Yamana struggles to find buyers for Brazil mines

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Yamana Gold Inc. has been trying to sell mines in Brazil for months, but is struggling to drum up interest in all the properties, people familiar with the matter say.

The Toronto-based company put its three mines in Brazil up for sale at the beginning of the year and hired Royal Bank of Canada to run the process, the sources said.

A spokesman for Yamana declined to comment.

The Chapada, Jacobina and Fazenda Brasileiro mines are nearing the end of their lives and are facing problems.

"I am not surprised that people have passed on it because they are very mature mines," said John Ing, the president of investment firm Maison Placements Canada.

"Jacobina has never worked right. Chapada has been a disappointment and Fazenda is very small."

Those three mines have a combined net asset value of about $3-billion (U.S.), according to a recent report from Canaccord Genuity.

Yamana was previously focused on building its portfolio in South America until it teamed up with another Canadian miner to buy half of Osisko Mining Corp.'s large gold mine in Quebec.

The Quebec gold mine, Canadian Malartic, holds more than nine million ounces of gold reserves and is ramping up production.

In a recent report, Canaccord Genuity analyst Tony Lesiak said he sees the potential for Yamana to try to sell "non-core Brazilian assets" such as its C1 Santa Luz, Ernesto/Pau-a-Pique, Pilar, Fazenda Brasileiro and Jacobina operations.

At the same time, Mr. Lesiak noted, Yamana's mines in Brazil that were supposed to provide growth have not performed as well as expected – and that has hurt Yamana's share price, he wrote.

He said that Chapada was a core asset for Yamana. Selling the other, non-core assets might enable investors to focus on larger, better performing mines, helping to boost the stock.

"In our view the potential divestiture or improved performance of some or all of these non-core assets would allow for a re-rating of the higher quality core," Mr. Lesiak wrote.

Editor's note: A version of this article previously published on the web said the Chapada and other mines in Brazil are nearing the end of their lives and facing problems. A Canaccord Genuity report also described the Chapada mine as a core asset for Yamana.