Desert Sun Mining

Feature Story
Date: December 01, 2005

Stars Are All Aligning For Desert Sun Mining

By Our Canadian Correspondent

The irrepressible Stan Bharti must have a smile on his face these days because the price of gold is around US$500 per ounce and his Desert Sun Mining is starting to fire on all cylinders in Brazil.

Canadian and Amex listed Desert Sun owns 100 per cent of the Jacobina mine and the 155 kms long Bahia Gold Belt in northeastern Brazil. The mine re-started operations earlier this year after the refurbishment and re-commissioning of the existing plant to process 4,200 tonnes of ore/day with mill feed sourced from the Joao Belo, Basal Reef and Serra do Córrego mining areas. Joao Belo and Basal Reef were mined in a previous incarnation of the Jacobina mine when it was plagued by low gold prices and high costs, whereas the Serra do Córrego, which lies 2.5 kms from the plant, is a new planned mining area outlined by exploration.

Right off the bat proven and probable mineral reserves in the area stood at 17.62 million tonnes at 2.11 g/t gold representing 1.2 million ounces of gold. On the up side, Desert Sun's exploration efforts have also outlined measured and indicated resources of 24.8 million tonnes grading 2.53 g/t representing 2.05 million ounces of gold, plus inferred resources of 22.2 million tones grading 2.61 g/t for another 1.9 million ounces of gold. Not bad at all but if the past is any indication of the future keeping production costs at reasonable levels will be key. In other words, investors should be keeping a close eye the operation’s profitability.

So far the company is off to a good start with the third quarter marking Desert Sun’s first quarter of commercial production. And while not earth shaking, they are positive as revenues tallied C$9 million from the sale of 16,400 ounces of gold at an average selling price of US$442 per ounce. Gold production hit 18,683 ounces in the quarter at an average cash cost of US$292 per ounce and operating cash flow was in the black to the tune of C$566,000. The Jacobina Mine produced operating earnings for the three months of C$1.2 million, before general and administration costs and financial revenue and expenses. In the three months, the mill at Jacobina processed 300,505 tonnes with an average grade of 2.03 g/t gold with a recovery rate of 95.4 per cent.

The Jacobina Mine produced at 75 per cent of operating capacity during the quarter but more importantly, the company remains on track to hit its mandate of 100,000 ounces per year with operating costs expected to drop by up to US$70 per ounce as the mine ramps up production and the company’s currency protection programme kicks in against the strength of the Brazilian Real.

While Desert Sun’s overall bottom line is still in the red with a posted loss of C$503,000 in the quarter, this is a big improvement from the C$4.6 million loss in the three months ended June 30, 2005 and net loss of C$1.7 million, or 2 cents per share, in the three months ended March 31, 2005.

But production is not the only good news. On the exploration front, ramp development has encountered a new conglomerate reef dubbed the Foot Wall Reef some 40 metres in the footwall of the ore zone that is currently being mined. The development programme exposed the new reef over a continuous strike length of 180 metres with channel samples returning up to 4.25 g/t gold over 9 metres. Even better news came from an ongoing step-out drilling programme with one hole intersecting 5.2 g/t gold over 0.6 metre true width within a broader zone of low grade mineralization (0.58 g/t gold over an 8.3 metre true width). The FW reef is open along strike both to the north and south as well as down-dip.

A deep drilling program is also underway at the Joao Belo zone to test the potential down dip extension of the ore zone to a depth of 600 metres below the main haulage level and along strike to the south. A total of eight holes are planned with the first 4-5 holes expected to be completed by the end of this year.

Meanwhile, some 50 kms north of Jacobina, drill results from the Pindobacu target continue to deliver the goods with 23.63 g/t over 2.5 metres and 3.11 g/t gold over 8 metres. Based on drilling and detailed mapping at the Pindobacu, Entry Point and Fumaca targets the mineralized structure has now been traced over a strike length of 18 kms.

On the immediate growth front, negotiations are progressing to fund development of Morro do Vento, which lies only 0.5 km from the processing plant. The area would be the second production area at Jacobina and add an additional 50,000 ounces per year bringing overall production to 150,000 ounces per year by 2007. With total indicated resources of nearly 5.8 million tonnes grading 2.18 g/t gold, plus an inferred tally of nearly 2.5 million tones grading 2.42 g/t, the throughput of the processing plant will need to be expanded from 4,200 tonnes per day to 6,500 tonnes per day. Total capital costs are pegged at US$31.2 million but gold produced from capital development in ore gives back US$14 million making the total new capital requirements for the project US$17.2 million.

Overall, I think you can see that Desert Sun has a lot on the go and, with the price of bullion looking strong, Jacobina may finally be able to shed its ghosts of the past and turn into a real money maker. :)) Desert Sun Mining is banking on it and we will be watching.
http://www.minesite.com/storyFull5.php?storySeq=3159

Yamana Gold Announces the Acquisition of Desert Sun Mining

DSM shareholders will receive 0.6 of a Yamana common share for each DSM common share held. Based on the 5-Day weighted average of Yamana's share price, the transaction price is C$5.47 per DSM common share, representing a premium of 21.1% over the 5-Day weighted average price of DSM's common shares

The transaction results in Yamana becoming a leading intermediate gold producer with the following profile:

- Estimated annualized gold production of 450,000 ounces in 2006 increasing to 700,000 ounces in 2007 and to more than 800,000 ounces in 2008 from operating mines and mines under construction (includes expansion plan for Jacobina Mine proposed by Desert Sun and excludes near development stage projects held by Yamana)

- Total resource base of approximately 11.6 million ounces of measured and indicated resources plus inferred resources of approximately 6.1 million ounces

- Proven and probable reserves of approximately 7.6 million gold ounces (included in above measured and indicated resource total above)

- Proven and probable copper reserves of approximately 2.3 billion pounds

- Cash costs projected at US$270 per ounce of gold in 2006, with US$125 and US$115 per ounce of gold projected for 2007 and 2008, respectively

- One of the largest Brazilian exploration land holdings with a significant presence in three major gold belts