News Release - Year end review
Yamana Resources Inc -
Year end review
Yamana Resources Inc
YRI
Shares issued 27306990
1998-01-29 close $0.68
Friday Jan 30 1998
Mr Victor Bradley reviews the company
Financial
While the now infamous Bre-X/Busang scandal during the first quarter of
Yamana's fiscal year had already adversely affected virtually every exploration
company in North America, falling gold and other metal prices, tax loss selling and
a general loss in market confidence in resource based stocks had an even more
dramatic effect during the third quarter ended November 30 1997. Yamana's
share price, along with all other gold related and exploration stocks, reflects these
market conditions.
In response to this combination of events, all outside of Yamana's control, the
company has implemented Draconian strategies to strengthen its position with
sharp cutbacks in program and administrative spending, across the board salary
reductions and extensive layoffs. Exploration spending is being minimized on all
Yamana projects, with the exception of Santa Cruz Vanguardia, Argentina, where
the company has several gold and gold and silver targets ready for drilling. As a
result of these measures, Yamana is reducing spending by about 75%.
While these cutbacks are unavoidable, they will also dramatically reduce the
company's ability to enhance shareholder value through exploration and property
development in several promising areas.
For the nine months ended November 30 1997, the company incurred a net loss
of $2,740,101 compared to a net loss of $1,248,647 for the same period in
1996. The increase in loss was due to exploration activity almost doubling during
the period, mineral property writeoffs of $314,459 and other non-recurring
expenses.
During the quarter ended November 30 1997, the company's exploration
expenditures particularly increased as it took over operational control of the
Papua New Guinea project from its joint venture partner, Union Mining NL. As a
result, the company will spend almost three years of its four year earn in
commitment, to earn a 40% interest in the property early in 1998, almost two
years ahead of schedule.
During the quarter, the company agreed to a best efforts placement of between
$10 million and $20 million in 8% senior convertible notes, with a five year term.
This aggressive financing was initiated to maintain and expand the company's
drilling programs. As laid out in the preliminary short form prospectus dated
November 21 1997, the offering includes incentives for early conversion of the
notes into shares and gives the company the ability to force conversion at a level
of 145% of the conversion price of the notes. At the end of the five year term, the
company has the option to repay any principal and accrued interest either in cash
at par, or in shares at a rate of 120% of par. Due to market conditions, Yamana
may reduce the targeted size of the financing and will continue its fund raising
efforts.
Operations
Responding to changing market forces, not for geologic or technical reasons, the
company has restructured its operations through employee cutbacks and project
stand downs. These measures are aimed at preserving operating capital while
maintaining the company's core project infrastructure and mineral assets.
The company has consistently maintained a deliberate diversification strategy, both
geographically and by metal targets. Currently, two thirds of the company's
spending is on gold; the rest is on a range of other metals. Yamana's aim is to shift
this to a three part balance among gold, silver and base metal targets.
The company's primary focus now includes drilling and prospecting its land
package at Santa Cruz Vanguardia, Argentina, as well as efforts to secure joint
venture partners for up to seven of the company's nine major projects.
Yamana ran three drilling campaigns during the third quarter: Santa Cruz
Vanguardia, Argentina; Paraguay; and Papua New Guinea.
ARGENTINA
Santa Cruz Vanguardia
The company's wholly owned Santa Cruz Vanguardia epithermal precious metals
project currently includes properties covering more than 1,200 sq km.
Independent geologists have described this developing mining district as being
geologically similar to areas in Nevada where a series of world class deposits has
been discovered.
Drilling continued at the company's Martinetas property in Santa Cruz in October,
following the winter shutdown, in an effort to define a gold resource in the
property's Northern Resource Area. Ten diamond drill core holes for 976m and
83 shallow RC holes for 1,752m were completed during the quarter. All ten DDH
intersected gold mineralization with one encountering 32m of 1.49 g/t Au,
including four metres of 9.86 g/t Au. The best RC hole intercepted 10m of 6.79
g/t Au, including four metres of 16.71 g/t Au.
Reconnaissance drilling, consisting of 35 shallow angle RC prospecting drill holes
for 705m was completed on the Goleta property. Of the 35 holes drilled on
several targets, four were drilled on a newly recognized, large structural feature.
Three hit important mineralization, the best being six metres of 27.72 g/t Au,
including two metres of 57.56 g/t Au.
Geologic mapping and outcrop sampling have defined other attractive drilling
targets at Estrella, Lejano, Bacon and Chispas.
