Mr. Peter Marrone of Yamana reports

YAMANA ANNOUNCES METAL PURCHASE AGREEMENTS WITH SANDSTORM AND PROVIDES UPDATE ON BRIO GOLD MONETIZATION INITIATIVE

Yamana Gold Inc. has entered into three metal purchase agreements with Sandstorm Gold Ltd., for which Sandstorm has paid Yamana total advance payments of $148-million and has issued the company 15 million common share purchase warrants with a strike price of $3.50 and a term of five years. Sandstorm will also pay the company an additional advanced payment of $4-million in six months. The metal purchase agreements include a silver purchase transaction related to production from Cerro Moro, Minera Florida and Chapada; a copper purchase transaction related to production from Chapada; and a gold purchase transaction related to production from Agua Rica. All of the advance payment will be used by Yamana to reduce the balance outstanding on its revolving credit facility. All amounts are expressed in United States dollars unless otherwise indicated.

The transaction is one of various alternatives the company has been evaluating and advancing to help achieve its stated goal of reducing the balance owning on its revolving credit facility to nil. The company continues to advance other alternatives on a number of fronts, including the planned monetization of its subsidiary Brio Gold Inc., an update for which is provided below.

Yamana's executive vice-president, finance, and chief financial officer Charles Main provided comments on the transaction as follows: "We are very pleased to have completed this transaction. The streams that we have put in place do not have significant impacts on the projects to which they relate. They represent a modest portion of our copper and silver production, which are secondary metals to Yamana, and they do not impact our exposure to our primary metal, which is gold. With this deal, and with the successful completion of a deal on Brio Gold, the goal and expectation is to be in a position to have generated cash proceeds well in excess of the amount required to complete the paydown of our credit facility prior to year-end, which was one of our strategic objectives for the year. This would leave us with a five-year undrawn credit facility of $1-billion along with an increased cash balance. With modest debt repayments of $118-million scheduled for the next couple of years, we believe that Yamana is very well positioned to fully execute on its business plan and on generating and increasing cash flow and free cash flow."

Peter Marrone, the company's chairman and chief executive officer, provided a further comment as follows: "We are following through on our commitment to strengthen the company's balance sheet. As Chuck mentioned, this has been a strategic objective for the year. These streaming transactions are a modest and benign way to reduce debt without taking away our leverage and exposure to gold. Our monetization efforts relating to Brio continue to advance and will further strengthen our balance sheet. With the completion of these financial catalysts, the company will be well positioned in the new year to shift strategic focus entirely to our core operations, several initiatives relating to optimizations of these operations, increasing production, and maximizing cash flow and EBITDA."

Brio Gold update

The company continues to pursue its planned monetization of Brio Gold and is currently advancing on a number of strategic alternatives. These alternatives include an initial public offering; reverse takeover; joint venture with private equity firms; a disposition to, or merger with, other companies; and other financing and liquidity options.

In addition to engaging CIBC World Markets Inc. and National Bank Financial Inc. as previously announced, the company has engaged FBR Capital Markets & Co. as an adviser to assist in the evaluation of additional financing alternatives, with an emphasis on transactions that could be completed on an accelerated timeline and may allow Brio Gold to continue to operate as a private company in the short term.

From an operational perspective, Brio Gold continues to meet or exceed targeted production and cost levels in 2015. The table shows select operational results for each of the last three quarters and highlights the positive operational trend. Results to date continue to support the expectation that Brio Gold will exceed 2015 production guidance of 130,000 ounces of gold production at cash costs approximating or better than cost guidance for the full year at $730 per ounce of gold.

With respect to C1 Santa Luz, infill drilling continues with the objective of better defining the metallurgical characteristics of the resources, which will in turn facilitate optimal mine planning and scheduling. In the fourth quarter, the company expects to drill 6,500 metres, the results for which will be incorporated into an updated reserve estimate in the first quarter of 2016. The company expects that the planned modifications to the process plant will be completed by the third quarter of 2016, facilitating the restart of production. C1 Santa Luz is expected to contribute approximately 100,000 ounces of gold production per year, bringing Brio Gold's annual production levels to more than 240,000 ounces per year.

