Shares issued 27,316,990 Jul 23 close $0.83
Fri 24 Jul 98 Company Review
Mr. Victor Bradley reviews the company
ARGENTINA
Santa Cruz Vanguardia
Yamana is in its fourth successful exploration season in the Santa Cruz
Vanguardia epithermal precious metals province.
Ranging over the entire province, Yamana's exploration campaign includes
reconnaissance sampling, property acquisition, geologic examination, and
drill evaluation. The portfolio contains 19 properties covering 1,348
square kilometres. Yamana is establishing permanent mine rights and has
purchased about 420 square kilometres of surface rights on some of these
properties. Yamana has built its own operating infrastructure, including
its Bema Ranch base camp and wholly owned drilling unit, to assure
operational success.
Yamana's properties lie within distinct metallogenic zones manifested by
silver gold ratios. This ratio is generally 1:1 in the east, where Yamana
has five properties, including its Microonda and Martinetas discoveries. In
the central zone, containing the Cerro Vanguardia deposit and two Yamana
properties, including Estrella, it is 10:1. The ratio exceeds 100:1 in the
west, flanking the Andean cordillera, an area approximately 75km by 350km,
now recognized as a distinct silver district. Yamana has established a
strong land position in the west with properties covering about 1,005 sq
km.
Drilling to date has produced precious metals discoveries on four
properties with several ore grade drill hole intercepts remaining to be
followed up. A significant portion of the most recent follow-up drilling
has been dedicated to resource definition. Forty additional drill targets
have been established on 14 of Yamana's properties.
Lejano is Yamana's most important discovery thus far. Bonanza grade silver
was encountered on two targets in 10 of 35 short reverse circulation holes,
totalling 906 metres, with 33 holes having significant mineralization.
Yamana launched a second RC drilling campaign in early April, planned for
2,500 metres in about 50 holes, to provide initial tests of five newly
identified mineralized zones and, at South Ridge, to extend the strike
length and conduct infill drilling.
North Ridge drilling amounted to 250 metres in 10 holes. Mapping, sampling
and drilling found braided, fault controlled mineralization over an area of
about 300 metres by 6 metres, with an average grade of 370 g/t Ag and 0.50
g/t Au. North Ridge is viewed as an ancillary target.
Better surface assays were obtained at South Ridge where the highest grab
sample yielded 3,472 g/t Ag, 3.00 g/t Au, and 5.5 per cent Pb from a poorly
exposed gossanous zone, mapped as being up to 100 metres wide and at least
350 metres long.
Nineteen of the 25 initial South Ridge drill holes probed the gossan, and
have an intercept weighted average grade of 296 g/t Ag, 0.66 g/t Au, and
4.2 per cent Pb.
Evidence suggests that there may be more than 2 million tonnes of gossan at
South Ridge, but there is insufficient drilling to calculate an inferred
resource or speculate on its mining economics. Future economic studies will
depend upon the metallurgical response of the oxide ore to various
processing techniques. The mineralized gossan likely reflects a large,
rich, underlying body of sulphide ores, which, when combined with several
nearby mineralized areas being explored, provides potential for discovery
of an orebody at Lejano.
Continuing geologic work has resulted in the discoveries, within a 4km by
1km arcuate zone, of five other gossans at Lejano: Red Slope, Broken Hill
West, Broken Saddle, East Ridge, and Broken Hill South.
The Lejano prospects show pronounced precious metals surface values, with
East Ridge, approximately 1.5km east of South Ridge, exhibiting the
strongest. Poorly exposed metalliferous gossans over 50 metres thick are
found at Broken Saddle and flank Broken Hill on the west and south.
Including Red Slope, these are all targets of the current drilling
campaign.
Reconnaissance radiating out from Lejano has resulted in a new find of
mineralization on Ciclon West, one of eight properties recently added to
Yamana's portfolio. First pass rock chip sampling at Ciclon West returned
assay values as high as 491 g/t Ag, 2.47 g/t Au, and 2.1 per cent Pb over
several metres. This area will receive intensive examination over the
coming months.
The Lejano drilling is being supplemented by a geophysical survey covering
the entire 4km long prospective zone in search of indications of deeper
bodies of sulphides. Similar surveying will also be conducted on Ciclon
West.
