Benzinga | Jul 29, 2021 05:21PM EDT

Yamana Gold Reports Progress On Phase 2 Expansion Of Jacobina Mine To Increase Throughput To 8.5K Tonnes/Day, Raise Production To 230K Oz./Year

YAMANA GOLD INC. (TSX:YRI, NYSE:AUY, LSE:AUY))) ("Yamana" or "the Company") today reported significant progress on the Phase 2 expansion of the Jacobina mine to increase throughput to 8,500 tonnes per day and raise production to 230,000 ounces per year. The Company also announced strong exploration results at Jacobina that expand the operation's mineral resource and support the phased expansion, underscoring Jacobina's exceptional long-term growth potential and ability to further extend strategic mine life.

Phase 2 Expansion Highlights

* Successful trials conducted at Jacobina during the second quarter demonstrate that the processing plant can consistently and reliably achieve a daily operating throughput above 8,000 tonnes per day (tpd), significantly higher than nameplate capacity, and a monthly average of at least 7,500 tpd, as was achieved in May of this year.

* The Company will achieve the Phase 2 rate of 8,500 tpd by implementing a simplified approach of debottlenecking and incremental operational improvements, without requiring the installation of an additional ball mill. This approach is expected to significantly reduce capital expenditure, increase energy efficiency, and de-risk the project.

* Capital costs are expected to be significantly lower than the original planned capital estimated in the Phase 2 pre-feasibility study, an amount not exceeding $15 million to $20 million.

* Subject to successful completion of required permit modifications, Jacobina expects to begin processing at 8,500 tpd by the second half of 2023.

* Engineering for the Phase 3 expansion to 10,000 tpd will advance in parallel with the Phase 2 expansion, with the plant modification originally planned for Phase 2 now considered adequate for Phase 3. A feasibility study for Phase 3 is scheduled for completion in 2023 and project commissioning is still on track for 2027.

Exploration Highlights

* At Canavieiras Central, exploration drilling has confirmed and expanded all of the mineralized reefs with solid grades and widths along 500 metres of new strike length, defining a continuous mineralized zone extending south from Canavieiras Central to Canavieiras Sul, expected to generate new indicated mineral resources by year end.

* Infill and exploration drilling at the north end of the Morro do Vento sector confirms good grades and widths for conversion to indicated mineral resources, while aggressive exploration step-outs down dip on the Main reef zone have provided strong results, demonstrating down dip continuity. An aggressive drilling program is underway to test the down dip target at Morro do Vento over a strike length of more than two kilometres.

* At Jo?o Belo, exploration drilling has demonstrated excellent potential south of the Jo?o Belo mineral resource area, with positive results along a 3.7 kilometre-long corridor. Drilling in 2019-2020 has defined an entirely new mineral resource area at Jo?o Belo Sul with 536,000 ounces of gold (8.7 million tonnes grading 1.91 grams per tonne ("g/t") of gold) of inferred mineral resources. Drilling is ongoing at this newly discovered zone and to the immediate south of Jo?o Belo at the Jo?o Belo South Extension, where a number of positive drill holes have defined a significant mineralized zone adjacent to mine infrastructure that will be modelled for further mineral resource by year end.

PHASE 2 UPDATE

Incremental Improvements to Increase Processing Capacity to 8,500 TPD

The Jacobina processing plant continues to exceed expectations, averaging 7,500 tpd in May and approximately 7,200 tpd over the full second quarter, a 5% increase compared to the previous quarter. Throughput for the balance of the year is expected to increase to rates above those experienced in the second quarter to approximately 7,500 tpd which represents the permitted operational point. The success reflects a simplified approach to complete the Phase 2 expansion, which will be achieved through incremental debottlenecking of the processing plant and tailings system combined with operational improvements, without requiring the installation of an additional ball mill. This approach is expected to significantly reduce capital expenditures, improve energy efficiency, and de-risk the project .

During the first quarter, a new Falcon concentrator and cyclone bank were installed, while an additional Knelson concentrator was installed in the second quarter. Other initiatives include an increase in the diameter of the pipeline feeding the tailings storage facility from 10 to 16 inches to relieve pipe pressures thereby increasing design limits.

