In an Oct. 4 research note, analyst Anita Soni reported that CIBC raised its valuation of Yamana Gold Inc.'s (YRI:TSX; AUY:NYSE; YAU:LSE) Jacobina mine in Brazil to $968 million from $925 million following a visit to the site.
"The mine showed well, with phase 1 optimization on track to be completed ahead of the scheduled mid-2020 commissioning and on budget of $5.3 million," Soni commented. With the changes already made, the mill achieved 6,400 tpd (6.4 Ktpd) in Q3/19. The goal is 6.5 Ktpd. That rate would increase production to 180,000 ounces (180 Koz) by 2022, noted Soni.
Yamana is considering a phase 2 expansion to 7.5–8.5 Ktpd, which CIBC incorporated into its model on the company. This throughput rate would boost production to 200–225 Koz in 2022-2023. Capex for phase 2 is now an estimated $75 million, down from about $150 million. The company is targeting Q1/20 for releasing the phase 2 prefeasibility study.
"We believe the company may be able to achieve the 200–225 Koz level at 7.5 Ktpd with higher throughput grade of 2.5–2.6 grams per ton (2.5–2.6 g/t), currently at about 2.4 g/t," Soni highlighted.
During the visit, management emphasized the exploration potential and long-term expansion opportunities at Jacobina, Soni reported. The current reserve estimate is 2.28 million ounces at 2.4 g/t, and all deposits there remain open along strike and downdip. Recent drill intercepts from the Canavieiras and Morro do Vento areas were positive, "including encouraging high-grade results near to mine infrastructure."
She added, "Ultimately, the company is targeting raising the overall reserve grade of the deposit from the current 2.4 g/t at 13 years of mine life to over 2.6 g/t with a 20-year reserve life."
CIBC has an Outperformer rating and a CA$4.40 per share price target on Yamana, whose stock is currently trading at around CA$3.46 per share.
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Disclosures from CIBC, Yamana Gold Inc., October 4, 2019
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Important Disclosure Footnotes for Yamana Gold Inc. (AUY)
CIBC World Markets Inc. expects to receive or intends to seek compensation for investment banking services from Yamana Gold Inc. in the next 3 months.