                                 First-     Second-      Third-    First nine
                                quarter     quarter     quarter        months
                                   2015        2015    2015 (i)       of 2015
Production (oz)
Pilar                            19,153      21,237      21,468        61,858
Fazenda Brasileiro               12,024      13,974      16,963        42,961
Total Brio Gold                  31,177      35,211      38,430       104,819
Cash costs (per oz) (1)
Pilar                              $832        $756        $648          $742
Fazenda Brasileiro                 $810        $798        $670          $751
Total Brio Gold                    $824        $773        $658          $746
All-in sustaining cash
costs (per oz) (1, 2)
Pilar                              $906        $892        $854          $883
Fazenda Brasileiro               $1,156      $1,000        $826          $975
Total Brio Gold                  $1,002        $964        $866          $944

(i) Preliminary results.
(1) Refers to a non-GAAP (generally accepted accounting principles) measure. 
Reconciliation of non-GAAP measures is available at the company's website.
(2) Includes cash costs, sustaining capital, site general, administrative 
and exploration expense. 

More details on each of the metal purchase agreements are provided below.

Silver purchase transaction

In consideration of a $70-million advanced payment and an additional payment of 30 per cent of the spot price of silver at the time each ounce of silver is delivered, Yamana has agreed to deliver silver to Sandstorm as follows:

1. From 2016 to 2018, the lesser of (i) 38 per cent of payable silver from Minera Florida and (ii) 200,000 ounces of payable silver per year;
2. From 2016 to 2018, the lesser of (i) 52 per cent of payable silver from Chapada and (ii) 100,000 ounces of payable silver per year;
3. From the later of (i) the commencement of production of Cerro Moro and (ii) from 2019 to the date on which Yamana has sold to Sandstorm seven million ounces of payable silver, the lesser of (1) 20 per cent of payable silver from Cerro Moro and (2) 1.2 million ounces of payable silver per year;
4. From the silver reduction date, 9 per cent of payable silver from Cerro Moro;
5. If the commencement of production of Cerro Moro has not occurred by 2019, from 2019 until the earlier of (i) the commencement of production of Cerro Moro and (ii) Dec. 31, 2020, the lesser of (1) 16 per cent of payable silver from El Penon and (2) 1.2 million ounces of payable silver per year.

Copper purchase transaction

In consideration of a $70-million advanced payment and an additional payment of 30 per cent of the spot price of copper at the time each pound of copper is delivered, Yamana has agreed to deliver copper to Sandstorm as follows:

1. From 2016, the lesser of (i) 4.2 per cent of payable copper from Chapada and (ii) 3.9 million pounds of payable copper, until Yamana has delivered to Sandstorm, on a cumulative basis, 39 million pounds of payable copper;
2. After Yamana has delivered to Sandstorm the first Chapada delivery threshold, 3 per cent of payable copper from Chapada, until Yamana has delivered to Sandstorm, on a cumulative basis, 50 million pounds of payable copper;
3. After Yamana has delivered to Sandstorm the second Chapada delivery threshold, 1.5 per cent of payable copper from Chapada;
4. If Yamana is unable to deliver silver from Cerro Moro, the first Chapada delivery threshold and the second Chapada delivery threshold will cease to be in effect and until such time that Cerro Moro is in commercial production, Chapada will continue to deliver the lesser of (i) 4.2 per cent of payable copper and (ii) 3.9 million pounds of payable copper per year.

Gold purchase transaction

In consideration of $12-million in advance payments, additional advance construction payments of between $135-million to $225-million and an additional payment of 30 per cent of the spot price of gold at the time each ounce of gold is delivered, Yamana has agreed to deliver to Sandstorm 20 per cent of payable gold from Agua Rica. The additional advance construction payments will be owed to Yamana and be based on the price of gold at the time the company completes 25 per cent of the construction of Agua Rica. The amount owed will be based on a sliding-scale basis with a minimum payment of $135-million if gold is below $900 per ounce and a maximum payment of $225-million if gold is above $1,400 per ounce.

If Sandstorm elects not to make further advanced payments to the company at the time of the completion of 25 per cent of the construction of Agua Rica, then the purchase obligation will convert into a 0.25-per-cent net-smelter royalty on Agua Rica.

We seek Safe Harbor.