Additionally, the Jacobina processing team continued to fine-tune the operation of the plant, optimizing the aperture of the crushers and sizing of the screens to reduce the feed size of material entering the ball mills, thereby improving milling performance. Furthermore, a new combination of mill liners and grinding balls allowed an increase in throughput while maintaining grinding size.

In May and June, Jacobina conducted trials to test the existing capacity of the processing plant and evaluate the optimal processing rate, and identify bottlenecks for future throughput increases. The May trial was conducted over six consecutive days, during which the processing plant exceeded 8,000 tpd, which is significantly above nameplate capacity, while maintaining a gold recovery of more than 96% and achieving a maximum daily throughput of 8,176 tonnes. A follow-up trial was conducted over a two-week period in June in which the processing plant exceeded 8,000 tpd for 10 days, averaging 8,179 tpd, and achieving a maximum daily throughput of 8,609 tpd. All told, throughput at Jacobina exceeded 8,000 tpd for 21 days during the second quarter. Following completion of the trials, operation of the plant is currently limited to a maximum monthly average processing rate of 7,500 tpd such as defined by the Company's operating permit pending changes to permitting, which are in progress.

Gold production was higher than budget in the second quarter as a result of higher-than-planned throughput. The supplementary mill feed in the second quarter came from ore in stockpiles, which had been created over several quarters for the purpose of providing mill feed to evaluate realizable throughput above the nameplate level for the plant. While this had a modest impact on unit costs per ounce, it ensures that the current plant's optimized throughput is sustainable. With a better understanding of the sustainable throughput of the plant, the Company is now increasing mine rates to bring those in line with the higher processing rate. This is expected to be achieved by the end of 2021 at which time the Company will no longer rely on stockpiled ore. Although mining grade is expected to be in line or better than plan for the second half of the year, the stockpile reclaiming strategy will continue for the remainder of the year. Consequently, the Company anticipates continued higher throughput and increased number of ounces of production as compared to plan, although at slightly higher costs than plan, as mining rates increase. This trade off of temporarily relying on much lower grade stockpile ore in favour of throughput is a necessary part of the Phase 1 optimization and has provided operational support for the simplified Phase 2 expansion. By end of year, and in the years to follow, as mining rates match throughput, feed grade is expected to normalize without reliance on stockpiles thereby resulting in sustainable, higher production at lower unit costs.

Following the better-than-expected processing performance in the first half of 2021, operational data from the aforementioned trials was used to calibrate the processing model and set the baseline for future expansions. These results confirm that the Jacobina processing plant has opportunities for further incremental capacity increases while maintaining high recoveries. The objective of the Phase 2 expansion remains unchanged: to achieve sustainable throughput of 8,500 tpd while maintaining gold recovery of 96% to 97%, increasing gold production to approximately 230,000 ounces per year based on recent plant performance and studies. Yamana is confident that this objective can be achieved with its simplified approach to continue incremental debottlenecking and operational improvements without requiring an expansion of the grinding circuit as originally contemplated.

Opportunities under evaluation include post-commissioning operational adjustments to the new Knelson and Falcon concentrators and further optimization of the crushing circuit. Additionally, installation of fine screens has the potential to improve classification efficiency compared to the existing cyclones, preventing particles finer than target grind size from reporting back to the ball mills, allowing mill capacity to be spent more efficiently on only particles requiring size reduction. Test work is planned for the third quarter to further evaluate this opportunity. Minor upgrades to the back end of the processing plant and tailings pumping system are required to sustain the higher throughput rates.

To support the higher processing rate, production from the underground mine continues to ramp up as a result of improvements to the ventilation circuits, addition of loading and hauling equipment to the mine fleet, and optimization of the shotcreting work groups, which has reduced development cycle times and provided access to additional production zones.

Simplified Approach to Require a Fraction of the Original Planned Capital

The simplified expansion approach is a continuation of the strategy that has been the basis for the quarter-over-quarter success of Jacobina over the past several years, and is expected to require significantly lower capital than originally planned in the Phase 2 pre-feasibility study, an amount not expected to exceed $15 million to $20 million.

Jacobina continues to work closely with regulatory authorities to increase the permitted throughput to 8,500 tpd and has the potential to achieve the Phase 2 objectives earlier than planned. Subject to successful completion of required permit modifications, Jacobina would begin processing at the new Phase 2 rate by the second half of 2023.