At Bacon, Yamana's second discovery in the silver district, first pass
scout drilling also produced bonanza grade silver intercepts. Bacon is
about 150km south of Lejano. Mineralization is hosted in a major quartz
fault vein structure. Eighteen RC holes for 556 metres were drilled in
widely spaced sets into a 1.2km segment of the quartz fault vein. The fault
zone hosting the vein runs for 9km within Bacon and contains two other
sections of similar size and hydrothermal alteration which are now being
developed as drill targets.
The next exploration phase of diamond core drilling at Bacon is expected to
build a precious metals resource, test other mineralized sites, probe the
veins at depth, and recover samples for metallurgical tests.
Yamana made its first discovery in Santa Cruz three years ago at Microonda,
near the Atlantic coast, where a major auriferous hydrothermal system was
identified spreading over at least 5 sq km. There, 11 targets have been
probed by 58 RC drill holes totalling 10,538 metres. All but eight holes
intercepted anomalous gold values, equivalent to at least 10 metres at 0.10
g/t Au.
Diamond core drilling is needed to unlock Microonda's geologic secrets. The
second discovery of a large epithermal gold system at Santa Cruz came at
Martinetas, 10km east of Microonda. Drilling was spread over about 3 sq km
and involved 152 drill holes for 6,959 metres. A total of 110 scout holes
were drilled in search of near surface mineralization. There are 13 diamond
core drill holes and 23 RC holes concentrated in a 0.5 sq km area on the
northern Martinetas target, where an undefined bulk tonnage resource
exists. The mineralized area covers at least 440 metres (north-south) by
210 metres (east-west) and ranges up to 200 metres deep. A major north
striking fault cuts the target off on the west, possibly down dropping and
concealing mineralized ground to the west. This down dropped fault block,
untested by drilling, remains the best exploration bet for enhancing
Martinetas.
Mineralization to the east of the fault occurs in a system of sheeted high
grade quartz veins, which constitute a large volume of low grade material
and this area has been insufficiently drilled to calculate a bulk tonnage
geologic resource.
The economic target at Martinetas is under reconsideration. The volcanic
tuft between the sheeted quartz veins may not be economically mineralized,
and development of discrete veins may provide a better model rather than
trying to group them into a bulk tonnage target. Preliminary metallurgical
tests on these veins show that the gold is generally amenable to
preconcentration by gravity methods, with substantial amounts reporting to
a simple gravity concentrate.
High grade targets on properties around Martinetas are being systematically
drilled as part of the continuing program. Limited follow-up drilling on
Goleta, about 5km north of the Martinetas mineralization, yielded a best
intercept of 10 metres at 1.39 g/t Au and 4 g/t Ag. The mineralized zone
remains open. Drill assay results are pending from a series of drill holes
at Hombro, about 15km northeast of Martinetas.
Fin del Mundo
At the southern tip of Argentina, Yamana holds 100 per cent interest in
1,632 sq km of land prospective for the discovery of volcanogenic massive
sulphide deposits and epithermal gold and silver deposits. Until early 1998
exploration was focused on massive sulphide showings, but now is more
directed to following up a series of gold anomalies. Yamana's geologists
think the findings point to the existence of a new epithermal precious
metals district.
Widespread precious metals prospects have been defined by pan concentrate,
stream sediment, soil, and rock chip sampling. Most show highly anomalous
arsenic, as well as gold. Those of interest are: Rio Amarillo, Rio Cafe,
Rio Almanza, Pink Hill and Barranca Blanca.
A first phase diamond core drilling program during the previous field
season completed a total of 14 core holes on 3 of 12 VMS prospects. An
assessment of those results continues this season, with additional geologic
mapping and sampling of the precious metals prospects, as well as core
logging, assaying, and spectrographic geochemistry in progress. Drill
targets are being defined on five of the remaining prospects.
Of the three prospects drilled, the best intercepts are at Arroyo Rojo
where six of seven holes returned good assays.
Fin del Mundo project development is continuing, with good prospects for
both epithermal precious metals and VMS polymetallic discoveries.
CHILE
Tierra del Fuego
Five concessions, totalling 108 sq km, have been established in Tierra del
Fuego, Chile Ž an extension of Yamana's Fin del Mundo project in
neighbouring Argentina. The Jurassic-age volcanic stratigraphy is
prospective for both volcanogenic massive sulphides and epithermal precious
metals deposits.
