Yamana Gold Declares Commercial Production at Gualcamayo and Announces Construction Decision for its C1 Santa Luz and Mercedes Projects

TORONTO, July 22 /CNW/ - YAMANA GOLD INC. (TSX: YRI; NYSE: AUY; LSE: YAU)
announced that it has declared commercial production at its Gualcamayo mine
effective July 1, 2009. Located in the province of San Juan, Argentina, the
Gualcamayo mine is expected to contribute significantly to Yamana's overall
production and be one of its core mines. The Gualcamayo mine primary ore pass,
conveyor system and processing facilities were constructed in less than 20
months following receipt of a positive feasibility study and the start up of
construction in August 2007. The ore pass and primary crushing facilities were
commissioned in late April 2009, although processing of ore at Gualcamayo
began in late December 2008. A list of key milestones is provided below:

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Key Milestones Status
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Mining Commissioned
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Primary ore pass Commissioned
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Primary & secondary crusher Commissioned
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Conveyor system Commissioned
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ADR plant Commissioned
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In declaring commercial production, the Company took into account the
following:

- Increased production from approximately 20,000 ounces in the first
quarter of 2009 to approximately 24,000 ounces in the second quarter;
- Cumulative weighted average cash costs from February to June 2009
below US$450 per ounce (capitalized as related production was not
commercial);
- Recovery is expected to increase progressively to the level of 76% to
80% into the fourth quarter of 2009;
- Sustained operation of ore pass and crushing facilities;
- Expected commercial production for 2009 of approximately
75,000 ounces of gold.

Production subsequent to 2009 is expected to include ore from the Amelia
Ines and Magdalena (AIM) satellite deposits supplementing the main ore body at
Quebrada del Diablo (QDD). The contribution to production from the AIM
satellite deposits after 2009 is currently being evaluated.

The three main mineral deposits at Gualcamayo include the main QDD
deposit, the AIM satellite deposits and the QDD Lower West underground zone.
The total reserve and resource base is approximately 3.9 million ounces of
gold including 2.9 million ounces of reserves.

ADVANCED DEVELOPMENT PROJECTS UPDATE

Yamana also announced that it has made a construction decision for the
development of its C1 Santa Luz project in Brazil and its Mercedes project in
Mexico, and also reported further progress on its other advanced development
stage growth projects and provided an exploration update. These advanced
development stage growth projects are part of Yamana's core philosophy of
focusing on quality as well as quantity of production at comparatively low
cash costs and in stable mining jurisdictions.

Construction and Development Projects
-------------------------------------

C1 Santa Luz, Brazil

Yamana has made a construction decision for C1 Santa Luz. The
construction decision is based on an economic update to a previously completed
feasibility study which shows improved economics and a longer mine life. C1
Santa Luz is planned as a conventional open pit mine with processing through a
floatation and CIL circuit.

Key parameters of the feasibility study and economic update include:

Reserves (Proven and Probable): 23.8 mt grading 1.55 g/t Au containing
1.2 M ounces
Resources (Measured and Indicated)(*): 45.82 mt grading 1.56 g/t Au
containing 2.5 M ounces
Capital Cost: US$143M
Operating Cost: US$17.78 per tonne
Cash Cost (per ounce): US$465
Average Throughput: 6,800 tonnes per day
Average Production (per year): 104,000 ounces
Initial Mine Life: 10 years
After-tax IRR: 27.9%

(*)Resources include reserves

The updated financial analysis is based on a gold price of US$900 per
ounce and a 5% discount rate resulting in an initial after-tax net present
value of approximately US$142 million. In the first two full years of
production, average annual production is expected to exceed 130,000 ounces,
which should accelerate payback. The mine life for the project has increased
from the initial 2007 feasibility study estimate of approximately seven years
to 10 years. The level of certainty of capital and operating costs along with
metallurgical recovery and engineering has increased with further work done
since 2007. The capital cost estimate assumes owner mining which can be
further reduced using contractor mining. The majority of the estimated capital
cost will be incurred in 2011 and 2012.

