Update On Construction Activities At Cerro Moro
TORONTO - Yamana Gold reported on construction activities at its Cerro Moro project in Argentina. Cerro Moro construction activities advanced in the fourth quarter according to plan. The commissioning and ramp up schedule has Cerro Moro well positioned to achieve previously provided production guidance. Notable milestones achieved in the fourth quarter include: Underground and open pit mine development is now being managed by Operations having already transitioned from Technical Services; Underground development in 2017 progressed according to plan and produced a high grade stockpile of approximately 16,265 tonnes grading 27 grams per tonne ("g/t") gold and 1,725 g/t silver; Open pit operations have commenced with mobilization beginning in December and development activities are now underway at the high grade Escondida Central pit, where the ore zone starts at surface; and in the processing facility, completion of the mechanical discipline was achieved at year end 2017 while electrical and instrumentation activities are scheduled to be completed in the first quarter of 2018.
Expenditures for the 12 months ending December 31, 2017 totaled approximately $172 million with the scope of activities and level of spend in line with plan of $178 million and the project remains on budget. The Company expects the balance of planned expenditures to be spent in the first half of 2018 with the majority in the first quarter. In line with plan, mill commissioning is scheduled for the first quarter of 2018 with ramp up of operations expected in the second quarter. The Company is expecting to account for production from Cerro Moro as commercial production before mid-year. As a result, nearly all of the 2018 production contribution from Cerro Moro is expected to contribute to cash flow.
Full year production for both gold and copper exceeded the higher guidance levels set in October, which, for gold, was the second increase of the year. Original guidance set in February 2017 was for 920,000 ounces of gold, 4.74 million ounces of silver, and 120 million pounds of copper. Production for all metals was delivered at costs in line with or better than guidance for the full year.
Yamana is also pleased to report that it has entered into a copper advanced sales program pursuant to which the Company will receive $125.0 million on January 12, 2018 in exchange for approximately 40.3 million pounds of copper to be delivered in the second half of 2018 and first half of 2019. This production represents approximately one third of planned production in the period of the program or approximately 16 per cent of the total production for 2018 and 2019. Copper is expected to be delivered against these prepaid volumes coincident with planned shipments of concentrate from its Chapada mine.
The program allows a better balance of cash flows quarter over quarter in that cash flows that would be generated from the production and sales of copper in later periods is being realized in this quarter which is normally a weaker quarter for cash flows and which, in this case, also coincides with the final quarter of significant capital expenditure in relation to Cerro Moro.
Peter Marrone, Chairman and Chief Executive Officer, said, "We are pleased with our strong operational performance. We have met and significantly exceeded production at low costs that are consistent with our costs guidance. We are also very pleased with the advancement of Cerro Moro, which is on schedule to begin operations in a few months. The copper advanced sales program is part of a series of steps we have undertaken, and continue to undertake, as part of a program begun several years ago, to definitively improve and settle our balance sheet and financial status, all in preparation of the start-up of Cerro Moro. We expect Cerro Moro to meaningfully increase our cash flows based on its planned strong production of precious metals at low costs, costs that are among the lowest in the industry. We are now well positioned with our six, and soon to be seven, producing mines along with a strong pipeline of advancing assets and opportunities."