Notes for Corporate Presentation to 1997 Annual Meeting by:
Victor Bradley, President & CEO and Richard Walters, Exec. VP & COO
Yamana Resources Inc.
Delivered: The Design Exchange, 241 Bay Street, Toronto, Ontario, Canada
10:00 a.m. August 15, 1997 (Please check against actual delivery.)
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Victor Bradley
President and CEO
Ladies and gentlemen, now that the formal portion of this meeting has been concluded, Dick and I would like to give you our overview of what we have accomplished in the past year, and outline our plans for the future.
It has been a year of some frustration. and much excitement:
In Santa Cruz, Vanguardia, Argentina, it's been a year in which we started up our own drill; opened our independently operated lab; and, intercepted significant gold in three separate areas, along with surface bonanza silver;
During the last year, following some serious innovation and investigation, we established ten promising targets in the Northern Porphyry Belt in Chile, the richest copper region in the world.
We were first into Tierra del Fuego, Chile, examining and staking prospective ground which has never seen a rock hammer. We're very excited about what we have found.
During the year that brought us the Bre-X travesty, Yamana established itself in Indonesia as both an industry leader -- in our reaction to proposed changes to the 7th Generation COW applications and as the holder of several promising gold targets.
Since we last met, we struck an agreement with Union Mining NL of Australia, giving us the right to earn in a majority share in a highly prospective region of Papua New Guinea, centered on an established, and expanding gold resource.
And, Yamana has entered North America, where we are drilling, as we speak, in Washington state.
These, and other accomplishments achieved this year, reflect a strategy which has served us well since Dick and I established Yamana in March 1994:
We identify, acquire and evaluate properties with the potential to produce substantial mineral deposits;
We explore and develop them to a target stage with sufficient interest to...
Attract partnerships with major companies with the technical and / or the financial strength to help to bring the project forward... Barrick Gold, Westmin Resources, Northern Orion... ; and,
We look to invest in under-valued situations. as we did in Papua New Guinea.
Yamana remains an exploration company. This is what we do best and this is what we will continue to do. At the same time, we remain opportunity driven.
As at May 31, Yamana had nearly US$15.5 million in the bank, with no debt. That gives us sufficient funds to operate for at least another year. We have 27 million shares outstanding and, with the warrants and options, fully diluted, we would be at 35 million shares, raising an additional US$22 million.
There are few, if any, true comparables: exploration companies with a demonstrated global view and which are diversified both geographically and by product target. This diversity is very deliberate:
Geographically, Yamana is located in some of the most exciting regions in the world. We have about 100 properties, in six countries, on three continents.
As for our targets, they too are diversified. With the plummeting of the gold price, we will increase the proportion of base metals projects. Our goal now is to move from our historic 80 / 20 gold-to-other-minerals ratio closer to a balance between gold and other mineral targets.
Along with our management and board, our technical team, and our partners, this diversity is one of Yamana's greatest strengths.
Looking back, our progress as an exploration company has been overshadowed by the fall in our share price. You may find little consolation in the fact that we have fared far better than most of our peer group. We completed this chart after closing on Tuesday. (Ad Libs re: of the 14 exploration companies working in the countries where we have projects, and taking their current share price as a percentage of their 12-month high, we were number two.)
Despite these disappointments, we remain convinced that Yamana is on the right course and we appreciate your continued support. Now, to offer more detail about what we have accomplished in this past year, here is Dick Walters.
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Richard Walters
Exec. VP & COO
Thanks, Vic. Yamana has projects on three continents:
in South America, we're in Argentina, Chile and Paraguay.
in Southeast Asia, we are in Indonesia and Papua New Guinea; and,
in North America, we have properties in the state of Washington, not far from our executive offices in Spokane.
There are thirteen projects in all, represented by about one hundred individual property positions. There isn't time to cover all of them, but I would like to bring you up-to-date on several of them. I'll begin with our agreement with Union Mining and the properties in Papua New Guinea.
This is a highly prospective geological region for epithermal gold deposits within the Pacific "Rim of Fire". Plate tectonics have produced some of the world's greatest gold and copper deposits including Lihir, with 42 million ounces of gold; Porgera, with more than 18 million ounces; and, the 5 million ounce Misima deposit.
On our PNG properties, we are looking for at least one, perhaps two Misima-type deposits.
