The Cerro Moro project is located approximately 70 kilometres southwest of the coastal port city of Puerto Deseado in the Santa Cruz province of Argentina. Cerro Moro contains a number of high grade epithermal gold and silver deposits, some of which will be mined via open pit and some via underground mining methods. In February 2015, Yamana announced that it would proceed with the construction of Cerro Moro. The feasibility study is based on annual production in the first three years of approximately 150,000 ounces of gold and 7.2 million ounces of silver, with annual production averaging approximately 130,000 ounces of gold and 6.4 million ounces of silver over an initial 6 year mine life at a throughput of 1,000 tonnes per day. The concentrator will consist of a standard crushing, grinding and flotation circuit with a counter current decantation and a Merrill Crowe circuit included.
The procurement of long lead items is underway and Cerro Moro remains on track for construction to begin in early 2016, commencing with select bulk earthworks activities. Project capital costs, as estimated in Q1 2015, are approximately US$265 million which includes US$31 million in late 2015 for detailed engineering and pre-development.
Sandstorm has a silver stream agreement to purchase an amount of silver from Cerro Moro equal to:
- 20% of the silver produced, up to a maximum of 1.2 million ounces of silver annually, until Yamana has delivered to Sandstorm 7.0 million ounces of silver; then
- 9.0% of the silver produced thereafter for the life of the mine.
As part of the Cerro Moro Stream, Sandstorm has agreed to purchase an amount of silver from the Minera Florida mine in Chile and the Chapada mine in Brazil, during the years 2016 through 2018 equal to:
- 38% of the silver produced, up to a maximum of 200,000 ounces of silver annually from Minera Florida; and
- 52% of the silver produced, up to a maximum of 100,000 ounces of silver annually from Chapada.
If by January 1, 2019, the Cerro Moro processing facility has not averaged 80% of its daily nameplate production capacity over a 30-day period (the “Commencement of Production”), then Yamana’s producing El Peñon mine in Chile will provide a 24 month backstop until the Commencement of Production has begun. During the 24 month backstop, if applicable, Sandstorm will purchase an amount of silver equal to 16% of El Peñon’s silver production up to a maximum of 1.2 million ounces per annum.
Sandstorm will make ongoing payments for each ounce of silver received, equal to 30% of the spot price per ounce of silver. Sandstorm made an upfront payment of US$70 million to acquire the stream in October 2015.