These five areas were staked on precious and base metals anomalies from
systematic stream silt and rock sampling and from identification of
favourable zones of hydrothermally altered rock.
Most promising is Hope 3, near the Argentine border where first pass
sampling identified an epithermal precious metals system.
Cupula, west of Punta Arenas, was identified by a stream silt sample of
2.03 g/t Au, with 0.2 per cent Zn and 0.2 per cent Pb.
On Peninsula Hardy, a promontory leading down to False Cape Horn in the
subarctic ocean, three concessions were staked in a volcanic rock belt.
This geologic environment defines clear potential for VMS, as well as
intrusive hosted gold deposits.
Jackson and Gardiner have exceptionally anomalous gold values in stream
silt samples. Both show earmarks of epithermal precious metals systems.
At Gardiner, stream silt samples yielded anomalous golo, up to 4.12 g/t Au.
Centinela gave anomalous zinc values. Centinela is highly prospective for a
base metals target.
Northern Porphyry Copper Belt
Eight concession blocks comprising 490 sq km are held within Chile's
Northern porphyry copper belt.
Capricornio is most attractive, with coincident geophysical and geochemical
anomalies. Two northeast trending zones have been outlined, the main one
being 800 metres wide by 2,000 metres long, where copper oxide ore is
possible at depths of 100 to 150 metres. Capricornio falls between the
Mantes Blancos mine to the west and the recently discovered Spence deposit
to the northeast. A strong northeast striking fault zone, which may have
influenced the positioning of those orebodies, also cuts Capricornio.
Satellite images of the concession indicate widespread rock alteration
characteristic of many mining areas, and major mining companies are
actively testing adjacent land parcels.
Bufalo, 30km east of Capricornio, consists of three blocks, each with a
defined surface geochemical anomaly ready for drilling.
Yamana recently expanded its Bufalo land position, based on hydrothermal
alteration of rocks, faulting and other positive geological signs. It now
covers the flanks of an extinct volcanic centre with strong central
silicification. There, beneath leached and barren surface outcrops which
surround a higher silicified volcanic vent, economic grades of copper are
concentrated in a blanket formation at about 200 metres below surface.
Viento, 150km south of Bufalo, is a shallow geophysical drilling target
where an attractive induced polarization anomaly 2km in diameter lies at
shallow depth beneath a pediment. Competitors have locked up the
surrounding ground.
Huasco, Salar, Paciencia, Plomo, and Elvira complete Yamana's concessions
portfolio. With work still to be completed on two blocks, Yamana's
geologists have already established 10 drilling targets on six concessions.
Twenty thousand metres of RC drilling are needed to test these 10 targets.
INDONESIA
In early 1998, pre-election uncertainties and financial constraints saw
Yamana's field operations there cease and staff reduced to a core group.
The crisis persists, but is being addressed.
On Feb. 19, 1998, Yamana and the government of Indonesia signed the CoW for
block 1. This provides Yamana with secure tenure over its most prospective
area. The remaining eight CoW applications may be processed in the coming
year. Block 1, now covering 1,650 sq km, is 170km northeast along a
volcanic corridor from the Kelian mine, which produced 484,000 ounces of
gold and 335,000 ounces of silver in 1997.
Block 1 has emerged as Yamana's primary target area following the
reconnaissance sampling and mapping conducted earlier on its southern seven
CoW applications. Exploration on blocks 7, 10, and 12 led to their
relinquishment, and the conversion of other land into a National Park
resulted in releasing the western halves of blocks 6, 8, and 11. The areas
released were not prospective. This reduced Yamana's applied-for area from
2.7 million hectares to about 1.7 million hectares.
Yamana subsequently shifted emphasis from reconnaissance to follow-up
examinations of anomalies. This resulted in the discovery of a new
epithermal gold and silver district, at least 10km long and 2 to 5km wide,
in central block 1.
Six prospects have been defined within the HSB/HSK district, with nine
drilling targets already developed on three of them. The three most
advanced prospects are HSB-10, HSB-19, and HSK-3. HSB-10 is a zone at least
1.2km long and up to 250 metres wide containing numerous mineralized
outcrops of breccia and intrusive. Five outcrop areas are now considered
drilling targets, with four others requiring additional work.
