March 26, 2008 / 4:17 PM / in 10 years

Yamana Gold sees payoff from more modest approach

OTTAWA (Reuters) - After last year’s big acquisition push, Canadian miner Yamana Gold (YRI.TO) says it now sees advantages in taking a more modest approach to growth and will stick to smaller-scale developments in 2008 that are close to existing infrastructure.

Yamana Gold Inc's Chief Executive, Peter Marrone speaks during a Reuters Mining Summit in London March 11, 2008. REUTERS/Luke MacGregor

In a commentary after releasing its fourth-quarter results late on Tuesday, Yamana said that in 2008 it hopes to skirt the risk of cost overruns that typically accompany large projects. It targets production of 1.3 million gold equivalent ounces in 2008 and 2.2 million ounces by 2012.

Yamana, which has seven operating mines and five in development, is targeting first-quarter production of about 220,000 gold equivalent ounces, and copper production from its Chapada mine in Brazil of about 30 million pounds.

Last October, it acquired gold miners Meridian Gold and Northern Orion Resources for $4.8 billion, and over the next three years Yamana plans capital investments of $1.3 billion. It will spend $575 million in 2008, with $84 million set for exploration.

“With last year’s acquisition, Yamana has fortified the base for subsequent phases of organic growth from a robust exploration, and smaller-scale, near-infrastructure development portfolio, and continue to grow cash flow and earnings throughout 2008,” Chief Executive Peter Marrone said in a statement.

The company said it will focus on operations at its Chapada and Jacobina mines in Brazil and the Gualcamayo mine in Argentina. At its El Penon mine in Chile, it now expects to reach annual production of about 500,000 gold equivalent ounces by the fourth quarter of 2008, up from its previous 425,000 to 435,000 ounce estimate.

Exploration efforts will target El Penon, Gualcamayo and its Mercedes project in Mexico, Yamana said.


Yamana said its fourth-quarter profit rose to $47.1 million, or 8 cents a share, from $6.1 million, or 2 cents a share, in the year-before quarter, with the results boosted by the start of operations at its Chapada mine.

That is well below analysts’ expectation of a profit of 20 cents a share, according to Reuters Estimates.

The company said the impact of rising gold prices was offset partly by higher operating costs and a stronger Brazilian currency against the U.S. dollar.

The company, whose quarterly mine operating costs rose to $76.6 million from $8.9 million, also said it had not yet received payment of $20.8 million from the sale of copper concentrate in the quarter.

Revenue more than tripled to $218.6 million on higher production, acquisition gains, and higher prices.

Quarterly gold production was 229,488 gold equivalent ounces. The average realized price was $795 per ounce of gold, $3.19 per pound of copper and $14.14 per ounce of silver.

Average cash costs, factoring sales from other metals, was negative $9 per gold equivalent ounce.

Yamana shares were off about 2 percent at C$16.95 on the Toronto Stock Exchange and at $16.70 in New York on Wednesday morning.

($1=$1.01 Canadian)

Reporting by Susan Taylor; Editing by Peter Galloway

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