“Generational signifies that we’re there for an prolonged interval time,” he mentioned. “Nothing is ever excellent working a mine. There are at all times 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 offers us the posh—it affords us the consolation, of having the ability to say that we now have 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 return,” 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 mean grade of two.5 grams per tonne. These are large ore our bodies.”
Yamana and accomplice Agnico Eagle made a development choice 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 challenge comes into manufacturing, Marrone mentioned. The underground mine, some areas of which shall be accessed by ramp and a few by shaft, is anticipated 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 value us very a lot — within the vary of C$60 to C$80 million per yr — for the event of a mine that shall be producing 550,000 ounces per yr and that may lengthen a minimum of till 2040 and certain considerably longer than that.”
Malarctic: Canada’s largest underground mine
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 gear together with vehicles, scoops, trams, long-haul drill rigs that may be remotely operated from floor on a 24-hour foundation, which implies 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 may be 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 part of growth on the mine to extend manufacturing to 230,000 ounces. A 3rd part growth to 270,000 oz. is being evaluated.
“Jacobina has been in manufacturing for a lot of, many many years, properly earlier than we assumed possession of it in 2006, nevertheless it was manufacturing that was finished by different firms,” he mentioned. “Its longest manufacturing earlier than ours was with AngloGold, and it was being operated with small gear. And with comparatively low budgets in the middle 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 have been producing below 80,000 ounces per yr at this mine. However it at all times 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 sort of mine it’s a advanced of mines. Presently, 4 mines, doubtless 5 mines very quickly, with a typical plant. And so we now have appreciable mine faces and mine workings and tonnage shouldn’t be actually a difficulty.”
Yamana has accomplished its part one growth on the plant, which is now producing at about 7,000 tonnes per day, and the part two growth will take the plant to eight,500 tonnes per day. The part three growth into account would take throughput to 10,000 tonnes per day.
“If we take a look at its confirmed and possible reserves alone, based mostly on part one and shifting into part two at 230,000 ounces per yr, we’re already very snug saying that we’ve obtained a few many years of mine life. It has develop 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 more likely to include extra ounces.
When it comes to ‘generational’ tasks, Marrone mentioned its 56.25%-owned MARA copper-gold-molybendum challenge 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 present within the allowing part.
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 herald one other accomplice.
Marrone additionally talked about Yamana’s choice in July to construct its 100%-owned Wasamac challenge in Quebec, which it acquired earlier this yr, and is an enormous a part of the corporate’s regional development 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 C$416 million is low for a 7,000 tonne-per-day underground operation and money prices can be $640 an oz. and all-in-sustaining prices would complete $828 per ounce.
“We’ve got a relatively shallow underground mine — it’s a shear zone — and is not any deeper than about 850 metres so we can have fast entry to the ore physique; this isn’t a shaft, long-hole stoping operation,” Marrone mentioned. “And for those who take a look at the AISCs, we count on it to be within the low- to mid-$800s, and that might be properly beneath the common within the trade.”
Marrone additionally famous that the aim is thru near-mine exploration and exploration on its larger land package deal to increase Wasamac’s mine life to a minimum of fifteen years. The corporate just 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 strategy to money returns. Yamana elevated its dividend by almost 15% to C12¢ 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 development (discovering new ounces) and sustaining a sturdy stability 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 little thing in our trade is measured on a per ounce foundation, let’s deal with a dividend on a per ounce foundation. Since we produce 1,000,000 ounces, it’s simple math. We have been paying C$100 million in dividends — that’s C$100 per oz.—and we elevated it to C$120 per oz. or C12¢ 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 definitely not inside a timeframe,” however added, “definitely I imagine they’re going greater.”
“I’m a believer in cycles and the endlessly nature of cycles and I don’t suppose that we’ve seen the highest of the cycle,” he mentioned. “And if we take a look at all the symptoms which are good for the gold worth, these indicators are nonetheless there, however what the central banks are telling us…I definitely suppose gold goes again to above $2,000 an oz..”
When it comes to whether or not consolidation within the gold sector is required, Marrone described the trade as fragmented and would profit from additional consolidation.
“It’s an trade with a cumulative market capitalization that may’t be greater than C$300 billion,” he mentioned. “I’m not present however that’s obtained to be what the scale of in all probability near one-eighth of one of many massive expertise firms like Apple or Google is, or a kind of tech behemoths. So it’s not an enormous trade and it appears to me that some consolidation, with an trade that has so many firms, 1000’s of firms 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’s synergy, and that’s fairly uncommon to search out … and it’s additionally good when it delivers a return on funding.”
(This text first appeared in The Northern Miner)