Yamana Gold Announces Sale of its Mercedes Mine in Mexico

TORONTO, ONTARIO--(Marketwired - July 28, 2016) - YAMANA GOLD INC. (TSX:YRI)(NYSE:AUY) ("Yamana" or "the Company") is pleased to announce that it has entered into a definitive Share Purchase Agreement (the "Agreement") to sell 100% of its interest in the Mercedes mine in Sonora, Mexico to Premier Gold Mines Limited ("Premier") (herein referred to as the "Transaction"). Pursuant to the Agreement, Yamana will receive consideration in the form of cash and equity securities, the value of which was $140 million at the time of negotiations. Total cash and equity securities consideration is summarized as follows:

1. Cash consideration of $122.5 million;
2. Approximately 6 million Premier common shares; and
3. Approximately 3 million Premier common share purchase warrants (exercisable at C$4.75 per common share for 24 months from the closing of the Transaction).

The Company expects to use the proceeds from the Transaction to reduce the Company's net debt position.

In addition, the Company will receive a 1% net smelter return ("NSR"), to become payable commencing on the earlier of six years from closing of the Transaction and the date upon which cumulative production of 450,000 ounces of gold equivalent from Mercedes has been achieved. The NSR allows Yamana to retain an economic interest in the potential for exploration success and ultimately mine life extension that exists at Mercedes, which is the Company's sole operating mine in Mexico.

With the previously announced decision to recommission the Company's C1 Santa Luz project in Brazil ("C1 Santa Luz"), the Company has identified an internal opportunity to replace gold production from Mercedes beginning in 2018. As per the details provided in the C1 Santa Luz announcement just released, production in the first full year from C1 Santa Luz is expected to be more than 130,000 ounces of gold, with an estimated average annual production of approximately 114,000 ounces of gold over the first seven years. The updated Mineral Reserve and Mineral Resource estimate for C1 Santa Luz shows an increase of approximately 21% in overall Mineral Resources, inclusive of Mineral Reserves but excluding Inferred Mineral Resources, compared to the 2015 preliminary economic assessment. The Company expects cash flows from the assets in its Brio Gold Division, including Riacho dos Machados, to fund the recommissioning of C1 Santa Luz.