uploads///Santa Luz

C1 Santa Luz Gets Go-Ahead, But Will It Be Positive for Yamana Gold?

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Nov. 20 2020, Updated 5:22 p.m. ET

C1 Santa Luz

On July 28, Yamana Gold (AUY) announced the recommissioning of C1 Santa Luz, a project located in Bahia, Brazil. It was put on care and maintenance in 2014, pending clarity on some technical aspects.

The announcement of recommissioning follows the completion of the project’s financial and technical analysis, and this resulted in an updated mineral reserve and resources statement. Resources increased by 21%, while proven and probable reserves came in at 1.2 million ounces. This increase will lead to an expected annual production of 114,000 ounces of gold over the ten-year mine life. Notably, this project’s costs are expected to be $850 per ounce—almost in line with Yamana’s average costs.

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Project highlights

Other highlights of the project include:

  • reserves of 1.2 million ounces of gold, 26.7 million tons at 1.42 grams per ton
  • expected recovery rate of 84%
  • initial capital expenditure of $84.2 million
  • after-tax net present value of $268 million at a discount rate of 5%
  • internal rate of return of 71%

Production from the project is expected to start in 2018.

Upside?

In addition to the large reserve, Yamana also has an underground resource of ~575,000 ounces. The company’s management said that they plan to evaluate these ounces later this year. It has the potential to supplement production and increase the life of the mine.

Yamana has a strong project pipeline, and so do Newmont Mining (NEM), Agnico Eagle Mines (AEM), and Goldcorp (GG) in the peer group (GDX) (SGDM).

In the next part of this series, we’ll look at another significant announcement made by Yamana Gold.

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