Yamana Gold To Form Subsidiary To Hold Non-core Brazilian Assets

(RTTNews) - Canadian miner Yamana Gold Inc. (AUY, YRI.TO) said Wednesday that it will form a new subsidiary company, Brio Gold Inc., that will hold its non-core underperforming mines in Brazil and help to improve their prospects.

Although Brio Gold will initially be a wholly-owned subsidiary, Yamana Gold said it is entrusting Brio Gold's management to manage these non-core Brazilian assets as well as to evaluate various strategic alternatives.

The company noted that these efforts will progress through 2015 with an optimization plan, with evaluation of strategic options expected by end of 2015.

Peter Marrone, Chairman and Chief Executive Officer of Yamana Gold said, "Our focus remains on our core portfolio of assets. 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 non-core assets."

Yamana Gold said it is in the process of structuring its intercorporate holdings to form a new subsidiary company, Brio Gold Inc., which will hold Fazenda Brasileiro, Pilar and C1 Santa Luz as well as some related exploration concessions. All of these assets are currently held as non-core assets within Yamana Gold.

Yamana Gold has engaged National Bank Financial Markets and CIBC World Markets Inc. as financial advisors to assist in the process of evaluating strategic alternatives with respect to Brio Gold.

The company expects the formation of the new subsidiary, Brio Gold, will enable it to improve and optimize its secondary portfolio of non-core assets, while allowing the company to focus on its core portfolio.

Starting in 2015, Brio Gold will be led by Gil Clausen as Chief Executive Officer. Clausen is a mining executive with over 30 years of experience in both executive and operational roles within the base and precious metals industry. Most recently, he held the position of President and CEO of Augusta Resource Corp., which was acquired earlier in 2014.

In addition, Joseph Longpre will be the chief financial officer of the new subsidiary, while Lance Newman will be Vice President of Technical Services and Mark Stevens will serve as Vice President of Exploration. All of them most recently held executive positions at Augusta.

Brio Gold is expected to initially produce more than 130,000 ounces of gold annually from Fazenda Brasileiro and Pilar. At C1 Santa Luz, Brio Gold's management will continue the process started by Yamana Gold to evaluate several identified metallurgical processes with the objective of improving recoveries.

Yamana Gold noted that C1 Santa Luz has the potential to produce upwards of an additional 100,000 ounces of gold per year, with a successful modification to its processing circuit bringing Brio Gold's expected annual production to more than 230,000 ounces of gold.

The company expects further increases in production levels and improved costs with the development of the Maria Lazarus deposit at Pilar and the additional significant exploration potential that exists in the surrounding land packages associated with these three assets.

Yamana Gold said it will provide initial working capital in the form of a bridge loan of up to $10 million to Brio Gold that will be repayable to Yamana. Further funding of operations will be done by Brio Gold's management in cooperation with Yamana.

Both Chapada and Jacobina mines will continue to be managed by the existing, but significantly scaled back management team in Brazil.

Further, Yamana Gold said it has received a positive independent technical review relating to previous studies on Agua Rica and on the potential development options for Agua Rica.

The company engaged RungPincockMinarco Ltd Latin America Limitada or RPM to undertake an independent review of Agua Rica, including comparing and consolidating prior technical studies done on the Project.

Agua Rica is a low cost, large scale porphyry copper, molybdenum, gold and silver deposit located in the province of Catamarca, Argentina with proven and probable mineral reserves of about 10 billion pounds of copper and 6.5 million ounces of gold.

The results of the RPM review continue to support the potential for Yamana Gold to deliver significant value from this high quality asset, and help to validate the various potential development options for the Project.

Marrone said, "This is another major milestone for us. We can now evaluate the various strategic options for Agua Rica in a disciplined way with full knowledge of this robust project in a quality jurisdiction."

There are two development scenarios for Agua Rica primarily focused on by RPM in their review. Yamana noted that the base case scenario assumes the full integration of Agua Rica with existing infrastructure at Alumbrera and considers a 110,000 tonnes per day operation. In effect, Agua Rica would be the mine replacement for Alumbrera, as Alumbrera is currently projected to exhaust its mineral reserves in 2019.

The alternative case scenario is based on a stand-alone project and considers a 90,000 tpd operation.

AUY is trading at $4.30, up $0.27 or 6.7 percent on a volume of 16.70 million shares.