Yamana Gold Announces Solid Quarter From Cerro Moro & Overall Portfolio, Increases Guidance for Gold and Copper Production While Lowering Guidance for Operating Costs
Press Release
TORONTO, Oct. 25, 2018 — YAMANA GOLD INC. (TSX:YRI; NYSE:AUY) (“Yamana” or “the Company”) is herein reporting its financial and operational results for the third quarter 2018. Adjusted Earnings(1) excluding certain items (see below), was $23.6 million or $0.02 per share. Net loss from operations attributable to Yamana equityholders for the three months ended September 30, 2018, was $81.3 million or $0.09 per share basic and diluted. This includes certain non-cash and other items that may not be reflective of current and ongoing operations reduced the Company’s net income by $104.9 million, or $0.11 per share basic and diluted. Excluding these items would result in Adjusted Earnings referred to above.
The most notable item is a non-cash accounting carrying value reduction totalling $75.0 million on an after-tax basis ($89.0 million on a gross basis) in respect of the sale of the Gualcamayo mine (refer to the Company’s press release dated October 25, 2018, announcing the sale for additional details). A summary of these items is included in the table on page 4 of this press release.
Gold equivalent ounce (“GEO”)(2) production from Yamana Mines(3) for the third quarter was 279,464, including 246,788 ounces of gold and 2.55 million ounces of silver. Total Yamana gold production(4) was 268,842 ounces. The Company also produced 28.6 million pounds of copper.
The Company is increasing its guidance for production to 920,000 ounces of gold, from the initially guided 900,000 ounces of gold for Yamana Mines based on the strong production through the first nine months of 2018. Notably, Cerro Moro, which had its first full quarter of commercial production in the third quarter of 2018, provided significant contributions to the overall performance with production run-rates already at the levels needed to meet guidance both for 2018 and 2019 and, also with costs in line with the levels guided for both years.
Full year silver production guidance is 7.55 million ounces compared to original guidance of 8.15 million ounces. The reduction in silver production guidance is attributable to lower than planned silver production from El Peñón.
With higher-than-plan gold production in the first nine months of 2018, GEO production for 2018 is expected to exceed the initially guided 1.013 million ounces(5) as increased gold production is forecast to more than offset lower-than-expected silver production. When providing guidance the silver to gold ratio was 72:1, which has since increased to a level closer to 80:1, however, the Company expects to meet original GEO guidance despite this change.
Based on Chapada’s strong performance to date and forecast improvements into the fourth quarter of the 2018, the Company is increasing full year guidance for copper production to approximately 125 million pounds compared to 120 million pounds initially guided.
Third quarter costs for Yamana Mines included all-in sustaining costs (“AISC”) on a by-product basis (1) of $739 per GEO; cash costs on a by-product basis (1) of $482 per GEO; and total cost of sales of $1,018 per GEO.
Co-product and by-product costs and AISC for 2018 are now expected to be below previously guided ranges. All cost metrics are benefiting from higher production, operational efficiencies and the impact of the depreciation of local currencies. Refer to page 6 of this press release for additional information on costs by metal on a co-product and by-product basis.
Cash flows from operating activities for the third quarter were $64.5 million and cash flows from operating activities before net change in working capital (1) were $86.6 million. Cash flows in the third quarter were affected by lower prices for gold and silver compared to the second quarter of 2018 and the third quarter of 2017, and lower prices for copper compared to the second quarter of 2018.
Third quarter cash flows were net of amortization of deferred revenue, $41.7 million of which were related to deferred revenue recognized attributable to deliveries under the Company’s copper advanced sales program during the quarter. Deliveries under the Company’s copper advanced sales program began during the quarter and will continue until mid-2019. If not for the timing difference of cash proceeds attributable to this transaction, the Company’s cash flows from operating activities before net change in working capital would have been higher by those amounts during the quarter as follows:
| (In millions of US Dollars, unless otherwise noted) | For the three months ended | ||||||
| Illustration of impact due to copper advanced sales program | March 31, 2018 | June 30, 2018 | September 30, 2018 | December 31, 2018 (2) | March 31, 2019(2) | June 30, 2019(2) | Cumulative impact |
| Copper pounds to be delivered per contract (millions) | 13.2 | 10.7 | 8.2 | 8.2 | 40.3 | ||
| Cash flows from operating activities before net change in working capital (1) | $206.4 | $157.5 | $86.6 | n/a | n/a | n/a | |
| Impact due to copper advanced sales program | (125.0) | — | 41.7 | 33.7 | 25.1 | 24.9 | — |
| Cash flows from operating activities before net change in working capital, normalized due to copper advanced sales program (1) | $81.4 | $157.5 | $128.3 | n/a | n/a | n/a | |
- A cautionary note regarding non-GAAP financial measures is included in Section 10: Non-GAAP Financial Measures and Additional Subtotals in Financial Statements of this MD&A. Adjusted operating cash flows are adjusted for payments not reflective of current period operations and advance payments received pursuant to metal purchase agreements.
