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Yamana upgrades reserve and grade estimates at Jacobina Mine

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(Kitco News) - Yamana Gold is not seeing much love from investors even after announcing an increase in reserves and grade estimates at Jacobina Mine.

Thursday, the mid-tier gold producer said that it is increasing its mineral reserve and resource estimate to 2.279 million ounces. The new estimate does not include the production the company has seen in the first six months of the year.

At the same time, Yamana gold increased the mineral reserve grade by 2.6%. This is the second consecutive year that the company has increased its grade estimates.

“From year-end 2017, overall mineral reserve grade has increased by 5.3%,” the company said in a press release. “The mineral reserve estimate and mineral reserve grade increase provides a stable platform for expanded long-term production and free cash flow generation.”

The company added that the mine, located in northeast Brazil, represents a significant production platform.

“Jacobina is now a significant contributor to Yamana’s net asset value, EBITDA, cash flow, and free cash flow,” the company said. “The improvement in mineral reserves and reserve grade in the mid-year updated mineral reserves at Jacobina supports annual gold production above the 170,000 ounces as previously guided after the completion of Phase 1 and further supports the potential of Phase 2, which would see production increase above 225,000 ounces per year.

However, the announcement does not come as much of a surprise to some analysts.

Andrew Kaip, analyst at BMO Capital Markets, said that the new reserve estimate doesn’t change his current outlook for the company.

“The improved reserve base should support [Yamana’s] goal of moving to higher long-term production rates, which are already factored into our forecasts,” he said.

Following the announcement, Yamana’s stock price is down more than 3% on the day. A drop in the gold price could also be weighing on the mining company.

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