The C1 Santa Luz project is located in the state of Bahia, Brazil,
approximately 60 kilometres north of Yamana's Fazenda Brasileiro mine and 160
kilometres east of its Jacobina mine. The C1 Santa Luz gold deposit lies
within the Rio Itapicuru Greenstone Belt, a deformed and metamorphosed
greenstone-granite terrain of paleoproterozoic age. The gold deposits are
closely associated with small porphyritic dacite intrusions and extensive
zones of breccia hosted in carbonaceous meta-sedimentary rocks, with
associated hydrothermal alteration centred on the intrusions. Yamana has
advanced C1 Santa Luz from a grassroots exploration prospect to an advanced
development stage project.

The carbonaceous nature of the ore and strip ratio for the project
increase the sensitivity of the project to operating cost increases and, for
these reasons significant efforts have been undertaken since the feasibility
study in 2007 to increase the level of certainty on recoveries and the
understanding of associated cash cost per ounce. Synergies between Yamana's
Fazenda Brasileiro mine and C1 Santa Luz have not been used in assessing the
associated costs for the project although these synergies will be reviewed
during the permitting process.

The Company anticipates that the permitting process will take
approximately nine months. During that period, Yamana intends to further
advance detailed engineering and order longer lead time items. Production at
C1 Santa Luz is expected to begin in mid-2012.

Mercedes, Mexico

The Company has also made a decision for the development and construction
of the Mercedes gold-silver project. This decision is based on positive
project economics from a study earlier this year, the results of which were
announced in February, and recent drilling results which add further certainty
to the extension of the initial mine life. In addition, since earlier this
year, Mercedes has been further advanced with the construction of a
development ramp. The ramp has accelerated development of the Mercedes vein
and confirmed continuity in the grade over approximately 600 metres of length,
plus approximately 300 metres in two cross-cuts and vein levels. Earlier this
year, the Company also acquired a mill which when refurbished would be
suitable for the project. The permitting process is also in progress.

Key parameters of the February 2009 study include:

Reserves (Proven and Probable): 2.65 mt grading 7.10 g/t Au and 72.43 g/t
Ag (7.58 g/t AuEq) containing 604,402 Au ounces and 6,163,221 Ag ounces
(645,490 GEO)
Resources (Measured and Indicated)(*): 2.39 mt grading 8.62 g/t Au and
85.14 g/t Ag (9.19 g/t AuEq) containing 661,830 Au ounces and 6,536,394
Ag ounces (705,000 GEO)
Construction Capital Cost: US$152M
Cash Cost (per GEO): US$264
Average Production (per year): 120,000 GEO
Initial Mine Life: 6 years
After-tax IRR: 22.4%

(*)Resources include reserves

The financial analysis provided in February 2009 was based on a gold
price of US$814 per ounce and a silver price of US$13 per ounce. The study
also included an upside scenario adding three years to the original initial
mine life based on current resources and recent exploration results. The
Company's further economic analysis with cash flow based on US$900 per ounce
of gold and US$15 per ounce of silver and assuming the upside mine life
scenario results in a 5% net present value of approximately US$181 million and
an IRR of 29%.

Further drilling results not included in the pre-feasibility study are
expected to increase the resource estimate for the Barrancas area and the
newly discovered Lupita vein zone areas. These drilling results were
previously announced by the Company in its June 17, 2009 news release,
highlighting drill hole M09-449D intersecting 7.70 metres of 17.48 g/t gold
and 66.0 g/t silver at Las Barrancas and L09-021D intersecting 7.64 metres of
28.15 g/t gold and 52 g/t silver at Lupita which support the upside mine life
scenario referred to above. A new resource estimate based in part on these
drilling results is in progress.

The Mercedes mine will be developed by two accesses from surface,
including the previously mentioned development ramp. The main pre-production
development activities during the permitting process now underway include:

- Main ramp excavation;
- Completion of ore/waste pass for Corona de Oro;
- Ramp development for main stopes;
- Completion of main ventilation system;
- Creation of an ore stockpile;
- Development of underground infrastructure and services including
water pumping system, electrical distribution, backfill distribution
and administrative installations; and
- Detailed engineering and procurement.