Estrella is west of and adjacent to the Cerro Vanguardia mine development,
where Minorco plans to produce more than 185,000 ounces of gold annually, at a
cost of less than $190 per ounce, from ore averaging about 10 g/t Au and 113 g/t
Ag. The structural zone hosting the Cerro Vanguardia reserves continues well into
the company's Estrella property. Recent rock chip sampling of one structural
offshoot more than one kilometre long consistently yielded assays of between
three and 12 g/t Au plus up to 45 g/t Ag over outcrop widths of one to two
metres. One RC drillhole completed last season in wall rock adjacent to this
structure found disseminated mineralization in an intercept of about 100m at 0.55
g/t Au, including six metres of 2.17 g/t Au.
Rock chip sampling during the quarter at the Lejano property confirmed previous
high grade silver assay results. Of 37 samples taken so far, five produced values
over 1,000 g/t Ag, the highest being 3,400 g/t Ag, and eight others showed more
than 100 g/t Ag.
Of 63 rock chip samples taken at the Bacon property, six assayed greater than
1,000 g/t Ag, including a high of 2,707 g/t Ag, with 2.63 g/t Au. This sampling
was conducted along three kilometres of a hydrothermally altered fault structure
which pinches and swells between 10 and 100m thick.
The company has recently taken surface samples at its Chispas property in the five
to six g/t Au range, on a large quartz vein swarm system with bulk tonnage
potential.
Beginning in January, the company will use its own drill to test many attractive
outcrops of mineralization, particularly at Goleta, Lejano, Bacon and Estrella.
Fin del Mundo
A field program at the company's volcanogenic massive sulphide (VMS) base
metals project, Fin del Mundo, is continuing with follow up of stream sediment
geochemical and airborne geophysical anomalies, field mapping to pull together
the properties geologically, and further analysis of last season's drilling data. The
company has also been conducting site visits for potential partners since access to
the area became possible late in the quarter, following the winter shutdown.
The company has recently assayed additional long sections of core from last
season's drilling at Arroyo Rojo where only about 37% of the 1,465m of core at
the main showing had previously been assayed. A pattern of geochemical trace
element zonation has emerged, which demonstrates that two of the six drill holes
fell short of the VMS target horizon. Based on this new information, the company
expects to be able to better position future drilling to penetrate extensions of the
target, which remains open in three directions.
Reconnaissance work has also allowed the company to reduce its project size at
Fin del Mundo from 1,950 sq km to about 1,650 sq km.
PARAGUAY
The company remains recognized as the leader in Paraguay, where it has made the
first gold discovery in bedrock in the country's history. Drilling during the quarter
included 12 DDHs for 1,345m on the company's Paraguari concession. The
drilling focused on a breccia pipe area which may be the vent of a large,
underlying gold and base metal sulphide porphyry system. The principal intercept
in the breccia pipe yielded 16m of 2.48 g/t Au and, deeper in the sames hole, four
metres of 3.25 g/t Au. Drill hole probing for the porphyry system below the
breccia pipe has encountered encouraging features in an unusual suite of rocks and
further results are pending. Petrographic studies are underway to assess the ore
deposit environment.
Based on reconnaissance results, the company recently relinquished the
Concepcion concession and cut down its San Miquel concession, reducing
project coverage in Paraguay from 1,500 sq km to about 560 sq km.
CHILE
In Chile, potential financing partners are reviewing all three of the company's
projects: Tierra del Fuego, El Indio and the Northern Porphyry copper belt
(NPCB). As a result of completed field programs, the company is continuing to
pare down its land position in all three projects to focus on geochemical and
geophysical targets it has identified within these areas.
A low cost field program is being completed in Tierra del Fuego where geologists
have collected over 200 rock samples from two of its seven gold and zinc
properties. The geology is prospective for VMS and Eskay Creek (BC) type gold
and zinc deposits.
Field work in the NPCB, involving a combination of geological, geochemical and
geophysical surveys, has defined 10 drill targets, concealed by overburden, on six
of the company's ten properties. One property, Capricornio, has had recent
follow up work to verify soil geochemical values up to 1% Cu and, in the Elvira
concession, intensified geochemical surveys have been done in the vicinity of an
intriguing geophysical anomaly.
PAPUA NEW GUINEA
January 23 1998 represents the first anniversary since the company finalized the
agreement with Union Mining NL to earn in on the D'Entrecasteaux Islands
project in Papua New Guinea. By the end of the quarter, the company had earned
30% on the project, adding to its 10.2% equity position in Union. The company
expects to have earned a 40% interest in the project by the end of the next
quarter.
