Gualcamayo Gold Mine, Argentina

Gualcamayo gold mine is an open-pit heap-leach mine 270km from San Juan, Argentina. It consists of Quebrada del Diablo (QDD), Magdalena and Amelia Ines satellite deposits (AIM) and QDD Lower West underground zone mineral deposits.

Drilling has found Gualcamayo could also have an underground mining operation. The expected minimum life of Gualcamayo is nine years and is expected to increase to 13 years as QDD Lower West reserves start contributing.

Yamana Gold is the owner and operator of the mine. Construction of Gualcamayo was substantially completed in less than 20 months following the receipt of a positive feasibility study and the start of construction in August 2007.

Processing of ore began in late December 2008 and Yamana declared commercial production on 1 July 2009.

Gualcamayo employs about 1,200 people, including contract and direct workers from local communities. In September 2009 the mine was officially inaugurated, which coincided with its first quarter of commercial production.

Geology and reserves

The main QDD open pit deposit, the AIM satellite open pit deposits and the potential QDD Lower West underground zone deposit are the three main mineral deposits at Gualcamayo.

The total measured and indicated mineral resources of the mine are 98.6mt at an average grade of 1.10g/t, totalling 3.5 million ounces of gold, an increase of 66% over mid-2006 estimates.

They also include proven and probable reserves of 83.7mt at an average grade of 1.08g/t, totalling 2.9 million ounces of gold. The inferred resources of the mine are 12.8mt at an average grade of 1.04g/t, totalling 0.42 million ounces of gold.

The cut-off grades of mineral resources at Gualcamayo are expected to be 0.3g/t Au for QDD open pit, 0.5g/t Au AIM open pit and 1g/t Au underground QDD Lower West.

Production

After commissioning in 2008, the first gold bullion was produced in early 2009. Production is expected to reach 120,000oz of gold in 2009 and increase in later years as QDD ramps-up fully and other deposits contribute.

Costs

Cash costs for producing gold at the mine are expected to be below $450/oz, though in the third quarter of 2009, the first full quarter of commercial production, cash costs were below $350/oz. Yamana Gold has also allocated $5m of the entire Gualcamayo exploration budget for further exploration of QDD Lower West.

Since the beginning of the project, the total expenditure has been $190.6m. In addition, $23.9m was spent on fixed assets exploration and feasibility-related expenditures. Metal prices for QDD upper gold are expected to be $480 followed by QDD Lower West at $725 and AIM at $625.

Mining and processing

Open-pit mining activities began at Gualcamayo in 2008. The ore is transported through haul trucks to the crusher.

The crushed ore is then sent for trituration, where the size of the ore is reduced by grinding. Crushed powder from the trituration is then sent for processing.

Ore processing activities at the mine started in early 2009. The processing process includes ore processing, leaching, carbon columns, dessorption, electrorefination and smelting.

The primary ore pass, primary and secondary crushing facilities, conveyor system and ADR plant were commissioned by April 2009.

Future developments

The third mineral deposit of the mine, QDD Lower West, is under exploration. In 2009 Yamana allocated $5m for advanced exploration activities at this deposit. A feasibility study update on QDD Lower West is expected in 2010. The aim is to expand the known orebody and total mineable reserves towards the western area of the deposit.

Salamanca, a new mineralisation area, is being explored as a part of the Gualcamayo exploration programme. Salamanca is 10km north of Gualcamayo and within the mine area.

It could add resource ounces to the mine. Drilling results in this area suggest an important source of further gold ounces. A mineral resource estimate is expected in the first half of 2010.