Quick Facts

• 100% owned by Yamana Gold
• Located in northwest Argentina, only 34 km from Alumbrera
• Drill defined metal inventory of 21.8 billion pounds of copper, 13.3 million ounces of gold and 1.7 billion pounds of molybdenum
• Estimated mine life of 23 years
• Agua Rica's estimated rock value makes it one of the world's most significant undeveloped copper/gold/moly deposits known today
• More than 176 holes drilled in excess of 65,000 metres
• Completed positive feasibility study update in October 2006
• Submitted Agua Rica Project Environmental and Social Impact Assessment to the Province of Catamarca, Argentina in July 2007

Overview

The Agua Rica deposit is located about 34 km from the Alumbrera mine in northwest Argentina, where the climate is generally mild and dry. There is road access to the Agua Rica site from the town of Andalgala (pop. 11,000) about 25 km away. The project has been advanced to the point where the Company now believes it could bring Agua Rica into production within four years for significantly less than any comparable development. The project's large metal inventory sits on the surface and is close to required infrastructure at Alumbrera that has the potential to dramatically reduce development costs.

The mineral-rich area around Agua Rica has attracted miners and prospectors since at least the early 1900s. The first modern exploration began in the early 1960s in a restricted area known as Mi Vida around Quebrada Minas. More detailed and modern exploration occurred here in the 1970s, but the major potential of the area was overlooked. The first systematic exploration of the property began in the mid 1990s. With copper prices then at historically high levels, a wide range of geochemical and geophysical studies were completed. A major program of diamond drilling followed in 1995. As this information was combined with surface sampling, aerial photography and metallurgical testing, the huge Agua Rica deposit took shape with great promise for the future. This work led to the completion of an initial feasibility study in 1997, when it was concluded that the deposit could be mined economically. However, a sharp drop in world copper prices at that time slowed progress until a major market recovery in late 2003.

The Agua Rica deposit is a large Cu-Mo-Au porphyry deposit with a polymetallic epithermal overprint. Three major stages of alteration/mineralization are clearly recognized: early porphyry Cu-Mo-Au, later epithermal Cu-Au-Ag-As-Pb-Zn, and supergene Cu enrichment.

Supergene leaching and enrichment has replaced pyrite, chalcopyrite and bornite with near surface high grade chalcocite, covellite and digenite which grades down to a zone of covellite and digenite without chalcocite and then into primary chalcopyrite-pyrite mineralization below the defined open pit. Almost all copper ore is covellite or chalcocite.

In addition to areas where mineralization is still open, exploration potential remains in the immediate vicinity of the defined Agua Rica pit.

A series of systematic exploration programs were carried out from the 1970s to 1998 at Agua Rica. These have included basic mapping, sampling, ground geophysics, geochemical analysis, and various diamond drilling programs.

• Cities Service (1970-1972) geological mapping, alteration studies, rock geochemistry, and diamond drilling.
• Joint Venture (Northern Orion/BHP Billiton, Operator) (1992-1998) geological mapping, rock geochemistry, regional BLEG survey, aerial photographic survey, sampling, bulk sampling, regional airborne magnetic/radiometric survey and a three-phase drill program of 176 diamond drill holes totalling more than 65,000 metres. The drill programs also saw the construction of an extensive network of drill roads at the highest levels of the mineral system.

Exploration also included sampling of a central portion of the Cerro Atajo property in which Yamana has an interest. Sampling covered an area of 15 sq. km about 20 km west of Agua Rica. The fieldwork led to the conclusion that the alteration and geochemical zoning at Cerro Atajo suggest the presence of a large porphyry stock at depth, and possibly porphyry-style mineralization.

The Company is examining a number of strategic options for the development of the Agua Rica facility. This includes possible joint venture opportunities as well as the potential integration with Alumbrera.

The Agua Rica resource sits mostly on or near the surface, and it can be mined using very cost-effective open pit methods. Engineering conducted in the 1990s identified three primary deposits, all combining to form an elongated mineralized zone 2.75 kilometres long and 2.5 kilometres wide. The plan would be to mine these zones one at a time, although the actual mining plan is yet to be finalized and will depend largely upon further engineering studies and metal prices at the time of extraction.

There is also considerable potential for expanding the deposit at Agua Rica, which remains open at depth and also on two sides. Future work will include drilling of these areas to determine the grade and extent of the unexplored ground. Several different mine scenarios have been studied, but one primary option is now receiving the most consideration, constructing a world-scale, 90,000-tonne-per-day mine and processing facility that could produce approximately 150,000 tonnes of copper annually, along with associated gold and molybdenum by-products.

