The Canadian based gold producer Yamana Gold recently signed an Agreement with the provincial Government of Catamarca, Argentina which extends the 2014 MOU that allows the mining company to consolidate mining projects especially the Agua Rica project. According to credible reports the Agua Rica project mineral deposit is estimated to be at least 3 times larger than the most lucrative mine in the region which includes, Bajo de Alumbrera, which is located roughly 35 kilometres away from Agua Rica.
The rich deposit site which was initially explored by Northern Orion and BHP Billiton more than 2 decades ago however has drawn flak from engaged mining companies as well as the local populace and hence the mine has yet to be productive. Although Yamana Gold Inc had been given the green light to start construction work, local communities, environmentalists and assemblies have successfully prevented mining activities from taking place despite heavy handed crackdowns from the authorities.
The violence had prompted international attention and as of 2010 any mining related activity was put on hold at Agua Rica. Most of the concerns to halt mining activities were centred on public health concerns that were related to air pollution, water supply and soil contamination as the mine’s location is approximately only 17 km from Andalagá city flanked by 3 rivers which is the main source of water supply to the communities in the region.
The mine is reported to hold vast reserves of copper and gold and the current situation has led the company to implement strategic frameworks to increase its value via a joint venture with XSTRATA and Goldcorp would collectively be paying Yamana using that theoretical spot price of $1,400 for gold enhancing their revenue streams which has caused the stock option for this company a gold mine in itself. Although the spot price component which has been incorporated into the deferred value of the company which may take a few more years to materialise, the potential for the company’s stock options to sky rocket is golden if not epic.
The company’s decision to monetize their holdings in Agua Rica is within the interest of its shareholders and thus the company has been careful about its strategic implementations pertaining to Agua Rica. Yaman would effectively be enjoying cost reductions with the proposed ventures due to 12.5 % stake and in retrospect the revenue stream would actually be enhanced as the mine reportedly holds a minimum of 6.56 million ounces of gold, which based on current spot gold prices multiplied by the percentage of holding and minus mining costs would increase the company’s net worth rather significantly.
The mine is also reported to hold a minimum of 102.2 million ounces of silver, 9.79 billion pounds of copper (largest on the planet), and 629 million pounds of molybdenum which are all governed by the same payout structure and processes. To find out more about how Yamana Gold Inc has structured its Agua Rica dealing please visit: http://www.fool.com/investing/general/2011/03/09/the-biggest-gold-deal-of-2011.aspx