UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 6-K
 
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16
OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the month of July 2015

Commission File Number 001-31880

Yamana Gold Inc.
(Translation of registrant’s name into English)
 
Royal Bank Plaza, North Tower, 200 Bay Street, Suite 2200, Toronto, ON M5J 2J3
(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:


Form 20-F ¨
 
Form 40-F ý
 
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): o

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): o




1


INCORPORATION BY REFERENCE
 
The Registrant’s Management’s Discussion and Analysis of Operations and Financial Condition for the Three and Six Months Ended June 30, 2015, included as Exhibit 99.1 of this Form 6-K and the Unaudited Condensed Consolidated Interim Financial Statements as of and for the Three and Six Months Ended June 30, 2015, included as Exhibit 99.2 of this Form 6-K (Commission File No. 001-31880), furnished to the Commission on July 30, 2015, are incorporated by reference into the Registration Statements on Form S-8 (Commission File No. 333-159047, File No. 333-148048 and File No. 333-145300) and Form F-10 (Commission File No. 333-202140) of the Registrant, Yamana Gold Inc.





2


Signatures
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



 
 
YAMANA GOLD INC.
 
 
 
Date:
July 30, 2015
By:
"Charles B. Main"
 
 
 
Charles Main
 
 
 
Executive Vice President, Finance
and Chief Financial Officer


3


EXHIBIT INDEX
 

Exhibit
Number
 
Description of Exhibit
 
 
 
99.1
 
Management’s Discussion and Analysis of Operations and Financial Condition for the Three and Six Months
Ended June 30, 2015
 
 
 
99.2
 
Unaudited Condensed Consolidated Interim Financial Statements as of and for the Three and Six Months
Ended June 30, 2015


4







EXHIBIT 99.1











 


MANAGEMENT’S DISCUSSION AND ANALYSIS OF

 OPERATIONS AND FINANCIAL CONDITION

 FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2015


TABLE OF CONTENTS
 
 
 
 
 
Page
1.
Core Business
 
2.
Highlights
 
3.
Outlook and Strategy
 
4.
Summary of Financial and Operating Statistics
 
 
4.1:
Financial Statistics
 
 
4.2:
Operating Statistics
 
5.
Overview of Results
 
 
5.1:
Overview of Financial Results
 
 
5.2:
Overview of Operating Results
 
6.
Operating Mines
 
7.
Construction, Development and Exploration
 
8.
Liquidity, Capital Resources and Contractual Commitments
 
9.
Income Taxes
 
10.
Economic Trends, Business Risks and Uncertainties
 
11.
Contingencies
 
12.
Critical Accounting Policies and Estimates
 
13.
Non-GAAP Measures
 
14.
Selected Quarterly Financial and Operating Summary
 
15.
Disclosure Controls and Procedures
 



MANAGEMENT’S DISCUSSION AND ANALYSIS OF OPERATIONS AND FINANCIAL CONDITION
 
(All figures are in United States Dollars ("US Dollars") unless otherwise specified and are in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (“IFRS”).  This Management’s Discussion and Analysis of Operations and Financial Condition ("MD&A") should be read in conjunction with the Company’s most recently issued annual consolidated financial statements for the year ended December 31, 2014 ("Consolidated Financial Statements").
 
Cautionary notes regarding forward-looking statements and mineral reserves and mineral resources follow this MD&A.


1.    CORE BUSINESS

Yamana Gold Inc. (TSX:YRI and NYSE:AUY) (the “Company” or “Yamana”) is a Canadian-headquartered gold producer with significant precious metal properties in Brazil, Chile, Argentina, Mexico and Canada.

Note 3(a) Significant Accounting Policies - Basis of Consolidation to the most recently audited Consolidated Financial Statements lists Yamana’s significant subsidiaries with 100% equity interest and its joint operation of the Canadian Malartic mine.  The Company does not have any material off-balance sheet arrangements, except as noted in Note 33 Contractual Commitments to the Consolidated Financial Statements.


2.    HIGHLIGHTS

Financial

•
Revenue from continuing operations of $455.0 million on the sale of 292,181 ounces of gold, 2.3 million ounces of silver, and 31.5 million pounds of copper(i).
•
Net loss from continuing operations of $7.0 million or $0.01 per share.
•
Adjusted loss(ii) from continuing operations of $8.3 million or $0.01 per share.
•
Mine operating earnings from continuing operations of $58.4 million.
•
Cash flows from operating activities from continuing operations after changes in non-cash working capital of $123.4 million and cash flows from operating activities before changes in non-cash working capital(ii) of $149.3 million.
•
G&A expenses were $32.0 million, compared to $36.6 million for the same period in 2014, or 13% lower. 

Operational

•
Gold production from continuing operations of 298,818 ounces or 7% higher than the second quarter of 2014, with gold production from core assets(iii) of 258,495 ounces of gold compared to 236,240 ounces of gold in the second quarter of 2014, representing a 9% increase.
•
Individual mine highlights include the following:
◦
Record quarterly production from Canadian Malartic(iv) of 68,440 ounces of gold.
◦
14% increase in production at Jacobina over the second quarter of 2014 and 15% increase over the first quarter of 2015.
◦
Increase in production at Chapada of 4% over the second quarter of 2014 and 35% increase over the first quarter of 2015.
◦
Increase in production at Brio Gold Inc. ("Brio Gold") of 2% over the second quarter of 2014 and 13% increase over the first quarter of 2015 and in the case of Pilar, a 64% increase over the second quarter of 2014 and 11% increase over the first quarter of 2015.
•
Cash costs(ii)of $603 per ounce of gold ($701 per ounce of gold on a co-product basis).
•
All-in sustaining costs(ii) of $896 per ounce of gold ($949 per ounce of gold on a co-product basis) with all-in sustaining costs from core assets of $763 per ounce of gold ($878 per ounce of gold on a co-product basis).
•
Silver production of 2.4 million ounces at cash costs of $6.59 per ounce and all-in sustaining costs of $10.72 per ounce.
•
Copper production from Chapada of 33.6 million pounds at cash costs of $1.39 per pound of copper, representing a decrease in costs of 21% compared to $1.75 per pound of copper in the same quarter of 2014.

Strategic Developments and Updates

•
Continuing to build on the existing Canadian platform, the Company acquired 100% of all issued and outstanding common shares of Mega Precious Metals Inc. ("Mega Precious"), a Canadian-based exploration company with a number of projects in Canada, the most significant of which is the Monument Bay gold/tungsten project located in northeastern Manitoba. Total

1

consideration paid by the Company was $14.5 million which consisted of approximately $0.2 million in cash, $14.0 million in Yamana common shares (4,366,675 shares) and transaction costs.
•
Improved overall debt levels of the Company by triggering an early conversion of the Company's 6.875% convertible unsecured subordinated debentures, assumed on the acquisition of Canadian Malartic, using previously escrowed and segregated shares and cash which had been set aside upon completion of the acquisition.
•
The Company continued with production and cost improvements at Pilar and Fazenda Brasileiro, and evaluation of plant improvements at C1 Santa Luz, thereby underpinning significant value in Brio Gold, in support of a pending going public event.

Construction and Development 

•
Continued with detailed engineering of the processing plant and mine at Cerro Moro with production expected to begin mid-2017.

Exploration

•
El Peñón, Chile - Drilling at the Ventura vein intersected mineral intervals which continued to support the economic potential of the target.
•
Minera Florida, Chile - Positive results of drilling campaign include the definition of three new structures at Manda with economic mineral intercepts. The Manda vein is interpreted to be a sub-parallel vein system that may correspond to the east extension of Portezuelo fault of Lo Prat and Marilyn system.
•
Fazenda Brasileiro, Brazil - A prospective new discovery named E388 East, near existing primary infrastructure and immediately adjacent to a main haulage ramp, has the potential to increase grade being mined, extend mine life and expand the mineral resources.
•
Jacobina, Brazil - Delineation drilling continued in the higher grade zones of Canavieras North, South and Morro do Vento, with results showing grades significantly above the current mineral reserve and mineral resource model.
•
Chapada, Brazil - Drilling at Sucupira continued to support a 1.5 kilometer high grade extension of the mineralization previously identified from the southwest limits of the Cava Norte Pit.

______________________________
(i)
Excluding attributable sales from Alumbrera.
(ii)
A non-GAAP measure - Refer to Section 13.
(iii)
Includes Chapada, El Peñón, Gualcamayo, Mercedes, Canadian Malartic, Minera Florida and Jacobina.
(iv)
Canadian Malartic acquisition closed June 16, 2014.
(v)
Brio Gold holdings include Fazenda Brasileiro, Pilar and C1 Santa Luz. Currently, C1 Santa Luz is on care and maintenance.



2

3.    OUTLOOK AND STRATEGY

The Company strives to maximize production with the lowest level of capital and operating costs, with the objective of generating sustainable and increasing cash flow.

In 2015, the Company expects to deliver production of 1.30 million ounces of gold, 9.6 million ounces of silver and 120 million pounds of copper. Gold production is expected to consist of approximately 1.17 million ounces of gold from the Company’s core operations and approximately 130,000 ounces attributable to Brio Gold. Consistent with prior years, the Company expects higher gold production in the second half of the year compared to the first half of the year, which is expected to be over 15% higher, most of which will come from production improvements at Mercedes and Jacobina along with increases in production at Gualcamayo, Chapada and Canadian Malartic.

Estimated cash costs for 2015 are targeted at approximately $545 per ounce of gold and $6.00 per ounce of silver. For the Company's portfolio excluding Brio Gold, estimated cash costs for 2015 are forecast to be approximately $525 per ounce of gold. For Brio Gold, estimated cash costs for 2015 are forecast to be approximately $730 per ounce of gold. Consistent with gold production, cash costs are expected to be lower in the second half of the year compared to the first half of the year.

Estimated all-in sustaining costs for 2015 are targeted to be approximately $830 per ounce of gold, and approximately $10.50 per ounce of silver. Estimated all-in sustaining co-product costs for 2015 are forecast to be approximately $910 per ounce of gold and approximately $11.30 per ounce of silver. Once again, all-in sustaining costs are expected to be lower in the second half of the year compared to the first half of the year.

In order to achieve targeted cash costs and all-in sustaining costs, the Company is focusing on operational improvements with the particular objective of increasing average grade of ore processed, which is expected in the second half of the year.

The Company’s operating results in the second quarter, and first half of the year, were in line with targets and support 2015 production guidance.

In terms of other components of its guidance for the year, results in the second quarter and first half of the year support guidance which is summarized as follows:

•
Sustaining capital which is expected to be approximately $265 million or approximately $176 per ounce of gold and $2.75 per ounce of silver;
•
Expansionary capital spending which is expected to be approximately $90 to $140 million;
•
Exploration spending which is expected to be approximately $98 million;
•
Depreciation, depletion and amortization which is expected to be approximately $570 million or approximately $395 per ounce of gold and $6 per ounce of silver; and
•
General and administrative ("G&A") expense which is expected to be approximately $120 million in 2015 with potential for further reductions beginning in 2016, resulting from additional savings related to the streamlining of management and the downsizing and relocation of its Brazilian and other South American offices.

Overall, the Company expects improved operating results for the remainder of 2015 and production growth into the next several years. As previously announced, the Company has made the construction decision for the Cerro Moro project which is a high quality project that has the potential to add significantly to production growth at lower costs beginning in 2017. Furthermore, the Company also continues to advance several other projects through exploration and economic evaluation and development such as the Preliminary Economic Assessments for Upper Beaver and Gualcamayo's Deep Carbonates project, which are both expected to be completed by the end of the year.

Importantly, the Company is first and foremost focused on its core operations, which include its cornerstone operations of Chapada, Canadian Malartic and El Peñón, and opportunities which have the best prospects for exploration successes, optimization and cash flow generation. The corollary is that the Company is also committed to rationalizing its portfolio which includes monetizing non-core assets. Consistent with this plan, the Company continues to advance its plans for a going public event for Brio Gold and continues to advance its efforts at realizing value from other non-producing assets including Agua Rica. The Company is reviewing and considering all going public events for Brio Gold which include an initial public offering, reverse takeover, private placement and disposition to, or merger with, other public companies for cash, shares or a combination of both.

3

4.             SUMMARY OF FINANCIAL AND OPERATING STATISTICS

4.1    Financial Statistics
 
For the three months ended
For the six months ended
 
June 30, 2015

June 30, 2014

June 30, 2015

June 30, 2014

Net (loss)/earnings per share attributable to Yamana equity holders - basic and diluted
$
(0.01
)
$
0.01

$
(0.17
)
$
(0.03
)
Net (loss)/earnings per share from continuing operations attributable to Yamana equity holders - basic and diluted
$
(0.01
)
$
0.02

$
(0.15
)
$
(0.02
)
Adjusted (loss)/earnings per share (i)(ii) from continuing operations attributable to Yamana Gold Inc. equity holders. - basic and diluted
$
(0.01
)
$
0.06

$
(0.05
)
$
0.08

Dividends declared per share
$
0.0150

$
0.0375

$
0.0300

$
0.0750

Dividends paid per share
$
0.0150

$
0.0375

$
0.0300

$
0.1025

Weighted average number of common shares outstanding - basic (in thousands)
938,900

772,565

926,377

763,014

Weighted average number of common shares outstanding - diluted (in thousands)
938,900

773,602

926,377

763,014

 
 
 
 
 
(In millions of United States Dollars; unless otherwise noted)
 
 
 
 
Net (loss)/earnings from continuing operations attributable to Yamana equity holders
$
(7.0
)
$
15.7

$
(142.3
)
$
(15.7
)
Adjusted (loss)/earnings from continuing operations attributable to Yamana Gold Inc. equity holders (i)
$
(8.3
)
$
49.9

$
(45.8
)
$
59.9

Revenues
$
455.0

$
443.8

$
913.0

$
797.8

Mine operating earnings
$
58.4

$
80.8

$
98.6

$
114.0

Cash flows from operating activities from continuing operations (v)
$
123.4

$
143.0

$
125.4

$
173.8

Cash flows from operating activities before changes in non-cash working capital (i)(v)
$
149.3

$
149.0

$
245.3

$
243.0

Cash flows to investing activities from continuing operations (v)
$
(101.4
)
$
(653.7
)
$
(174.7
)
$
(793.0
)
Cash flows (used in)/from financing activities from continuing operations (v)
$
(23.8
)
$
419.3

$
(20.8
)
$
516.3

Average realized gold price per ounce (iii)
$
1,195

$
1,292

$
1,206

$
1,293

Average realized silver price per ounce (iii)
$
16.28

$
19.81

$
16.51

$
20.19

Average realized copper price per pound (iii)
$
2.91

$
3.11

$
2.90

$
3.18

Average market gold price per ounce (iv)
$
1,192

$
1,288

$
1,206

$
1,291

Average market silver price per ounce (iv)
$
16.39

$
19.62

$
16.55

$
20.05

Average market copper price per pound (iv)
$
2.74

$
3.08

$
2.69

$
3.14

_____________________________
(i)
A cautionary note regarding non-GAAP measures and their respective reconciliations are included in Section 13 including a discussion and definition of Adjusted Earnings, Adjusted Earnings per Share, and additional measures.
(ii)
The dilution effect of the convertible debt recognized in net earnings is a non-cash factor which is excluded in determining Adjusted Earnings.  Therefore, the dilution effect of the convertible debt has no effect on the calculation of Adjusted Earnings per share.
(iii)
Realized prices based on gross sales compared to market prices for metals may vary due to infrequent shipments and depending on timing of the sales.
(iv)
Source of information: LBMA p.m. price and LME Cash.
(v)
Cash flow balances are attributable to Yamana Gold Inc. equity holders.



4

4.2    Operating Statistics
For the three months ended June 30,
2015

2014

2015

2014

Ounces of Production
Gold
Silver
Chapada
30,172

28,875

72,978

77,148

El Peñón
55,404

75,727

2,028,975

2,013,812

Gualcamayo
37,558

52,863

—

—

Mercedes
19,306

22,809

78,932

93,057

Canadian Malartic (iv)
68,440

11,878

—

—

Minera Florida
26,298

25,311

191,162

185,952

Jacobina
21,318

18,776

—

—

Alumbrera (i)
5,111

8,311

—

—

Brio Gold (ii)
35,211

34,568

—

—

Total from continuing operations
298,818

279,118

2,372,047

2,369,969

Ernesto/Pau-a-Pique (discontinued operations)
—

5,246

—

—

Total production
298,818

284,364

2,372,047

2,369,969

Cash costs from continuing operations per ounce (iii)
 
 
 
 
Chapada
$
(969
)
$
(505
)
$
(52.28
)
$
(39.70
)
El Peñón
$
676

$
492

$
8.43

$
7.98

Gualcamayo
$
795

$
700

$
—

$
—

Mercedes
$
1,018

$
779

$
10.11

$
11.41

Canadian Malartic (iv)
$
609

$
614

$
—

$
—

Minera Florida
$
757

$
673

$
8.13

$
8.01

Jacobina
$
978

$
1,188

$
—

$
—

Alumbrera (i)
$
2,500

$
252

$
—

$
—

Brio Gold (ii)
$
773

$
934

$
—

$
—

Cash costs from continuing operations per ounce produced (iii)
$
603

$
540

$
6.59

$
6.57

Co-product cash costs from continuing operations per ounce produced (iii)
$
701

$
646

$
8.29

$
8.01

All-in sustaining costs from continuing operations per ounce (iii)
$
896

$
897

$
10.72

$
11.76

All-in sustaining co-product costs from continuing operations per ounce (iii)
$
949

$
951

$
11.81

$
12.47

 
 
 
 
 
Concentrate Production
 
 
2015

2014

Chapada concentrate production (tonnes)
 
 
61,324

60,975

Chapada copper contained in concentrate production (millions of lbs)
 
 
33.6

33.0

Chapada co-product cash costs per pound of copper (iii)
 
 
$
1.39

$
1.75

Co-product cash costs per pound of copper produced (iii)
 
 
$
1.66

$
1.84

 
 
 
 
 
Sales Included in Revenue (excluding 12.5% interest in Alumbrera)
 
 
2015

2014

Gold (ounces)
 
 
292,181

253,111

Silver (ounces)
 
 
2,332,161

2,217,779

Chapada concentrate (tonnes)
 
 
60,455

56,010

Chapada payable copper contained in concentrate (millions of lbs)
 
 
31.5

28.7

____________________
(i)
The Company holds a 12.5% equity interest in Alumbrera.
(ii)
Brio Gold holdings include Fazenda Brasileiro, Pilar and C1 Santa Luz. Currently, Santa Luz is on care and maintenance. Commissioning production related to Brio Gold is included.
(iii)
A cautionary note regarding non-GAAP measures and their respective reconciliations are included in Section 13 including a discussion and definition of Cash Costs and All-in Sustaining Costs. Comparatives have been restated to conform to the change in presentation adopted in the current period.
(iv)
Canadian Malartic acquisition closed June 16, 2014.



5

For the six months ended June 30,
2015

2014

2015

2014

Ounces of Production
Gold
Silver
Chapada
52,532

49,330

134,920

139,877

El Peñón
115,931

135,396

4,194,176

3,838,607

Gualcamayo
83,734

91,344

—

—

Mercedes
43,576

46,388

192,371

187,099

Canadian Malartic (iv)
136,334

11,878

—

—

Minera Florida
54,411

49,721

333,489

381,239

Jacobina
39,908

33,629

—

—

Alumbrera (i)
10,417

18,426

—

—

Brio Gold (ii)
66,389

65,867

—

—

Total from continuing operations
603,232

501,979

4,854,956

4,546,822

Ernesto/Pau-a-Pique (discontinued operations)
460

14,519

—

—

Total production
603,692

516,498

4,854,956

4,546,822

Cash costs from continuing operations per ounce (iii)
 
 
 
 
Chapada
$
(639
)
$
(615
)
$
(37.77
)
$
(43.88
)
El Peñón
$
635

$
539

$
8.02

$
8.20

Gualcamayo
$
782

$
716

$
—

$
—

Mercedes
$
914

$
722

$
8.40

$
10.71

Canadian Malartic (iv)
$
620

$
614

$
—

$
—

Minera Florida
$
737

$
673

$
9.38

$
7.67

Jacobina
$
971

$
1,213

$
—

$
—

Alumbrera (i)
$
1,678

$
(662
)
$
—

$
—

Brio Gold (ii)
$
797

$
945

$
—

$
—

Cash costs from continuing operations per ounce produced (iii)
$
629

$
511

$
6.85

$
6.66

Co-product cash costs from continuing operations per ounce produced (iii)
$
699

$
664

$
7.99

$
8.16

All-in sustaining costs from continuing operations per ounce (iii)
$
895

$
881

$
10.58

$
12.20

All-in sustaining co-product costs from continuing operations per ounce (iii)
$
922

$
988

$
11.16

$
13.09

 
 
 
 
 
Concentrate Production
 
 
2015

2014

Chapada concentrate production (tonnes)
 
 
109,009

112,546

Chapada copper contained in concentrate production (millions of lbs)
 
 
60.5

60.5

Chapada co-product cash costs per pound of copper (iii)
 
 
$
1.57

$
1.79

Co-product cash costs per pound of copper produced (iii)
 
 
$
1.86

$
1.90

 
 
 
 
 
Sales Included in Revenue (excluding 12.5% interest in Alumbrera)
 
 
2015

2014

Gold (ounces)
 
 
588,348

445,697

Silver (ounces)
 
 
4,770,494

4,416,484

Chapada concentrate (tonnes)
 
 
110,792

104,757

Chapada payable copper contained in concentrate (millions of lbs)
 
 
58.2

54.0

____________________
(i)
The Company holds a 12.5% equity interest in Alumbrera.
(ii)
Brio Gold holdings include Fazenda Brasileiro, Pilar and C1 Santa Luz. Currently, Santa Luz is on care and maintenance. Commissioning production related to Brio Gold is included.
(iii)
A cautionary note regarding non-GAAP measures and their respective reconciliations are included in Section 13 including a discussion and definition of Cash Costs and All-in Sustaining Costs. Comparatives have been restated to conform to the change in presentation adopted in the current period.
(iv)
Canadian Malartic acquisition closed June 16, 2014.


