YAMANA
HEDGES 90 MILLION POUNDS OF COPPER PRODUCTION
Toronto,
Ontario, May 24, 2006 -
Yamana Gold Inc. (“Yamana”) (TSX:YRI;
AMEX:AUY; LSE (AIM):YAU) is
pleased to announce that it has entered into a conventional hedging program
relating to the forward sale of 90 million pounds of its 2008 Chapada copper
production at an average price of $2.75 per pound. The Chapada copper-gold
mine
is scheduled for completion by late 2006 and the feasibility study for
this
Brazil-based mine suggests a two-year pay back at a copper price of $1.00
per
pound. This hedging program greatly maximizes value and return for shareholders
by accelerating that payback to about one year.
The
additional benefits of this program include the following:
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|
Includes
long call options at an average strike price of approximately $3.25
per
pound of copper which provides further upside on the hedged production
in
the event that copper prices exceed the call
strike price
|
| ·
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Unhedged
2008 copper production of approximately 90 million pounds continues
to
have full exposure to the copper price
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Better
positions the Company and Chapada as a significant gold producer
as the
copper is monetized into cash
|
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Reduces
projected cash costs in 2008 as compared to recent guidance
estimates
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“Yamana
is an intermediate gold producer and we have consistently said that we
would
monetize copper, which is a secondary metal we will produce, and maximize
value
for our shareholders,” said Peter Marrone, President and Chief Executive Officer
of Yamana. “This copper hedging program ensures revenue from copper produced at
the Chapada mine that is more than 2.5 times higher than levels assumed
in the
feasibility study, and will result in a payback of approximately one year
to our
shareholders. Further, we will be ensuring a meaningfully lower cash cost
per
ounce of gold production. Forecast cash costs for our planned 800,000 ounces
of
gold production in 2008 are now at less than $35 per ounce of gold net
of copper
by-product credits. This is approximately $80 per ounce lower than our
previous
guidance estimates, and excludes the benefits of potentially higher copper
prices on our unhedged production and on the hedged production above the
call
strike price. Additionally, as the copper is monetized Yamana is ensured
increased cash flow availability for the development and acquisition of
other
gold projects.”
Chapada
is now approximately 75% completed and on track to begin operations at
the end
of this year. Gold production from Chapada is expected to be approximately
1.3
million ounces of gold over its mine life with 700,000 ounces of gold of
that
total in the first five years and 365,000 ounces of gold in the first two
years
alone. Total copper production over the 19 year mine life at Chapada is
expected
to be two billion pounds of copper.
| News Release |
May
24,
2006
|
About
Yamana
Yamana
is
a Canadian gold producer with significant gold production, gold and copper-gold
development stage properties, exploration properties, and land positions
in
Brazil and Central America.
Yamana
expects to produce gold at intermediate company production levels in 2006
in
addition to significant copper production by 2007. Company management plans
to
continue to build on this base through the advancement of its exploration
properties and by targeting other gold consolidation opportunities in Brazil
and
elsewhere in Latin America.
Cautionary
GAAP Statements
The
economic hedges do not meet the requirements for hedge accounting under
current
generally accepted accounting principles, however, Yamana has concluded
that the
above mentioned financial instruments provide an effective means to manage
metal
risk price and enable business planning with greater certainty. As accounting
rules preclude Yamana from reflecting the economic substance of these
transactions, market-to-market values on these financial instruments will
be
recognized period to period. As such, the recognition of unrealized gains
and
losses on the fair value of financial instruments will cause net earnings
to
fluctuate period to period.
Cautionary
Statements
This
news release contains “forward-looking statements”, within the meaning of the
United States Private Securities Litigation Reform Act of 1995 and similar
Canadian legislation, concerning the business, operations and financial
performance and condition of each of Yamana. Forward-looking statements
include,
but are not limited to, statements with respect to estimated production,
synergies and financial impact of acquisitions and the development potential
of
Yamana’s properties; the future price of gold and copper; the estimation of
mineral reserves and resources; the realization of mineral reserve estimates;
the timing and amount of estimated future production; costs of production;
capital expenditures; success of exploration activities; permitting time
lines
and permitting, mining or processing issues; currency exchange rate
fluctuations; government regulation of mining operations; environmental
risks;
unanticipated reclamation expenses; title disputes or claims; and limitations
on
insurance coverage. Generally, these forward-looking statements can be
identified by the use of forward-looking terminology such as “plans”, “expects”
or “does not expect”, “is expected”, “budget”, “scheduled”, “estimates”,
“forecasts”, “intends”, “anticipates” or “does not anticipate”, or “believes”,
or variations of such words and phrases or state that certain actions,
events or
results “may”, “could”, “would”, “might” or “will be taken”, “occur” or “be
achieved”. Forward-looking statements are based on the opinions and estimates of
management as of the date such statements are made, and they are subject
to
known and un known risks, uncertainties and other factors that may cause
the
actual results, level of activity, performance or achievements of Yamana
to be
materially different from those expressed or implied by such forward-looking
statements, including but not limited to risks related to: unexpected events
during construction, expansion and start-up; variations in ore grade, tones
mined, crushed or milled;
| News Release |
May
24,
2006
|
variations
in relative amounts of refractory, non-refractory and transition ores;
delay or
failure to receive board or government approvals; timing and availability
of
external financing on acceptable terms; the businesses of Yamana and
acquisitions not being integrated successfully or such integration proving
more
difficult, time consuming or costly than expected; not realizing on the
anticipated benefits from the acquisitions or not realizing on such anticipated
benefits within the expected time frame; risks related to international
operations; actual results of current exploration activities; actual results
of
current reclamation activities; conclusions of economic valuations; changes
in
project parameters as plans continue to be refined; future prices of gold
and
copper; possible variations in ore reserves, grade or recovery rates; failure
of
plant, equipment or processes to operate as anticipated; accidents, labour
disputes and other risks of the mining industry; delays in the completion
of
development or construction activities, as well as those factors discussed
in or
referred to in the current annual Management’s Discussion and Analysis and
current Annual Information Form of Yamana filed with the securities regulatory
authorities in Canada and available at www.sedar.com,
and Yamana’s Form 40-F filed with the United States Securities and Exchange
Commission. Although management of Yamana has attempted to identify important
factors that could cause actual results to differ materially from those
contained in forward-looking statements, there may be other factors that
cause
results not to be as anticipated, estimated or intended. There can be no
assurance that such statements will prove to be accurate, as actual results
and
future events could differ materially from those anticipated in such statements.
Accordingly, readers should not place undue reliance on forward-looking
statements. Yamana does not undertake to update any forward-looking statements
that are incorporated by reference herein, except in accordance with applicable
securities laws.
For
further information please contact:
|
Yamana
Gold Inc.
Peter
Marrone
President
and Chief Executive Officer
+1
416 815 0220
|
Leslie
Powers
Director,
Investor and Public Relations
+1
416 815 0220
|