PAPUA NEW GUINEA
Yamana has been actively exploring for precious metals in Papua New Guinea
since February 1997, following its agreement to earn-in on Union Mining
NL's 100 per cent interest in 13 mineral tenements, and to purchase equity
in Union. Yamana must spend $6.8-million (U.S.) over four years in order to
earn a 51 per cent interest in the properties. In the event that Union
elects not to maintain its 49 per cent interest, Yamana has the right to
increase its interest to 75 per cent. It has reached a 30 per cent earn-in
interest level in the PNG property and expects this interest level to reach
40 per cent by July 1998. Yamana also holds a 7.8 per cent equity interest
in Union.
The properties are in the prospective Pacific Rim of Fire, mainly in the
D'Entrecasteaux Islands of eastern PNG. They comprise 3,260 sq km, covering
all of Fergusson and Goodenough islands, about one-third of Normanby
Island, and an area on the nearby PNG mainland.
Yamana assumed management of the joint venture from Union midway through
the 1997 exploration program.
New geologic cross sections show that numerous drill holes were too shallow
to reach the main ore zone at either the Gameta or Wapolu gold deposits.
During 1997, the joint venture drilled 271 holes for 11,362 metres on three
properties on Fergusson Island: Gameta, Wapolu and Igwageta. This involved
six diamond core drill holes for 436 metres, 156 RC holes for 9,454 metres,
and 109 airtrack holes for 1,472 metres. Work was terminated on the
Igwageta prospect in mid-year when results pointed up only a limited gold
resource possibility, but continued at Gameta and Wapolu, where several
peripheral targets were tested.
The stronger effort went into Gameta, where drilling opened up a large area
for further exploration, showing potential to substantially increase the
gold resource, now estimated at 4.01 million tonnes at 2.36 g/t Au (304,400
ounces). One of the last RC holes completed in the 1997 program intercepted
49 metres at 4.02 g/t Au and 7 g/t Ag from a vertical depth of 42 metres,
bottoming in mineralization. The geologic and assay results of this hole,
together with other mineralized RC drill holes in the vicinity, establish
an attractive target for a multi-million ounce gold deposit, which requires
diamond core drilling for further evaluation.
Drilling also increased the gold resource at Wapolu, to an estimated 7.61
million tonnes at 1.55 g/t Au (378,100 ounces). More importantly,
application of the revised geologic concepts has resulted in a series of
new drill targets, adding considerably to Wapolu's upside.
Based on this latest drilling program, a revised global gold resource
estimate for Gameta and Wapolu is 11.62 million tonnes at 1.83 g/t Au
(682,500 ounces), including both oxide and sulphide mineralization.
The joint venture also completed airborne geophysical and photographic
surveys covering 2,500 sq km. The airborne database was integrated with
reconnaissance geologic and geochemical results and produced 32 target
areas for further follow-up.
Although Yamana's PNG program has been stood down while exploration efforts
are focused elsewhere, this project holds promise for future development.
UNITED STATES
Washington State: Wenatchee
The Wenatchee gold belt project is near Wenatchee, Washington. The gold
belt is a northwesterly trending linear structural zone at least 9 miles
long and up to 0.5 miles wide, containing extensive gold and silver
mineralization. Two mines, roughly in the centre of the belt, have produced
about 1.6 million ounces of gold.
In 1997, Yamana carried out a comprehensive property acquisition program in
the area, acquiring mining rights covering 750 acres of private land and
260 acres of unpatented mining claims along the 3 mile extension of the
trend to the south of the L-D mine.
As part of the property transaction, Yamana obtained a database valued by
one independent geologist at over $20-million including assay results and
much of the core from 122 diamond core drill holes (202,000 feet) on the
projected trend of the Wenatchee gold belt.
An extraordinary number of these holes encountered significant
mineralization.
Yamana's geological team is focused on organizing the huge database to
support future exploration, as well as discussions with potential joint
venture partners.
Based on the previous exploration drilling, it appears that the southern
portion now controlled by Yamana contains the best potential for discovery
of additional deposits.
Washington State: Palmer Mountain
During 1997, Yamana completed a successful diamond drilling program on its
Palmer Mountain project in Okanogan County, Washington. This drilling
defined significant copper/zinc volcanogenic massive sulphide
mineralization in a block of greenstone rocks of Permo-Triassic age. Most
of the mineralization underlies patented mining claims that are not subject
to any possible future federal royalties.