Over the past 11 months, the company has directed: a four part exploration
program of airborne geophysics and mapping with ground follow up; short hole
drilling at the Igwageta property; exploration drilling on the Wapolu property; and,
exploration drilling and mapping of the Gameta property. This work has reinforced
the company's conviction of the project's potential to yield a multimillion ounce
gold deposit.
Of particular interest is the Gameta deposit on Fergusson Island, where a geologic
resource of 2.32 million tonnes averaging 2.29 g/t Au, for about 170,000
contained ounces of gold in a 0.15 by 1.2km zone, had already been established.
The company's reinterpretation of the geologic ore deposit model shows that the
Gameta deposit remains open to the east. This geologically prospective zone is
believed to extend for 15km.
Since taking over the operation, the company has added 3,693m of RC drilling at
Gameta using a more effective drilling contractor. Of the 42 holes drilled, 31
penetrated the upper of two mineralized horizons, with one hitting both horizons.
The company has received assays from 12 completed holes to date, with many
intersecting 10 to 20m of thickness with 1.5 to 2.0 g/t Au. The best intercept is
17.6m of 1.69 g/t Au. This hole, GRC 145, ended in three metres of 5.27 g/t Au,
including the final metre of 8.89 g/t Au. Results from an estimated 40 more RC
holes are expected late in the fourth quarter. Groundwater inflow is present in
many drill holes and this turbulence dilutes the grade of the RC samples.
Therefore, comprehensive DDH drilling will ultimately be required to produce
accurate assay results in the future.
Drilling at Wapolu has shown promise to expand the existing 347,000 ounce gold
resource, and continued drilling is justified. Results at Igwageta have indicated that
the property contains a limited oxide gold resource but does not hold sufficient
potential for a large discovery, and no more work is planned.
Reflecting the company's cost control efforts, virtually all aspects of the PNG
project, including regional reconnaissance, will be stood down by Yamana by the
middle of the next quarter. By that time, the company expects to have completed
approximately 9,200m of RC drilling on Fergusson Island.
INDONESIA
In Indonesia, the company's field work on Kalimantan has identified several
promising hydrothermal breccias on one of the company's contract of work
application blocks. The company has found significant silver and gold values within
a large zone where it has identified five targets worthy of drilling. Continued delays
in granting the COWs, combined with market uncertainties, have motivated the
company to sharply reduce its efforts and spending in this area. With the full
support of the company's partner, Barrick Gold, operations both in the field and in
the Jakarta office have been reduced to a core group of employees who will finish
building and organizing the company's technical database and maintain the
project's infrastructure. This will allow reactivation of exploration, including drilling,
in the event the COWs are granted.
WASHINGTON STATE
In Washington state, the company has discovered an important massive sulphide
system at Yamana's Palmer Mountain project. With first phase drilling having
found grades typical of many North American VMS deposits, this remains a highly
attractive target clearly justifying further drilling to delimit the resource. The target
remains open both at depth and along strike. Geophysical examination of the area
showed numerous EM anomalies, several of which were coincident with VMS
layers found by the drilling. There are several more EM anomalies which have yet
to be drill tested.
The company has secured almost three miles of a proven mineralized structural
zone for its Wenatchee project in Washington, south of the Cannon and Lovitt
mines which produced 1.7 million ounces of gold. Numerous DDH drill intercepts
in the structure by former exploreres, including 30 ft of 1.36 opt Au, prove the
prospectivity of the target zone. The company has begun discussions with possible
partners on the project, which has the potential for a major deep level
(approximately 1,800 ft) gold deposit discovery.
STATEMENT OF EARNINGS
Nine months ended November 30
(US$)
1997 1996
Revenue
Interest income $ 529,047 $ 656,258
Expenses
Salaries and
consulting fees 1,181,468 713,566
General and
administrative 818,881 541,533
Mineral properties
written off 314,459 -
Investor relations 300,211 186,055
Legal and
professional fees 369,956 88,338
Federal, state and
provincial taxes 62,704 112,115
Bank charges and
foreign exchange 55,968 (8,482)
Filing and transfer
agent fees 52,222 34,296
Depreciation 46,761 46,503
General exploration 36,395 124,878
Relocation expenses 30,123 66,103
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3,269,148 1,904,905
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Net loss $2,740,101 $1,248,647
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Loss per share $0.10 $0.05
(c) Copyright 1997 Canjex Publishing Ltd. canada-stockwatch.com |
