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Aura Minerals acquires three gold mines from Yamana Gold for $200 million

Published: 12:58 10 Jun 2009 EDT

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Yamana Gold has signed an agreement to sell three of its mines to Vancouver-based junior Aura Minerals for a US$200 million cash and stock transaction.

In a statement Tuesday, Yamana CEO Peter Marrone said, "The sale of these non-core mines is expected to result in lower cash operating costs, higher margins, and increased reserves, production and cash flow per mine."

The sale of the San Andrés Mine in Honduras and the São Francisco and São Vincente Mines in Brazil, Marrone asserts, will allow Yamana to "derive significantly more value from our share position than had these mines remained directly held by our company, particularly in a higher gold price environment."

In the deal Aura will acquire 1.8 million ounces of proven and probable gold reserves, plus 2.44 million measured and indicated gold resources. It will give the company the potential to "internally fund capital projects with the cash flow from the acquired gold mines," an Aura press release said.

Among Aura's holdings is the Aranzazu Project which includes the producing Arroyos Azules Copper mine in Zacatecas State, Mexico, along with an advanced 1,400-hectare land package. The Aranzazu Project reportedly hosts a large copper resource with concentrations of gold and silver.

The deal includes US$90 million in cash, $70 million in deferred cash payments, and $40 million in common shares of Aura Minerals, at a price of Cdn 40 cents per share. In addition, Yamana will receive a contingent cash flow-based royalty on the three gold mines "that will provide payments to Yamana of up to US$40 million, based on operations generating net free cash flow above certain milestones," Yamana said.

Patrick Downey, president and CEO of Aura said, the three mines "will transform Aura Minerals into an intermediate gold producer, focused in the Americas with a significant development pipeline. The acquisition of these producing gold mines provides immediate cash flow from stable jurisdictions and fits ideally with our strategy of growth in the Americas."

"We will take immediate possession on closing of the San Andrés Gold Mine, with formal transfer of the Brazilian assets being completed after approval of the relevant authorities, which is expected in approximately six months," he added.

Aura plans to continue the operational improvements initiated by Yamana at the San Andrés Gold Mine and to further ramp up production and reduce cash costs once installation and commission of the new primary crusher and conveyor system are complete.

At the Brazilian gold operations, the two companies intend to form a joint management team during the period that the transfer of the assets is being finalized. "This will allow both parties to determine potential opportunities to improve throughput and recoveries at both operations which will be of mutual benefit," Aura said.

"We also plan an immediate exploration reconnaissance program on the exploration concessions contiguous with the São Francisco Gold Mine and São Vincente Gold Mine. To date, no drilling has been completed but there is evidence of several garimpeiro (artisanal miner) workings in the 50 kilometre stretch between the operations," Aura added.

In a statement, Yamana's Marrone said, "We are confident in the ability of Aura's management to manage these mines, allowing us to maintain an interest through our share position and royalty."

The acquisition will close in two stages with the acquisition of the San Andrés gold mine expected to close by July 23, 2009. The second stage-the acquisition of the Brazilian mines, is expected to be completed in six months. Aura plans to complete a Cdn$70 million financing during that time.

 

Mineweb is a web-based international mining publication focusing on mining financial and corporate news and comment.    

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