The Yamana-Union agreement includes a 3,260-square-kilometer land package, with thirteen exploration licenses in Milne Bay province of PNG, mostly on the D'Entrecasteaux islands in the Solomon Sea.
We have reported our arrangement with Union in the press, but just to recap: Yamana has purchased 11.1 percent equity in Union, with the option of going to 17.6 percent. Yamana has also committed 10-million-Australia-dollars in exploration expenditures over four years to earn in on 51 percent of the PNG properties.
We will likely spend half of that this year, giving us a 30 percent interest in the properties already.
The package includes an 8-million Australia dollar private database that shows 50 gold anomalies on the islands, most of which have never been followed up.
Right now, the focus is on Fergusson Island where we have four key projects: Gameta, Wapolu, Igwageta and Iaupolo West. Our first area of focus is on the Gameta project in the northeastern part of Fergusson Island.
Last year's drilling campaign at Gameta came up with 2.3 million tonnes of 2.3 g/t Au, or about 171,000 ounces, all in sheared metamorphic rocks. A widely recognized independent consulting firm calculated this resource using a 111 drill hole data base. And the drill coverage is only 10 percent of the outcropping defined by surface sampling.
Indications are that the geologically prospective zone extends over a strike-length of about 20 kilometers. Mineralization has been found in scattered outcrops, in stream-sediment and in soil geochemical samples.
The plan this year is to drill as much as we can of the area extending up the hill from the previous drilling where it appears open. The first drill hole outside of the resource area, only 16 meters deep, shows 15 meters at 2.9 g/t Au, ending in ore grade material. At the moment, there are two drills working at Gameta and we expect to have further results shortly.
We have multi-gram outcrop samples extending far beyond the drill area and we are convinced that Gameta has multimillion-ounce gold deposit potential.
At the second project site, Wapolu, there is an identified sulfide resource of 3.8 million tonnes of 1.4 g/t Au or 172,000 ounces. Yamana also has an option on an oxide resource of 3.4 million tonnes of 1.6 g/t Au, or 179,000 ounces. Again, these resources were calculated by a well known independent consulting company. There is extensive evidence we can greatly expand this resource as well. A peripheral drill hole just came in at 24 meters at 1.8 g/t Au. And the drill has just been moved about a kilometer to the Kanagara site, where a new outcrop showing epithermal gold values up to 52.7 g/t Au has been found.
Meanwhile, new drill target development is ongoing elsewhere on the Wapolu property. Most recently, we have found many sub-outcrop samples in the 2 to 4 g/t Au range, with a separate suite of float samples running 80 to 130 g/t Au in the Keweama area. Excavator trenching and bedrock sampling will soon commence.
I'll just touch on the remaining two areas:
The Igwageta gold-bearing zone covers an area at least 300 meters by 2 kilometers. It's made up of volcanic and metamorphic rocks. Strong oxide gold mineralization was encountered in 29 of 51 drill holes. The best intercept is 14 meters at 5.6 g/t Au. Some other intercepts of interest are shown on the screen behind me. The length and depth of the mineralized zone are open. A geological engineer is currently working on a resource calculation.
At Iaupolo West, three kilometers from Igwageta, we're completing a road construction program. Hand trenching found strongly anomalous gold, including 32 meters of 0.5 g/t gold in hydrothermally altered volcanic rocks. We expect to start drilling at Iaupolu West later this year.
To aid us in our prospecting, we have recently completed a helimag survey over the D'Entrecasteaux Islands. From this data, we are able to get topographic information as well as rock type distributions, and identify magnetic lows sometimes caused by hydrothermal alteration associated with gold mineralization.
Together, the Fergusson Island properties are attractive places to work. Local surface landowners are cooperative; Union and Yamana have helped to build the local school and improve roads; and the location, near easy water access, makes getting around reasonably efficient.
By the way, the air track drill shown on the screen is owned by the joint venture. It is used basically as a prospecting tool, and affords us great flexibility in our explorations.
Also in Southeast Asia, we have our properties in Indonesia, on the Island of Kalimantan. They are on the Magmatic Arc of Sintang Intrusives and near the Kelian and Mt. Muro mines which, together, are producing over 600,000 ounces of gold every year. [AD LIB: ...remains highly prospective... watch results]
I'm certain there's not an individual in this room who isn't aware of the impact that Bre-X had not only on virtually every exploration company working in the area... but on company's around the world.