The Mercedes project is located in northern Sonora, Mexico approximately
200 kilometres south of Tucson, Arizona. The deposit consists of a complex
gold-silver hydrothermal low-sulphidation vein/stockwork system.

The Company expects to receive permitting in mid-2010 with production
targeted to begin in late-2012.

Ernesto/Pau-a-Pique, Brazil

In February 2009, the Company completed a scoping study with positive
results for Ernesto/Pau-a-Pique.

Key parameters of the study include:

Resources (Indicated): 3.95 mt grading 4.67 g/t Au containing
593,000 ounces
Resources (Inferred): 3.14 mt grading 3.02 g/t Au containing
305,000 ounces
Capital Cost (2010-2011): US$86M
Cash Cost (per ounce): US$356
Average Production (per year): 100,000 ounces
Initial Mine Life: 8 years
After-tax IRR: 38%

The financial analysis is based on a gold price of US$825 per ounce and a
5% discount rate resulting in an initial after-tax net present value of
approximately US$138 million. The Company's further analysis with cash flow
based on US$900 per ounce of gold results in a value of approximately US$173
million and an IRR of 44%.

At Ernesto/Pau-a-Pique, Yamana has continued driving an exploration
tunnel for determining continuity of grade and accelerating development work.
In addition, the Company plans on focusing on infill drilling to upgrade
inferred resources to the indicated category, with 7,000 metres of drilling
planned for 2009. The infill program planned is to support a feasibility
study.

The Ernesto/Pau-a-Pique project is located in southwest Mato Grasso
state, near Pontes e Lacerda in Brazil. The Pau-a-Pique deposit is
approximately 56 kilometres by road south of the Ernesto deposit. The
significant existing infrastructure including paved roadways supports the
development of Ernesto/Pau-a-Pique as two mines with a common plant.

A formal construction decision is expected to be made by the end of the
year.

Minera Florida, Chile

At Minera Florida, Yamana has advanced a plan to process historical
tailings of approximately six million tonnes with an average gold grade of 1.2
g/t and average silver grade of 12 g/t for a gold equivalent grade of
approximately 1.4 g/t. Key parameters of the study include:

Capital Cost: US$43 million
Cash Cost (per GEO): US$290
Average Production (per year): 40,000 GEO
Initial Mine Life: 6 years
IRR: 33%

Implementation of the project and ramp up is estimated to be achieved
with 24 months. Yamana has made a decision to proceed with a basic engineering
study and expects to make a final decision to proceed with the project by
year-end. The project would add another 40,000 GEO to current expected
production at Minera Florida beginning in early 2012.

Growth Projects to Add 365,000 New GEO

C1 Santa Luz, Mercedes and Ernesto/Pau-a-Pique are advanced development
projects which along with the expected further production at Minera Florida
are expected to collectively add approximately 365,000 GEO of new production
at a weighted average cash cost of approximately US$350 per GEO which is
consistent with the Company's current cost structure. This does not include
expected production from the Pilar/Caiamar projects or from QDD Lower West,
the underground area of mineralization at Gualcamayo, which Yamana continues
to advance.

"We have reached an exciting growth stage for Yamana," said Ludovico
Costa, Yamana's chief operating officer. "These new organic growth projects
represent significant additional production at industry low cash costs with
robust returns, consistent with Yamana's core philosophy of focusing on
quality as well as quantity of production at comparatively low cash costs in
stable mining jurisdictions."

Agua Rica, Argentina
--------------------

Yamana continues to increase the value of Agua Rica. The Company received
the environmental license early in 2009, dependent on compliance with certain
conditions and sectoral permits which are expected within 18 months.

The Company is also updating components to the feasibility study
delivered in October 2006. In the context of current metal prices, Yamana is
currently re-evaluating the prospects of a strategic partnership.