The permitting process is well underway. A bankable feasibility study has been completed for the Agua Rica project and the Company will continue to build upon its progress to date with a strategy to advance Agua Rica so as to achieve maximum monetary returns in the shortest time frame.

Feasibility Study Update

A positive Feasibility Study Update (FSU) for Agua Rica has been prepared on the basis of the development of the Agua Rica deposit on an independent basis and is based on a 1997 Initial Feasibility Study and recent additional work undertaken by Northern Orion, the projects previous owner. All cost amounts are reported in second quarter 2006 US dollars.

The development plan proposed in the FSU indicates that Agua Rica is technically feasible and economically viable and can be developed as a long life copper-gold-molybdenum mine with a low cost of copper production and significant by-product credits. The FSU indicates an IRR of 20% based on 100% equity, a payback of initial capital investment of 2.9 years and an NPV (8%) of $1.9 Billion.

Key Results of the 2006 Feasibility Study Update

• Proven and Probable reserve of 731 million tonnes of ore
• 90,000 tpd open pit operation at a 1.89 to 1 strip ratio
• 23 year mine life, with higher grade ore over the initial 10 years
• Unescalated capital cost of $2,055 million
• Approximate annual production
• Years 1-10: 365 million lb/yr copper, 135,000 oz/yr gold and 15 million lb/yr molybdenum
• Life of Mine (LOM): 300 million lb/yr copper, 125,000 oz/yr gold and 16 million lb/yr molybdenum
• Project Economics
• Operating cost of $6.82/ton milled, or negative $0.73/lb copper (net of credits), FOB port of exit
• Internal Rate of Return (IRR) of 20% (100% equity)
• Post-tax Net Present Value (NPV) at a 8% discount rate of $1.9 Billion
• 2.9 year capital payback

The FSU was prepared by Hatch and Amec. Amec was responsible for the mine design, mine capital and mine operating costs and the reserve statement and Hatch was responsible for the balance of the work scope and the production of the overall study report including the overall capital and operating costs.

Mining and Reserve

The mineable reserve was based on $1.10 copper, $425 gold and $6 molybdenum. Proven and probable reserves total 730,700,000 tonnes. LOM grades are 0.50% Cu, 0.23 g/t Au and 0.03% Mo. LOM strip ratio is 1.89 to 1. The diluted grade for the first five years is 0.71% Cu and 0.28 g/t Au and 0.03% Mo. Using these parameters, the project IRR is positive.

Gerrit Vos, P. Eng., Amec Principal Mining Engineer, is a Qualified Person under NI 43-101 and is responsible for the mining and reserve estimate portion of the FSU.

The FSU recommends that the mine be developed as an open pit operation. Mined ore and waste rock would be crushed separately and conveyed through a 5.5 km downhill tunnel to the desert area in the rain shadow north of the Aconquija range where the process plant would be located. Waste would be stacked in a waste rock storage facility in the vicinity of the plant along with filtered tailings. The process plant would be a typical large tonnage single mill line concentrator producing separate copper/gold and molybdenum concentrates. The copper/gold concentrate would be transported via a pipeline to a filter plant and transported by rail to a new ship loading facility on the Paraná River for sea shipment to international smelters. The molybdenum concentrates would be packaged for shipment by truck. More details from the feasibility study can be found in the document posted on www.sedar.com.

Community and Environment

Yamana strives to support communities and protect the environment wherever it operates. The Company continues to sustain the social and educational programs in the Agua Rica region that were established in the mid-1990s. In addition to participating in social programs in Alumbrera, Yamana’s programs and activities include:

• Community consultation including environmental disclosures and site visits
• Joint projects on infrastructure construction, repairs and maintenance with local authorities including roads, sewers, irrigation channels and flood prevention structures
• Education scholarships and training programs
• Sustainable development projects with small and medium-sized communal businesses such as textiles, arts and crafts, poultry, bakeries, health education and recovery of historic sites
• A program called Forestar, aimed at recovering natural forests and grasslands in the extended Agua Rica project area and at raising awareness in the local communities
• Cooperation with the creation of the firefighters' centre of Andalgalá
• Development of local suppliers and creation of the Chamber of Mining Suppliers of Catamarca (first in the country).