6

5.    OVERVIEW OF RESULTS

5.1    Overview of Financial Results
 
For the three months ended
For the six months ended
(In millions of United States Dollars; unless otherwise noted)
June 30, 2015
June 30, 2014
June 30, 2015
June 30, 2014
Revenues
$
455.0

$
443.8

$
913.0

$
797.8

Cost of sales excluding depletion, depreciation and amortization
(272.3
)
(243.3
)
(552.2
)
(452.2
)
Gross margin excluding depletion, depreciation and amortization
182.7

200.5

360.8

345.6

Depletion, depreciation and amortization
(124.3
)
(119.7
)
(262.2
)
(231.6
)
Mine operating earnings
58.4

80.8

98.6

114.0

Other expenses (i)
(83.9
)
(104.0
)
(153.4
)
(154.2
)
Equity (loss)/earnings from associate
(6.6
)
0.3

(11.0
)
1.4

Loss before income taxes
(32.1
)
(22.9
)
(65.8
)
(38.8
)
Income tax recovery/(expense)
25.1

38.6

(76.5
)
23.1

Net (loss)/earnings from continuing operations
(7.0
)
15.7

(142.3
)
(15.7
)
Net loss from discontinued operations
(0.8
)
(10.6
)
(17.4
)
(8.8
)
Net (loss)/earnings attributable to Yamana Gold Inc. equity holders
$
(7.8
)
$
5.1

$
(159.7
)
$
(24.5
)
 
 
 
 
 
Adjustments (ii):
 
 
 
 
Net (loss)/earnings from continuing operations
$
(7.0
)
$
15.7

$
(142.3
)
$
(15.7
)
   Non-cash unrealized foreign exchange losses/(gains)
22.3

5.3

0.3

(1.5
)
   Share-based payments/mark-to-market of deferred share units
—

4.2

5.1

9.5

   Impairment and mark-to-market of investment in available-for-sale securities and other assets
(2.4
)
0.4

(0.4
)
6.6

   Other non-recurring adjustments
(3.3
)
37.9

14.3

39.5

Adjusted earnings before income tax effect
$
9.6

$
63.5

$
(123.0
)
$
38.4

   Non-cash unrealized foreign exchange losses in tax
(21.2
)
(16.0
)
75.2

18.1

   Income tax effect of adjustments
3.3

2.4

2.0

3.4

Adjusted (loss)/earnings from continuing operations (ii)
$
(8.3
)
$
49.9

$
(45.8
)
$
59.9

 
 
 
 
 
Net loss per share from continuing operations attributable to Yamana Gold Inc. equity holders - basic and diluted
$
(0.01
)
$
0.02

$
(0.15
)
$
(0.02
)
Net loss per share attributable to Yamana Gold Inc. equity holders - basic and diluted
$
(0.01
)
$
0.01

$
(0.17
)
$
(0.03
)
Adjusted (loss)/earnings per share from continuing operations attributable to Yamana Gold Inc. equity holders (ii)- basic and diluted
$
(0.01
)
$
0.06

$
(0.05
)
$
0.08

______________________________
(i)
For the three and six month periods ended June 30, 2015, other expenses represent the aggregate of the following expenses: general and administrative of $32.0 million and $61.5 million (2014 - $36.6 million and $68.1 million), exploration and evaluation of $4.0 million and $9.4 million (2014 - $4.3 million and $8.9 million), other operating expense of $3.4 million and $26.8 million, (2014 - $38.7 million and $50.9 million) and net finance expense of $44.5 million and $55.7 million (2014 - finance expense $24.4 million and $26.3 million).
(ii)
A cautionary note regarding non-GAAP measures and their respective reconciliations are included in Section 13 including a discussion and definition of Adjusted Earnings and Adjusted Earnings per Share. Cash flow balances are attributable to Yamana Gold Inc. equity holders.

Acquisition of Mega Precious Metal Inc.

On June 22, 2015, the Company acquired all of the issued and outstanding common shares of Mega Precious Metals Inc. ("Mega Precious"). Mega Precious was a Canadian-based exploration company with a high quality pipeline of projects located in the mining-friendly jurisdictions of Manitoba, Northwestern Ontario and Nunavut. The most significant and advanced project is the Monument Bay gold/tungsten project located in northeastern Manitoba.

Total consideration paid for the acquisition of Mega Precious was $14.5 million (C$17.8 million) which consisted of approximately $0.2 million in cash, $14.0 million in Yamana common shares (4,366,675 shares) and transaction costs. Under the terms of the Agreement, each Mega Precious shareholder received $0.068 per share comprised of C$0.001 in cash and 0.02092 of a Yamana

7

common share for each Mega common share held. As part of the acquisition and included in the total consideration paid, the Company acquired the Pacific Road convertible notes totaling $2.4 million, and issued 744,187 Yamana common shares at $3.21 (C$3.94) per share, which concurrently terminated the Pacific Road Agreement.

The transaction is expected to advance the Company’s strategy to expand its presence in Canada as the significant existing mineral resource base at Monument Bay and North Madsen projects, in particular, provide an opportunity for further exploration to meaningfully increase the potential of these assets.

For the three months ended June 30, 2015

Net loss from continuing operations attributable to Yamana equity holders for the three months ended June 30, 2015 was $7.0 million or $0.01 per share basic, compared to net earnings from continuing operations attributable to Yamana equity holders of $15.7 million or $0.02 per share basic and diluted for the three months ended June 30, 2014.  Net loss resulted from higher foreign exchange losses and an equity loss from Alumbrera, compared to equity earnings in the comparative period.

Adjusted loss (a non-GAAP measure, see Section 13) from continuing operations was $8.3 million or $0.01 per share basic for the three months ended June 30, 2015, compared to adjusted earnings of $49.9 million or $0.06 per share for the same period of 2014. Mine operating earnings for the three months ended June 30, 2015 were $58.4 million, compared to $80.8 million for the same period of 2014. Adjusted loss and mine operating earnings for the period were impacted by lower realized metal prices of approximately 8% for gold, 18% for silver and 6% for copper and higher cash costs, partially offset by higher sales volume. Mine operating earnings included additional depletion, depreciation and amortization as a result of the acquisition of Canadian Malartic in the second quarter of 2014 and Pilar which completed commissioning in the third quarter of 2014.

Cash flows from operating activities from continuing operations for the three months ended June 30, 2015, after and before (a non-GAAP measure, see Section 13) changes in non-cash working capital, were $123.4 million and $149.3 million, respectively. The Company generated $0.33 of operating cash flows before changes in non-cash working capital for every dollar of revenue generated during the period, representing a 5% increase over the same period of 2014 from continuing operations, not including dividends from Alumbrera and notwithstanding lower metal prices in 2015 compared to 2014.

Revenue for the three months ended June 30, 2015 was $455.0 million, compared to $443.8 million for the same period of 2014 as a result of higher sales quantities driven predominantly by the contribution from Canadian Malartic acquired at the end of the second quarter of 2014, offset by lower metal prices. Revenue for the second quarter of 2015 was generated from the sale of 292,181 ounces of gold, 2.3 million ounces of silver and 31.5 million pounds of copper, excluding attributable sales from Alumbrera which is accounted for as an equity investment. This compares to sales, excluding Alumbrera, of 253,111 ounces of gold, 2.2 million ounces of silver and 28.7 million pounds of copper for the three months ended June 30, 2014.
 
The average realized price of gold for the quarter was $1,195 per ounce, compared to $1,292 per ounce for the same quarter in 2014, or 8% lower and the average realized silver price was $16.28 per ounce, compared to $19.81 per ounce for the same quarter in 2014, or 18% lower. The average realized price of copper was $2.91 per pound, comparable to the $3.11 per pound for the same quarter in 2014, or 6% lower.
 
Revenue for the quarter was comprised of the following:
For the three months ended June 30,
2015
2014
(In millions of Dollars; unless otherwise noted)
Quantity 
Sold (ii)
 
Realized Prices (iii)
Revenue
Revenue
Gold (i)
292,181

oz
$
1,195

$
349.1

$
320.0

Silver (i)
2,332,161

oz
16.28

38.0

43.9

Copper (i)
31,522,846

lbs
2.91

91.9

89.1

Gross revenue
 
 
 
$
479.0

$
453.0

(Deduct)/add:
 
 
 
 
 
- Treatment and refining charges of gold
and copper concentrate
 
 
 
(9.8
)
(7.8
)
- Sales taxes
 
 
 
(6.3
)
(8.2
)
- Metal price adjustments related to concentrate revenue
 
 
 
(8.2
)
7.7

- Other adjustments
 
 
 
0.3

(0.9
)
Revenue (ii)
 
 
 
$
455.0

$
443.8

______________________________

8

(i)
Includes payable gold, silver and copper contained in concentrate.
(ii)
Excludes Alumbrera which is accounted for as an equity investment and Ernesto/Pau-a-Pique which is a discontinued operation.
(iii)
Realized prices based on gross sales compared to market prices for metals may vary due to infrequent shipments and depending on timing of the sales. Realized price for copper of $2.91 is better than market price reflecting the settlements on copper forward contracts entered into by the Company.

Cost of sales excluding depletion, depreciation and amortization for the three months ended June 30, 2015 was $272.3 million, compared to $243.3 million for the same period in 2014. Cost of sales excluding depletion, depreciation and amortization for the second quarter was higher than that of the same period in 2014 due to higher sales volume and higher cash costs.

The following table provides a reconciliation of the co-product cash cost (a non-GAAP measure, see Section 13) to the cost of sales excluding depletion, depreciation and amortization for the quarter:
For the three months ended June 30,
2015
2014
(In millions of Dollars; unless otherwise noted)
Gold/Silver Ounces or Pounds
of Copper
Produced (i)
 
Co-product 
Cash Cost
per Unit (ii)
Total Costs
Total Costs
Chapada — Gold
30,172

oz
$
322

$
9.7

$
11.6

Chapada — Silver
72,978

oz
2.95

0.2

0.4

Chapada — Copper
33,616,203

lbs
1.39

46.6

57.7

El Peñón — Gold
55,404

oz
676

37.5

37.2

El Peñón — Silver
2,028,975

oz
8.43

17.1

16.1

Gualcamayo — Gold
37,558

oz
795

29.9

37.0

Mercedes — Gold
19,306

oz
1,018

19.7

17.8

Mercedes — Silver
78,932

oz
10.11

0.8

1.1

Canadian Malartic — Gold (50% interest)
68,440

oz
609

41.6

7.3

Minera Florida — Gold
26,298

oz
757

19.9

17.0

Minera Florida — Silver
191,162

oz
8.13

1.6

1.5

Jacobina — Gold
21,318

oz
978

20.8

22.3

Brio Gold — Gold
35,211

oz
—

27.2

14.4

Co-product cash cost of sales (ii)
 
 
 
$
272.6

$
241.4

Add (deduct):
 
 
 
 
 
- Inventory movements and adjustments
 
 
 
2.6

3.3

- Treatment and refining charges of gold
and copper concentrate

 
 
 
(9.8
)
(7.8
)
- Commercial and other costs
 
 
 
4.0

1.6

- Overseas freight for Chapada concentrate
 
 
 
2.9

4.8

Cost of sales excluding depletion, depreciation and amortization (i)
 
 
 
$
272.3

$
243.3

______________________________
(i)
Excludes Alumbrera which is accounted for as an equity investment and Ernesto/Pau-a-Pique which is a discontinued operation.
(ii)
A cautionary note regarding non-GAAP measures is included in Section 13 of this Management’s Discussion and Analysis of Operations and Financial Condition.

Depletion, depreciation and amortization ("DDA") expense for the three months ended June 30, 2015 was $124.3 million, compared to $119.7 million for the same period of 2014. Higher DDA was attributable to additional DDA following the acquisition of Canadian Malartic which closed at the end of the second quarter of 2014 including DDA on the amount of purchase price in excess of historical cost. Furthermore, additional DDA was recognized relative to the comparative period in 2014 from Pilar which completed commissioning effective October 1, 2014.
 
G&A, exploration and evaluation, other and net finance expenses were $83.9 million for the three months ended June 30, 2015, compared to $104.0 million for the same period in 2014, representing a decrease of 19%, a breakdown of which is as follows:

•
G&A expenses were $32.0 million, compared to $36.6 million for the same period in 2014, or 13% lower. 
•
Exploration and evaluation expenses were $4.0 million, compared to $4.3 million for the same period of 2014, or 7% lower.
•
Other expenses were $3.4 million, compared to $38.7 million for the same period of 2014, or 91% lower, mainly reflecting the fact that the 2014 period also includes transaction costs on the acquisition of Canadian Malartic with no current period comparative cost.

9

•
Net finance expense was $44.5 million, compared to net finance expense of $24.4 million for the same period of 2014, an increase of 82% due to higher foreign exchange losses as some of the currencies appreciated against the US Dollar towards the end of the period, higher interest expense on higher long-term debt following the acquisition of Canadian Malartic and reduced amount of interest capitalized following the completion of mine commissioning.
 
Equity loss from Alumbrera was $6.6 million for the three months ended June 30, 2015, compared to equity earnings of $0.3 million for the three months ended June 30, 2014. The equity loss was mainly a result of lower metal prices and planned reduced production from Alumbrera as the mine is near the end of its life. No cash dividends were received during the three months ended June 30, 2015 from the Company’s equity investment in Alumbrera compared to $10.5 million of the same period of 2014.

For the six months ended June 30, 2015

Net loss from continuing operations attributable to Yamana equity holders for the six months ended June 30, 2015 was $142.3 million or $0.15 per share, impacted by higher income tax expense and an equity loss from Alumbrera with equity earnings in the comparative period. This compares to net loss from continuing operations attributable to Yamana equity holders of $15.7 million or $0.02 per share basic for the six months ended June 30, 2014. The income tax expense for the first six months reflects the impact of non-cash unrealized foreign exchange losses related to deferred income taxes of $76.7 million, as during the period the Brazilian Real, Argentinean Peso, Mexican Peso and Canadian Dollar devalued against the US Dollar (for a detailed discussion, see Section 9).
 
Adjusted loss (a non-GAAP measure, see Section 13) from continuing operations was $45.8 million or $0.05 per share basic for the six months ended June 30, 2015, compared to adjusted earnings of $59.9 million or $0.08 per share for the same period of 2014. Mine operating earnings for the six months ended June 30, 2015 were $98.6 million, compared to $114.0 million for the same period of 2014. Adjusted loss and mine operating earnings for the period were impacted by lower realized metal prices of approximately 7% for gold, 18% for silver and 9% for copper and higher costs and DDA offset by higher sales volume. Mine operating earnings included additional depletion, depreciation and amortization as a result of the acquisition of Canadian Malartic in the second quarter of 2014 and Pilar which completed commissioning in the third quarter of 2014.

Cash flows from operating activities from continuing operations for the six months ended June 30, 2015, after and before (a non-GAAP measure, see Section 13) changes in non-cash working capital, were $125.4 million and $245.3 million, respectively. The Company generated $0.27 of operating cash flows before changes in non-cash working capital for every dollar of revenue generated during the period, which is consistent with the same period of 2014, not including dividends from Alumbrera and notwithstanding lower metal prices in 2015 compared to 2014. Operating cash flow before changes in non-cash working capital for every dollar of revenue generated improved in the second quarter, since the final payment of prior year's taxes is made at the beginning of the following fiscal year.

Revenue for the six months ended June 30, 2015 of $913.0 million, compared to $797.8 million for the same period of 2014 as a result of higher sales quantities driven predominantly by the contribution from Canadian Malartic acquired at the end of the second quarter of 2014, offset by lower metal prices. Revenue for the first six months of 2015 was generated from the sale of 588,348 ounces of gold, 4.8 million ounces of silver and 58.2 million pounds of copper, excluding attributable sales from Alumbrera which is accounted for as an equity investment. This compares to sales, excluding Alumbrera, of 445,697 ounces of gold, 4.4 million ounces of silver and 54.0 million pounds of copper for the six months ended June 30, 2014. The average realized price of gold for the six months ended June 30, 2015 was $1,206 per ounce, compared to $1,293 per ounce for the same period in 2014, or 7% lower and the average realized silver price was $16.51 per ounce, compared to $20.19 per ounce for the same period in 2014, or 18% lower. The average realized price of copper was $2.90 per pound, compared to the $3.18 per pound for the same period in 2014, or 9% lower.
 

10

Revenue for the period was comprised of the following:
For the six months ended June 30,
2015
2014
(In millions of Dollars; unless otherwise noted)
Quantity 
Sold (ii)
 
Realized Prices (iii)
Revenue
Revenue
Gold (i)
588,348

oz
$
1,206

$
709.4

$
570.4

Silver (i)
4,770,494

oz
16.51

78.8

88.9

Copper (i)
58,235,066

lbs
2.90

169.0

171.5

Gross revenue
 
 
 
$
957.2

$
830.8

(Deduct)/add:
 
 
 
 
 
- Treatment and refining charges of gold
and copper concentrate
 
 
 
(18.5
)
(15.6
)
- Sales taxes
 
 
 
(13.3
)
(15.8
)
- Metal price adjustments related to concentrate revenue
 
 
 
(12.5
)
2.2

- Other adjustments
 
 
 
0.1

(3.8
)
Revenue (ii)
 
 
 
$
913.0

$
797.8

______________________________
(i)
Includes payable gold, silver and copper contained in concentrate.
(ii)
Excludes Alumbrera which is accounted for as an equity investment and Ernesto/Pau-a-Pique which is a discontinued operation.
(iii)
Realized prices based on gross sales compared to market prices for metals may vary due to infrequent shipments and depending on timing of the sales. Realized price for copper of $2.90 is better than market price reflecting the settlements on copper forward contracts entered into by the Company.

Cost of sales excluding depletion, depreciation and amortization for the six months ended June 30, 2015 was $552.2 million, compared to $452.2 million for the same period in 2014. Cost of sales excluding depletion, depreciation and amortization for the second quarter was higher than that of the same period in 2014 due to higher sales volume and higher cash costs.

The following table provides a reconciliation of the co-product cash cost (a non-GAAP measure, see Section 13) to the cost of sales excluding depletion, depreciation and amortization for the period:
For the six months ended June 30,
2015
2014
(In millions of Dollars; unless otherwise noted)
Gold/Silver Ounces or Pounds
of Copper
Produced (i)
 
Co-product 
Cash Cost
per Unit (ii)
Total Costs
Total Costs
Chapada — Gold
52,532

oz
$
379

$
19.9

$
23.2

Chapada — Silver
134,920

oz
3.25

0.4

0.8

Chapada — Copper
60,462,766

lbs
1.57

95.3

107.1

El Peñón — Gold
115,931

oz
635

73.6

72.9

El Peñón — Silver
4,194,176

oz
8.02

33.6

31.5

Gualcamayo — Gold
83,734

oz
782

65.5

65.4

Mercedes — Gold
43,576

oz
914

39.8

33.6

Mercedes — Silver
192,371

oz
8.40

1.6

2.0

Canadian Malartic — Gold (50% interest)
136,334

oz
620

84.6

7.3

Minera Florida — Gold
54,411

oz
737

40.1

33.4

Minera Florida — Silver
333,489

oz
9.38

3.1

2.9

Jacobina — Gold
39,908

oz
971

38.7

40.8

Brio Gold — Gold
66,389

oz
797

52.9

26.6

Co-product cash cost of sales (ii)
 
 
 
$
549.1

$
447.5

Add (deduct):
 
 
 
 
 
- Inventory movements and adjustments
 
 
 
10.3

1.1

- Treatment and refining charges of gold
and copper concentrate
 
 
 
(18.5
)
(15.6
)
- Commercial and other costs
 
 
 
5.4

10.6

- Overseas freight for Chapada concentrate
 
 
 
5.9

8.6

Cost of sales excluding depletion, depreciation and amortization (i)
 
 
 
$
552.2

$
452.2

______________________________
(i)
Excludes Alumbrera which is accounted for as an equity investment and Ernesto/Pau-a-Pique which is a discontinued operation.

11

(ii)
A cautionary note regarding non-GAAP measures is included in Section 13 of this Management’s Discussion and Analysis of Operations and Financial Condition.

Depletion, depreciation and amortization ("DDA") expense for the six months ended June 30, 2015 was $262.2 million, compared to $231.6 million for the same period of 2014. Higher DDA was attributable to additional DDA following the acquisition of Canadian Malartic which closed at the end of the second quarter of 2014 including DDA on the amount of purchase price in excess of historical cost. Furthermore, additional DDA was recognized relative to the comparative period in 2014 from Pilar which completed commissioning effective October 1, 2014.
 
G&A, exploration and evaluation, other and net finance expenses were $153.4 million for the six months ended June 30, 2015, in line with $154.2 million for the same period in 2014, a breakdown of which is as follows:

•
G&A expenses were $61.5 million, compared to $68.1 million for the same period in 2014, or 10% lower. 
•
Exploration and evaluation expenses were $9.4 million, in line with the $8.9 million for the same period of 2014.
•
Other expenses were $26.8 million, compared to $50.9 million for the same period of 2014, or 47% lower, as other expenses for the 2014 period include transaction costs on the acquisition of Canadian Malartic with no current period comparative cost.
•
Net finance expense was $55.7 million, compared to net finance expense of $26.3 million for the same period of 2014, or approximately double, due to higher interest expense on higher long-term debt following the acquisition of Canadian Malartic and reduced amount of interest capitalized following the completion of mine commissioning partially offset by a higher net foreign exchange gain relative to the same period of 2014.
 
Equity loss from Alumbrera was $11.0 million for the six months ended June 30, 2015, compared to equity earnings of $1.4 million for the six months ended June 30, 2014. Equity loss was mainly a result of lower metal prices and reduced production from Alumbrera as the mine is near the end of its life. No cash dividends were received during the six months ended June 30, 2015 from the Company’s equity investment in Alumbrera compared to $28.1 million of the same period of 2014.

5.2    Overview of Operating Results

For the three months ended June 30, 2015

Production for the second quarter was higher than 2014 levels. Overall, production was in line with target and at most mines was in line or above targets, except Jacobina and Mercedes for each of which production was below target. Had production at Jacobina and Mercedes been in line with target, the Company would have been well positioned to comfortably exceed overall production targets. Planned improvements at Jacobina and Mercedes began to take hold late into the second quarter and, as such, production at these mines will improve for the second half of the year.