EXPLORATION UPDATE

Pilar and Caiamar Exploration Concessions

Yamana recently acquired an extensive exploration concession and project
called Caiamar located approximately 38 kilometres from Yamana's Pilar project
and just east of the Crixas Greenstone Belt.

Caiamar is located in the northern portion of a regional Shear Zone in
the Guarinos Greenstone Belt and mineralization consists of arserno-pyrite
rich quartz breccias hosted in metagraywacke layers. A total of 16,000 metres
of drilling and 2,000 metres of underground development in 2 metre x 2 metre
sections and three levels (55 metres, 110 metres and 150 metres) were
conducted by previous companies. Mineralization is opened down plunge and
along strike.

A total of US$3.4 million has been budgeted for regional exploration and
25,000 metres of drilling at Caiamar. The objective of the drill program for
the first year will be to assess the potential of the deposit and evaluate the
regional potential inside the Caiamar concessions, in addition to define the
ore bodies' geometry and grade. As part of the drill program, Yamana is
re-logging and re-sampling the previous holes and expects to start an
underground panel sampling and initial extension drilling program of 3,700
metres. The Company believes that it can rapidly validate and extend the
existing resource.

At Pilar, Yamana has budgeted US$4.1 million for exploration in 2009 and
11,000 metres of drilling is currently in progress along with an exploration
ramp for continuity of grade and accelerating development work. A new resource
estimate based on drilling in 2009 is expected in the fourth quarter of 2009,
with a feasibility study and construction decision expected in the first
quarter of 2010.

The Pilar and Caiamar projects share similar geology and prospectivity
and the Company believes that the combination of these two areas will
meaningfully increase the potential for increased resources and rapid
advancement of project development. In addition, Pilar and Caiamar are located
approximately 78 kilometres and 50 kilometres, respectively, from Yamana's
Chapada mine and the Company believes there would be synergies resulting from
the operations at Chapada.

Increased 2009 Exploration Budget

Consistent with the previously disclosed strategy of the Company, Yamana
has increased its 2009 exploration budget from US$56 million to US$66 million
based on exploration successes to date. The exploration program will continue
to focus on high margin, high quality ounces at and near its mines. The US$10
million increase will be allocated to the following projects:

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PROJECT ORIGINAL BUDGET INCREASE TOTAL
(US$M) (US$M) (US$M)
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El Penon $12.6 $2.7 $15.3
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Mercedes $4.5 $1.5 $6.0
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Caiamar $0 $3.4 $3.4
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Minera Florida $8.6 $2.4 $11.0
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TOTAL $25.7 $10.0 $35.7
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The objective of Yamana's exploration program is to advance new 2009
discoveries to indicated resources for El Penon, Minera Florida and Mercedes,
to advance the Pilar and Caiamar projects to the feasibility stage and more
generally to add high margin, high quality ounces.

The Company will evaluate any additional increases in its exploration
budget depending on further successes.

Quality Assurance and Quality Control

Yamana incorporates a rigorous Quality Assurance and Quality Control
program for all of its mines and exploration projects which conforms to
industry Best Practices as outlined by the CSE and National Instrument 43-101.
All exploration diamond drill cores are split in half by mechanical or
electrical sawing techniques and sampled at appropriate intervals for assay.
The remaining core is stored on-site pending assay results. Quality Assurance
standards, duplicates and blanks are routinely inserted into the sample stream
as a control for assay accuracy, precision and contamination. The results of
these checks are tracked and failures are reanalyzed. Results are incorporated
into resource models following approval of the QAQC Manager.

Qualified Person

Evandro Cintra, P.Geo., Senior Vice President, Technical Services for
Yamana Gold Inc. has reviewed and confirmed the data contained within this
news release and serves as the Qualified Person as defined in National
Instrument 43-101.

About Yamana

Yamana is a Canadian-based gold producer with significant gold
production, gold development stage properties, exploration properties, and
land positions in Brazil, Argentina, Chile, Mexico and Central America. The
Company plans to continue to build on this base through existing operating
mine expansions and throughput increases, the advancement of its exploration
properties and by targeting other gold consolidation opportunities in the
Americas.


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