- For illustration purposes only; the Company intends to provide information each subsequent period reflecting the impact due to copper advanced sales program over its term.
The balance sheet as at September 30, 2018, includes cash and cash equivalents of $120.7 million, and available credit of $685.0 million, for total liquidity to the Company of $805.7 million. Net debt(5) as at September 30, 2018, was $1.66 billion.
(All amounts are expressed in United States Dollars unless otherwise indicated.)
- Refers to a non-GAAP financial measure or an additional line item or subtotal in financial statements as described at the end of this press release. Reconciliations for all non-GAAP financial measures are available at http://www.yamana.com/Q32018 and in Section 1 and Section 10 of the Company’s third quarter 2018 Management’s Discussion & Analysis, which has been filed on SEDAR.
- Gold equivalent ounces include gold plus silver at a ratio of 78.0:1.
- Yamana Mines include Chapada, El Peñón, Canadian Malartic, Minera Florida, Jacobina and Cerro Moro.
- Total production includes production from Gualcamayo.
- Includes gold plus silver at a ratio of 72:1 as per guidance provided in press release on February 15, 2018.
Refers to a non-GAAP financial measure or an additional line item or subtotal in financial statements as described at the end of this press release. Reconciliations for all non-GAAP financial measures are available at http://www.yamana.com/Q32018 and in Section 1 and Section 10 of the Company’s third quarter 2018 Management’s Discussion & Analysis, which has been filed on SEDAR.
Summary of Certain Non-Cash and Other Items Included in Net (Loss) Earnings and Adjusted Earnings per Share
| (In United States Dollars, per share amounts may not add due to rounding, unaudited) | Three Months Ended Sept. 30 | |
| 2018 | 2017 | |
| Net (loss) earnings attributable to Yamana equityholders | (81.3) | 45.7 |
| Non-cash unrealized foreign exchange losses | 7.4 | 11.5 |
| Share-based payments/mark-to-market on deferred share units | 1.2 | 3.4 |
| Mark-to-market on derivative contracts | 3.3 | (3.3) |
| Mark-to-market losses on investments | 2.8 | 0.3 |
| Revision in estimates and liabilities including contingencies | (1.1) | (3.2) |
| Impairment of non-operational mineral properties held for sale | 89.0 | — |
| Reorganization costs | 2.7 | 1.9 |
| Other provisions, write-downs and adjustments | 10.2 | (29.5) |
| Non-cash tax on unrealized foreign exchange losses | 78.6 | 0.5 |
| Income tax effect of adjustments and other one-time tax adjustments | (89.2) | 1.8 |
| Total adjustments – increase to earnings attributable to Yamana equityholders | 104.9 | (16.6) |
| Adjusted Earnings attributable to Yamana equityholders (i) | 23.6 | 29.1 |
| (Loss) earnings per share attributable to Yamana equityholders | (0.09) | 0.05 |
| Total adjustments – increase to earnings per share attributable to Yamana equityholders | 0.11 | (0.01) |
| Adjusted earnings per share attributable to Yamana equityholders (i) | 0.02 | 0.04 |
(i) Refers to a non-GAAP financial measure or an additional line item or subtotal in financial statements as described at the end of this press release. Reconciliations for all non-GAAP financial measures are available at http://www.yamana.com/Q32018 and in Section 1 and Section 10 of the Company’s third quarter 2018 Management’s Discussion & Analysis, which has been filed on SEDAR.
For a full discussion of Yamana’s operational and financial results, please refer to the Company’s third quarter 2018 Management’s Discussion & Analysis and Condensed Consolidated Interim Financial Statements, which have been filed on SEDAR and are also available on the Company’s website.
KEY STATISTICS
Key operating and financial statistics for the third quarter 2018 are outlined in the following tables.
Financial Summary
| (In millions of United States Dollars except for shares and per share amounts, and per metal amounts by unit, unaudited) | Three Months Ended Sept. 30 |
|
| 2018 | 2017 (Restated) |
|
| Revenue | 416.8 | 493.4 |
| Cost of sales excluding depletion, depreciation and amortization | (233.5) | (279.0) |
| Depletion, depreciation and amortization (“DDA”) | (109.4) | (108.0) |
| Total cost of sales | (342.9) | (387.0) |
| Mine operating earnings | 73.9 | 106.4 |
| General and administrative expenses | (20.7) | (28.5) |
| Exploration and evaluation expenses | (2.5) | (4.9) |
| Net (loss)/earnings | (81.3) | 41.5 |
| Net (loss)/earnings attributable to Yamana Gold equityholders | (81.3) | 45.7 |
| Net (loss)/earnings per share – basic and diluted(1) | (0.09) | 0.05 |
| Cash flows from operating activities | 64.5 | 149.8 |
| Cash flows from operating activities before net change in working capital | 86.6 | 135.8 |
| Revenue per ounce of gold | 1,183 | 1,264 |
| Revenue per ounce of silver | 15.16 | 16.64 |
| Revenue per pound of copper | 2.80 | 2.43 |
| Average realized gold price per ounce | 1,213 | 1,278 |
| Average realized silver price per ounce | 15.14 | 16.66 |
| Average realized copper price per pound | 2.93 | 2.89 |
- For the three months ended September 30, 2018, the weighted average numbers of shares outstanding, basic and diluted was 949,114 thousand.
