Yamana Gold Inc.said March 31 that it signed a copper purchase agreement with Altius Minerals Corp., giving the latter the right to receivepayments of copper-related production from Yamana's Chapada copper-gold mine in Brazil in exchangefor about US$61 million in cash and warrants.
The total consideration comprises advanced payments of US$60million in cash, plus 400,000 Altius warrants, with a strike price of C$14 eachand a term of five years.
Altius has already paid a non-refundable deposit of US$8 millionto Yamana; the balance of the advanced payments and the warrants are expected tobe received on May 3 as Altius will only be entitled to receive payments of coppersubject to the completion of the advanced payments.
In accordance with the deal, Altius will pay 30% of the spotprice per pound of copper at the time of metal delivery. The delivery of copper,with the first targeted payment on July 5, will be 3.70% of payable copper referencedfrom the Chapada mine, subject to certain conditions.
Concurrent with the purchase agreement, Yamana completed thepurchase of Macquarie Bank Ltd.'s rights and interests in certain project loan facilities,gold purchase agreements, related guarantees and security entered into with MineracaoRiacho dos Machados Ltda., which owns the Riacho dos Machados gold project in Brazil. The purchasewas among the several steps for Yamana's Brio Gold Inc. unit to acquire the Riachodos Machados project.
By completing the purchase agreement at the same time as thecompletion of Macquarie's interest in Riacho dos Machados, Yamana is effectivelyswapping about 3 million pounds of annual copper production for 100,000 ounces ofannual gold output in the short- to medium-term. The company also expects the short-termcash flow accretion to be significant.
According to Yamana, the purchase agreement has been enteredinto to finance its Brio Gold Inc.unit's previously announced purchaseof the Riacho dos Machados project for about US$48.5 million — US$3 million lessthan previously announced. The copper purchase deal is one of the various alternativesthat Yamana evaluated to finance the project acquisition as it de-leverages thecompany's exposure to copper and increases the potential value of its Brio Goldunit.
Yamana expects the final acquisition of the Riacho dos Machadosproject to close in May, with the economic benefits of the acquisition, if any,to accrue to Brio Gold effective March 31.
With the acquisition of Riacho dos Machados, Yamana will havethree producing mines within its Brio Gold division, with a combined initial fullcapacity of about 250,000 gold ounces annually starting 2017, which is Riacho dosMachados' targeted full year of production. The annual capacity would further increaseto approximately 350,000 gold ounces, assuming the recommissioning of gold project inBrazil.
For 2016, the Yamana unit is expected to produce at least 180,000gold ounces. Alternatives for financing the recommissioning of C1 Santa Luz willbe evaluated once certain pending technical evaluations are completed, this willinclude Brio Gold self-funding the recommissioning with cash flow generated fromits three producing mines starting in 2017.