Gold

Second quarter gold production from continuing operations of 298,818 ounces was 7% higher compared to the 279,118 ounces of gold in the second quarter of 2014. Production from core assets for the quarter was 258,495 ounces of gold and compares to 236,240 ounces of gold in the second quarter of 2014, representing a 9% increase. Production increases from the second quarter of 2014 included a 14% increase at Jacobina, a 4% increase at Chapada, a 4% increase at Minera Florida, a 2% increase at Brio Gold, as well as the attributable ounces from Canadian Malartic. Production increases from the first quarter of 2015 included a 35% increase at Chapada, a 15% increase at Jacobina, a 13% increase at Brio Gold and a fourth consecutive quarterly record at Canadian Malartic. Production continues to be expected to be higher for the second half of the year with the largest impact at mines that contribute most significantly to the operating cash flow generation of the Company.

The following summarizes total production of gold ounces by mine for the second quarter relative to the comparative quarter in 2014:


12

(i)
Canadian Malartic acquisition closed June 16, 2014.

Cash costs (a non-GAAP measure, see Section 13) for the second quarter were $603 per ounce of gold, compared to $540 per ounce of gold in the same quarter of 2014.  Cash costs were impacted by a 6% decline in the realized price of copper resulting in lower by-product credits for the quarter partly offset by higher sales volume. On a co-product basis, cash costs (a non-GAAP measure, see Section 13) for the second quarter were $701 per ounce of gold, compared to the $646 per ounce of gold in the second quarter of 2014. Higher total cash costs are due to higher sales volume and higher costs due to planned lower grades at some mines. Relative to the first quarter of 2015, cash costs on a co-product basis reflect the impact of lower production.

All-in sustaining costs ("AISC", a non-GAAP measure, see Section 13) were $896 per ounce of gold compared to $897 per ounce of gold for the second quarter of 2014. On a co-product basis, AISC were $949 per ounce of gold for the second quarter compared to $951 per ounce of gold for the second quarter of 2014. AISC from core assets of $878 per ounce of gold on a co-product basis.

Silver

Second quarter silver production was 2.4 million ounces in line with the 2.4 million ounces of silver in the second quarter of 2014. Cash costs for the second quarter of 2015 were $6.59 per ounce of silver, impacted by lower by-product copper credits when compared to $6.57 per ounce of silver in the second quarter of 2014. Cash costs on a co-product basis for the second quarter were $8.29 per ounce of silver, compared to $8.01 per ounce of silver in the second quarter of 2014.

Copper

Copper production for the three months ended June 30, 2015 was 36.4 million pounds, compared to 39.4 million pounds for the same period of 2014. Copper production for the three months ended June 30, 2015 was 33.6 million pounds from the Chapada mine, compared to 33.0 million pounds for the same period of 2014. Cash costs per pound of copper on a co-product basis were $1.39 per pound from the Chapada mine compared to $1.75 per pound of copper in the second quarter of 2014.

For the six months ended June 30, 2015

Production for the first half of the year was higher than 2014 levels. Overall, production was in line with target, well positioning the Company toward its annual production guidance. Production at most mines was in line or above targets except for Jacobina and Mercedes for each of which production was below target, mostly as a result of production in the second quarter. Planned

13

improvements at Jacobina and Mercedes began to take hold late into the second quarter and, as such, production at these mines will improve for the second half of the year.

Gold

Production in the first half of 2015 was 603,692 ounces of gold of which 603,232 ounces were gold from continuing operations or 20% and 18% higher than the 516,498 and 501,979 ounces of gold from continuing operations in the same period of 2014, respectively. Production from core assets of 526,426 ounces of gold was 26% higher than the 417,686 ounces of gold in the same period of 2014. Higher production included a 19% increase at Jacobina, a 9% increase at Minera Florida and a 6% increase at Chapada as well as the attributable ounces from Canadian Malartic.

The following summarizes the cumulative effect of gold production at each mine for the current and comparative period of 2014:


(i)
Canadian Malartic acquisition closed June 16, 2014.

Cash costs from continuing operations in the first half of 2015 were $629 per ounce of gold, compared to $511 per ounce of gold in the same period of 2014.  While production increased 20% compared to the first six months of 2014, cash costs were impacted by a 9% decline in the realized price of copper resulting in lower by-product credits for the first half year. On a co-product basis, cash costs from continuing operations for the first six months of 2015 were $699 per ounce of gold, compared to $664 per ounce of gold in the same period of 2014.

In the first half of 2015, AISC were $895 per ounce of gold, compared to $881 per ounce of gold for the same period of 2014. On a co-product basis, AISC from continuing operations were $922 per ounce of gold for the first six months of 2015, compared to $988 per ounce of gold for the same period of 2014. All-in sustaining costs from core assets of $845 per ounce of gold a co-product basis for the first half of 2015, in line with the same period of 2014.

Silver

Silver production for the first half of 2015 was 4.9 million ounces compared to 4.5 million ounces of silver for the same period of 2014. Cash costs from continuing operations for the first half of 2015 were $6.85 per ounce of silver, impacted by lower by-product copper credits when compared to $6.66 per ounce of silver in the same period of 2014. Cash costs from continuing operations on a co-product basis were $7.99 per ounce of silver, compared to $8.16 per ounce of silver in the first half of 2014.

14


Copper

Copper production for the first half of 2015 was 66.3 million pounds including Alumbrera, compared to 74.1 million pounds for the same period of 2014. Copper production for the first half of 2015 was 60.5 million pounds from the Chapada mine, in line with the 60.5 million pounds for the same period of 2014. Cash costs per pound of copper on a co-product basis were $1.57 per pound from the Chapada mine compared to $1.79 per pound of copper in the second half of 2014.

15

6.    OPERATING MINES
 
CHAPADA, BRAZIL
 
For the three months ended June 30,
For the six months ended June 30,
Operating Statistics
2015

2014

 
2015

2014

 
Production
 
 
 
 
 
 
Concentrate (tonnes)
61,324

60,975

1%
109,009

112,546

(3)%
Gold contained in concentrate (ounces)
30,172

28,875

4%
52,532

49,330

6%
Silver contained in concentrate (ounces)
72,978

77,148

(5)%
134,920

139,877

(4)%
Copper contained in concentrate (millions of pounds)
33.6

33.0

2%
60.5

60.5

—%
 
 
 
 
 
 
 
Cash costs per gold ounce produced (ii)
$
(969
)
$
(505
)
92%
$
(639
)
$
(615
)
4%
Cash costs per silver ounce produced (ii)
$
(52.28
)
$
(39.70
)
32%
$
(37.77
)
$
(43.88
)
(14)%
Co-product cash costs per gold ounce produced (ii)
$
322

$
403

(20)%
$
379

$
444

(15)%
Co-product cash costs per silver ounce produced (ii)
$
2.95

$
4.74

(38)%
$
3.25

$
4.94

(34)%
Co-product cash costs per pound of copper produced (ii)
$
1.39

$
1.75

(21)%
$
1.57

$
1.79

(12)%
 
 
 
 
 
 
 
Ore mined (tonnes)
5,440,428

4,375,863

24%
8,429,404

8,728,649

(3)%
Ore processed (tonnes)
4,997,816

5,034,490

(1)%
9,260,162

9,879,242

(6)%
 
 
 
 
 
 
 
Gold feed grade (g/t)
0.32

0.30

8%
0.30

0.26

15%
Copper feed grade (%)
0.38

0.37

2%
0.37

0.35

6%
Concentrate grade - gold (g/t)
15.30

14.73

4%
14.99

13.63

10%
Concentrate grade - copper (%)
24.86

24.52

1%
25.16

24.40

3%
 
 
 
 
 
 
 
Gold recovery rate (%)
58.5

60.0

(3)%
59.1

59.4

(1)%
Copper recovery rate (%)
80.8

80.0

1%
80.2

79.7

1%
 
 
 
 
 
 
 
Sales (iii)
 
 
 
 
 
 
Concentrate (tonnes)
60,455

56,010

8%
110,792

104,757

6%
Payable ounces contained in concentrate
 
 
 
 
 
 
   Payable gold contained in concentrate (ounces)
28,700

21,458

34%
49,185

39,958

23%
   Payable silver contained in concentrate (ounces)
48,183

16,509

192%
90,147

43,807

106%
   Payable copper contained in concentrate (millions of pounds)
31.5

28.7

10%
58.2

54.0

8%
 
 
 
 
 
 
 
Depletion, depreciation and amortization
 
 
 
 
 
 
Per gold ounces sold
$
118

$
128

(8)%
$
120

$
128

(6)%
Per silver ounces sold
$
1.53

$
2.39

(36)%
$
1.68

$
2.17

(23)%
Per copper pound sold
$
0.26

$
0.30

(13)%
$
0.27

$
0.30

(10)%
______________________________
(i)
A cautionary note regarding non-GAAP measures is included in Section 13 of this Management’s Discussion and Analysis. Comparatives have been restated to conform to the change in presentation adopted in the current period.
(ii)
Quantities sold include quantity adjustment on provisional and final invoice settlements.


Chapada continued the year with strong results for the second quarter, following a strong first quarter. Production was higher, and co-product cash costs lower compared to the second quarter of 2014, and the mine exceeded targets for the second quarter and first half of the year.

At Chapada, higher gold and copper production compared to the second quarter of 2014 reflects increased gold and copper grades mostly from the contribution of higher grade ore from Corpo Sul. Gold production increased approximately 35% compared to the first quarter of 2015 reflecting an increase in gold grades. Silver production also increased in comparison to the first quarter of 2015. Copper production in the second quarter was in line with the second quarter of 2014 and approximately 25% higher than the first quarter of 2015 benefiting from higher grades.


16

Lower co-product cash costs for gold compared to the second quarter of 2014 and the first quarter of 2015 were the result of increased production. Co-product cash costs for copper were lower compared to the second quarter of 2014 due to the favourable foreign exchange impact during the period. Hedges denominated in Brazilian Real negatively impacted the second quarter of 2015 co-product cash costs per gold ounce and per copper pound by $38 and $0.14, respectively, compared to a negative impact of $20 per gold ounce and $0.08 per copper pound in the comparative quarter of 2014. The expiry of the hedges in the fourth quarter will result in an improved cost structure for both gold and copper.

The Company periodically uses forward contracts to economically hedge against the risk of declining copper prices for a portion of Chapada's forecast copper concentrate sales. In late 2014, the Company entered into contracts representing approximately 60% of expected Chapada production for 2015 at a price of $3.00 per pound. For the three and six months ended June 30, 2015, $5.4 million and $12.1 million, respectively, have been settled under this program positively impacting earnings and cash flow for the periods then ended. These settlements are reflected on the effective realized copper price of $2.91 and $2.90 per pound as compared to average market copper prices of $2.74 and $2.69 per pound, for the three and six months ended June 30, 2015, respectively. As at June 30, 2015, the Company has open contracts remaining for approximately 37 million pounds of copper at $3.00 per pound.

Stable throughput at higher levels is expected going forward from more efficient flow of material through the now commissioned in-pit crusher. Certain modifications completed late in the second quarter, the most impactful of which was to the discharge chute at the head of the overland conveyor, are expected to further increase efficiency. The Company continues to advance efforts to increase recoveries. In the second quarter, improvements to the plant flotation circuit resulted in better than expected recoveries, which partially offset the impact on throughput resulting from the increase in processing of harder ore.
 
In the second quarter of 2015, Chapada produced 30,172 ounces of gold and 72,978 ounces of silver compared to 28,875 ounces of gold and 77,148 ounces of silver for the same quarter of 2014. Co-product cash costs were $322 per ounce of gold and $2.95 per ounce of silver in the second quarter, compared to $403 per ounce of gold and $4.74 per ounce of silver in the same quarter of 2014.

Copper production was 33.6 million pounds in the second quarter of 2015, compared to production of 33.0 million pounds of copper for the same quarter of 2014. Co-product cash costs for copper were $1.39 per pound in the second quarter compared to $1.75 per pound for the same quarter of 2014.

Chapada produced 52,532 ounces of gold and 134,920 ounces of silver in the first half of 2015, compared to 49,330 ounces of gold and 139,877 ounces of silver in the same period of 2014. Cash costs were $379 per ounce of gold and $3.25 per ounce of silver in the first half of 2015, compared to $444 per ounce of gold and $4.94 per ounce of silver in the same period of 2014.
 
Copper production was 60.5 million pounds in the first half of 2015, compared to production of 60.5 million pounds of copper for the same period of 2014. Co-product cash costs for copper were $1.57 per pound in the first half of 2015, compared to $1.79 per pound for the same period of 2014.

Payable ounces of gold and silver increased due to higher sales quantities of concentrate during the period, together with higher concentrate grade of the aforementioned metals.



17

EL PEÑÓN, CHILE
 
For the three months ended June 30,
For the six months ended June 30,
Operating Statistics
2015

2014

 
2015

2014

 
Production
 

 

 
 
 
 
Gold production (ounces)
55,404

75,727

(27)%
115,931

135,396

(14)%
Silver production (ounces)
2,028,975

2,013,812

1%
4,194,176

3,838,607

9%
 
 
 

 
 
 
Co-product cash costs per gold ounce produced (i)
$
676

$
492

37%
$
635

$
539

18%
Co-product cash costs per silver ounce produced (i)
$
8.43

$
7.98

6%
$
8.02

$
8.20

(2)%
 
 
 

 
 
 
Ore mined (tonnes)
312,159

362,039

(14)%
615,179

740,044

(17)%
Ore processed (tonnes)
364,181

366,756

(1)%
743,256

718,157

3%
 
 
 

 
 
 
Gold feed grade (g/t)
5.07

6.81

(26)%
5.24

6.29

(17)%
Silver feed grade (g/t)
198.56

210.56

(6)%
202.58

201.63

—%
 
 
 

 
 
 
Gold recovery rate (%)
93.0

93.6

(1)%
92.9

93.4

(1)%
Silver recovery rate (%)
87.8

81.7

7%
87.1

82.5

6%
 
 
 

 
 
 
Sales
 
 

 
 
 
Gold (ounces)
55,623

74,406

(25)%
115,411

133,610

(14)%
Silver (ounces)
2,015,907

1,929,133

4%
4,160,757

3,767,039

10%
 
 
 

 
 
 
Depletion, depreciation and amortization
 
 
 
 
 
 
Per gold ounce sold
$
405

$
346

17%
$
409

$
372

10%
Per silver ounce sold
$
5.57

$
5.30

5%
$
5.63

$
5.80

(3)%
______________________________
(i)
A cautionary note regarding non-GAAP measures is included in Section 13 of this Management’s Discussion and Analysis. Comparatives have been restated to conform to the change in presentation adopted in the current period.

El Peñón production in the second quarter and first half of the year were in line with targets, despite being affected by heavy rains in Northern Chile which occurred in late March. El Peñón mined and processed lower grade in the first half of 2015 than it did in the comparative period of 2014, all of which was consistent with its mine plan. For the second half of 2015, the Company expects better production and costs, predominantly driven by the expectation of higher grades and a strong fourth quarter.

At El Peñón, gold production was lower compared to the second quarter of 2014 mostly as a result of planned lower gold grades. Production was in line with the Company's mine plans, which recognized that during the quarter significant ore contribution would be coming from areas where grades were more erratic, particularly as mining entered ore fringe areas of higher grade bodies such as Bonanza. Silver recovery was higher compared to 2014. Higher costs during the quarter were related to the relative increase in ore development due to mining of fringe areas and the lower grade compared to the second quarter of 2014. Costs are expected to be lower in the second half of the year mostly due to operational improvements planned for and initiated in the first half of the year. Third quarter production is expected to be lower than the fourth quarter as the Company continues to move through peripheral areas. Planned production contribution from higher grade areas in both the north and south mines will be mostly realized in the fourth quarter.

In the second quarter of 2015, El Peñón produced 55,404 ounces of gold and 2.0 million ounces of silver, compared to 75,727 ounces of gold and 2.0 million ounces of silver for the same quarter of 2014. Cash costs were $676 per ounce of gold and $8.43 per ounce of silver in the second quarter of 2015, compared to $492 per ounce of gold and $7.98 per ounce of silver in the same quarter of 2014.

El Peñón produced 115,931 ounces of gold and 4.2 million ounces of silver in the first half of 2015, compared to 135,396 ounces of gold and 3.8 million ounces of silver in the same period of 2014. Cash costs were $635 per ounce of gold and $8.02 per ounce of silver in the first half of 2015, compared to $539 per ounce of gold and $8.20 per ounce of silver in the same period of 2014.


18

GUALCAMAYO, ARGENTINA
 
For the three months ended June 30,
For the six months ended June 30,
Operating Statistics
2015

2014

 
2015

2014

 
Production
 
 
 
 
 
 
Gold production (ounces)
37,558

52,863

(29)%
83,734

91,344

(8)%
 
 
 

 
 
 
Co-product cash costs per gold ounce produced (i)
$
795

$
700

14%
$
782

$
716

9%
 
 
 

 
 
 
Ore mined (tonnes)
1,848,452

1,349,512

37%
3,592,369

3,323,077

8%
Ore processed (tonnes)
1,754,416

1,435,864

22%
3,498,956

3,341,551

5%
 
 
 

 
 
 
Gold feed grade (g/t)
1.44

1.63

(12)%
1.36

1.54

(12)%
Gold recovery rate (%)
46.1

66.7

(31)%
54.6

67.4

(19)%
 
 
 

 
 
 
Sales
 
 

 
 
 
Gold sales (ounces)
36,825

53,590

(31)%
82,937

92,371

(10)%
 
 
 

 
 
 
Depletion, depreciation and amortization per gold ounce sold
$
311

$
390

(20)%
$
286

$
458

(38)%
______________________________
(i)
A cautionary note regarding non-GAAP measures is included in Section 13 of this Management’s Discussion and Analysis. Comparatives have been restated to conform to the change in presentation adopted in the current period.

For Gualcamayo, production for the first half of 2015 was in line with target, although production in the first quarter exceeded target, while production in the second quarter was below target, mostly due to a localized ore zone with increased clay levels encountered early in the second quarter which had a negative impact on recoveries, production and costs overall in the quarter. This is considered a timing issue for recoveries. Also, for the balance of the year, the Company expects to improve production and costs as the ore loaded on the heap leach pads in the balance of the second quarter and thereafter does not contain the higher clay levels. Production is planned to increase in the third and fourth quarters.

At Gualcamayo, production was lower compared to the second quarter of 2014 mostly due to lower recoveries partially offset by higher throughput. Gold grades in the quarter were higher than the first quarter of 2015 and are consistent with normal mine sequencing as the contribution from the lower grade open-pit ore was partially offset by the contribution from the higher grade QDD Lower West ("QDDLW") underground mine. Recoveries during the quarter were impacted by ore from a localized clay zone with slower leaching times, thereby resulting in an increased level of metal in progress, which is expected to be recovered in subsequent quarters. Recoveries are expected to increase and to normalize to recovery levels comparable to levels established in prior years as the effects of a localized clay zone encountered early in the second quarter pass and as ore loaded onto the pads no longer contains higher clay concentration.

The expansion of the Adsorption and Desorption plant remains on track for completion in the third quarter and will further increase recoveries beginning late in 2015. Furthermore, as the Company increases the proportion of production from sub-level caving underground mining beginning in 2016, which is now in development, more ore will be contributed from high grade underground operations and costs will further improve.

During the second quarter, a Preliminary Economic Assessment for the Deep Carbonates project, which describes a potential large scale, bulk tonnage underground operation beneath the current QDD pit limits, was advanced. An internal review of the project has been completed and the findings are being consolidated for release later in 2015.

In the second quarter of 2015, Gualcamayo produced 37,558 ounces of gold, compared to 52,863 ounces of gold in the same quarter of 2014. Cash costs were $795 per ounce of gold in the second quarter of 2015, compared to $700 per ounce of gold in the second quarter of 2014.

Gualcamayo produced 83,734 ounces of gold in the first half of 2015, compared to 91,344 ounces of gold in the same period of 2014. Cash costs were $782 per ounce of gold in the first half of 2015, compared to $716 per ounce of gold in the same period of 2014.

19


MERCEDES, MEXICO
 
For the three months ended June 30,
For the six months ended June 30,
Operating Statistics
2015

2014

 
2015

2014

 
Production
 
 
 
 
 
 
Gold production (ounces)
19,306

22,809

(15)%
43,576

46,388

(6)%
Silver production (ounces)
78,932

93,057

(15)%
192,371

187,099

3%
 
 
 

 
 
 
Co-product cash costs per gold ounce produced (i)
$
1,018

$
779

31%
$
914

$
722

27%
Co-product cash costs per silver ounce produced (i)
$
10.11

$
11.41

(11)%
$
8.40

$
10.71

(22)%
 
 
 

 
 
 
Ore mined (tonnes)
121,971

170,012

(28)%
234,358

328,263

(29)%
Ore processed (tonnes)
179,983

167,552

7%
355,907

327,114

9%
 
 
 

 
 
 
Gold feed grade (g/t)
3.65

4.60

(21)%
4.10

4.71

(13)%
Silver feed grade (g/t)
37.67

58.58

(36)%
45.37

59.31

(24)%
 
 
 

 
 
 
Gold recovery rate (%)
92.1

93.9

(2)%
93.2

94.3

(1)%
Silver recovery rate (%)
36.1

30.0

20%
37.1

30.1

23%
 
 
 

 
 
 
Sales
 
 

 
 
 
Gold (ounces)
18,563

24,002

(23)%
43,963

46,789

(6)%
Silver (ounces)
78,334

98,436

(20)%
195,450

188,175

4%
 
 
 

 
 
 
Depletion, depreciation and amortization
 
 
 
 
 
 
Per gold ounce sold
$
471

$
449

5%
$
429

$
427

—%
Per silver ounce sold
$
6.44

$
6.91

(7)%
$
5.91

$
6.66

(11)%
______________________________
(i)
A cautionary note regarding non-GAAP measures is included in Section 13 of this Management’s Discussion and Analysis. Comparatives have been restated to conform to the change in presentation adopted in the current period.

Mercedes production for the second quarter of 2015 was below target, largely driven by excessive mining dilution. The impact of dilution resulted in lower feed grades, lower recoveries and higher costs. For the second half of 2015, results are expected to improve significantly as the Company takes measures to improve dilution control, which will lower dilution going forward. Additionally, grade is expected to improve as the Company transitions into the higher grade areas of Lagunas and Barrancas.

The Company expects gold and silver production to increase to higher levels beginning in the third quarter and further increasing in the fourth quarter mostly due to better dilution control, with improved design, engineering and blasting, and as the Company transitions into the aforementioned higher grade areas. The increased silver recoveries were consistent with the first quarter of 2015.

