advancing the second section of enlargement on the mine to extend manufacturing to 230,000 ounces. A 3rd section enlargement to 270,000 oz. is being evaluated.
“Jacobina has been in manufacturing for a lot of, many a long time, properly earlier than we assumed possession of it in 2006, nevertheless it was manufacturing that was executed by different corporations,” he mentioned. “Its longest manufacturing earlier than ours was with AngloGold, and it was being operated with small tools. And with comparatively low budgets in the midst of that interval from 2006 till 2014, we’ve been conducting exploration campaigns and attempting to get the mine proper from 2014 onward. I believe that’s the necessary level to think about right here. Within the 2014-2015 blueprint we had been producing below 80,000 ounces per yr at this mine. But it surely all the time appeared to us that it had the prospectivity to do extra.”
Marrone famous that Jacobina is a conglomerate construction similar to what one sees in West Africa, and could be very distinctive to the Americas. “To be that kind of mine it’s a advanced of mines. Presently, 4 mines, probably 5 mines very quickly, with a standard plant. And so we’ve got appreciable mine faces and mine workings and tonnage isn’t actually a problem.”
Yamana has accomplished its section one enlargement on the plant, which is now producing at about 7,000 tonnes per day, and the section two enlargement will take the plant to eight,500 tonnes per day. The section three enlargement into consideration would take throughput to 10,000 tonnes per day.
“If we take a look at its confirmed and possible reserves alone, based mostly on section one and shifting into section two at 230,000 ounces per yr, we’re already very snug saying that we’ve acquired a few a long time of mine life. It has turn into a generational, low-cost [AISCs between US$750 and US$800 per oz.], high-quality and excessive ounce producing mine in Brazil.”
Yamana’s third generational mine is El Penon in Chile, which has a reserve life index that has by no means exceeded eight years, but which has been in manufacturing for 22 years. Marrone estimates this mine has a minimum of ten years of mine life in entrance of it, and with extra exploration is prone to comprise extra ounces.
When it comes to ‘generational’ tasks, Marrone mentioned its 56.25%-owned MARA copper-gold-molybendum venture in Argentina matches into that class, as it’s forecast to have a throughput of 115,000 tonnes per day and produce greater than 500 million lb. copper a yr for roughly thirty years. Yamana is near finishing a feasibility examine and is the operator. It’s at the moment within the allowing section.
Yamana is weighing the way it needs to proceed, that’s, whether or not it wish to develop it with its companions and obtain its portion of copper manufacturing (about 260 million lb. of copper yearly), or does it wish to usher in one other associate.
Marrone additionally talked about Yamana’s resolution in July to construct its 100%-owned Wasamac venture in Quebec, which it acquired earlier this yr, and is a giant a part of the corporate’s regional progress technique in Quebec.
Wasamac, which sits about 100 km west of Canadian Malartic, has
reserves of 1.91 million oz. of gold at a grade of two.56 grams per tonne, and can produce about 169,000 oz. of gold a yr over a 10-year mine life, together with 200,000 oz. per yr within the first 4 years. Preliminary capex of $416 million is low for a 7,000 tonne-per-day underground operation and money prices could be US$640 an oz. and all-in-sustaining prices would complete US$828 per ounce.
“Now we have a relatively shallow underground mine — it’s a shear zone — and is not any deeper than about 850 metres so we could have fast entry to the ore physique; this isn’t a shaft, long-hole stoping operation,” Marrone mentioned. “And in the event you take a look at the AISCs, we anticipate it to be within the low- to mid-$800s, and that might be properly under the common within the business.”
Marrone additionally famous that the objective is thru near-mine exploration and exploration on its better land bundle to increase Wasamac’s mine life to a minimum of fifteen years. The corporate lately acquired three different gold deposits inside 6 km of Wasamac’s deliberate mill.
Marrone additionally touched on different themes, together with the corporate’s method to money returns. Yamana elevated its dividend by practically 15% to 12¢ per share in July — the sixth time it has raised dividends because the second quarter of 2019.
Marrone famous that at Yamana, dividends are given equal significance to progress (discovering new ounces) and sustaining a sturdy steadiness sheet.
“Whereas we don’t have a strict coverage that claims: ‘that is what we are going to do with our money payouts,’ what we’ve mentioned is that since every part in our business is measured on a per ounce foundation, let’s deal with a dividend on a per ounce foundation. Since we produce one million ounces, it’s straightforward math. We had been paying $100 million in dividends — that’s $100 per oz.—and we elevated it to $120 per oz. or 12¢ per share.”
Requested for his forecast on the place gold costs are headed, Marrone joked that he was neither “snug or good sufficient to have the ability to predict the place gold costs are going, and positively not inside a timeframe,” however added, “actually I imagine they’re going larger.”
“I’m a believer in cycles and the perpetually nature of cycles and I don’t assume that we’ve seen the highest of the cycle,” he mentioned. “And if we take a look at all the indications which are good for the gold worth, these indicators are nonetheless there, however what the central banks are telling us…I actually assume gold goes again to above US$2,000 an oz..”
When it comes to whether or not consolidation within the gold sector is required, Marrone described the business as fragmented and would profit from additional consolidation.
“It’s an business with a cumulative market capitalization that may’t be greater than $300 billion,” he mentioned. “I’m not present however that’s acquired to be what the scale of most likely near one-eighth of one of many massive expertise corporations like Apple or Google is, or a type of tech behemoths. So it’s not a giant business and it appears to me that some consolidation, with an business that has so many corporations, hundreds of corporations and such a small market capitalization, does make sense.”
However for consolidation to happen “it has to make sense” he cautioned. “It needs to be good and when is it good? It’s good when there may be synergy, and that’s fairly uncommon to search out … and it’s additionally good when it delivers a return on funding.”
To see a video of Peter Marrone’s interview on the International Mining Symposium go to: https://we.tl/t-TQQrGcA6NK