Yamana to sell Mexico mine

Toronto-based Yamana Gold announced plans to sell its Mercedes mine in Mexico.

The company entered a definitive agreement to sell its 100% interest in the Sonora state asset to fellow Canadian company Premier Gold Mines for cash and shares totaling US$140mn.

Under the deal, Premier Gold will pay US$122mn in cash and issue 6mn shares and 3mn share warrants to Yamana.

In addition, Premier will grant Yamana a 1% net smelter return royalty on production from the current land package after 450,000oz gold equivalent has been produced following the closing of the acquisition or six years after closing, whichever comes first.

Proceeds from the sale will be used by Yamana to reduce debt, the company said in a release. Lost gold production will be replaced by the recommissioning of its C1 Santa Luz project in Brazil.

C1 Santa Luz was placed on care and maintenance in 2014. Yamana said that initial capital expenditures to bring the mine back on line are US$84.2mn, including an additional vertimill for a higher processing rate, contingencies and all social and owner's costs.

The mine has proven and probable reserves of 1.2Moz gold, and a forecast 10-year life at an annual average rate production of 114,000oz gold over the first seven years.

The transaction is expected to close by end-September. Yamana, Latin America's fourth biggest gold producer, also has mines in Brazil, Chile, Argentina and Canada.

Premier Gold has projects in the US and Canada.

SECOND QUARTER RESULTS

Yamana posted net earnings from continuing operations of US$32.9mn for the second quarter, compared with a net loss of US$7mn in the same three months of last year.

Second quarter revenue was up to US$467mn from US$455mn on increased gold sales, partly offset by lower silver and copper production and significantly lower realized copper prices, the company said in a report.

Yamana's second quarter production totaled 313,086oz gold compared to 293,707oz in 2Q15. Silver production was down to 1.79Moz from 2.37Moz in the same period of last year.

Copper production at the Chapada polymetallic operation in Brazil fell to 23.2Mlb from 33.6Mlb.