Yamana Gold [stock_market_widget type="inline" template="generic" color="default" assets="YRI.TO" markup="(TSX: {symbol} {currency_symbol}{price} ({change_pct}))" api="yf"] recently announced the results of the pre-feasibility study of the Agua Rica project in Argentina, and investors are going to like what the company has revealed. Let’s take a closer look at the results of the study and see how the project can impact Yamana in the long run.
Impressive Results from the Pre-feasibility Study
The study carried out by Yamana reveals that the proven and probable copper mineral reserves at Agua Rica have increased 21% to 11.8 billion pounds as compared to the end of 2018. What’s more, gold reserves at the mine have increased to 7.4 million ounces, up 12% from the end of December last year.
The mine has a life of 28 years. For the first 10 years of its life, the mine is expected to deliver annual copper equivalent production of 533 million pounds. But the higher production is not the only positive for Yamana. This is because the cash costs at the mine have decreased to $1.29 per pound of copper, while all-in sustaining costs are now down to $1.52 per pound for the first decade of production.
Yamana expects to complete the entire feasibility study by next year.
The Impact on Yamana
Yamana Gold anticipates big returns from the project. The press release issued for the feasibility study states that:
What’s more, the project should allow Yamana to capitalize on an improvement in copper prices. This is because if copper prices increase by $0.25 per pound, the NPV of the project will increase by over $500 million as compared to the base case scenario.
This bodes well for the company as copper prices can be expected to improve in the future. This is because the copper market is expected to move into a deficit from 2021 onward after recording a surplus over 2018, 2019, and 2020.
In fact, investment bank Morgan Stanley predicts that a copper market deficit will start emerging this year itself and push up the price of the metal. As reported by the Financial Times:
Demand growth should slow versus 2018, but anything above 0 per cent is sufficient to tighten the market, jolting it from its finely balanced state into outright deficit.
So Yamana Gold is making the right move from a long-term perspective to boost its copper business and take advantage of the uptrend in prices.
