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Yamana Gold green lights Ernesto/Pau-a-pique gold mine development in Brazil

Last updated: 13:01 26 Jan 2010 EST, First published: 14:01 26 Jan 2010 EST

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Yamana Gold (TSX: YRI; NYSE: AUY; LSE: YAU) confirmed this morning that it would commence construction on its Ernesto/Pau-a-pique project (“Ernesto/Pau”) in Brazil by mid 2010 with first production expected to start in late 2012. 

Enresto/Pau currently hosts a mineral reserve of 710,000 ounces of gold, but Yamana Gold stated today that is expected the project to deliver additional ounces in the proven and probable categories as drilling continued down dip.  The initial mine life will be seven years.
“The Company continues to progress more detailed engineering and an exploration tunnel to facilitate drilling in deeper areas where there are further resources,” the company reported, “Yamana also continues to conduct pilot tests on metallurgy and recoveries.”

Enresto/Pau is a relatively modest undertaking for Yamana Gold with a capital cost of US$116 million to develop a 1 million tonnes per annum underground mine that will produce at a rate of approximately 100,000 ounces per annum.  The cash cost per ounce is expected to be in the region of $427, with an post-tax internal rate of return of 31% (based on $900/ounce gold).
“Ernesto/Pau-a-pique represents a modest cost, low capital and high return project contributing 8 to 10% to overall production. Significant potential for mineral resource upgrade serves as a platform for further exploration at the Guapore belt where Yamana has extensive exploration concessions.”

Yamana also updated investors on the Agua Rica project in Argentina, a large, low grade copper-gold-silver-molybdenum porphyry deposit where the company initially completed a feasibility study in 2006. Yamana is currently updating and optimizing the original study.  The company reported a number of advances, including a new plan to cut overburden, the replacement of a proposed slurry pipeline with trucking to an existing railway, and the application of a thickening paste in tailings.  Yamana’s original feasibility study was also based on considerably lower metals prices, notably $1.05/lb copper and $425/ounce gold, which were being re-examined to take into account much higher prices for both gold and copper, not to mention silver and molybdenum.  Agua Rica hosts a measured resource of 64.1 million tonnes averaging 0.49% copper and 0.17 grams per tonne (g/t) gold, plus a further 248 million tonnes averaging 0.4% copper and 0.16 g/t gold in the indicated category and 651 million tonnes averaging 0.34% copper and 0.12 g/t gold.

"In 2009, we undertook a review of Agua Rica and Yamana is now able to further embrace this project as a potential significant future contributor to production,” said Peter Marrone, Yamana's Chairman and CEO, “Our review of Agua Rica also demonstrates that the project should provide considerable value. We are now undertaking additional optimization initiatives, providing the potential for substantial additional upside to the project."

Yamana expects Agua Rica to produce 12.5 million tonnes of copper-gold concentrate and 357,750 tonnes of molybdenum concentrate over 26.5 years.

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