2006 Sustainability Report

Quick Facts

• Ownership interests: Yamana Gold 12.5%, Xstrata Plc. 50%, Goldcorp 37.5%
• Located in northwest Argentina at a 2600m (8500 ft) elevation,
• Commenced open pit mining operations in 1997
• One of the world's largest copper and gold mining operations, and among the world's lowest cash cost copper producers
• Production (12.5% share): 76,895 ounces of gold
• Proven and probable reserves (December 2007): 399 million pounds of copper and 683,000 ounces of gold
• Forecasted annual gold production (Yamana's 12.5% share):
• 60,000 to 65,000 ounces in 2008
• 55,000 to 60,000 ounces in 2009 

Overview

The operating company is Minera Alumbrera Limited (MAA). MAA has the right to mine the deposit by agreement with Yacimientos Mineros de Agua de Dionisio (YMAD), an Argentine statutory entity which has title to the deposit and which now receives 20% of the net before tax proceeds since project capital plus interest has now been recovered.



The project consists of five facilities in three provinces, namely:

• The open pit mine and processing facilities at Alumbrera, Catamarca
• A 316-km concentrate slurry pipeline through Catamarca and Tucumán provinces
• A 202-km, 220kV power line from El Bracho, Tucumán
• The filter plant and rail loading facilities at Cruz del Norte, Tucumán
• The port and handling facilities at San Martín near Rosario, Santa Fe
• The project also has support offices in Tucumán, Catamarca and Buenos Aires

Geology

The Alumbrera area has been known since the 1800s for its veins of copper and gold ore as well as alum, which appeared by pyrite oxidation. The presence of this mineralization gave rise to small-scale mining activity in the late 1800s and early 1900s, and these works were situated at the southern sector of the edges of the present "Bajo" area.

The Alumbrera alkalic porphyries were intruded some 8 million years ago into the roots of the Farallon Negro volcano. The intrusion generated large-scale hydrothermal circulation, which resulted in alteration and mineralization of the porphyry itself, and its volcanic host rocks. Subsequent erosion has exposed the upper part of the volcano and its porphyry system at a level that is favourable to mining.

Topographically, the Alumbrera deposit is a bowl-shaped, northeast to southwest oriented ellipsoidal depression surrounded by ridges formed mostly by andesitic breccia of the Farallon Negro volcano. The floor of the bowl covers an area of 2.5 square kilometres.

The primary mineralized rocks of Bajo de la Alumbrera consist of a series of porphyritic intrusions into the andesites of the Farallon Negro complex. A total of seven distinctive porphyritic intrusions have been recognised, which form stocks (earliest units) and dyke-like bodies (youngest units) that extend to the outer edge of the deposit with some of the dykes forming a radial pattern around the central stocks.

The ore grades correlate with alteration with the highest copper-gold grades associated with intense Potassic (quartz-magnetite) alteration of two of the earliest mineralized porphyritic intrusions, and in adjacent biotised or potassium feldspar altered andesites. Younger porphyries are less mineralized or barren. The majority of the copper is primary and occurs as chalcopyrite in disseminated grains, and in veinlets.

Copper and gold are positively correlated with gold occurring in association with early pyrite - chalcopyrite - magnetite as free gold grains in the 10 to 50 micron range and as inclusions within chalcopyrite crystals.

Mining and Milling Operations

• Standard truck and shovel mining techniques operations - 42 m 3 shovels and 220 t haul trucks
• Mining carried out on 17 m benches, with 2 m sub-drill
• Current mineral reserves have a low waste to ore ratio of an average of 1.8:1
• Average reserve grade is 0.51 % copper and 0.58 Au g/t
• Total material mined averaged 355,000 tpd, for the fiscal years 2004 to 2007
• Projected throughput is estimated to average approximately 40 million tonnes of ore per annum for the remaining mine life to 2016
• MAA employs approximately 1,100 permanent staff and 800 contractors

Production Processes

The Alumbrera mine produces a copper-gold concentrate and a gold-silver rich dore on-site. The concentrator uses contemporary equipment and is designed to treat 100,000 tonnes of primary ore per day through two identical grinding and flotation lines. Tailings are pumped to an engineered tailings storage facility for long-term containment. The copper and gold concentrates are pumped with added water through a 316-km, 175-mm diameter pipeline over the Nevados del Aconquija mountains to the province of Tucumán, where concentrates are de-watered to obtain an almost dry product (less than 8% moisture content).