In the second quarter of 2015, Mercedes produced 19,306 ounces of gold and 78,932 ounces of silver, compared to 22,809 ounces of gold and 93,057 ounces of silver in the same quarter of 2014. Cash costs were $1,018 per ounce of gold and $10.11 per ounce of silver in the second quarter of 2015, compared to $779 per ounce of gold and $11.41 per ounce of silver in the same quarter of 2014. Hedges denominated in Mexican Peso negatively impacted the second quarter of 2015 co-product cash costs per gold ounce by $21, compared to a positive impact of $2 per gold ounce in the comparative quarter of 2014. The expiry of the hedges which occurred during the current quarter will result in an improved cost for gold going forward and will coincide with an improving production profile and cost structure.

Mercedes produced 43,576 ounces of gold and 192,371 ounces of silver in the first half of 2015, compared to 46,388 ounces of gold and 187,099 ounces of silver in the same period of 2014. Cash costs were $914 per ounce of gold and $8.40 per ounce of silver in the first half of 2015, compared to $722 per ounce of gold and $10.71 per ounce of silver in the same period of 2014.

20

CANADIAN MALARTIC (50% interest), CANADA
 
For the three months ended June 30,
For the six months ended June 30,
Operating Statistics (i)
2015

2014

 
2015

2014

 
Production
 
 
 
 
 
 
Gold production (ounces)
68,440

11,878

476%
136,334

11,878

1,048
 %
 
 
 
 
 
 
 
Co-product cash costs per gold ounce produced (ii)
$
609

$
614

(1)%
$
620

$
614

1
 %
 
 
 
 
 
 
 
Ore mined (tonnes)
2,323,982

366,786

534%
5,213,745

366,786

1,321
 %
Ore processed (tonnes)
2,307,082

397,813

480%
4,646,556

397,813

1,068
 %
 
 
 
 
 
 
 
Gold feed grade (g/t)
1.04

1.03

1%
1.02

1.03

(1
)%
Gold recovery rate (%)
88.5

89.9

(2)%
89.2

89.9

(1
)%
 
 
 
 
 
 
 
Sales
 
 
 
 
 
 
Gold sales (ounces)
72,264

16,303

343%
135,067

16,303

728
 %
 
 
 
 
 
 
 
Depletion, depreciation and amortization per gold ounce sold
$
348

$
314

11%
$
364

$
314

16
 %
______________________
(i)
Canadian Malartic acquisition closed June 16, 2014.
(ii)
A cautionary note regarding non-GAAP measures is included in Section 13 of this Management’s Discussion and Analysis.

Canadian Malartic continues to operate at levels that are in line with, or above target, and production in the second quarter achieved a fourth consecutive quarterly record of 68,440 ounces of gold on a 50%-basis. Increased production compared to the first quarter of 2015 was the result of higher grades partially offset by lower throughput and slightly lower recovery rates. Throughput in the first half of 2015 was lower in part due to an unplanned maintenance shutdown relating to the conveyor belt. Throughput is planned at an average of 53,000 tonnes per day for the second half of 2015 and will remain at, or above that level. The planned reduction in throughput levels in the second half compared to previous expectations is due to limitations relating to pre-crushing activities. Production expectations are unchanged as the planned reduction in throughput is expected to be offset by an increase in grade. Cash costs in the second quarter were lower than the first quarter of 2015 and were positively impacted by increased production and lower production costs in all sectors.

In the second quarter of 2015, Canadian Malartic produced 68,440 ounces of gold on a 50%-basis, compared to 67,894 ounces of gold in the first quarter of 2015. Cash costs were $609 per ounce of gold in the second quarter, compared to $632 per ounce in the first quarter of 2015.

Canadian Malartic produced 136,334 ounces of gold on a 50%-basis at cash costs of $620 per ounce in the first half of 2015.


21

MINERA FLORIDA, CHILE
 
For the three months ended June 30,
For the six months ended June 30,
Operating Statistics
2015

2014

 
2015

2014

 
Production
 
 
 
 
 
 
Gold production (ounces)
26,298

25,311

4%
54,411

49,721

9%
Silver production (ounces)
191,162

185,952

3%
333,489

381,239

(13)%
 
 
 

 
 
 
Co-product cash costs per gold ounce produced (i)
$
757

$
673

12%
$
737

$
673

10%
Co-product cash costs per silver ounce produced (i)
$
8.13

$
8.01

1%
$
9.38

$
7.67

22%
 
 
 

 
 
 
Ore mined (tonnes)
216,565

207,417

4%
417,140

415,833

—%
Ore processed (tonnes)
466,584

405,855

15%
920,880

853,258

8%
 
 
 

 
 
 
Gold feed grade (g/t)
2.16

2.41

(10)%
2.24

2.27

(1)%
Silver feed grade (g/t)
20.70

24.89

(17)%
19.72

25.46

(23)%
 
 
 

 
 
 
Gold recovery rate (%)
80.8

80.4

—%
81.2

79.9

2%
Silver recovery rate (%)
60.1

57.3

5%
58.5

54.6

7%
 
 
 

 
 
 
Sales
 
 

 
 
 
Gold (ounces)
26,341

24,635

7%
54,356

48,730

12%
Silver (ounces)
189,055

173,701

9%
323,460

417,463

(23)%
 
 
 

 
 
 
Depletion, depreciation and amortization
 
 
 
 
 
 
Per gold ounce sold
$
539

$
668

(19)%
$
534

$
653

(18)%
Per silver ounce sold
$
7.32

$
10.33

(29)%
$
7.31

$
10.23

(29)%
_____________________________
(i)
A cautionary note regarding non-GAAP measures is included in Section 13 of this Management’s Discussion and Analysis. Comparatives have been restated to conform to the change in presentation adopted in the current period.

Minera Florida continued the year with strong production results for the second quarter of 2015, following strong first quarter production, all of which was above targets.

Higher gold and silver production compared to the second quarter of 2014 was the result of increased throughput and recoveries partially offset by lower grades. Gold and silver grades for the first half of the year were in line with mine plans as mining continued in lower grade areas. Silver grades were higher than the first quarter of 2015 resulting in a significant quarter over quarter increase in silver production and decrease in silver cash costs. Cash costs in the second quarter compared to the second quarter of 2014 were impacted by lower gold and silver grades.

In the second quarter of 2015, Minera Florida produced 26,298 ounces of gold and 191,162 ounces of silver, compared to 25,311 ounces of gold and 185,952 ounces of silver in the same quarter of 2014. Cash costs were $757 per ounce of gold and $8.13 per ounce of silver in the second quarter of 2015, compared to $673 per ounce of gold and $8.01 per ounce of silver in the same quarter of 2014.

Minera Florida produced 54,411 ounces of gold and 333,489 ounces of silver in the first half of 2015, compared to 49,721 ounces of gold and 381,239 ounces of silver in the same period of 2014. Cash costs were $737 per ounce of gold and $9.38 per ounce of silver in the first half of 2015, compared to $673 per ounce of gold and $7.67 per ounce of silver in the same period of 2014.

22

JACOBINA, BRAZIL
 
For the three months ended June 30,
For the six months ended June 30,
Operating Statistics
2015

2014

 
2015

2014

 
Production
 
 
 
 
 
 
Gold production (ounces)
21,318

18,776

14%
39,908

33,629

19%
 
 
 
 
 
 
 
Co-product cash costs per gold ounce produced (i)
$
978

$
1,188

(18)%
$
971

$
1,213

(20)%
 
 
 
 
 
 
 
Ore mined (tonnes)
359,847

358,901

—%
715,213

699,930

2%
Ore processed (tonnes)
366,308

350,919

4%
714,581

690,801

3%
 
 
 
 
 
 
 
Gold feed grade (g/t)
1.89

1.82

4%
1.85

1.66

11%
Gold recovery rate (%)
95.6

91.6

4%
94.0

90.9

3%
 
 
 
 
 
 
 
Sales
 
 
 
 
 
 
Gold Sales (ounces)
21,801

18,287

19%
41,289

33,650

23%
 
 
 
 
 
 
 
Depletion, depreciation and amortization per gold ounce sold
$
351

$
482

(27)%
$
365

$
565

(35)%
______________
(i)
A cautionary note regarding non-GAAP measures is included in Section 13 of this Management’s Discussion and Analysis. Comparatives have been restated to conform to the change in presentation adopted in the current period.

While Jacobina’s production was higher and costs lower in the first half of 2015, when compared to the first half of 2014, the mine’s cumulative production for the first half of 2015 was below target, due to lower than planned head grades. For the second half of the year, grades are expected to significantly increase, resulting in higher production and lower costs. So far, in the third quarter, grades have been on average approximately 2.6 grams per tonne, compared to the processed grade of 1.89 grams per tonne in the second quarter. This trend of improved grades is expected to continue going forward, and to average at least 2.4 grams per tonne for the remainder of the year. Overall, grades expected to be realized in the second quarter were realized later than planned, mostly as a result of slower than expected development. With development now advanced into higher grade zones, production in the second half of the year is expected to be in line with or exceed targets, and significantly exceed production of the first half of the year.

At Jacobina, increased production at lower cost in the second quarter compared to the second quarter of 2014 continues to demonstrate advancement of the Company's plan for improvement at the operation and the focus on producing higher quality and more ounces. Production in the second quarter increased compared to the second quarter of 2014 and the first quarter of 2015 by 14% and 15%, respectively. Increased production was the result of increased throughput, grade and recoveries. Cash costs in the quarter were in line with the first quarter of 2015 and approximately 20% lower than the second quarter of 2014. Hedges denominated in Brazilian Real negatively impacted the second quarter of 2015 co-product cash costs per gold ounce by $110, compared to a negative impact of $57 per gold ounce in the comparative quarter of 2014. The expiry of the hedges in the fourth quarter will result in an improved cost for gold and will coincide with an improving production profile and cost structure.

Production and costs are expected to improve further throughout 2015 mostly as a result of improvements in grade. Grades increased in the second quarter, however, grades improved significantly in late June which has extended into July as development work now enters higher grade areas.

During the quarter, delineation drilling continued in the higher grade zone of Canavieras North, South and Morro do Vento, with results continuing to support the higher grades in the mineral resource model, as the assay results support grades significantly above the current mineral reserve grades. The refinement of the geological models and detailed mine planning of this area are ongoing in support of planned development into higher grade ore starting in the third quarter.

In the second quarter of 2015, Jacobina produced 21,318 ounces of gold, compared to 18,776 ounces of gold in the same quarter of 2014. Cash costs were $978 per ounce of gold in the second quarter of 2015, compared to $1,188 per ounce of gold in the second quarter of 2014.

Jacobina produced 39,908 ounces of gold in the first half of 2015, compared to 33,629 ounces of gold in the same period of 2014. Cash costs were $971 per ounce of gold in the first half of 2015, compared to $1,213 per ounce of gold in the same period of 2014.

BRIO GOLD, BRAZIL

23

 
For the three months ended June 30,
For the six months ended June 30,
Operating Statistics
2015

2014

 
2015

2014

 
Production
 
 
 
 
 
 
Gold production from Brio Gold mines (i)
35,211

15,178

132%
66,389

27,871

138%
Gold production from Commissioning Brio Gold mines (ii)
—

19,390

(100)%
—

37,996

(100)%
Total production from Brio Gold mines
35,211

34,568

2%
66,389

65,867

1%
Cash costs per ounce of gold produced (iii)
$
773

$
934

(17)%
$
797

$
945

(16)%
______________________________
(i)
Includes Fazenda Brasileiro, Pilar and C1 Santa Luz.
(ii)
Commissioning at Pilar was completed as of September 30, 2014. C1 Santa Luz is on care and maintenance.
(iii)
A cautionary note regarding non-GAAP measures is included in Section 13 of this Management’s Discussion and Analysis. Comparatives have been restated to conform to the change in presentation adopted in the current period.

Second quarter results for Brio Gold and the ongoing progress with its portfolio continue to demonstrate significant value and continue to support a going public event.

In the second quarter of 2015, Brio Gold produced a total of 35,211 ounces of gold, compared to 34,568 ounces of gold in the same quarter of 2014. Cash costs were $773 per ounce of gold in the second quarter of 2015, compared to $934 per ounce of gold in the second quarter of 2014.

Brio Gold produced 66,389 ounces of gold in the first half of 2015, compared to 27,871 ounces of gold in the same period of 2014. Cash costs were $797 per ounce of gold in the first half of 2015, compared to $945 per ounce of gold in the same period of 2014.

PILAR, BRAZIL
 
For the three months ended June 30,
For the six months ended June 30,
Operating Statistics
2015
2014
 
2015
2014
 
Production
 
 
 
 
 
 
Gold production (ounces) (i)
21,237

12,961

64%
40,390

24,847

63%
 
 
 

 
 
 
Co-product cash costs per gold ounce produced (ii)
$
756

$
—

—%
$
792

$
—

—%
 
 
 

 
 
 
Ore mined (tonnes)
294,796

203,455

45%
523,395

367,353

42%
Ore processed (tonnes)
308,156

301,259

2%
573,277

549,864

4%
 
 
 

 
 
 
Gold feed grade (g/t)
2.30

1.51

52%
2.35

1.59

48%
Gold recovery rate (%)
93.3

88.6

5%
93.3

88.8

5%
 
 
 

 
 
 
Sales
 
 

 
 
 
Gold Sales (ounces)
19,718

—

—%
38,919

—

—%
 
 
 

 
 
 
Depletion, depreciation and amortization per gold ounce sold
$
188

$
—

—%
$
159

$
—

—%
______________
(i)
Comparative includes commissioning production as commissioning at Pilar was completed as of September 30, 2014.
(ii)
A cautionary note regarding non-GAAP measures is included in Section 13 of this Management’s Discussion and Analysis. Comparatives have been restated to conform to the change in presentation adopted in the current period.

At Pilar, production of approximately 7,000 ounces per month in the second quarter was higher than the previous quarter which averaged approximately 6,300 ounces per month, and both for the first and second quarters, production exceeded targets. Increased production was due to increased grade and recoveries. Cash costs continued to improve in the quarter and were approximately 9% lower than the first quarter of 2015. Pilar continues to demonstrate improved production and operating costs as the result of more efficient mining and dilution control. Development work continues at the satellite Maria Lazarus deposit with full production stoping ready to begin in the third quarter of 2015. When in full production, Maria Lazarus is expected to contribute approximately 25,000 ounces per year.
   

24

In the second quarter of 2015, Pilar produced a total of 21,237 ounces of gold, compared to 12,961 ounces of gold in the same quarter of 2014. Cash costs were $756 per ounce of gold in the second quarter of 2015.

Pilar produced 40,390 ounces of gold in the first half of 2015, compared to 24,847 ounces of gold in the same period of 2014. Cash costs were $792 per ounce of gold in the first half of 2015.

FAZENDA BRASILEIRO, BRAZIL
 
For the three months ended June 30,
For the six months ended June 30,
Operating Statistics
2015
2014
 
2015
2014
 
Production
 
 
 
 
 
 
Gold production (ounces)
13,974

15,178

(8)%
25,998

27,871

(7)%
 
 
 
 
 
 
 
Co-product cash costs per gold ounce produced (i)
$
798

$
949

(16)%
$
804

$
953

(16)%
 
 
 
 
 
 
 
Ore mined (tonnes)
301,730

273,008

11%
568,689

531,304

7%
Ore processed (tonnes)
294,837

288,817

2%
550,159

543,437

1%
 
 
 

 
 
 
Gold feed grade (g/t)
1.76

1.84

(4)%
1.75

1.80

(3)%
Gold recovery rate (%)
80.8

87.3

(7)%
84.1

88.9

(5)%
 
 
 

 
 
 
Sales
 
 

 
 
 
Gold Sales (ounces)
12,347

14,981

(18)%
27,220

28,836

(6)%
 
 
 

 
 
 
Depletion, depreciation and amortization per gold ounce sold
$
548

$
310

77%
$
490

$
308

59%
______________
(i)
A cautionary note regarding non-GAAP measures is included in Section 13 of this Management’s Discussion and Analysis. Comparatives have been restated to conform to the change in presentation adopted in the current period.

At Fazenda Brasileiro, production and costs improved quarter over quarter as expected with production increasing approximately 16% compared to the first quarter of 2015. Improved production and costs in the quarter were the result of higher throughput and grade partially offset by lower recoveries.

In the second quarter of 2015, Fazenda Brasileiro produced a total of 13,974 ounces of gold, compared to 15,178 ounces of gold in the same quarter of 2014. Cash costs were $798 per ounce of gold in the second quarter, compared to $949 per ounce of gold in the second quarter of 2014.

Fazenda Brasileiro produced 25,998 ounces of gold in the first half of 2015, compared to 27,871 ounces of gold in the same period of 2014. Cash costs were $804 per ounce of gold in the first half of 2015, compared to $953 per ounce of gold in the same period of 2014.

C1 SANTA LUZ, BRAZIL

In the second quarter, detailed metallurgical testwork to further evaluate the identified options to modify the process flowsheet continued. Preliminary flowsheet modifications have been designed, and capital and operating cost estimates are expected early in the third quarter. Further detailed metallurgical testwork is expected in the second half of 2015 in order to optimize the modified process flowsheet with any further modifications expected to be integrated into the final design during the remainder of the year. Detailed engineering design of the flowsheet modifications are expected to be completed by the end of 2015, with the modifications to the plant taking place in the first half of 2016. Commissioning is planned to commence by mid-2016.

This work is being directed by Brio Gold’s management in consultation with the Company's technical services group.

Total capital spending at C1 Santa Luz is currently expected to be approximately $20 to $30 million for 2015 and 2016 which would be spent beginning in the second half of 2015 and most of which would be spent in 2016.

Once operations resume, C1 Santa Luz is targeted to produce approximately 100,000 ounces of gold annually, which would bring the total Brio production to 230,000 ounces of gold.

25



OTHER MINES

ALUMBRERA (12.5% interest), ARGENTINA

In the second quarter of 2015, Alumbrera produced 5,111 ounces of gold, compared to 8,311 ounces of gold in the same quarter of 2014. Cash costs were $643 per ounce of gold in the second quarter on a co-product basis, compared to $393 per ounce of gold in the second quarter of 2014.

Alumbrera produced 10,417 ounces of gold in the first half of 2015, compared to 18,426 ounces of gold in the same period of 2014. Cash costs were $611 per ounce of gold in the first half of 2015 on a co-product basis, compared to $347 per ounce of gold in the same period of 2014.

26



7.    CONSTRUCTION, DEVELOPMENT AND EXPLORATION
 
CONSTRUCTION AND DEVELOPMENT

The following summary highlights key updates from the development projects of the Company since March 31, 2015.

Cerro Moro, Argentina

The Company previously announced the formal decision to proceed with the construction of Cerro Moro and provided updated project parameters with the announcement of year end 2014 results. During the second quarter, detailed engineering continued for the 1,000 tonnes per day processing plant and mine. Notable advancements in the quarter included improvements to the access road, continuation of site geotechnical and condemnation drilling, advancement of the locked-cycle metallurgical tests, the completion of orders on long-lead time items such as mills and crushers, the commencement of the first stage of the construction camp and the onsite arrival of the second reverse osmosis plant. Importantly, an agreement with the union involved with construction was signed during the quarter and the Company continued to assemble the construction team.

The project remains on track for construction to begin late in 2015 with the commencement of select bulk earthworks activities. The procurement of long lead items is underway with the majority of these contracts expected to be awarded in the second half of 2015.

Project capital costs are estimated at approximately $265 million which includes $31 million in late 2015 for detailed engineering and pre-development.

The Cerro Moro project contains a number of high grade epithermal gold and silver deposits, some of which will be mined via open pit and some via underground mining. The feasibility study is based on annual production in the first three years of 135,000 ounces of gold and 6.7 million ounces of silver, with annual production averaging approximately 102,000 ounces of gold and 5 million ounces of silver at a throughput of 1,000 tonnes per day. The concentrator will consist of a standard crushing, grinding and flotation circuit with a counter current decantation and a Merrill Crowe circuit included.

The Company believes that the Cerro Moro project offers significant opportunities for the conversion of mineral resources into mineral reserves and for further discoveries on the property. This will serve to significantly improve the returns and value from this high grade project.

Agua Rica, Argentina

Agua Rica is a low cost, large scale porphyry copper, molybdenum, gold and silver deposit located in the province of Catamarca, Argentina with proven and probable mineral reserves of approximately 10 billion pounds of copper and 6.5 million ounces of gold contained in approximately 910 million tonnes at copper and gold grades of 0.49% and 0.22 grams per tonne respectively.

On March 12, 2015, the Company announced the signing of a Definitive Agreement (the "Agreement”) with the provincial Government of Catamarca, Argentina (the "Government”), represented by the provincial mining company Catamarca Mineria y Energetica Sociedad del Estado (“CAMYEN”).  The Agreement advances the previously announced Memorandum of Understanding, which set the groundwork for cooperation to consolidate important mining projects and prospective properties in the province, most notably the Agua Rica property and the Cerro Atajo prospect, to create the Catamarca mining district (“the District”).  The Agreement is the first of its kind between a provincial company and a private company in the Catamarca Province.
 
The signing of the Agreement provides the basis for further advancement of exploration and ultimately mining in the District.  The Company expects to use the existing workforce at Agua Rica to begin a planned exploration program in 2015 with a focus on Cerro Atajo.  In addition, a plan is being implemented to train the existing workforce in Catamarca to ensure local communities have the opportunity to benefit directly from planned economic activity in the District.
 
The Company and the Government through CAMYEN will continue to evaluate the potential of Cerro Atajo and as the potential is confirmed a plan will be developed to improve and upgrade infrastructure in the District.  Under the Agreement CAMYEN will receive up to a 5% interest in a combined entity, including the Agua Rica project and the Cerro Atajo prospect.

The Cerro Atajo prospect lies 10 km east of Alumbrera and 25 km west of Agua Rica, a region in which both the Company and the Government have interests. The property is prospective for both high grade gold-copper-silver veins and large tonnage copper-

27

gold porphyry mineralization. Cerro Atajo is centred on an intrusive complex within the same host rock as the nearby Alumbrera mine.

The Company has begun a program to evaluate multiple alternatives to unlock the significant value inherent in Agua Rica. The program is expected to continue into 2016.