Now, five months later, it looks like we are coming out of it. It appears that the president may sign the 7th Generation of Contracts of Work or COWs -- including ours -- before the end of the year.
Having the COWs signed means that we would have full and exclusive rights to develop any mineral deposit we find, and be able to drill when we were ready.
I was over in Indonesia recently and I am very pleased with what I found. Under our exploration agreement with Barrick Gold, we have budgeted 4.8 million US dollars for the project for 1997.
We've secured SIPPs, or government prospecting permits for all of the COWs, established regional operating bases and built field camps. Further fieldwork, especially since we brought our helicopter in a few months ago, has allowed us to extend our geochemical sampling and to examine some interesting structures.
We have covered about 25 percent of our entire land package. Already, we have sampled more than 1,400 stream sites and collected 1,800 rock samples, on which some 30,000 geochemical analyses have been performed. So far, we have identified 28 geochemically anomalous drainage basins.
This map illustrates the six southern of our 12 COW blocks. A 32,000-line-kilometer aeromagnetic survey of the area identified more than two dozen magnetic anomalies. several associated with stream sediment geochemical anomalies. And with all this, yes, we have discovered something very promising.
In the rugged, primitive jungles of the south central part of COW 1 we have identified a zone at least five by ten kilometers. Some 500 samples are returned from this zone showing more than 100 anomalous gold and silver values. For example, the high in outcrop so far is 3.5 g/t Au with 380 g/t Ag (12 oz/t Ag), and the high for boulders in the creeks is 5.9 g/t Au with 199 g/t Ag (6 oz/t Ag). One float sample assays 4,128 g/t Ag. (133 oz/t Ag). Hundreds of sample results are pending from this area which contains a nest of Sintang type intrusives and associated breccias which are hydrothermally altered and mineralized.
Its too early to predict the significance of this completely new find. But we do consider it important, and are focusing five of our seven geological crews on it, who are there as we speak mapping the geology and collecting hundreds of more samples.
On the other side of the world, in South America, we've had an extremely productive season at Santa Cruz, Vanguardia.
We've reported all of our key findings before but, just to recap, we have 18 properties covering a huge area in Patagonia. We conducted an analyst tour there in the spring and received an enthusiastic response.
We are disappointed that Rio Algom decided to withdraw from the project at the end of this month, not wanting to commit an additional $3.5 million for 1998.. or to commit a total of $16 million more before earning any portion of the project.
But it's important to realize what DID come out of the last season:
with their participation, Yamana gained another $4 million worth of exploration information on the project;
we tested 25 targets on nine properties with over 16,000 meters of drilling as 145 holes; and,
we made three significant gold finds.
Our technical team and I believe that this is a very important project for Yamana. We have identified more than 35 targets which remain to be drilled.
It has caught the attention of several major mining companies, who have solicited us for project reviews. As we speak, we are conducting field tours for those companies. Some have already expressed serious interest in doing a deal, and I am quite optimistic we will soon have a new partner to fund our Santa Cruz explorations.
At Martinetas, 21 out of 23 holes came back mineralized with encouraging intercepts. Some show intercepts of 100 meters at about 1 g/t Au. So far, the best is 20 meters of almost an ounce of gold per tonne. In fact, you can see native gold speckled in a 2 meter section of quartz vein in the drill core, which runs about eight ounces to the tonne - some pieces of which are on the table in front of me. You are welcome to examine it after our meeting.
We have a bulk mineable target here with a large volume of lower grade material, sweetened by high grade gold in vein swarms. We are confident that a gold mine will be proven here, and will be undertaking an extensive core drilling program on Martinetas during the coming months to establish a gold resource.
Southwest of Martinetas, at Microonda, we've completed 58 reverse circulation holes for 10,500 meters. The best intercepts are 42 meters of 1.5 g/t Au, including 12 meters of 4.7 g/t; and 40 meters of 1.2 g/t, including 14 meters of 3.3 g/t Au. These are surrounded by numerous intercepts on the order or 50 meters of « g/t Au. We plan to core drill the guts of this in the coming months to establish a resource, and to continue reconnaissance drilling on other favorable shows on the 100 square kilometer property.
