By Judy McKinnon And Alistair MacDonald
Yamana Gold Inc. said Wednesday it would form a subsidiary to
hold its noncore Brazilian assets, allowing the gold mining company
to focus on its core assets and trim costs amid slumping gold
prices.
A number of gold mining companies have considered asset spinoffs
as they look to separate assets that don't fit the profile of the
rest of the company owing to factors such as political risk or
location.
The company also said that it has hired Credit Suisse Securities
to look at options for its Argentina project Agua Rica. That could
include joint ventures, or selling a stake or entire project, it
said.
In an interview with The Wall Street Journal last month, Chief
Executive Peter Marrone said Yamana was considering placing some of
its mines in Brazil into a separate company that could be spun off
to current shareholders.
"This approach segregates our portfolios, better focuses our
efforts, reduces our overall costs and allows us in the fullness of
time to evaluate how to best maximize value for our noncore
portfolio," Mr. Marrone said in a statement on Wednesday.
Gold prices have fallen around 38% from their 2011 highs and
Yamana's share prices has declined by about 47% this year, hurt by
lower gold prices and write-downs of Brazilian assets. In the third
quarter, Yamana recorded charges of about $635 million related to
three Brazilian development projects.
In April, Yamana was part of one of the largest mining deals of
the year, when it and another Canadian gold company, Agnico-Eagle
Mines Ltd., agreed to buy Osisko Mining Corp. for about $3.5
billion.
But analysts said that also created a debt pile that now stands
at $1.9 billion. In his interview, Mr. Marrone said the company has
a credit facility of $365 million and its $1.1 billion in long-term
debt matures between 2022 and 2024.
Yamana said the new subsidiary, to be named Brio Gold Inc., will
hold its Fazenda Brasileiro and Pilar gold mines, its C1 Santa Luz
development project and some related exploration concessions in
Brazil. Yamana will retain its Chapada and Jacobina mines.
The new company will be led by a management team made up of
former executives of Augusta Resource Corp., taken over earlier
this year by Hudbay Minerals Inc . The team will be headed by Gil
Clausen as chief executive.
Toronto-based Yamana said Brio management will be tasked with
evaluating strategic options for the spinoff company throughout
2015.
Raymond James Ltd said that the move was positive for the stock
over time.
"Given the underperformance of these noncore mines, the
introduction of a new management team to oversee these assets
provides the potential for improved performance but also allows for
increased attention by Yamana on its remaining portfolio," analyst
Phil Russo said in a note.
Write to Judy McKinnon at judy.mckinnon@wsj.com and Alistair
MacDonald at alistair.macdonald@wsj.com
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