EXPLORATION

The Company continues to consider exploration to be a key to unlocking and creating further value for shareholders at existing operations. The 2015 exploration program focuses on finding higher quality ounces, being those ounces with the greatest potential to most quickly generate cash flow, and on infill drilling to do the work necessary to upgrade the existing inferred mineral resources.

The following is a summary of the exploration and evaluation expenditures for the current and comparative periods.
 
For the three months ended June 30,
 
For the six months ended June 30,
 
(In millions of United States Dollars)
2015
2014
2015
2014
Exploration and evaluation capitalized (i)
$
14.0

$
15.8

$
26.2

$
27.1

Exploration and evaluation expensed (ii)
4.0

4.3

9.4

8.9

Total exploration and evaluation expenditures
$
18.0

$
20.1

$
35.6

$
36.0

______________________________
(i)
Capitalized exploration and evaluation costs are reflected in the Consolidated Balance Sheet's property, plant and equipment as part of the additions to mining property costs not subject to depreciation for near-mine exploration and tangible exploration and evaluation assets with probable future economic benefits.
(ii)
Expensed exploration and evaluation costs are reported in the consolidated statements of operations.

The following summary highlights the areas of focus for the 2015 exploration program and provides key updates from the second quarter of 2015.

Monument Bay, Canada

In June 2015, as part of the Mega Precious Metals Inc. acquisition, the Company acquired the Monument Bay property, which is located in Manitoba, approximately 570 kilometres northeast of Winnipeg, and consists of 136 contiguous claims totaling 338,000 square kilometres. The Twin Lakes deposit contains the majority of the gold and tungsten mineralization found on the property to date. The deposit occurs within the Archean North Caribou Terrane along and adjacent to the Stull-Wunnumin structural break. The large mineral resource base provides opportunities for future mineral resource growth through the potential expansion of the existing measured and indicated mineral resource base of 2.2 million ounces of gold in 46.9 million tonnes at an average grade of 1.43 grams per tonne.

Exploration plans for the second half of 2015 include a modest summer drill program on the western portion of the deposit, continuing the old core assaying program and developing new targets on structures parallel to the Stull-Wunnumin break for drill testing during the winter campaign.

Chapada, Brazil

The 2015 exploration program at Chapada is focused on further testing of the Sucupira and Santa Cruz targets that were discovered in 2014, and on mineral resource infill drilling of select areas at Corpo Sul. The Company expects to complete 10,000 metres of exploration drilling and 12,000 metres of infill drilling over the course of 2015.

During the second quarter, drilling at Sucupira completed thirteen drill holes that intersected mineral intervals which continued to support the extension of the mineralization previously identified.  The Sucupira mineral body is comprised of a high grade gold and copper cigar-shaped core surrounded by a broad, low grade halo. The current drilling campaign has identified a 1.5 kilometre strike length of mineralization which extends from the southwest limits of the Cava Norte pit and remains open to the southwest and to depth. Exploration will continue to test both the strike and down dip extensions of the mineral body.

The infill drilling programs continued in the second quarter with the aim of upgrading mineral resources and completed fourteen holes at Corpo Sul and seven holes at Cava Norte.

28




El Peñón, Chile

The 2015 exploration program at El Peñón is focused on exploring near mine targets, including the recently discovered Ventura vein, and on infill and limited definition drilling at the El Peñón, Fortuna and Pampa Augusta Victoria mine complexes. The Company expects to complete 38,500 metres of local and district exploration drilling, and 50,000 metres of combined underground and surface infill drilling over the course of 2015.

During the second quarter, infill drilling continued at the Ventura vein and results continue to support the economic potential of the target. Deep drilling beneath Ventura advanced during the quarter with final assay results pending.

Gualcamayo, Argentina

The 2015 exploration program at Gualcamayo is focused on discovering and extending near surface oxide mineral zones to both the east and west of current QDDLW limits, and on expanding the Rodado Southwest mineral body near current underground mine workings. The Company expects to complete a total of 17,000 metres of drilling, an increase of 9,000 metres more than the program outlined in the first quarter. Geologists conducted mapping and sampling in the Las Vacas area to develop drill targets to test in the second half of the year.

During the second quarter, the Company focused on mineral resource definition drilling in the open-pit area and completed the planned program by the end of the quarter. Underground based mineral resource expansion drilling focused on the area surrounding Rodado Southwest began in June. Mapping and chip sampling continued during the quarter to develop new targets for follow-up surface drill testing.

Mercedes, Mexico

The 2015 exploration program at Mercedes is focused on mineral resource infill and extension drilling, completing limited ore definition drilling, and testing near mine and regional targets developed in prior exploration campaigns. The Company expects to complete approximately 39,000 metres of combined surface and underground drilling, an increase of 16,000 metres more than the program outlined in the first quarter.

During the second quarter, infill drilling continued on the Aida vein with the objective of upgrading inferred mineral resources. Underground reserve delineation drilling continued to advance during the quarter with the objective to aid mining by more precisely locating ore zones, and identifying and sampling parallel mineral shoots with the potential to contribute to the production profile.

Minera Florida, Chile

The 2015 exploration program at Minera Florida is focused on infill drilling to replace mineral resources that were previously upgraded to mineral reserves, testing new areas with the aim to discover a new high potential target, and delineation drilling to further improve the reliability of life-of-mine mineral reserves. The Company expects to complete 10,000 metres of infill drilling, 5,000 metres of exploration drilling and 2,000 metres of delineation drilling over the course of 2015.

During the second quarter, the underground based drill program completed 34 holes testing the Manda, Lisset, Lorena and other targets. Positive results include the definition of three new structures at Manda with economic mineral intercepts.

Jacobina, Brazil

The 2015 exploration program at Jacobina is focused on extensive infill drilling with the aim to improve geologic knowledge and mineral continuity in support of mineral resource conversion and mineral reserve delineation.

During the quarter, infill drilling continued at Canavieras North, South and Morro do Vento, with results continuing to support the higher grades in the mineral resource and mineral reserve models. Grades significantly above the current mineral reserve grade are reported along intercept widths favorable to current methods in all three mine areas. The infill drilling program is progressing as planned and the addition of two rigs is expected to accelerate the program late in the third quarter of 2015.

The refinement of the geological models and detailed mine planning of this area are ongoing in support of planned development into these higher grade ore zones starting in the third quarter of 2015.

29




Cerro Moro, Argentina

The 2015 exploration program at Cerro Moro is focused on detailed mapping, outcrop and soil sampling, and targeted core drilling with the aim to discover a new high grade structure within the current property boundaries. The Company expects to complete 10,500 metres of drilling over the course of 2015, an increase of 6,500 metres over and above the program outlined in the first quarter.

During the quarter, condemnation drilling began at the Escondida Central Dump area and exploration drilling began in June to test the Gabriela Northwest, Michelle and Guillermina targets.

Canadian Malartic Corporation, Canada

As 50-50 partners in the Canadian Malartic Corporation, Yamana and Agnico jointly explore the Kirkland Lake, Hammond Reef, Pandora, and the Wood-Pandora properties. The 2015 exploration programs include the following:

•
Pandora - continued drill testing of near surface and underground targets while concurrently constructing an exploration tunnel from the Lapa mine 101 level to the west for approximately 1 kilometre to facilitate additional subsurface drill testing;
•
Kirkland Lake - focused drill testing of the Upper Canada, AK and other surface targets;
•
Upper Beaver - initiation of a Preliminary Economic Assessment on the deposit; and
•
Canadian Malartic mine - limited drilling of the South Odyssey mineral body.

During the second quarter, drilling at Pandora continued to return positive results including most North Branch holes returning multiple intercepts over narrow to expansive widths. The Preliminary Economic Assessment for Upper Beaver is being internally reviewed and expected to be completed by the end of the year.

Brio Gold

The 2015 exploration program for Brio Gold is focused at Pilar on infill drilling in support of operations, limited mineral resource expansion drilling and delineation drilling at Maria Lazarus, and at Fazenda Brasileiro on replacing the mineral resource base. Brio Gold expects to complete 25,500 metres of drilling at Pilar and Maria Lazarus, and 36,000 metres at Fazenda Brasileiro over the course of 2015.

During the second quarter, infill drilling continued at Pilar with results returning narrow to 2.0 metre intervals of mineable grades. At Maria Lazarus, channel sampling along drifts is showing positive widths and grades. An additional 6,500 metres of drilling are planned at Pilar due to the depreciation of the Brazilian Real.

A prospective new discovery has also been made at the Fazenda Brasileiro mine. The new discovery, named E388 East, is at relatively shallow depth (350 metres) and near existing primary infrastructure, immediately adjacent to a main haulage ramp (E-Ramp). The exploration results are similar in thickness and grade to those that were seen in the early years of the mine and supports Brio Gold’s belief that the mine, which has been in operation for more than three decades, still has considerable exploration potential and mine life to come. See the Company's July 16, 2015 press release for additional details including a summary of significant intercepts.  


8.    LIQUIDITY, CAPITAL RESOURCES AND CONTRACTUAL COMMITMENTS

LIQUIDITY
 
The Company continues to focus on containing costs in order to maximize available cash. The following is a summary of liquidity and capital resources balances:

30

As at, (In millions of United States Dollars)
June 30,
2015

December 31,
2014

Cash
$
119.1

$
191.0

Trade and other receivables
$
19.6

$
51.0

Long term debt
$
1,842.4

$
2,025.4

Working capital (i)
$
167.0

$
42.6

______________________________
(i)Working capital is defined as the excess of current assets over current liabilities which includes the current portion of long term debt.

Cash and cash equivalents were $119.1 million as at June 30, 2015 compared to $191.0 million as at December 31, 2014.  Cash and cash equivalents were comprised of cash in bank and bank term deposits. The sources and uses of cash and cash equivalent during the year are explained below. Working capital was $167.0 million as at June 30, 2015, compared to $42.6 million as at December 31, 2014.

The following table summarizes yearly cash inflows and outflows:
 
Three months ended June 30,
Six months ended June 30,
(In millions of United States Dollars of inflows/(outflows))
2015

2014

2015

2014

Cash flows from operating activities from continuing operations (ii)
$
123.4

$
143.0

$
125.4

$
173.8

Cash flows from operating activities before changes in non-cash working capital (i) (ii)
$
149.3

$
149.0

$
245.3

$
243.0

Cash flows (used in)/from financing activities from continuing operations (ii)
$
(23.8
)
$
419.3

$
(20.8
)
$
516.3

Cash flows used in investing activities from continuing operations (ii)
$
(101.4
)
$
(653.7
)
$
(174.7
)
$
(793.0
)

(i)
A cautionary note regarding non-GAAP measures is included in Section 13 of this Management’s Discussion and Analysis.
(ii)
Cash flow balances are attributable to Yamana Gold Inc. equity holders.

CASH FLOWS FROM OPERATING ACTIVITIES FROM CONTINUING OPERATIONS
 
Cash flows from operating activities from continuing operations after changes in non-cash working capital items for the three months ended June 30, 2015 were $123.4 million, compared to $143.0 million for the three months ended June 30, 2014. Cash flows from operating activities before changes in non-cash working capital (a non-GAAP measure, see Section 13) for the three months ended June 30, 2015 were $149.3 million, compared to $149.0 million generated for the same period of 2014. Cash flows from operating activities for the period were impacted by lower metal prices. Additionally, no cash distributions were received from Alumbrera for the period, compared to $10.5 million for the three months ended June 30, 2014.

Changes in non-cash working capital items for the three months ended June 30, 2015 were cash outflows of $25.9 million compared to outflows of $6.0 million.

CASH FLOWS (USED IN)/FROM FINANCING ACTIVITIES FROM CONTINUING OPERATIONS
 
In the second quarter of 2015, cash flows used in financing activities from continuing operations were $23.8 million compared to inflows of $419.3 million in the same quarter of 2014. During the second quarter of 2015, the Company's 6.875% convertible unsecured subordinated debentures assumed on the acquisition of Canadian Malartic were converted for 3.2 million Yamana common shares and restricted cash previously set aside. Other outflows from financing activities for the period included dividends paid of $14.1 million. In the following period, dividends paid are expected to marginally decrease as approximately 15.0 million Yamana common shares will receive dividends through the Company's dividend re-investment plan.

Net debt (a non-GAAP measure, see Section 13) as at June 30, 2015, excluding debt assumed from the Company's 50% interest in Canadian Malartic which is neither corporate nor guaranteed by the Company, was $1.69 billion.

The principal repayment schedule of senior debt notes to be repaid in the next five years is as follows:
(In millions of United States Dollars)
2016

2017

2018

2019

2020

Senior debt notes
73.5

—

110.0

181.5

85.0

 
 
 
 
 



31


The balance of senior debt notes of $1.11 billion is due in and after 2022.

The Company has a revolving credit facility with a long maturity date of 2020. The Company will, from time to time, repay balances outstanding on its revolving credit with operating cash flow and cash flow from other sources. Additionally, the Company intends to renew the credit facility upon maturity in 2020.


CASH FLOWS USED IN INVESTING ACTIVITIES FROM CONTINUING OPERATIONS
 
Cash outflows used in investing activities from continuing operations were $101.4 million for the quarter ended June 30, 2015, compared to cash outflows of $653.7 million for the quarter ended June 30, 2014.
 
Capital expenditures including sustaining, expansionary and capitalized exploration and evaluation for the three months ended June 30, 2015, were $101.7 million. These expenditures were incurred as follows:
 
 
Three months ended June 30,
Six months ended June 30,
(In millions of United States Dollars)
2015

2014

2015

2014

Chapada
$
15.3

$
33.7

$
27.0

$
40.9

El Peñón
22.8

32.9

40.8

64.7

Gualcamayo
4.7

14.9

7.5

24.9

Mercedes
7.7

12.0

12.1

21.0

Canadian Malartic
13.1

2.8

23.9

2.8

Minera Florida
13.7

13.5

24.1

27.8

Jacobina
7.8

7.5

12.6

14.1

Cerro Moro
6.6

5.6

11.4

16.0

Brio Gold (i)
9.6

63.2

15.5

104.2

Other
0.4

2.2

2.6

9.5

Total capital expenditures (ii)
$
101.7

$
188.3

$
177.5

$
325.9

______________________________
(i)
Includes Fazenda Brasileiro, Pilar and C1 Santa Luz.
(ii)
Net of movement in accounts payable as applicable for projects under construction.

CAPITAL RESOURCES
 
In order to maintain or adjust its capital structure, the Company may issue shares or debt securities, pay dividends, or undertake other activities as deemed appropriate under the specific circumstances.
 
The Company is authorized to issue an unlimited number of common shares at no par value and a maximum of eight million first preference shares. There are no first preference shares issued or outstanding. As of July 29, 2015, the total number of shares outstanding were 946.5 million, the total number of stock options outstanding were 2.9 million, the total number of Deferred Share Units ("DSU") outstanding were 3.2 million, the total number of Restricted Share Units ("RSU") outstanding were 1.4 million, and the total number of Performance Share Units ("PSU") outstanding were 1.3 million.

For the second quarter, the Company declared a quarterly dividend of $0.0150 per share compared to second quarter 2014 dividend of $0.0375 per share.
 
The following table summarizes the weighted average common shares and equity instruments outstanding as at June 30, 2015:

32

 
Equity instruments outstanding
as at
Weighted average dilutive equity instruments (i),
three months 
ended
Weighted average dilutive equity instruments (i),
six months 
ended
(In thousands)
June 30, 2015

June 30, 2015

June 30, 2015

Common shares (i)
946,348

938,900

926,377

Options (ii)
2,881

—

—

RSU (ii)
1,519

—

—

DSU (iii)
3,231

—

—

PSU (iii)
1,258

—

—

 
 
938,900

926,377

______________________________
(i)
The Company has a dividend reinvestment plan to provide holders of common shares a simple and convenient method to purchase additional common shares by reinvesting cash dividends, less any applicable withholding tax. A plan participant may obtain additional common shares by electing to automatically reinvest all or any portion of cash dividends paid on common shares held by the plan participant without paying any brokerage commissions, administrative costs or other service charges. During the period ended June 30, 2015, a total of 15,038,564 shares have subscribed to the plan.
(ii)
For the three and six months ended June 30, 2015, these items have not been included in the weighted average number of shares as they are anti-dilutive.
(iii)
DSU and PSU are settled in cash and, as such, excluded from the calculation of the weighted average number of shares outstanding.

CONTRACTUAL COMMITMENTS

Day-to-day mining, sustaining and expansionary capital expenditures as well as administrative operations give rise to contracts requiring agreed upon future minimum payments. Management is of the view that such commitments will be sufficiently funded by current working capital, future operating cash flows and available credit facilities which provide access to additional funds.

As at June 30, 2015, the Company is contractually committed to the following:
(In millions of United States Dollars)
Within
1 year
Between
1 to 3 years
Between
3 to 5 years
After
5 years
Total
Mine operating/construction and service contracts and other
$
488.2

$
366.5

$
67.7

$
0.1

$
922.5

Long-term debt principal repayments (i)
7.1

117.5

295.0

1,455.0

1,874.6

Decommissioning, restoration and similar liabilities (undiscounted)
5.7

26.6

66.7

196.3

295.4

 
$
501.0

$
510.6

$
429.4

$
1,651.4

$
3,092.5

______________________________
(i)
Excludes interest expense.


9.    INCOME TAXES

The Company recorded an income tax recovery of $25.1 million for the quarter ended June 30, 2015 compared to an income tax recovery of $38.6 million in the second quarter of 2014. The decrease in the income tax recovery for the quarter is a result of the movement in foreign exchange for the period relative to the same period of the prior year. The income tax provision reflects a current income tax recovery of $3.1 million and a deferred income tax recovery of $22.0 million versus a current income tax expense of $46.3 million and a deferred income tax recovery of $84.9 million for the three months ended June 30, 2014.

The income tax provision is subject to a number of factors including the allocation of income between different countries, different tax rates in the various jurisdictions, the non-recognition of tax assets, foreign currency exchange movements, changes in tax laws and the impact of specific transaction and assessments.  Due to the number of factors that can potentially impact the effective tax rate, it is expected that the Company's effective tax rate will fluctuate in future periods.

The Company has elected, under IFRS, to record foreign exchange related to deferred income tax assets and liabilities and interest and penalties in income tax expense, therefore, due to foreign exchange differences, the tax rate will fluctuate during the year with the change in the Brazilian Real, Argentinean Peso, Mexican Peso and Canadian Dollar. Under IFRS, the US Dollar value of non-monetary assets are converted into local currency each quarter for the purpose of calculating the deferred tax owing in the event of the disposition of that asset.  The difference in the value of the deferred tax owing from period to period as a result of fluctuations in local currency is recorded in the income tax expense.  As a local currency depreciates in value relative to the US Dollar, an asset becomes more valuable in local currency resulting in a higher notional deferred tax expense increasing the Company’s consolidated income tax expense.  When local currencies appreciate, relative to the US Dollar,  the value of the asset is diminished in local currency, reducing the notional deferred tax owing resulting in a reduction in the Company’s income tax expense. There is a specific exemption for this calculation under US GAAP.

During the period, the Argentinean Peso and Mexican Peso spot rates devalued against the US Dollar while the Brazilian Real and Canadian Dollar spot rates appreciated against the US Dollar. As a result for local purposes, a recovery of $19.8 million relating to unrealized foreign exchange was recorded in the tax expense. The impact of these foreign exchange movements on taxes are non-cash and, as such, are excluded from adjusted earnings.


33

The deferred tax liabilities relating to the operating mines will reverse in the future as the assets are depreciated or depleted. The deferred tax liabilities relating to exploration will not reverse until the property becomes a mine subject to depletion, is written-off or sold. The deferred income taxes would only be paid on a direct disposition of the asset that may never occur.

See Note 6 to the Condensed Consolidated Interim Financial Statements for the period ended June 30, 2015 for a breakdown of the foreign exchange charged to the income tax expense. Readers are also encouraged to read and consider the tax related risk factors and uncertainties in the Company’s Annual Information and Annual Management Discussion and Analysis Form for the year ended December 31, 2014.


10.    ECONOMIC TRENDS, BUSINESS RISKS AND UNCERTAINTIES
 
Exploration, development and mining of precious metals involve numerous risks as a result of the inherent nature of the business, global economic trends and the influences of local social, political, environmental and economic conditions in the various geographical areas of operation. As such, the Company is subject to several financial and operational risks that could have a significant impact on its profitability and levels of operating cash flows.
 
The Company manages its exposure to these risks in accordance with its Risk Management Policy. Readers are also encouraged to read and consider the risk factors and related uncertainties in the Company’s Annual Information and Annual Management Discussion and Analysis Form for the year ended December 31, 2014. Such risk factors could materially affect the future operating results of the Company and could cause actual events to differ materially from those described in forward-looking statements relating to the Company. There were no significant changes to those risks or to the Company's management of exposure to those risks during the three months ended June 30, 2015, except as noted below:
 

34

Metal Price Risk

Gold Price - Market Update
Gold Price Two-Year Trend (LBMA p.m. price: USD per ounce of gold)

For the quarter ended June 30, 2015, spot gold prices averaged $1,192 per ounce, or 8% lower, compared to $1,288 per ounce in the second quarter of 2014. Prices ranged between $1,165 and $1,225 per ounce and ended the quarter at $1,171 per ounce.

Gold price generally moved sideways within a narrow range for most of the quarter before moving slightly lower towards the end of the quarter. The US Dollar underwent a moderate correction during the first half of the quarter before resuming its strengthening trend. The strength of the US Dollar continues to provide headwinds to gold price rallies. US Dollar strength has primarily been driven by an improving US labour market data and the continued adoption of easier monetary policies by other central banks which have made US treasury bonds more attractive relative to other sovereign bonds.

The timing of an increase in the US Federal Reserve ("US Fed") Funds rate remains unclear, but it is expected that there will be at least one rate increase in 2015. Gold price continues to be sensitive to changing expectations around the timing of a US Fed Funds rate hike and this should continue going forward. Although the US Fed is moving towards tighter monetary policy, most central banks have been moving towards easier monetary policy due to concerns over economic growth and the prospect of deflation. These easier monetary policies combined with many governments facing challenging fiscal situations and elevated levels of debt, should be supportive of gold over the longer term.

