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DAILY NEWS Feb 13, 2013 4:51 PM - 0 comments

Yamana beefs up Cerro Moro

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Yamana Gold (YRI-T, AUY-N) is getting a firmer handle on its recently acquired Cerro Moro gold project in Argentina.

The senior gold producer says, pending a construction decision after feasibility next year, it could have a mine up and running by 2016. And while that date is still a ways away, the company is gaining greater insight into the ore it could one day be processing.

Yamana released its first resource estimate on the project since acquiring it as part of its $404 million acquisition of Extorre Gold Mines last summer.

At the time of the acquisition, Extorre had established indicated resources of 2.43 million tonnes grading 7.4 grams gold and 498.8 grams silver for 1.4 million gold equivalent ounces and inferred resources of 4.75 million tonnes grading 3.5 grams gold and 172 grams silver for 1.05 million gold equivalent ounces.

Yamana has managed to bolster resources in the indicated category by 44%. Using a 1 gram per tonne cutoff indicated resources now stand at 4.2 million tonnes grading 6.6 grams gold and 400.3 grams silver for 1.95 million gold equivalent ounces.

The uptick in indicated tonnage, however, has come at the expense of inferred resources which fell to 3.6 million tonnes grading 1.9 grams gold and 115.9 grams silver for 490,000 gold equivalent ounces.

Yamana also said it has begun pre-development at the site in Argentina’s Santa Cruz province.

The project is being envisioned as a combined open pit and underground operation with 1,000 tonnes per day throughput. Roughly 70% of that mill feed is expected to come from underground mining with the remaining 30% coming from an open pit. Average annual production is expected to be around 200,000 gold equivalent ounces per year.

Cerro Moro is a low sulphidation epithermal vein deposit, similar to Yamana’s El Penon mine in Chile and its Mercedes mine in Mexico, both of which are currently in operation.

The similarity has led Yamana to say that it intends to use a mining and processing method similar to the one it is using at Mercedes.

Exploration at Cerro Moro is ongoing via a $12 million, 25,000 metre program for this year with the main focus on the expansion of the areas of mineralization at the La Negrita block, located outside the current resource base.

One drill hole in January, which was intended to test the extension of an anomalous mineralization from prior holes, intercepted three separate vein zones, and preliminary indications are that two of these occur at mineable widths with the potential for grades. Assays for the holes are still pending

Yamana expects capex for the mine to come in around the $400 million range with operating costs around the $450 per oz. range.

A preliminary economic study released by Extorre in April of last year outlined a project that would process 1,150 tonnes per day with production of 248,000 gold equivalent ounces per year at cash costs of US$303 per oz. for the first five years.

In Toronto on Feb. 13, Yamana shares were off 15¢ to $15.81 on 2.2 million shares traded.

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