Yamana completed 18 diamond core drill holes, totalling 5,130 feet. Sixteen
of the holes showed VMS mineralization and nine intersected significant
zones of copper/zinc values.
The 1997 drill hole locations were based on mineralization at two old mines
which produced about 3,500 tons averaging 3.1 per cent Cu 0.030 oz/t Au,
and 0.4 oz/t Ag. Mineralization in outcrops and geophysical data indicate
extensions of the mineralized layers between them, a distance of about
2,000 feet. A geophysical survey conducted just prior to drilling
identified many new targets and extended the probable strike length of
mineralization several times that of the original target. Further drilling
could develop substantial mineral reserves.
A number of major mining companies have shown interest in Palmer Mountain,
and Yamana hopes to complete a joint venture agreement and move ahead with
exploration in 1998.
PARAGUAY
Yamana's primary mineral concession in Paraguay is Paraguari. The property
is being expanded from 495 to 992 sq km to completely cover an alkalis
complex, the largest of its kind known in South America, where Yamana
encountered encouraging gold values with initial drilling. Similar alkalis
rocks elsewhere in the world host large copper and gold orebodies. Twelve
diamond core drill holes (1,345 metres) in the Sapucai area within
Paraguari made the first gold discovery in bedrock ever recorded in
Paraguay.
The Sapucai area is an attractive exploration target which remains largely
untested. Widespread dispersion of visible gold in panned concentrates
comes from streams draining a 35 sq km area, much of which is covered by
jungle and thick soil. Many samples showed assays in the 2.00 to 5.00 g/t
Au range, with a high of about 14.00 g/t Au. Application has been made for
a concession in the Paso Yobai area, about 70km east of Paraguari, to cover
the potential bedrock source of recent alluvial gold activities.
Expenditures in Paraguay will be kept to a minimum until a financing joint
venture partner can be found.
OTHER PROPERTIES
Chile: El Indio Belt
Yamana holds two optioned areas, totalling 54 sq km, which show strong
hydrothermal alteration in Tertiary age volcanic terrain, similar to
Barrick's nearby El Indio gold mine.
Manila shows a geophysical response that warrants 1,500 metres of first
pass RC drilling. Intense hydrothermal alteration encircles a valley where
there is evidence of highly silicified rocks 100 metres below its floor,
which may contain gold. Arrieros has geochemically anomalous gold values in
surface samples. An underlying iron rich volcanic layer, the Ferruginous
Manta contains polymetallic mineralization. Bulldozer trenching was partly
completed to provide subsurface exposures and to establish future drill
platforms.
FINANCIAL
For this year, Yamana incurred a net loss of $5.7-million compared to a net
loss of $1.8-million for the previous year. This increase was mainly due to
mineral property writeoffs of $2.5-million reflecting an assessment of the
diminished value of the Neuquen oxide copper project and decisions to
abandon exploration at Concepcion in Paraguay and at Blue Lake and Schuer
Bet in Washington State.
Expenditures relating to exploration, including amounts spent by partners
and the investment in Union Mining NL, increased 30 per cent to
$17.1-million in 1998, from $13.2-million in 1997. Partners' expenditures
were $3.3-million in 1998 and $2.8-million in 1997. Yamana earned a 30 per
cent interest in the PNG mineral properties and, except for minimal
continuing property payments, fulfilled all major work commitments in
Indonesia, PNG, Paraguay and Chile for the upcoming year. Corporate, rather
than technical, decisions by Rio Algom and Westmin Resources returned 100
per cent of the Santa Cruz and Fin del Mundo projects, respectively, to
Yamana. These decisions have worked to Yamana's advantage due to recent
exploration successes, especially at Santa Cruz where Yamana now intends to
enhance shareholder value by maintaining complete ownership and using
systematic equity financing to finance continuing development activities.
Working capital as at Feb. 28, 1998 was $4.2-million, compared to
$19.9-million at Feb. 28, 1997. To conserve cash, Yamana implemented sharp
cutbacks in program and administrative spending, across the board salary
reductions, and extensive layoffs. Expenditures for all properties,
excluding Santa Cruz, are at a minimum.
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