From Tucumán, concentrates are railed through the Nuevo Central Argentino railway, on Minera Alumbrera Limited's (MAA's) privately owned trains, to its port facility in Puerto General San Martín, located near Rosario in the province of Santa Fe, where vessels are loaded and shipped to international markets.

Some of the gold in the Alumbrera deposit is "free gold," not chemically dissolved in the other minerals, but freely liberated as discrete gold particles. The particles are very small, averaging about 10 microns, but a significant fraction of the gold can be separated from the other material by gravity processes. The high density of gold allows a centrifuge-type device (called a Knelson concentrator) to separate the gold from other particles of lower density. The Knelson concentrate, which contains about 500 grams per tonne of gold, is transferred to the gold room for further upgrading to dore bullion.

Environment

The operator, Xstrata (formerly MIM Holdings) is committed to conducting business responsibly and in a manner designed to protect employees, the community's health, and the environment. MIM Holdings developed an Environmental Policy and Standards in 1997 for all sites to follow to ensure minimal impact of its operations on the surrounding environment.

The design, development and operation of the facilities is managed with a view to reducing the impact of the operations; ensuring efficient use of energy, water and other resources; minimising waste generation and disposal; and where waste must be disposed of, doing so responsibly. A high standard of environmental protection across all sites is maintained through site-specific Environmental Management Systems (EMS).

A key requirement of the EMS is the ongoing development of comprehensive Compliance Registers for all sites, which is an internal audit of sites' compliance with environmental commitments.

Environmental Initiatives

Since commissioning the Alumbrera operation, the operator has implemented several environmental initiatives to mitigate environmental risk:

• Approximately 75% of the water in the tailings storage facility is recycled for use in the concentrator.
• A tailings pumpback system has been implemented to maximize the amount of water returned to the tailings storage facility from seepage. The design, modelling and ongoing performance of this system, has been openly communicated with the provincial authorities and local communities.
• A joint water monitoring programme has been established with representatives from the provincial government to monitor the area of influence of the minesite, freshwater borefield and below the mining lease.
• The operator has quarterly presentations to provincial government representatives to provide information on the mine s acid rock drainage prediction programme.

The following appeared in the July 17, 2003 issue of Mining Environmental Management, published by Mining Communications Ltd. of London England:

"Minera Alumbrera has opened an urban waste recycling plant in Tafi del Valle, in the Argentina's northwest Tucumán province. The plant separates organic and inorganic waste, converting organic waste into fertilisers, and setting aside inorganic waste for recycling. It will take all of the Tafi del Valle's domestic waste and is part of the compensation offered by Alumbrera to the village for the right to run a transmission line through the municipality. Other sustainable development projects include support for more than 150 primary schools, 18 secondary schools, 70 hospitals and clinics, 50 heath centre, and sports clubs throughout northwest Argentina. It also helps local agricultural producers carry out crop diversification programmes, irrigation works, greenhouse projects and farming schools."

Community Relations

From the early stages of Alumbrera's development, local communities were kept informed regarding the progress of the operation. Since commissioning, Alumbrera has had considerable impact as a direct and indirect employer and provider of infrastructure. The project has helped fund roads, including heavy vehicle by-passes around the towns of Aimogasta, Santa Maria, Londres and Belen, so that the movement of trucks transporting supplies to the mine does not compromise people's safety and quality of life.

Minera Alumbrera Limited (MAA) works closely with Government at the national, provincial, and municipal levels to resolve the inevitable problems arising as a consequence of the development of a large-scale mining industry in its infancy in Argentina.

MAA recognises its responsibility to the communities in which it operates and provides a range of support, including sponsorship. MAA has concentrated community assistance in the Alumbrera neighbourhood on training, education and health, and buying supplies locally where available to encourage regional business development.