Physical demand for gold has softened somewhat in China, most likely due to the Chinese equity market attracting investment in recent months. However, with the recent correction in the Chinese equity market, gold demand may rebound in the coming months if investors begin to shy away from the equity markets. It is expected that physical demand, particularly from China and India, will continue to be supportive during periods of price weakness. Central banks continue to be net buyers in 2015 with Russia, Jordan, and Kazakhstan being notable buyers. It is expected that central banks will continue to be net buyers for the foreseeable future. Global ETF holdings continued to remain stable over the course of the quarter with a slight decrease in total ounces held.

The Company has not hedged any of its gold sales.

Copper Price - Market Update

35

Copper Price Two-Year Trend (LME Cash: USD per pound of copper)

For the quarter ended June 30, 2015, spot copper prices averaged $2.74 per pound, representing a decrease of 11% compared to $3.08 per pound in 2014. Prices ranged between $2.56 and $2.94 per pound and ended the quarter at $2.61 per pound.

After rising over the first half of the quarter, copper prices declined steadily over the second half of the quarter. Concerns about slowing economic growth in China and the expectations of near term supply growth continue to be the key drivers of copper prices. It is expected that the copper market will be in surplus over the next few years and concerns about the impact of slowing economic growth in China will likely persist. In the short-term these factors may limit the potential upside for copper prices but over the longer term, supply constraints should result in a situation that is much more supportive of copper price.

As at the end of the second quarter, the Company had outstanding contracts whereby 37 million pounds of remaining 2015 copper production was sold at a price of $3.00 per pound, which represents approximately 60% of expected Chapada production. The Company periodically uses forward contracts to economically hedge against the risk of declining copper prices for a portion of its forecast copper concentrate sales.

Currency Risk

United States Dollar - Market Update

The US Dollar has continued to remain strong. The strength has been broad-based and the Company's operating currencies either weakened or were only marginally stronger against the US Dollar during the quarter ended June 30, 2015. Despite the US Dollar strengthening that has already occurred, there remains potential for additional strength going forward due to diverging monetary policy between the US and the rest of the world and better US economic performance relative to many other countries.

The US Fed took extraordinary monetary policy actions before other central banks and completed its quantitative easing ("QE") program in 2014 before the European Central Bank announced its own QE program in early 2015. With the Bank of Japan currently operating a QE program and the Bank of Canada recently cutting its benchmark interest rate, the US Fed is likely headed towards tighter monetary policy while other G10 central banks move towards easier policies. This divergence, along with the expectation of better US economic growth going forward relative to other G10 countries, is likely to attract investment flows into the US which should result in continued US Dollar strength going forward. Should the US Dollar continue to strengthen against the Company’s operating currencies, the Company will continue to benefit in the form of lower operating costs, given that the majority of foreign exchange requirements in 2015 are unhedged and fully unhedged thereafter.

The following summarizes the movement in key currencies vis-à-vis the US Dollar:



36


Average and Period-end Market Exchange Rate
For the three months ended June 30,
2015
2014
Variance
Average Exchange Rate
 
 
 
USD-CAD
1.2290
1.0902
12.7%
USD-BRL
3.0691
2.2289
37.7%
USD-ARG
8.9525
8.0549
11.1%
USD-CLP
618.26
554.73
11.5%
USD-MXN
15.333
12.995
18.0%

For the six months ended June 30,
2015
2014
Variance
Average Exchange Rate
 
 
 
USD-CAD
1.2355
1.0968
12.6%
USD-BRL
2.9739
2.2951
29.6%
USD-ARG
8.8244
7.8450
12.5%
USD-CLP
621.47
553.50
12.3%
USD-MXN
15.150
13.113
15.5%

As at,
June 30, 2015
December 31, 2014
Variance
June 30, 2014
Variance
Period-end Exchange Rate
 
 
 
 
 
USD-CAD
1.2494
1.1621
7.5%
1.0671
17.1%
USD-BRL
3.1030
2.6576
16.8%
2.2143
40.1%
USD-ARG
9.0869
8.4650
7.3%
8.1323
11.7%
USD-CLP
639.12
606.45
5.4%
552.95
15.6%
USD-MXN
15.739
14.752
6.7%
12.968
21.4%
 
The Company previously entered into forward contracts to economically hedge against the risk of an increase in the value of the Brazilian Real versus the United States Dollar. The Company has not entered into any new contracts during the period ended June 30, 2015.
 

37

The currency hedge has been accounted for as a cash flow hedge with the effective portion taken to other comprehensive income and the ineffective portion taken to income.
 
The following table summarizes the details of the remaining currency hedging program as at June 30, 2015:
(Amount in millions)
Brazilian Real to USD
Year of 
Settlement
Brazilian Real Notional
Amount
Weighted
Average
Contract
Rate
Market rate
as at
June 30, 2015
2015
259.5
2.283
3.103
 

11.    CONTINGENCIES
 
Due to the size, complexity and nature of the Company’s operations, various legal and tax matters arise in the ordinary course of business. The Company accrues for such items when a liability is both probable and the amount can be reasonably estimated.  In the opinion of management, these matters will not have a material effect on the Consolidated Financial Statements of the Company.
 
In December 2012, the Company received assessments from the Brazilian federal tax authorities disallowing certain deductions relating to debentures for the years 2007 to 2010. The Company believes that these debentures were issued on commercial terms permitted under applicable laws and is challenging these assessments. As such, the Company does not believe it is probable that any amounts will be paid with respect to these assessments with the Brazilian authorities and the amount and timing of any assessments cannot be reasonably estimated.


12.    CRITICAL ACCOUNTING POLICIES AND ESTIMATES
 
The Company's consolidated financial statements are prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board. The significant accounting policies applied and recent accounting pronouncements are described in Note 3 and Note 5 to the Company's annual consolidated financial statements for the year ended December 31, 2014.

In preparing the consolidated financial statements in accordance with IFRS, management is required to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses for the period end. Critical accounting estimates represent estimates that are uncertain and for which changes in those estimates could materially impact the Company's consolidated financial statements. Actual future outcomes may differ from present estimates. Management reviews its estimates and assumptions on an ongoing basis using the most current information available.

The critical judgments and key sources of estimation uncertainties in the application of accounting policies during the second quarter ended June 30, 2015 are disclosed in Note 4 to the Company's annual consolidated financial statements for the year ended December 31, 2014.


13.    NON-GAAP AND ADDITIONAL MEASURES
 
The Company has included certain non-GAAP measures including Cash costs per ounce of gold, Cash costs per ounce of silver, Co-product cash costs per ounce of gold, Co-product cash costs per ounce of silver, Co-product cash costs per pound of copper, All-in sustaining costs per ounce of gold, All-in sustaining costs per ounce of silver, All-in sustaining co-product costs per ounce of gold, All-in sustaining co-product costs per ounce of silver, Adjusted earnings or loss, Adjusted earnings or loss per share and Net debt to supplement its Consolidated Financial Statements, which are presented in accordance with IFRS. The term IFRS and generally accepted accounting principles (“GAAP”) are used interchangeably throughout this MD&A.
 
The Company believes that these measures, together with measures determined in accordance with IFRS, provide investors with an improved ability to evaluate the underlying performance of the Company. Non-GAAP measures do not have any standardized meaning prescribed under IFRS, and therefore they may not be comparable to similar measures employed by other companies. The data is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS.


38

CASH COSTS AND ALL-IN SUSTAINING COSTS
 
The Company discloses “cash costs” because it understands that certain investors use this information to determine the Company’s ability to generate earnings and cash flows for use in investing and other activities. The Company believes that conventional measures of performance prepared in accordance with IFRS do not fully illustrate the ability of its operating mines to generate cash flows. The measures, as determined under IFRS, are not necessarily indicative of operating profit or cash flows from operating activities. Cash costs figures are calculated in accordance with a standard developed by The Gold Institute, which was a worldwide association of suppliers of gold and gold products and included leading North American gold producers. The Gold Institute ceased operations in 2002, but the standard remains the generally accepted standard of reporting cash costs of production in North America. Adoption of the standard is voluntary and the cost measures presented herein may not be comparable to other similarly titled measures of other companies.
 
The measure of cash costs, along with revenue from sales, is considered to be a key indicator of a company’s ability to generate operating earnings and cash flows from its mining operations. This data is furnished to provide additional information and is a non-GAAP measure. It should not be considered in isolation as a substitute for measures of performance prepared in accordance with IFRS and is not necessarily indicative of operating costs, operating profit or cash flows presented under IFRS.

The Company’s business model is focused on the production and sale of precious metals - gold and silver, which accounts for a significant portion of the Company's total revenue generated. The emphasis on precious metals therefore entails the necessity to provide investors with cash costs information that is relevant to their evaluation of the Company’s ability to generate earnings and cash flows for use in investing and other activities.

Cash costs

Cash costs include mine site operating costs such as mining, processing, administration, production taxes and royalties which are not based on sales or taxable income calculations, but are exclusive of amortization, reclamation, capital, development and exploration costs. The Company believes that such measure provides useful information about the Company’s underlying cash costs of operations in isolating the impact of precious metal production volumes and the impact of by-product credits on the Company’s cost structure. Cash costs are computed net of by-products or on a co-product basis.

Beginning January 1, 2015, the Company realigned key performance indicators ("KPIs") to support its objective of financial and operating predictability, as such, it no longer discloses a combined precious metal production unit in gold equivalent ounce. Silver production is no longer treated as a gold equivalent. The Company reports production and cost information for gold, silver and copper separately and in addition, by-product costs for gold and silver, applying copper as the credit based on revenue contribution. There is no change in the calculation of copper cash costs.


39

With this realignment, the KPIs are as follows:

•
Cash costs of gold and silver on a by-product basis - shown on a per ounce basis.
◦
The Attributable Cost for each metal is calculated net of by-products by applying copper and zinc net revenues, which are incidental to the production of precious metals, as a credit to gold and silver ounces produced, thereby allowing the Company’s management and stakeholders to assess net costs of precious metal production. These costs are then divided by gold and silver ounces produced.
•
Cash costs of gold and silver on a co-product basis - shown on a per ounce basis.
◦
Costs directly attributed to gold and silver will be allocated to each metal. Costs not directly attributed to each metal will be allocated based on the relative value of revenues which will be determined annually.
◦
The Attributable Cost for each metal will then be divided by the production of each metal in calculating cash costs per ounce on a co-product basis for the period.
•
Cash costs of copper on a co-product basis - shown on a per pound basis.
◦
Costs attributable to copper production are divided by commercial copper pounds produced.
Cash costs per ounce of gold and silver ounce, and per pound of copper are calculated on a weighted average basis.

All-in sustaining costs

All-in sustaining costs per ounce of gold and silver seeks to represent total sustaining expenditures of producing gold and silver ounces from current operations, based on cash costs and co-product costs, including cost components of mine sustaining capital expenditures, corporate general and administrative expense excluding stock-based compensation, and exploration and evaluation expense. All-in sustaining costs do not include capital expenditures attributable to projects or mine expansions, exploration and evaluation costs attributable to growth projects, income tax payments, financing costs and dividend payments. Consequently, this measure is not representative of all of the Company's cash expenditures. In addition, the calculation of all-in sustaining costs does not include depletion, depreciation and amortization expense as it does not reflect the impact of expenditures incurred in prior periods.

•
All-in sustaining costs reflect by-product copper revenue credits and 100% of the aforementioned cost components.
•
All-in sustaining co-product costs reflect allocations of the aforementioned cost components on the basis that is consistent with the nature of each of the cost component to the gold, silver or copper production activities.

Cash costs per ounce of gold and silver, co-product cash costs per ounce of gold and silver, all-in sustaining costs per ounce of gold and silver and all-in sustaining co-product costs per ounce of gold and silver are from continuing operations and, as applicable, exclude Ernesto/Pau-a-Pique, a discontinued operation.

The following tables provide a reconciliation of cost of sales per the Consolidated Financial Statements to (i) Cash costs per ounce of gold and per ounce of silver, (ii) Co-product cash costs per ounce of gold and per ounce of silver, (iii) Co-product cash costs per pound of copper, (iv) All-in sustaining costs per ounce of gold and per ounce of silver, and (v) All-in sustaining co-product costs per ounce of gold and per ounce of silver.


40

(i)    Reconciliation of Cost of Sales per the Consolidated Financial Statements to cash costs of gold and silver from continuing operations:
Gold Cash Costs
Three months ended June 30,
Six months ended June 30,
(In millions of US Dollars, except ounces and cash costs per ounce produced)
2015

2014

2015

2014

Cost of sales (ii)
$
272.3

$
243.3

$
552.2

$
452.2

Adjustments:
 
 
 
 
Chapada treatment and refining costs related to gold, silver and copper
9.8

7.7

18.4

15.5

By-product costs related to silver
(15.6
)
(15.6
)
(33.3
)
(30.3
)
Inventory movements and adjustments
(2.3
)
(3.6
)
(9.8
)
(8.9
)
Commercial, overseas freight and other costs
(6.9
)
(6.4
)
(11.3
)
(11.5
)
By-product credits from Chapada copper revenue
including copper pricing adjustment
(89.6
)
(87.4
)
(154.2
)
(167.6
)
Total gold cash costs (excluding Alumbrera)
$
167.7

$
138.0

$
362.0

$
249.4

Minera Alumbrera (12.5% interest) cash costs
12.4

2.2

17.1

(12.1
)
Total gold cash costs (ii)
$
180.1

$
140.2

$
379.1

$
237.3

Commercial gold ounces produced excluding Alumbrera
293,707

251,728

592,814

445,557

Commercial gold ounces produced including Alumbrera
298,818

259,728

603,231

463,983

Total cash costs (excluding Alumbrera) per gold ounce produced
$
571

$
550

$
611

$
560

Minera Alumbrera (12.5% interest) cash costs per gold ounce produced
32

(10
)
18

(48
)
Total cash costs per gold ounce produced
$
603

$
540

$
629

$
512


Silver Cash Costs
Three months ended June 30,
Six months ended June 30,
(In millions of US Dollars, except ounces and cash costs per ounce produced)
2015

2014

2015

2014

Cost of sales (ii)
$
272.3

$
243.3

$
552.2

452.2

Adjustments:
 
 
 
 
Chapada treatment and refining costs related to gold, silver and copper
9.8

7.7

18.4

15.5

By-product costs related to gold
(167.7
)
(138.1
)
(362.1
)
(249.3
)
Inventory movements and adjustments
(2.3
)
(3.6
)
(9.8
)
(8.9
)
Commercial, overseas freight and other costs
(6.9
)
(6.4
)
(11.3
)
(11.5
)
By-product credits from Chapada copper revenue
including copper pricing adjustment
(89.6
)
(87.4
)
(154.2
)
(167.6
)
Total silver cash costs (ii)
$
15.6

$
15.5

$
33.2

$
30.4

Commercial silver ounces produced
2,372,046

2,369,969

4,854,956

4,546,822

Total cash costs per silver ounce produced
$
6.59

$
6.57

$
6.85

$
6.66

___________________________
(i)
Cost of sales includes non-cash items including the impact of the movement in inventory. Comparatives have been restated to conform to the change in presentation adopted in the current period.
(ii)
Depletion, depreciation and amortization are excluded from both total cash costs and cost of sales.
(iii)
During the period ended June 30, 2015, the Company revised the presentation of the reportable cash costs and all-in sustaining costs. Comparatives have been restated to conform to the change in presentation adopted in the current period.




41

(ii)    Reconciliation of cost of sales per the Consolidated Financial Statements to co-product cash costs of gold and silver from continuing operations:
Gold Cash Costs
Three months ended June 30,
Six months ended June 30,
(In millions of US Dollars, except ounces and cash costs per ounce produced)
2015

2014

2015

2014

Cost of sales (i) (iii)
$
272.3

$
243.3

$
552.2

$
452.2

Adjustments:
 
 
 
 
Copper contained in concentrate related cash costs
(excluding related TCRC’s) (ii)
(38.2
)
(51.1
)
(79.4
)
(93.9
)
Silver related cash costs (excluding related TCRC’s) (ii)
(19.7
)
(19.0
)
(38.8
)
(37.2
)
Treatment and refining costs (“TCRC”) related to Chapada gold
1.4

1.1

2.6

2.2

Inventory movements and adjustments
(2.6
)
(3.6
)
(10.2
)
(10.2
)
Commercial, overseas freight and other costs
(6.9
)
(6.4
)
(11.3
)
(11.5
)
Total gold co-product cash costs (excluding Alumbrera)
$
206.3

$
164.3

$
415.1

$
301.6

Minera Alumbrera (12.5% interest) gold cash costs
3.3

3.4

6.3

6.5

Total gold co-product cash costs (iii) 
$
209.6

$
167.7

$
421.4

$
308.1

Commercial gold ounces produced excluding Alumbrera
293,707

251,417

592,814

455,557

Commercial gold ounces produced including Alumbrera
298,818

259,728

603,231

463,983

Total co-product cash costs (excluding Alumbrera) per gold ounce produced
$
703

$
654

$
700

$
677

Minera Alumbrera (12.5% interest) cash costs per gold ounce produced
(2
)
(8
)
(1
)
(13
)
Total co-product cash costs per gold ounce produced
$
701

$
646

$
699

$
664


Silver Cash Costs
Three months ended June 30,
Six months ended June 30,
(In millions of US Dollars, except ounces and cash costs per ounce produced)
2015

2014

2015

2014

Cost of sales (i) (iii)
$
272.3

$
243.3

$
552.2

$
452.2

Adjustments:
 
 
 
 
Copper contained in concentrate related cash costs
(excluding related TCRC’s) (ii)
(204.9
)
(163.3
)
(412.6
)
(206.0
)
Gold related cash costs (excluding related TCRC’s) (ii)
(38.2
)
(51.1
)
(79.4
)
(188.3
)
Treatment and refining costs (“TCRC”) related to Chapada silver
0.1

0.1

0.1

1.1

Inventory movements and adjustments
(2.6
)
(3.6
)
(10.3
)
(10.4
)
Commercial, overseas freight and other costs
(6.9
)
(6.4
)
(11.3
)
(11.5
)
Total silver co-product cash costs (iii) 
$
19.8

$
19.0

$
38.7

$
37.1

Commercial silver ounces produced
2,372,046

2,369,969

4,854,956

4,546,822

Total co-product cash costs per silver ounce produced
$
8.29

$
8.01

$
7.99

$
8.16

___________________________
(i)
Cost of sales includes non-cash items including the impact of the movement in inventory. Comparatives have been restated to conform to the change in presentation adopted in the current period.
(ii)
Costs directly attributed to a specific metal are allocated to that metal. Costs not directly attributed to a specific metal are allocated based on relative value. As a rule of thumb, the relative value is 80% copper, 20% gold and silver at Chapada (2014 - 80% copper and 20% gold and silver). TCRC’s are defined as treatment and refining charges.
(iii)
Depletion, depreciation and amortization are excluded from both total cash costs and cost of sales.
(iv)
During the period ended June 30, 2015, the Company revised the presentation of the reportable cash costs and all-in sustaining costs. Comparatives have been restated to conform to the change in presentation adopted in the current period.




42

(iii)    Reconciliation of cost of sales per the Consolidated Financial Statements to co-product cash costs of copper:
Copper Cash Costs
Three months ended June 30,
Six months ended June 30,
(In millions of US Dollars, except pounds and cash costs per pound produced)
2015

2014

2015

2014

Cost of sales (i) (iii)
$
272.3

$
243.3

$
552.2

$
452.2

Adjustments:
 
 
 
 
Gold related cash costs (excluding related TCRC’s) (ii)
(205.2
)
(163.3
)
(413.0
)
(299.4
)
Silver related cash costs (excluding related TCRC’s) (ii)
(19.7
)
(19.0
)
(38.8
)
(37.2
)
TCRC related to Chapada copper
8.4

6.6

15.8

13.3

Inventory movements and adjustments
(2.3
)
(3.6
)
(9.8
)
(8.7
)
Commercial, overseas freight and other costs
(6.9
)
(6.4
)
(11.3
)
(11.5
)
Total copper co-product cash costs (excluding Alumbrera)
$
46.6

$
57.6

$
95.1

$
108.7

Minera Alumbrera (12.5% interest) copper cash costs
13.7

14.9

28.1

32.1

Total copper co-product cash costs (iii) 
$
60.3

$
72.5

$
123.2

$
140.8

Commercial copper produced excluding Alumbrera
 (millions of lbs)
33.6

33.0

60.5

60.5

Commercial copper produced including Alumbrera
 (millions of lbs)
36.4

39.4

66.3

74.1

Total co-product cash costs (excluding Alumbrera) per pound of copper produced
$
1.39

$
1.75

$
1.57

$
1.79

Minera Alumbrera (12.5% interest) co-product cash costs per pound of copper produced
0.27

0.09

0.29

0.11

Total co-product cash costs per pound of copper produced
$
1.66

$
1.84

$
1.86

$
1.90

___________________________
(i)
Cost of sales includes non-cash items including the impact of the movement in inventory. Comparatives have been restated to conform to the change in presentation adopted in the current period.
(ii)
Costs directly attributed to a specific metal are allocated to that metal. Costs not directly attributed to a specific metal are allocated based on relative value. As a rule of thumb, the relative value is 80% copper, 20% gold and silver at Chapada (2014 - 80% copper and 20% gold and silver). TCRC’s are defined as treatment and refining charges.
(iii)
Depletion, depreciation and amortization are excluded from both total cash costs and cost of sales.
(iv)
During the period ended June 30, 2015, the Company revised the presentation of the reportable cash costs and all-in sustaining costs. Comparatives have been restated to conform to the change in presentation adopted in the current period.

(iv)    All-in sustaining costs from continuing operations:
Gold All-in Sustaining Costs
Three months ended June 30,
Six months ended June 30,
(In millions of US Dollars, except ounces and all-in sustaining costs per ounce produced)
2015

2014

2015

2014

Total gold cash costs (i)
$
180.1

$
140.2

$
379.1

$
237.3

General and administrative, excluding share-based compensation
26.6

26.9

50.0

51.2

Sustaining capital expenditures
57.4

62.1

102.1

112.3

Exploration and evaluation expense
3.6

3.7

8.5

7.8

Total gold all-in sustaining costs
$
267.7

$
232.9

$
539.7

$
408.6

Commercial gold ounces produced including Alumbrera
298,818

259,728

603,231

463,983

Total all-in sustaining costs per gold ounce produced
$
896

$
897

$
895

$
881



43

Silver All-in Sustaining Costs
Three months ended June 30,
Six months ended June 30,
(In millions of US Dollars, except ounces and all-in sustaining costs per ounce produced)
2015

2014

2015

2014

Total silver cash costs (i)
$
15.6

$
15.5

$
33.2

$
30.4

General and administrative, excluding share-based compensation
2.4

3.3

4.8

6.4

Sustaining capital expenditures
6.9

8.5

12.3

17.7

Exploration and evaluation expense
0.4

0.5

1.0

1.0

Total silver all-in sustaining costs
$
25.3

$
27.8

$
51.3

$
55.5

Commercial silver ounces produced
2,372,046

2,369,969

4,854,956

4,546,822

Total all-in sustaining costs per silver ounce produced
$
10.72

$
11.76

$
10.58

$
12.20

___________________________
(i)
Chapada copper revenue credits reflected in cash costs.
(ii)
During the period ended June 30, 2015, the Company revised the presentation of the reportable cash costs and all-in sustaining costs. Comparatives have been restated to conform to the change in presentation adopted in the current period.

