The Mines and Money (M&M) conference in London started on Monday, November 26, with a keynote presentation from Peter Marrone, the founder and executive chairman of Canada-based Yamana Gold Inc. Mr Marrone explained that not all countries in Latin America are created equal and summarised his experiences of the continent.
Mr Marrone acquired the original company, with assets centred on Brazil, for US$18 million in 2003 and listed it in July that year on the Toronto Stock Exchange. The company expanded in 2006 through the acquisition of RNC Gold, Desert Sun Mining Corp. and Viceroy Exploration for a total of some US$1.2 billion. Meridian Gold and Northern Orion were acquired the following year and Extorre Gold Mines in 2012 (bringing with it the Cerro Moro project in Argentina).
Yamana's mission is "to mine precious metals profitably and responsibly", and the company now has six gold mines in the Americas. Prior to founding Yamana, Mr Marrone was an investment banker and corporate lawyer in Toronto. He has now moved away from day-to-day operations, and taken on the new position of executive chairman, with Daniel Racine stepping into the role of president and CEO from his position as chief operating officer.
The company's portfolio of operating mines includes the original asset Chapada (a whole complex acquired from Vale SA) and Jacobina in Brazil, El Peñón and Minera Florida in Chile, and Cerro Moro in Argentina (the latter mine began operations in the second quarter of 2018).
In Canada, Yamana owns half of the Canadian Malartic operation in Quebec. The mine, which is the largest gold producer in Canada, was acquired in 2014 following the acquisition of Osisko Mines Corp. following a 'white knight' joint takeover (with Agnico Eagle) to thwart a hostile bid for Osisko from Goldcorp.
Mining Beacon (MB) caught up with Mr Marrone to ask him what he looked for in a new project?
Peter Marrone (PM): The main things are always prospective geology and stable politics, coupled with a long mining pedigree and a mining code of conduct. Grade is always important, take Cerro Moro, for example, which is one of the world's top-ranked deposits by grade.
MB: Over the past 15 years Yamana has been able to secure good-value assets, is there a secret?
PM: There is no magic formula, but we have been looking in the best place in the world for elephant-sized opportunities; Brazil and Chile are well understood but Argentina also has the potential to be a world class location for mining. All of the jurisdictions in which we operate also benefit from excellent infrastructure and geological potential. At Jacobina (which we acquired in 2006), for example, we have extensive greenstone belt holdings and an attractive risk profile because of the readily-available infrastructure.
MB: What have been the benefits of having assets in different jurisdictions?
PM: Yamana has been able to use its experiences, and skill sets, in one location to benefit operations in other countries. We can diversify our portfolio by assets and jurisdiction while relying on the competency of managing similar assets in different places.
MB: What are the main differences between operating in Canada and Latin America?
PM: Canada has been extensively geologically mapped, whereas barely one-third of Brazil, for example, has been similarly evaluated. There are also different skill sets; in Latin America there is a heightened expertise with regard to operating within communities. These skills manifest themselves with high levels of interaction, local engagement and in compensating local communities for noise, dust etc. With regard to market valuations, assets in Latin America are often discounted compared with the Canadian equivalent, perhaps because of the unfamiliarity of many investors.
MB: In your presentation you focused on the importance of environmental, social and governance (ESG) issues in mining; has it always been important for Yamana?
PM: Yes, absolutely. We inherited certain challenges when we acquired Canadian Malartic because it was an operation that was already ramping up production but, where possible, we implement ESG programmes from the very first stages of exploration. Indeed, we find the focus on ESG high, and comparable, in all the jurisdictions in which we operate (and have won awards for our work).
MB: Yamana expects to deliver 920,000 oz of gold, 7.55 Moz silver and 125 Mlb copper this year. What are your plans for 2019?
PM: Yes, on a gold equivalent basis we expect to produce over 1.01 Moz gold (gold:silver at a ratio of 72:1) this year. We have no major development activity planned for next year, so capital expenditure commitments will fall sharply, but we are evaluating various opportunities. The exploration budget this year is US$89 million, including an unallocated US$16 million to be spent based on exploration results.
MB: Have you ever considered diversifying the search to Africa?
PM: In a word, no. Yamana has lots of opportunities already available to it, and Latin America is a region where we understand the geopolitics, and there is a tolerance of the rule of law.
MB: As an entrepreneur, has it been an advantage having been a lawyer and banker, rather than mining engineer?
PM: Not sure that it makes a specific difference, but you need to know what you don't know, and be ready to ask for advice. My role has always been to make the strategic decisions rather than become too deeply involved in operating activities and to develop a quality management team equipped with the skills required to manage a successful mining company.
MB: Many thanks.
Peter Marrone will be presenting at the upcoming Mines and Money Asia, taking place in Hong Kong, 2-4 April 2019.