On our Estrella property, drilling intercepted significant gold in three holes roughly a kilometer apart. There are three striking issues that make Estrella another interesting target for the new season:
The gold we found there is disseminated; One hole bottomed in a thick section of strong mineralization - 100 meters of 0.55 g/t Au; and, This property is adjacent to and on strike with the Cerro Vanguardia gold deposit that has announced mineable reserves of 2.9 million ounces of gold and 33 million ounces of silver. And it is widely believed that the Cerro Vanguardia mine will produce many times those announced numbers.
Finally, near the end of the season we staked four more properties in the northwestern region. At Lejano, one of 27 rock chip samples assayed up to 109 oz/t Ag. Another four samples show more than 30 ounces of silver per tonne, with 9 more greater than three ounces. We also found up to 1.5 g/t Au in the area. This looks like another very promising area that we expect to bring quickly to the drilling stage.
Further south in Tierra del Fuego, Argentina, we are looking for Volcanogenic Massive Sulfides, primarily with base metals - zinc and copper - but also gold. Westmin is the project operator under terms of an earn-in joint venture agreement. They have met their first year's expenditure commitment of 1.8 million US dollars, established a base camp and completed the first phase of a helicopter supported diamond core drilling campaign.
During the season, which ended in May, 18 holes for about 3,500 meters were completed on three properties: Arroyo Rojo, Sargent and Lago Guanaco. The best results came from the first two targets.
At Arroyo Rojo, the best intercept of 7 drill holes is 6.9 meters of 2.2% Cu, 3.7 % Pb and 9.4 % Zn. All of the other holes hit weaker, but still significant mineralization. The sulfide body is a minimum of 250 meters long and plunges to depths of more than 210 meters below its outcroppings. This season we will continue drilling in an attempt to find the strike and dip limits of the sulfide body.
Drilling at Sargent intercepted 0.28 meters - about a foot-of 1% Cu, 10% Pb, 27.5% Zn, 0.6 g/t gold and 277 g/t silver. That's a total of over 40 percent combined metals. Another hole hit about 12 meters of nearly 1% Cu stringers. The characteristics of this mineralization - classically banded massive sulfide ore with associated stringers - lead us to believe that we are very near a large hidden body of sulfides which will take more drilling to find. And that we intend to accomplish very soon.
Yamana now has three major projects underway in Chile. One is in Tierra del Fuego, a second is in the El Indio Belt, and in what may turn out to be the most exciting project of all, we have eight properties in the Northern Porphyry Belt. All three Chilean projects are held 100 percent by Yamana and we have had positive exploration results from all three.
In Tierra del Fuego, we've discovered several encouraging outcrops of stockwork and disseminated base metal sulfides in volcanics and intrusives as well as gold-bearing volcanic breccias. This is a continuation of the mineralized areas on the Argentine side of the border.
An eight-man crew used a sea-going boat and helicopter to conduct wide-ranging geochemical and geologic reconnaissance for volcanogenic massive sulfides.
We have staked 7 claim groups. These properties will be enhanced by geological mapping and sampling during the coming season.
We've had some interest in joint-venture deals on this project and we may be having early stage discussions later this year.
The El Indio Belt is located approximately 400 kilometers north of Santiago, close to the Argentine border. The Manila property is a promising gold prospect. Hydrothermally altered volcanic rocks along the inner ring of a caldera rim give a positive geophysical response. The setting is similar to the nearby El Indio and Tambo mines, which produce about 300,000 ounces of gold annually. It is also similar to Barrick's Sancarron project which is located on the other side of the caldera.
At our Arrieros property we have identified another hydrothermally altered volcanic center.
Drill targets here are a combination of mineralized gold faults and veins, as well as mineralized breccia zones and pipes associated with the throat of the extinct volcano.
Near the end of the last season we had a bulldozer work its way up the mountain, cutting through the overburden to expose mineralization. This will help with drilling which we hope to begin later this year.
Thirdly, we have our star Chilean project : the Northern Porphyry Copper Belt. This is the richest copper zone in the world - 20 percent of all of the copper being produced today comes from this zone. There are deposits such as Collahuasi and Chuquicamata, each with more than 3 billion tonnes of 0.8% Cu; and Escondida, one of the world's most profitable copper mines, has over 2 billion tonnes of 1.3% Cu.
In Spanish, escondida means "hidden", because the giant Escondida deposit lay concealed under a blanket of gravel, called a pediment. All modern exploration in the porphyry belt is now aimed at seeing prospects under the vast pediments of what we call "Porphyry Alley".