(v)    All-in sustaining costs on a co-product basis from continuing operations:
Gold All-in Sustaining Co-product Costs
Three months ended June 30,
Six months ended June 30,
(In millions of US Dollars, except ounces and all-in sustaining costs per ounce produced)
2015

2014

2015

2014

Total gold co-product cash costs
$
209.6

$
167.7

$
421.4

$
308.1

General and administrative, excluding share-based compensation (i)
22.4

21.9

41.9

41.6

Sustaining capital expenditures (ii)
48.9

54.7

86.2

102.8

Exploration and evaluation expense (i)
2.9

2.6

6.8

5.7

Total gold all-in sustaining co-product costs
$
283.8

$
246.9

$
556.3

$
458.2

Commercial gold ounces produced including Alumbrera
298,818

259,728

603,231

463,983

Total all-in sustaining co-product costs per gold ounce produced
$
949

$
951

$
922

$
988


Silver All-in Sustaining Co-product Costs
Three months ended June 30,
Six months ended June 30,
(In millions of US Dollars, except ounces and all-in sustaining costs per ounce produced)
2015

2014

2015

2014

Total silver co-product cash costs
$
19.8

$
19.0

$
38.7

$
37.1

General and administrative, excluding share-based compensation (i)
2.0

2.7

3.9

5.1

Sustaining capital expenditures (ii)
6.0

7.5

10.7

16.5

Exploration and evaluation expense (i)
0.3

0.4

0.7

0.8

Total silver all-in sustaining co-product costs
$
28.1

$
29.6

$
54.0

$
59.5

Commercial silver ounces produced
2,372,046

2,369,969

4,854,956

4,546,822

Total all-in sustaining co-product costs per silver ounce produced
$
11.81

$
12.47

$
11.16

$
13.09

___________________________
(i)
Chapada's general and administrative expense and exploration expense are allocated reflecting costs incurred on the related activities at Chapada. G&A and exploration expenses of all other operations are allocated based on the relative proportions of consolidated revenues from gold and silver sales.
(ii)
Chapada's sustaining capital expenditures are allocated reflecting costs incurred on the related activities at Chapada. Sustaining capital expenditures of all other operations are allocated based on the relative proportions of consolidated revenues from gold and silver sales.
(iii)
During the period ended June 30, 2015, the Company revised the presentation of the reportable cash costs and all-in sustaining costs. Comparatives have been restated to conform to the change in presentation adopted in the current period.




44

ADJUSTED EARNINGS OR LOSS AND ADJUSTED EARNINGS OR LOSS PER SHARE

The Company uses the financial measures “Adjusted Earnings or Loss” and “Adjusted Earnings or Loss per share” to supplement information in its consolidated financial statements. The Company believes that in addition to conventional measures prepared in accordance with IFRS, the Company and certain investors and analysts use this information to evaluate the Company’s performance. The presentation of adjusted measures are not meant to be a substitute for net earnings or loss or net earnings or loss per share presented in accordance with IFRS, but rather should be evaluated in conjunction with such IFRS measures. Adjusted Earnings or Loss and Adjusted Earnings or Loss per share are calculated as net earnings excluding (a) share-based payments and other compensation, (b) unrealized foreign exchange (gains) losses related to revaluation of deferred income tax asset and liability on non-monetary items, (c) unrealized foreign exchange (gains) losses related to other items, (d) unrealized (gains) losses on derivatives, (e) impairment losses and reversals on mineral interests and other assets, (f) deferred income tax expense (recovery) on the translation of foreign currency inter-corporate debt, (g) mark-to-market (gains)/ losses on available-for-sale securities and other assets, (h) one-time tax adjustments to historical deferred income tax balances relating to changes in enacted tax rates; (i) reorganization costs; (j) non-recurring provisions; (k) (gains) losses on sale of assets; (l) any other non-recurring adjustments and the tax impact of any of these adjustments calculated at the statutory effective rate for the same jurisdiction as the adjustment. Non-recurring adjustments from unusual events or circumstances are reviewed from time to time based on materiality and the nature of the event or circumstance. Earnings adjustments for the comparative period reflect both continuing and discontinued operations.
 
The terms “Adjusted Earnings or Loss” and “Adjusted Earnings or Loss per share” do not have a standardized meaning prescribed by IFRS, and therefore the Company’s definitions are unlikely to be comparable to similar measures presented by other companies. Management believes that the presentation of Adjusted Earnings or Loss and Adjusted Earnings or Loss per share provide useful information to investors because they exclude non-cash and other charges and are a better indication of the Company’s profitability from operations. The items excluded from the computation of Adjusted Earnings or Loss and Adjusted Earnings or Loss per share, which are otherwise included in the determination of net earnings or loss and net earnings or loss per share prepared in accordance with IFRS, are items that the Company does not consider to be meaningful in evaluating the Company’s past financial performance or the future prospects and may hinder a comparison of its period-to-period profitability. Reconciliations of Adjusted Earnings to net earnings is provided in Section 5.1, Overview of Financial Results the three months ended June 30, 2015. The reconciliation on a per share basis as follows:


45

 
For the three months ended
For the six months ended
 
June 30, 2015

June 30, 2014

June 30, 2015

June 30, 2014

 
 
 
 
 
Net (loss)/earnings per share from continuing operations attributable to Yamana Gold Inc. equity holders - basic
$
(0.01
)
$
0.02

$
(0.15
)
$
(0.02
)
   Non-cash unrealized foreign exchange gains
0.02

0.01

—

—

   Share-based payments/mark-to-market of deferred share units
—

—

0.01

0.02

   Impairment and mark-to-market of investment in available-for-sale securities and other assets
—

—

—

0.01

   Other non-recurring provisions, losses and adjustments
—

0.05

0.02

0.05

Adjusted earnings/(loss) before income tax effect
$
0.01

$
0.08

$
(0.12
)
$
0.06

   Non-cash unrealized foreign exchange losses in tax
(0.02
)
(0.02
)
0.07

0.02

   Income tax effect of adjustments
—

—

—

—

Adjusted (loss)/earnings per share from continuing operations attributable to Yamana Gold Inc. equity holders - basic
$
(0.01
)
$
0.06

$
(0.05
)
$
0.08

 
 
 
 
 
Net (loss)/earnings per share from continuing operations attributable to Yamana Gold Inc. equity holders - diluted
$
(0.01
)
$
0.02

$
(0.15
)
$
(0.02
)
   Non-cash unrealized foreign exchange gains
0.02

0.01

—

—

   Share-based payments/mark-to-market of deferred share units
—

—

0.01

0.02

   Impairment and mark-to-market of investment in available-for-sale securities and other assets
—

—

—

0.01

   Other non-recurring provisions, losses and adjustments
—

0.05

0.02

0.05

Adjusted earnings/(loss) before income tax effect
$
0.01

$
0.08

$
(0.12
)
$
0.06

   Non-cash unrealized foreign exchange losses in tax
(0.02
)
(0.02
)
0.07

0.02

   Income tax effect of adjustments
—

—

—

—

Adjusted (loss)/earnings per share from continuing operations attributable to Yamana Gold Inc. equity holders - diluted
$
(0.01
)
$
0.06

$
(0.05
)
$
0.08

 
 
 
 
 
Weighted average number of shares outstanding (in thousands)
 

 

 
 

Basic
938,900

772,565

926,377

763,014

Diluted
938,900

773,602

926,377

763,014


NET DEBT

The Company uses the financial measure "Net Debt" to supplement information in its consolidated financial statements. The Company believes that in addition to conventional measures prepared in accordance with IFRS, the Company and certain investors and analysts use this information to evaluate the Company’s performance. The presentation of Net Debt is not meant to be a substitute for the debt information presented in accordance with IFRS, but rather should be evaluated in conjunction with such IFRS measures. Net Debt is calculated as the sum of the current and non-current portions of long-term debt excluding debt assumed from the Company's 50% interest in Canadian Malartic which is neither corporate nor guaranteed by the Company net of the cash and cash equivalent balance as at the balance sheet date. A reconciliation of the non-GAAP measure is provided below:

As at, (In millions of United States Dollars)
June 30, 2015

December 31, 2014

Debt
 
 
   Non-current portion
$
1,842.4

$
2,025.4

   Current portion
16.4

34.6

Total debt
$
1,858.8

$
2,060.0

Less: Canadian Malartic debt
53.7

105.2

Less: Cash and cash equivalents
119.1

191.0

Net Debt
$
1,686.0

$
1,763.8



46

ADDITIONAL MEASURES
 
The Company uses other financial measures the presentation of which is not meant to be a substitute for other subtotals or totals presented in accordance with IFRS, but rather should be evaluated in conjunction with such IFRS measures. The following other financial measures are used:
 
•
Gross margin excluding depletion, depreciation and amortization- represents the amount of revenue in excess of cost of sales excluding depletion, depreciation and amortization.
•
Mine operating earnings - represents the amount of revenue in excess of cost of sales excluding depletion, depreciation and amortization and depletion, depreciation and amortization.
•
Operating earnings - represents the amount of earnings before net finance income/expense and income tax expense.
•
Cash flows from operating activities before changes in non-cash working capital — excludes the non-cash movement from period-to-period in working capital items including trade and other receivables, other assets, inventories, trade and other payables.
•
Depletion, depreciation and amortization ("DD&A") per ounce of gold and silver, and per pound of copper — is a unitary measure of DD&A, based on ounces of gold and silver, and pound of copper sold to supplement the Company's disclosure with respect to the performance of each of the operation mines.

The terms described above do not have a standardized meaning prescribed by IFRS, and therefore the Company’s definitions are unlikely to be comparable to similar measures presented by other companies. The Company’s management believes that their presentation provides useful information to investors because gross margin excluding depletion, depreciation and amortization excludes the non-cash operating cost item (i.e. depreciation, depletion and amortization), cash flows from operating activities before changes in non-cash working capital excludes the non-cash movement in working capital items, mine operating earnings excludes expenses not directly associate with commercial production and operating earnings excludes finance and tax related expenses and income/recoveries. These, in management’s view, provide useful information of the Company’s cash flows from operating activities and are considered to be meaningful in evaluating the Company’s past financial performance or the future prospects.

47

14.    SELECTED QUARTERLY FINANCIAL AND OPERATING SUMMARY
 
Jun. 30,

Mar. 31,

Dec. 31

Sept. 30,

(In millions of United States Dollars, unless otherwise noted)
2015

2015

2014

2014

Financial results
 
 
 
 
Revenue (i)
$
455.0

$
458.1

$
542.9

$
494.4

Mine operating earnings
$
58.4

$
40.2

$
87.6

$
84.2

Net (loss)/earnings from continuing operations (iv)
$
(7.0
)
$
(135.2
)
$
(299.5
)
$
(879.6
)
Adjusted (loss)/earnings (ii) from continuing operations (iv)
$
(8.3
)
$
(37.5
)
$
(16.2
)
$
(2.0
)
Net (loss)/earnings (iv)
$
(7.8
)
$
(151.8
)
$
(335.3
)
$
(1,023.3
)
Cash flows from operating activities from continuing operations (iv)
$
123.4

$
2.0

$
183.6

$
156.5

Cash flows from operating activities before changes
in non-cash working capital (ii)(iv)
$
149.3

$
96.0

$
166.4

$
185.6

Cash flows to investing activities from continuing operations (iv)
$
(101.4
)
$
(73.2
)
$
(150.7
)
$
(138.1
)
Cash flows (to)/from financing activities operations
from continuing operations (iv)
$
(23.8
)
$
2.9

$
(10.4
)
$
34.1

Per share financial results
 
 
 
 
Net loss per share from continuing operations attributable to Yamana equity holders
Basic
$
(0.01
)
$
(0.15
)
$
(0.34
)
$
(1.00
)
Diluted
$
(0.01
)
$
(0.15
)
$
(0.35
)
$
(1.00
)
Adjusted loss per share (ii) from continuing operations attributable to Yamana equity holders
Basic and diluted
$
(0.01
)
$
(0.04
)
$
(0.02
)
$
—

 
 
 
 
 
Weighted average number of common shares outstanding - basic (in thousands)
938,900

913,716

877,664

877,551

Weighted average number of common shares outstanding - diluted (in thousands)
938,900

913,716

880,841

877,551

Financial position
 
 
 
 
Cash and cash equivalents
$
119.1

$
121.1

$
191.0

$
167.0

Total assets
$
12,224.5

$
12,405.4

$
12,530.7

$
12,784.7

Total long term liabilities
$
4,925.7

$
4,925.7

$
5,066.1

$
5,057.5

Production - Gold
 
 
 
 
Commercial gold ounces produced (v)
298,818

304,414

350,159

302,875

Commissioning gold ounces produced (iii) (v)
—

—

—

23,722

Discontinued operations - gold ounces
—

460

2,414

5,745

Total gold ounces produced
298,818

304,874

352,573

332,342

Cash costs per gold ounce produced (ii) (v)
$
603

$
654

$
513

$
528

Co-product cash costs per gold ounce produced (ii) (v)
$
701

$
696

$
640

$
695

All-in sustaining costs per gold ounce produced (ii) (v)
$
896

$
893

$
816

$
867

All-in sustaining co-product costs per gold ounce produced (ii) (v)
$
949

$
896

$
893

$
971

Production - Silver
 
 
 
 
Commercial silver ounces produced (v)
2,372,047

2,482,910

2,652,036

2,946,664

Cash costs per silver ounce produced (ii) (v)
$
6.59

$
7.10

$
5.86

$
4.80

Co-product cash costs per silver ounce produced (ii) (v)
$
8.29

$
7.71

$
7.88

$
6.84

All-in sustaining costs per silver ounce produced (ii) (v)
$
10.72

$
10.45

$
10.02

$
8.80

All-in sustaining co-product costs per silver ounce produced (ii) (v)
$
11.81

$
10.55

$
11.17

$
9.99

Production - Other
 
 
 
 
Chapada concentrate production (tonnes)
61,324

47,685

63,955

69,279

Chapada copper contained in concentrate (millions of pounds)
33.6

26.8

35.0

38.0

Chapada co-product cash costs per pound of copper produced
$
1.39

$
1.81

$
1.57

$
1.59

Sales Included in Revenue (excluding 12.5% interest in Alumbrera)
 
 
 
 
Gold (ounces)
292,181

296,167

346,588

287,180

Silver (millions of ounces)
2.3

2.4

2.8

2.7

Chapada concentrate (tonnes)
60,455

50,337

66,534

70,288

Chapada payable copper contained in concentrate (millions of pounds)
31.5

26.7

33.8

35.7

Average Realized Prices
 
 
 
 
Gold - per ounce (i)
$
1,195

$
1,217

$
1,199

$
1,276


48

Silver - per ounce (i)
$
16.28

$
16.74

$
16.39

$
19.27

Copper - per pound (i)
$
2.91

$
2.89

$
2.99

$
3.14



49

 
Jun. 30,

Mar. 31,

Dec. 31,

Sept. 30,

(In millions of United States Dollars, unless otherwise noted)
2014

2014

2013

2013

Financial results
 
 
 
 
Revenues (i)
$
443.8

$
353.9

$
420.7

$
456.7

Mine operating earnings
$
80.8

$
33.1

$
70.1

$
144.0

Net (loss)/earnings from continuing operations (iv)
$
15.7

$
(31.4
)
$
(414.7
)
$
45.6

Adjusted (loss)/earnings (ii) from continuing operations (iv)
$
49.9

$
9.9

$
36.8

$
69.9

Net (loss)/earnings (iv)
$
5.1

$
(29.6
)
$
(583.9
)
$
43.5

Cash flows from operating activities from continuing operations (iv)
$
143.0

$
30.7

$
165.9

$
94.8

Cash flows from operating activities before changes
in non-cash working capital (ii)(iv)
$
148.9

$
93.9

$
165.2

$
177.5

Cash flows to investing activities from continuing operations (iv)
$
(653.7
)
$
(139.2
)
$
(241.2
)
$
(205.6
)
Cash flows from / (to) financing activities operations
from continuing operations (iv)
$
419.3

$
97.2

$
66.7

$
(27.3
)
Per share financial results
 
 
 
 
(Loss)/earnings per share from continuing operations attributable to Yamana equity holders
Basic and diluted
$
0.02

$
(0.04
)
$
(0.55
)
$
0.06

Adjusted (loss)/earnings per share (ii) from continuing operations attributable to Yamana equity holders
Basic and diluted
$
0.06

$
0.01

$
0.05

$
0.09

 
 
 
 
 
Weighted average number of common shares outstanding - basic (in thousands)
772,565

753,356

752,995

752,918

Weighted average number of common shares outstanding - diluted (in thousands)
773,602

753,356

752,995

753,816

Financial position
 
 
 
 
Cash and cash equivalents
$
174.0

$
209.5

$
220.0

$
232.1

Total assets
$
13,473.7

$
11,375.5

$
11,410.7

$
12,026.2

Total long term liabilities
$
4,678.0

$
3,717.2

$
3,615.5

$
3,589.6

Production - Gold
 
 
 
 
Commercial gold ounces produced (v)
259,728

204,254

233,866

246,072

Commissioning gold ounces produced (iii) (v)
19,390

18,605

16,614

11,101

Discontinued operations - gold ounces
5,246

5,511

9,707

6,657

Total gold ounces produced
284,364

228,370

260,187

263,830

Cash costs per gold ounce produced (ii) (v)
$
540

$
474

$
429

$
369

Co-product cash costs per gold ounce produced (ii) (v)
$
646

$
687

$
674

$
589

All-in sustaining costs per gold ounce produced (ii) (v)
$
897

$
859

$
779

$
747

All-in sustaining co-product costs per gold ounce produced (ii) (v)
$
951

$
1,034

$
975

$
916

Production - Silver
 
 
 
 
Commercial silver ounces produced (v)
2,369,969

2,176,853

2,179,016

2,155,185

Cash costs per silver ounce produced (ii) (v)
$
6.57

$
6.76

$
7.10

$
6.92

Co-product cash costs per silver ounce produced (ii) (v)
$
8.01

$
8.32

$
10.05

$
9.69

All-in sustaining costs per silver ounce produced (ii) (v)
$
11.76

$
12.67

$
12.40

$
12.69

All-in sustaining co-product costs per silver ounce produced (ii) (v)
$
12.47

$
13.77

$
14.67

$
14.72

Production - Other
 
 
 
 
Chapada concentrate production (tonnes)
60,975

51,570

67,395

67,315

Chapada copper contained in concentrate production (millions of pounds)
33.0

27.6

36.0

36.8

Chapada co-product cash costs per pound of copper produced
$
1.75

$
1.84

$
1.53

$
1.48

Sales Included in Revenue (excluding 12.5% interest in Alumbrera)
 
 
 
 
Gold (ounces)
253,111

192,587

218,223

232,284

Silver (millions of ounces)
2.2

2.2

2.1

2.2

Chapada concentrate (tonnes)
56,010

48,747

67,616

68,512

Chapada payable copper contained in concentrate (millions of pounds)
28.7

25.4

34.5

35.7

Average Realized Prices
 
 
 
 
Gold - per ounce (i)
$
1,292

$
1,300

$
1,277

$
1,332

Silver - per ounce (i)
$
19.81

$
20.43

$
20.63

$
21.45

Copper - per pound (i)
$
3.11

$
3.25

$
3.37

$
3.13


(i)
Revenue consists of sales net of sales taxes. Revenue per ounce data is calculated based on gross sales. Realized prices reflect continuing operations.
(ii)
A cautionary note regarding non-GAAP measures is included in Section 13 of this MD&A. Balances include the 12.5% equity interest in Alumbrera as applicable. Comparatives have been restated to conform to the change in presentation adopted in the current period.

50

(iii)
Including commissioning ounces from C1 Santa Luz and Pilar.
(iv)
Balances are attributable to Yamana Gold Inc. equity holders.
(v)
Balances are from continuing operations.


15.    DISCLOSURE CONTROLS AND PROCEDURES

Disclosure controls and procedures are designed to provide reasonable assurance that all relevant information is gathered and reported to senior management, including the Company’s Chairman and Chief Executive Officer and Executive Vice President, Finance and Chief Financial Officer, on a timely basis so that appropriate decisions can be made regarding public disclosure. The Company’s system of disclosure controls and procedures includes, but is not limited to, our Timely Disclosure and Confidentiality Policy, our Code of Conduct, our Insider Trading Policy, our Corporate Controls Policy, the effective functioning of our Audit Committee and procedures in place to systematically identify matters warranting consideration of disclosure by the Audit Committee.
 
As at the end of the period covered by this Management’s Discussion and Analysis, management of the Company, with the participation of the Chairman and Chief Executive Officer and the Executive Vice President, Finance and Chief Financial Officer, evaluated the effectiveness of the Company’s disclosure controls and procedures as required by applicable rules of the Canadian Securities Administrators (or Canadian securities regulatory authorities). The evaluation included documentation review, inquiries and other procedures considered by management to be appropriate in the circumstances. Based on that evaluation, the Chairman and Chief Executive Officer and the Executive Vice President, Finance and Chief Financial Officer have concluded that, as of the end of the period covered by this management’s discussion and analysis, the disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) were effective to provide reasonable assurance that information required to be disclosed in the Company’s annual filings and interim filings and other reports filed or submitted under applicable securities laws, is recorded, processed, summarized and reported within time periods specified by those laws and that material information is accumulated and communicated to management of the Company, including the Chairman and Chief Executive Officer and the Executive Vice President, Finance and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
 
MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
 
Management of the Company is responsible for establishing and maintaining effective internal control over financial reporting as such term is defined in the rules of the United States Securities and Exchange Commission and the Canadian Securities Administrators. The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of the Company’s financial reporting for external purposes in accordance with IFRS.  The Company’s internal control over financial reporting includes:
 
•
maintaining records, that in reasonable detail, accurately and fairly reflect our transactions and dispositions of the assets of the Company;
•
providing reasonable assurance that transactions are recorded as necessary for preparation of our consolidated financial statements in accordance with generally accepted accounting principles;
•
providing reasonable assurance that receipts and expenditures are made in accordance with authorizations of management and the directors of the Company; and
•
providing reasonable assurance that unauthorized acquisition, use or disposition of Company assets that could have a material effect on the Company’s consolidated financial statements would be prevented or detected on a timely basis.