Cost Summary
| Three Months Ended Sept. 30 |
||
| Gold | 2018 | 2017 |
| Total cost of sales per ounce sold – Yamana Mines | $989 | $950 |
| Total cost of sales per ounce sold – Total Yamana | $998 | $999 |
| Total cost of sales per ounce sold – consolidated | $998 | $1,022 |
| Co-product cash costs per ounce produced – Yamana Mines | $618 | $608 |
| Co-product cash costs per ounce produced – Total Yamana | $650 | $672 |
| All-in sustaining co-product costs per ounce produced – Yamana Mines | $824 | $834 |
| All-in sustaining co-product costs per ounce produced – Total Yamana | $849 | $874 |
| By-product cash costs per ounce produced – Yamana Mines | $484 | $407 |
| All-in sustaining by-product costs per ounce produced – Yamana Mines | $745 | $668 |
| Silver | 2018 | 2017 |
| Total cost of sales per ounce sold | $17.15 | $14.15 |
| Co-product cash costs per ounce produced | $7.93 | $10.53 |
| All-in sustaining co-product costs per ounce produced | $10.16 | $13.70 |
| By-product cash costs per ounce produced | $5.96 | $8.64 |
| All-in sustaining by-product costs per ounce produced | $8.89 | $12.24 |
| Copper | 2018 | 2017 |
| Total cost of sales per copper pound sold | $1.80 | $1.63 |
| Co-product cash costs per pound of copper produced | $1.64 | $1.35 |
| All-in sustaining costs per pound of copper produced | $2.03 | $1.44 |
Production Summary
| Three Months Ended Sept. 30 |
||
| Gold Ounces | 2018 | 2017 |
| Chapada | 27,080 | 38,782 |
| El Peñón | 35,746 | 44,466 |
| Canadian Malartic (50%) | 88,603 | 82,097 |
| Jacobina | 35,368 | 34,838 |
| Minera Florida | 21,909 | 23,089 |
| Cerro Moro | 38,083 | — |
| Yamana Mines | 246,788 | 223,272 |
| Gualcamayo | 22,054 | 34,183 |
| TOTAL | 268,842 | 257,455 |
| Three Months Ended Sept. 30 |
||
| Silver Ounces | 2018 | 2017 |
| El Peñón | 892,461 | 1,088,921 |
| Cerro Moro | 1,656,550 | — |
| TOTAL | 2,549,011 | 1,088,921 |
| Three Months Ended Sept. 30 | ||
| Copper Pounds | 2018 | 2017 |
| Chapada (millions of pounds) | 28.6 | 37.1 |
| TOTAL (millions of pounds) | 28.6 | 37.1 |
THIRD QUARTER 2018 CONFERENCE CALL
The Company will host a conference call and webcast on Friday, October 26, 2018, at 9:00 a.m. ET.
Third Quarter 2018 Conference Call Details
| Toll Free (North America): | 1-866-223-7781 | |||
| Toronto Local and International: | 416-340-2218 | |||
| Webcast: | www.yamana.com | |||
| Conference Call Replay | ||||
| Toll Free (North America): | 1-800-408-3053 | |||
| Toronto Local and International: | 905-694-9451 | |||
| Passcode: | 7856108 | |||
The conference call replay will be available from 12:00 p.m. ET on October 26, 2018, until 11:59 p.m. ET on November 9, 2018.
Qualified Persons
Scientific and technical information contained in this press release relating to operations at Chapada, Canadian Malartic and Jacobina has been reviewed and approved by Yohann Bouchard (Senior Vice President, Operations); and relating to operations at El Peñón, Cerro Moro, Minera Florida and Gualcamayo has been reviewed and approved by Esteban Chacon (Manager, Technical Services). Each of Messrs. Bouchard and Chacon is an employee of Yamana Gold Inc. and a “Qualified Person” as defined by Canadian Securities Administrators’ National Instrument 43-101 – Standards of Disclosure for Mineral Projects.
About Yamana
Yamana is a Canadian-based gold producer with significant gold production, gold development stage properties, exploration properties, and land positions throughout the Americas including Canada, Brazil, Chile and Argentina. Yamana plans to continue to build on this base through existing operating mine expansions and optimization initiatives, development of new mines, the advancement of its exploration properties and, at times, by targeting other gold consolidation opportunities with a primary focus in the Americas.
FOR FURTHER INFORMATION PLEASE CONTACT:
Investor Relations and Corporate Communications
416-815-0220
1-888-809-0925
Email: investor@yamana.com
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