As the Company's expansion strategy is well advanced, Jacobina is now seen as a multi-decade, low cost operation with a planned production level of at least 230,000 ounces per year, with annualized production expected to achieve this level by the second half of 2023.

Evaluation of Phase 3 Expansion to 10,000 TPD Advancing; Plant Modifications Originally Planned for Phase 2 Now Considered Adequate for Phase 3

As previously presented in the Company's 10-year production outlook, Yamana is evaluating a further expansion at Jacobina to increase throughput to 10,000 tpd, referred to as Phase 3. With the Phase 2 expansion now underway with a simpler process at reduced capital costs, the Company will now pursue the Phase 3 expansion as part of a comprehensive plan which aligns the processing plant, underground mine, tailings strategy, and permitting, while managing capital expenditure and cash flow.

During the second quarter, the Company discontinued basic engineering and development of a detailed project execution plan for the installation of a third grinding line, which was originally intended as part of the Phase 2 expansion to 8,500 tpd as a result of the optimizations referred to above. With an improved Phase 2 plan which no longer requires a third grinding line, the Company is now evaluating the installation of a third grinding line not to achieve the planned 8,500 tpd contemplated for the Phase 2 expansion, but for the Phase 3 plant expansion to 10,000 tpd.

Updated modelling indicates that the 10,000 tpd target throughput could be achieved with only two ball mills in operation, allowing for grinding line two to be suspended. Compared to the pre-feasibility study completed in 2020, the detailed design incorporates additional test work and geotechnical analysis together with several improvements to the plant design for line three including an optimized design of the additional crushed ore silo and associated conveyors and increased recovery from gravity concentration using the same gravity circuit that is now installed on line two. Further improvements will continue to be evaluated.

With the processing plant expansion plan well understood, the Jacobina team is now focusing on the mine plan and infrastructure required to support the higher throughput rate including a haulage optimization study to evaluate alternative solutions for transporting ore from the underground mines to the processing plant.

One promising ore haulage solution is the use of Rail-Veyor technology, for which engineering was completed in the first quarter of 2021. The installation of the Rail-Veyor system as the primary method of ore haulage from the Canavieiras mines to the processing plant stockpiles would provide a robust and low-cost method of haulage. Evaluation of the Rail-Veyor concept is continuing as part of the overall haulage optimization study.

Engineering for the Phase 3 expansion to 10,000 tpd will advance in parallel with the Phase 2 expansion, and the processing model will continue to be updated to integrate operational data from Phase 2, with a feasibility study for Phase 3 scheduled for completion in 2023.

Comprehensive Tailings Management Strategy for Long-Term Sustainability

To complement the Jacobina phased expansion, Yamana has adopted a comprehensive Jacobina life-of-mine tailings management strategy, that substitutes surface deposition of tailings, with underground tailings disposal as backfill. The Company has initiated several studies to ensure long-term sustainability and to reduce the environmental footprint of the operation. Test work conducted in 2020 confirmed that both paste backfill and hydraulic backfill are technically feasible options for disposal of tailings into underground voids, thereby minimizing the quantity of tailings stored on surface. Additionally, use of backfill is expected to improve underground stope stability and minimize the requirements to leave behind pillars in ore, resulting in increased mining recovery and reduced dilution.

As a first step, a hydraulic backfill plant provides a relatively simple and low capital cost solution for underground deposition of 2,000 tonnes of dry tailings per day, with the extra advantage that hydraulic backfill can be placed into historic voids with minimal cement content, significantly reducing the operating cost. Utilization of historic voids for backfilling will also allow Jacobina to gradually introduce backfill into the mining sequence without impacting the production rate of the mine. In March 2021, Jacobina completed a feasibility study for the installation of a hydraulic backfill plant. The initial capital cost for the backfill system is estimated at $8.0 million. The Company has decided to move forward with the hydraulic backfill plant project and is in the permitting phase. The permit required for the backfill project is separate from the one required for the Phase 2 expansion, although both are being pursued simultaneously. Additionally, a conceptual study is underway to evaluate further opportunities for a dry stack tailings facility and/or a paste backfill plant in parallel to the hydraulic backfill plant, which could provide opportunities in the future for additional storage of tailings to support future mineral reserve development.

Existing surface tailings capacity, combined with tailings storage underground as backfill will be sufficient for life of mine production at Jacobina at the planned increased processing rates.