The Company recently announced an agreement with Xstrata Queensland Limited and Goldcorp Inc. that would facilitate the ultimate integration of Agua Rica into Minera Alumbrera. Subject to Xstrata and Goldcorp exercising their option to have Alumbrera acquire the assets of Agua Rica, and following the integration of the projects, Xstrata, Goldcorp and Yamana would own interests in the combined project of 50%, 37.5% and 12.5% respectively, consistent with their current interest in Alumbrera.
In addition, the Company will receive a combination of initial and option payments and deferred consideration which allows Yamana to retain positive exposure to the majority of the significant gold resources at the Agua Rica project. The integration of Agua Rica with Alumbrera provides the greatest value potential for Yamana and the best opportunity for the development of Agua Rica in the Catamarca province of
Development Projects Update
Yamana has four development projects which are expected to commence production throughout 2012 and 2013 which are Mercedes, C1 Santa Luz, Pilar and Ernesto/Pau a Pique. Cumulatively, these projects will contribute an additional average annual production of 440,000 GEO.
The construction of Mercedes began in mid 2010 and is progressing as expected. During the quarter the mill was received on site. Concrete works and the first phase of the tailings dam development were almost completed. The bulk excavation and access roads were also completed. Mercedes is on track to be in production by mid 2012 with average annual production of 120,000 GEO.
Exploration at Mercedes continued to confirm the continuation and high grades of Lagunas Norte in the Barrancas system, increasing the strike length of the Barrancas zone to 1.1 kilometres. Development of Lagunas Norte has been accelerated to potentially enhance production levels at the project. Drilling also confirmed the continuation of significant widths within the Diluvio zone of the Lupita vein structure. The results of this exploration are expected to continue to increase and upgrade the total mineral resources at Mercedes. These new areas and additional exploration will provide additional accesses to the ore bodies. This increases the prospects that the Company will be able to increase production and extend mine life.