Yamana has an innovative approach to exploration project development here, using rock density maps developed by universities in their studies of plate tectonics. The gravity "lows", or low density rocks, are directly associated with the igneous intrusions of porphyry with copper. And today, Yamana Resources has eight properties in the region staked on gravity lows. (Actually, we've just added two more so we now have ten properties... one of them is on the flank of the most extreme gravity low measured in this survey.)
We acquired Viento, our first property in January, and today are completing geophysical and geochemical tests on all eight them. The results are generally promising. We intend to secure an appropriate funding partner to carry out an extensive drilling program, and to that end we have teamed up with Rothschild Canada Limited to find one. There is a high degree of industry interest in this project, and we have received several unsolicited inquiries from major mining houses.
Our hope is to have that agreement completed shortly and to begin drilling before the end of the first quarter of next year. perhaps sooner.
Ladies and gentlemen, this is the sort of world class project which could definitely be a company-maker.
In Paraguay, Yamana's focus is on a 20-square kilometer area of interest at Sapucai within the 500-square kilometer Paraguari concession. We have identified geologic, geochemical and geophysical features at two locations which are analogous to the famous multi-million ounce, Cripple Creek, Colorado gold camp.
At the Picua prospect, our geologists discovered a volcanic diatreme, or breccia pipe, which covers more than one hectare and averages about « g/t Au. We have technical reasons to think that there is vertical zonation , yielding better gold grades deeper within it.
At our nearby Potrero Ybate prospect, we have found an astounding bi-polar ground magnetic anomaly of some 7,500 gammas amplitude; and its big - « km x 1 km. Now what does that mean ? Well, our consulting geophysicist says he has never seen an anomaly of this magnitude.
Our consensus is it represents buried diatremes, rich in a magnetic sulfides, which stand a good chance of being enriched in gold. The area is blanketed by thick soil and there are some pits in which we have found geochemically anomalous gold.
We are currently engaged in selecting a drilling contractor to immediately start drilling on these prospects.
Finally, I like to just touch on our Washington state exploration projects. We have been drilling all three, shown on the map. My favorite is Palmer Mountain. We are drilling volcanogenic massive sulfides there as I speak. All of the 12 holes to date have intersected visually interesting mineralization; however most of the assays are pending. One of the first holes hit almost 80 feet of 0.6% Cu, including 8 feet of 2.0% Cu. And another shows a 13 foot intersection of 1.3% Cu plus 2.4% Zn, including 4 feet of 1.8% Cu plus 4.5% Zn. These are a lot of numbers to absorb, but we shall be putting them into a press release when we have complete assays for this phase of drilling.
Ladies and gentlemen, fellow shareholders, with that overview, you can see that this has really been the year of the drill for Yamana, and will continue to be throughout the coming year. I'll turn the podium back to Vic for his concluding remarks. Vic?
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Victor Bradley
President and CEO
Thanks, Dick.
When Dick and I started Yamana, we made a few specific promises.
First, to maintain our complete focus on Yamana, without outside distractions and without breaking any pieces off for other vehicles, no diversions of corporate opportunities.
We continue to keep this promise.
Second, we promised to build a diverse, world-class exploration company with a portfolio that would stand on its own against almost any other in the world.
We feel we have built something extraordinary - an organization without true comparables.
At this meeting last year, we were sought for "gold in Indonesia" almost exclusively. Today, we are sought for the diversity which only constant adherence to our original objectives has brought.
Third, we said that we would build a management team, a technical team, and a board of directors, second to none.
Again, I would hold Yamana's people up against anyone else in the business.
As explorers:
we must be constantly alert to opportunities;
we must hold the right ground;
we must explore and drill it;
we must communicate our story to the investment community; and,
we must add value for our shareholders.
Today:
We have the ground.
We are exploring and drilling - with more than 80 percent of the money going into the ground.
And we are telling the world what we have, what we have accomplished, and where we are going.
All the while, we will maintain our credibility and this means keeping our promises. to you. and to ourselves. telling our story as it develops . exactly the way it is.
Where will we be in a year? As this last year has shown, it would be foolish to predict. However, with Papua New Guinea, with Indonesia, Santa Cruz, Tierra del Fuego, the Northern Porphyry Belt - the list goes on - we are well positioned not only to return to where we have been, but also, to bring us all the returns that your patience and support deserve. Thank you. Now, I'll open the floor to your questions. |