The Company’s internal control over financial reporting may not prevent or detect all misstatements because of inherent limitations.  Additionally, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because changes in conditions or deterioration in the degree of compliance with the Company’s policies and procedures.

CHANGES IN INTERNAL CONTROLS
 
During the period ended June 30, 2015, there has been no change in the Company’s internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
 
LIMITATIONS OF CONTROLS AND PROCEDURES
 
The Company’s management, including the Chairman and Chief Executive Officer and the Executive Vice President, Finance and Chief Financial Officer, believe that any disclosure controls and procedures or internal controls over financial reporting, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, they cannot provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been prevented or detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by unauthorized override of the control. The design of any systems of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Accordingly, because of the inherent limitations in a cost effective control system, misstatements due to error or fraud may occur and not be detected.
 
This report provides a discussion and analysis of the financial condition and results of operations (“Management’s Discussion and Analysis”) to enable a reader to assess material changes in financial condition between June 30, 2015 and December 31, 2014 and results of operations for the periods ended June 30, 2015 and June 30, 2014.
 
This Management’s Discussion and Analysis has been prepared as of July 30, 2015. The condensed consolidated interim financial statements prepared in accordance with IFRS as issued by IASB follow this Management’s Discussion and Analysis. This Management’s Discussion and Analysis is intended to supplement and complement the annual audited consolidated financial statements and notes thereto as at and for the year ended December 31, 2014 (collectively the “Financial Statements”). You are encouraged to review the financial statements in conjunction with your review of this Management’s Discussion and Analysis. This Management’s Discussion and Analysis should be read in conjunction with both the annual audited consolidated financial statements for the year ended December 31, 2014 and the most recent Annual Information Form for the year ended December 31, 2014 on file with the Securities Commissions of all of the provinces in Canada, which are included in the 2014 Annual Report on Form 40-F on file with the United States Securities and Exchange Commission. Certain notes to the Financial Statements are specifically referred to in this Management’s Discussion and Analysis and such notes are incorporated by reference herein. All Dollar amounts in the Management’s Discussion and Analysis are in United States Dollars, unless otherwise specified.
 
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
 
This Management’s Discussion and Analysis contains or incorporates by reference “forward-looking statements” and “forward-looking information” under applicable Canadian securities legislation within the meaning of the United States Private Securities Litigation Reform Act of 1995. Forward-looking information includes, but is not limited to information with respect to the Company’s strategy, plans or future financial or operating performance. Forward-looking statements are characterized by words such as “plan,” “expect”, “budget”, “target”, “project”, “intend”, “believe”, “anticipate”, “estimate” and other similar words, or statements that certain events or conditions “may” or “will” occur. Forward-looking statements are based on the opinions, assumptions and estimates of management considered reasonable at the date the statements are made, and are inherently subject to a variety of risks and uncertainties and other known and unknown factors that could cause actual events or results to differ materially from those projected in the forward-looking statements. These factors include the Company’s expectations in connection with the production and exploration, development and expansion plans at the Company's projects discussed herein being met, the impact of proposed optimizations at the Company's projects, the impact of the proposed new mining law in Brazil, the new tax reform bill in Mexico, the amended federal income tax statute in Argentina and the new Chilean tax reform package, and the impact of general business and economic conditions, global liquidity and credit availability on the timing of cash flows and the values of assets and liabilities based on projected future conditions, fluctuating metal prices (such as gold, copper, silver and zinc), currency exchange rates (such as the Brazilian real, the Chilean peso, the Argentine peso and the Mexican peso versus the United States dollar) possible variations in ore grade or recovery rates, changes in the Company’s hedging program, changes in accounting policies, changes in mineral resources and mineral reserves, risks related to non-core mine disposition, our expectations relating to the Osisko Acquisition (as defined herein), including with respect to anticipated benefits thereof and the magnitude of synergies therefrom, and the performance of the assets acquired from Osisko (as defined herein), and risks related to other acquisitions, changes in project parameters as plans continue to be refined, changes in project development, construction, production and commissioning time frames, the possibility of project cost overruns or unanticipated costs and expenses, higher prices for fuel, steel, power, labour and other consumables contributing to higher costs and general risks of the mining industry, including but not limited to, failure of plant, equipment or processes to operate as anticipated, unexpected changes in mine life, final pricing for concentrate sales, unanticipated results of future studies, seasonality and unanticipated weather changes, costs and timing of the development of new deposits, success of exploration activities, permitting timelines, government regulation and the risk of government expropriation or nationalization of mining operations, risks related to relying on local advisors and consultants in

51

foreign jurisdictions, environmental risks, unanticipated reclamation expenses, risks relating to joint venture operations, title disputes or claims, limitations on insurance coverage and timing and possible outcome of pending and outstanding litigation and labour disputes, risks related to enforcing legal rights in foreign jurisdictions, as well as those risk factors discussed or referred to herein and in the Company's Annual Information Form filed with the securities regulatory authorities in all provinces of Canada and available at www.sedar.com, and the Company’s Annual Report on Form 40-F filed with the United States Securities and Exchange Commission. Although the Company has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results not to be anticipated, estimated or intended.  There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. The Company undertakes no obligation to update forward-looking statements if circumstances or management’s estimates, assumptions or opinions should change, except as required by applicable law. The reader is cautioned not to place undue reliance on forward-looking statements. The forward-looking information contained herein is presented for the purpose of assisting investors in understanding the Company’s expected financial and operational performance and results as at and for the periods ended on the dates presented in the Company’s plans and objectives and may not be appropriate for other purposes.
 
CAUTIONARY STATEMENT REGARDING MINERAL RESERVES AND MINERAL RESOURCES
 
Readers should refer to the Annual Information Form of the Company for the year ended December 31, 2014 and other continuous disclosure documents filed by the Company since January 1, 2015 available at www.sedar.com, for further information on mineral reserves and mineral resources, which is subject to the qualifications and notes set forth therein.
 
CAUTIONARY STATEMENT TO UNITED STATES INVESTORS CONCERNING ESTIMATES OF MINERAL RESERVES AND MINERAL RESOURCES
 
This Management’s Discussion and Analysis has been prepared in accordance with the requirements of the securities laws in effect in Canada, which differ in certain material respects from the disclosure requirements of United States securities laws.  The terms “mineral reserve”, “proven mineral reserve” and “probable mineral reserve” are Canadian mining terms as defined in accordance with Canadian National Instrument 43-101 Standards of Disclosure for Mineral Projects (“NI 43-101”) and the Canadian Institute of Mining, Metallurgy and Petroleum (the “CIM”) - CIM Definition Standards on Mineral Resources and Mineral Reserves, adopted by the CIM Council, as amended. These definitions differ from the definitions in the disclosure requirements promulgated by the Securities and Exchange Commission (the “Commission”) and contained in Industry Guide 7 (“Industry Guide 7”).  Under Industry Guide 7 standards, a “final” or “bankable” feasibility study is required to report mineral reserves, the three-year historical average price is used in any mineral reserve or cash flow analysis to designate mineral reserves and the primary environmental analysis or report must be filed with the appropriate governmental authority.
 
In addition, the terms “mineral resource”, “measured mineral resource”, “indicated mineral resource” and “inferred mineral resource” are defined in and required to be disclosed by NI 43-101.  However, these terms are not defined terms under Industry Guide 7 and are not permitted to be used in reports and registration statements of United States companies filed with the Commission.  Investors are cautioned not to assume that any part or all of the mineral deposits in these categories will ever be converted into mineral reserves.  “Inferred mineral resources” have a great amount of uncertainty as to their existence, and great uncertainty as to their economic and legal feasibility. It cannot be assumed that all or any part of an inferred mineral resource will ever be upgraded to a higher category. Under Canadian rules, estimates of inferred mineral resources may not form the basis of feasibility or pre-feasibility studies, except in rare cases. Investors are cautioned not to assume that all or any part of an inferred mineral resource exists or is economically or legally mineable.  Disclosure of “contained ounces” in a mineral resource is permitted disclosure under Canadian regulations.  In contrast, the Commission only permits U.S. companies to report mineralization that does not constitute “mineral reserves” by Commission standards as in place tonnage and grade without reference to unit measures.
 
Accordingly, information contained in this Management’s Discussion and Analysis may not be comparable to similar information made public by U.S. companies subject to the reporting and disclosure requirements under the United States federal securities laws and the rules and regulations of the Commission thereunder.

*************


52


    


EXHIBIT 99.2









 

CONDENSED INTERIM CONSOLIDATED
FINANCIAL STATEMENTS
 
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2015
(UNAUDITED)

                            


TABLE OF CONTENTS
 
 
 
 
 
Page
 
 
Condensed Interim Consolidated Statements of Operations
 
 
Condensed Interim Consolidated Statements of Comprehensive Income/(Loss)
 
 
Condensed Interim Consolidated Statements of Cash Flows
 
 
Condensed Interim Consolidated Balance Sheets
 
 
Condensed Interim Consolidated Statements of Changes in Equity
 
 
 
 
 
 
 
 
 
 
 
 
 
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS:
 
Note 1:
 
Basis of Preparation and Presentation
Note 2:
 
Critical Accounting Policies and Estimates
Note 3:
 
Recent Accounting Pronouncements
Note 4:
 
Acquisition and Disposition of Mineral Interests
Note 5:
 
Finance Income and Expense
Note 6:
 
Income Taxes
Note 7:
 
Earnings (Loss) Per Share
Note 8:
 
Accumulated Other Comprehensive Income
Note 9:
 
Fair Value Measurement
Note 10:
 
Inventories
Note 11:
 
Property, Plant and Equipment
Note 12:
 
Long-term Debt
Note 13:
 
Other Provisions and Liabilities
Note 14:
 
Share Capital
Note 15:
 
Share-based Payments
Note 16:
 
Capital Management
Note 17:
 
Supplementary Cash Flow Information
Note 18:
 
Segmented Information
Note 19:
 
Contractual Commitments
Note 20:
 
Contingencies

2

YAMANA GOLD INC.
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS

 
For the three months ended June 30,
For the six months ended June 30,
(In millions of United States Dollars except for shares and per share amounts, unaudited)
2015
2014
2015
2014
Revenue
$
455.0

$
443.8

$
913.0

$
797.8

Cost of sales excluding depletion, depreciation and amortization
(272.3
)
(243.3
)
(552.2
)
(452.2
)
Gross margin excluding depletion, depreciation and amortization
182.7

200.5

360.8

345.6

Depletion, depreciation and amortization
(124.3
)
(119.7
)
(262.2
)
(231.6
)
Mine operating earnings
58.4

80.8

98.6

114.0

 


 
 
 
Expenses


 
 
 
General and administrative
(32.0
)
(36.6
)
(61.5
)
(68.1
)
Exploration and evaluation
(4.0
)
(4.3
)
(9.4
)
(8.9
)
Equity (loss)/earnings from associate
(6.6
)
0.3

(11.0
)
1.4

Other expenses
(3.4
)
(38.7
)
(26.8
)
(50.9
)
Operating earnings/(loss)
12.4

1.5

(10.1
)
(12.5
)
Finance income (Note 5)
6.7

0.4

7.6

2.2

Finance expense (Note 5)
(51.2
)
(24.8
)
(63.3
)
(28.5
)
Net finance expense
(44.5
)
(24.4
)
(55.7
)
(26.3
)
Loss before taxes
(32.1
)
(22.9
)
(65.8
)
(38.8
)
Current income tax recovery/(expense) (Note 6)
3.1

(46.3
)
(30.4
)
(72.0
)
Deferred income tax recovery/(expense) (Note 6)
22.0

84.9

(46.1
)
95.1

Income tax recovery/(expense)
25.1

38.6

(76.5
)
23.1

Net (loss)/earnings from continuing operations
(7.0
)
15.7

(142.3
)
(15.7
)
Net loss from discontinued operations (Note 4(b))
(0.8
)
(10.6
)
(17.4
)
(8.8
)
Net (loss)/earnings attributable to Yamana Gold Inc. equity holders
$
(7.8
)
$
5.1

$
(159.7
)
$
(24.5
)
 

 
 
 
Net (loss)/earnings per share attributable to Yamana Gold Inc. equity holders (Note 7)

 
 
 
Net (loss)/earnings per share from continuing operations - basic and diluted
$
(0.01
)
$
0.02

$
(0.15
)
$
(0.02
)
Net loss per share from discontinued operations - basic and diluted
$
—

$
(0.01
)
$
(0.02
)
$
(0.01
)
Net (loss)/earnings per share basic and diluted
$
(0.01
)
$
0.01

$
(0.17
)
$
(0.03
)
 


 
 
 
Weighted average number of shares outstanding (in thousands) (Note 7)
 

 

 
 

Basic
938,900

772,565

926,377

763,014

Diluted
938,900

773,602

926,377

763,014


The accompanying notes are an integral part of the condensed interim consolidated financial statements.


CONDENSED INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS)
 
 
For the three months ended June 30,
For the six months ended
June 30,
(In millions of United States Dollars, unaudited)
2015
2014
2015
2014
Net (loss)/earnings attributable to Yamana Gold Inc. equity holders
$
(7.8
)
$
5.1

$
(159.7
)
$
(24.5
)
 
 
 
 
 
Other comprehensive (loss)/income, net of taxes (Note 8)
 
 
 
 
   Items that may be reclassified subsequently to profit or loss:
 
 
 
 
    - Net change in fair value of available-for-sale securities
(0.1
)
(0.4
)
0.2

1.8

    - Net change in fair value of hedging instruments
8.7

27.3

10.6

49.7

Total other comprehensive income
$
8.6

$
26.9

$
10.8

$
51.5

Total comprehensive income/(loss) attributable to Yamana Gold Inc. equity holders
$
0.8

$
32.0

$
(148.9
)
$
27.0

The accompanying notes are an integral part of the condensed interim consolidated financial statements.

3


YAMANA GOLD INC.
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

 
For the three months ended June 30,
For the six months ended
June 30,
(In millions of United States Dollars, unaudited)
2015
2014
2015
2014
Operating activities
 

 
 
 
Loss before taxes
$
(32.1
)
$
(22.9
)
$
(65.8
)
$
(38.8
)
Adjustments to reconcile earnings before taxes to net operating cash flows:
 
 
 
 
Depletion, depreciation and amortization
124.3

119.7

262.2

231.6

Share-based payments (Note 15)
—

4.2

5.1

9.5

Equity loss/(earnings) from associate
6.6

(0.3
)
11.0

(1.4
)
Finance income (Note 5)
(6.7
)
(0.4
)
(7.6
)
(2.2
)
Finance expense (Note 5)
51.2

24.8

63.3

28.5

Mark-to-market on sales of concentrate and price adjustments on unsettled invoices
7.3

(7.9
)
(0.7
)
—

Impairment of available-for-sale securities and other assets
8.9

8.4

9.7

13.7

Other non-cash expenses
0.4

10.4

24.0

19.3

Decommissioning, restoration and similar liabilities paid
(1.0
)
(0.7
)
(2.2
)
(1.5
)
Cash distributions from associate
—

10.5

—

28.1

Income taxes (paid)/recovered
(9.6
)
3.2

(53.7
)
(43.8
)
Cash flows from operating activities before non-cash working capital
149.3

149.0

245.3

243.0

Net change in non-cash working capital (Note 17(b))
(25.9
)
(6.0
)
(119.9
)
(69.2
)
Cash flows from operating activities of continuing operations
$
123.4

$
143.0

$
125.4

$
173.8

Cash flows (used in)/from operating activities of discontinued operations
(Note 4(b))
$
(1.6
)
$
5.5

$
(0.5
)
$
13.7

Investing activities
 

 

 
 

Acquisition of property, plant and equipment
$
(101.7
)
$
(188.3
)
$
(177.5
)
$
(325.9
)
Acquisition of Osisko Mining Corporation (Note 4(a))
—

(451.2
)
—

(451.2
)
Restricted cash
—

(11.6
)
—

(11.6
)
Acquisition of investments and other assets
—

(73.2
)
—

(73.2
)
Proceeds on disposal of investments and other assets
—

70.2

3.6

68.2

Other investing activities
0.3

0.4

(0.8
)
0.7

Cash flows used in investing activities of continuing operations
$
(101.4
)
$
(653.7
)
$
(174.7
)
$
(793.0
)
Cash flows used in investing activities of discontinued operations (Note 4(b))
$
—

$
(5.2
)
$
(0.1
)
$
(13.5
)
Financing activities
 
 
 
 
Dividends paid
$
(14.1
)
$
(28.4
)
$
(27.2
)
$
(77.2
)
Proceeds on common share offering
—

—

228.1

—

Interest and other finance expenses paid
(36.5
)
(37.7
)
(42.5
)
(41.9
)
Repayment of term loan and assumed debt (Note 12)
(123.2
)
(514.1
)
(379.8
)
(514.1
)
Proceeds from term loan and notes payable (Note 12)
150.0

999.5

200.6

1,149.5

Cash flows (used in)/from financing activities of continuing operations
$
(23.8
)
$
419.3

$
(20.8
)
$
516.3

Effect of foreign exchange on non-United States Dollar denominated cash and cash equivalents
(0.2
)
(3.4
)
(1.8
)
(2.3
)
Decrease in cash and cash equivalents of continuing operations
$
(2.0
)
$
(94.8
)
$
(71.9
)
$
(105.2
)
Decrease in cash and cash equivalents of discontinued operations
$
(1.6
)
$
0.3

$
(0.6
)
$
0.2

Cash and cash equivalents of continuing operations, beginning of period
$
121.1

$
268.8

$
191.0

$
279.2

Cash and cash equivalents of discontinued operations, beginning of period
$
1.6

$
0.2

$
0.6

$
0.3

Cash and cash equivalents, end of period of continuing operations
$
119.1

$
174.0

$
119.1

$
174.0

Cash and cash equivalents, end of period of discontinued operations (Note 4(b))
$
—

$
0.5

$
—

$
0.5


Supplementary cash flow information (Note 17)
The accompanying notes are an integral part of the condensed interim consolidated financial statements.




4

YAMANA GOLD INC.
CONDENSED INTERIM CONSOLIDATED BALANCE SHEETS

 
As at June 30,
As at December 31, (Restated)
(In millions of United States Dollars, unaudited)
2015
2014
Assets
 

 

Current assets:
 

 

Cash and cash equivalents
$
119.1

$
191.0

Trade and other receivables
19.6

51.0

Inventories (Note 10)
302.7

299.5

Other financial assets
125.1

111.8

Other assets
129.4

103.7

Assets held for sale (Note 4(b))
21.9

19.5

 
717.8

776.5

Non-current assets:


 
Property, plant and equipment (Note 11)
10,866.2

10,927.6

Investment in associates
55.6

66.6

Other financial assets
31.1

43.3

Deferred tax assets
93.3

112.9

Goodwill and intangibles
409.9

411.0

Other assets
50.6

63.9

Total assets
$
12,224.5

$
12,401.8

 


 
Liabilities


 
Current liabilities:


 
Trade and other payables
$
356.4

$
407.9

Income taxes payable
3.9

24.7

Other financial liabilities 
161.3

204.8

Other provisions and liabilities (Note 13)
6.5

69.4

Liabilities held for sale (Note 4(b))
22.7

27.1

 
550.8

733.9

Non-current liabilities:


 
Long-term debt (Note 12)
1,842.4

2,025.4

Decommissioning, restoration and similar liabilities
201.5

204.1

Deferred tax liabilities
2,555.7

2,513.2

Other financial liabilities
65.4

54.7

Other provisions and liabilities (Note 13)
182.3

137.7

Total liabilities
$
5,398.1

$
5,669.0

 


 
Equity


 
Share capital (Note 14)


 
Issued and outstanding 946,348,046 common shares (December 31, 2014 - 878,052,814 shares)
7,620.0

7,347.3

Reserves
6.1

(2.9
)
Deficit
(818.4
)
(630.3
)
Equity attributable to Yamana shareholders
$
6,807.7

$
6,714.1

Non-controlling interest
18.7

18.7

Total equity
6,826.4

6,732.8

Total liabilities and equity
$
12,224.5

$
12,401.8

Contractual commitments and contingencies (Notes 19 and 20).

The accompanying notes are an integral part of the condensed interim consolidated financial statements.

Approved by the Board

“Peter Marrone”
“Patrick Mars”
PETER MARRONE
PATRICK MARS
Director
Director

5

YAMANA GOLD INC.
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(In millions of United States Dollars, unaudited)
Share
capital
Equity
reserve
Hedging
reserve
Available
-for-sale
reserve
Other reserve
Total
reserves
Retained
earnings/(deficit)
Equity
attributable
to Yamana
shareholders
Non-
controlling
interest
Total
equity
Balance at January 1, 2014
$
6,320.1

$
24.8

$
(66.1
)
$
0.1

$
—

$
(41.2
)
$
860.5

$
7,139.4

$
18.7

$
7,158.1

Net loss
—

—

—

—

—

—

(24.5
)
(24.5
)
—

(24.5
)
Accumulated other comprehensive income, net of income tax (Note 8)
—

—

49.7

1.8

—

51.5

—

51.5

—

51.5

Transactions with owners
 
 

 

 
 
 
 

 

 

 
Issued on acquisition of mineral interest (Note 4)
1,011.8

—

—

—

—

—

—

1,011.8

—

1,011.8

Issued on vesting of restricted share units (Note 14)
8.9

(8.9
)
—

—

—

(8.9
)
—

—

—

—

Restricted share units (Note 14)
—

7.3

—

—

—

7.3

—

7.3

—

7.3

Share cancellation (Note 14)
(1.1
)
1.4

—

—

—

1.4

—

0.3

—

0.3

Dividends
—

—

—

—

—

—

(61.7
)
(61.7
)
—

(61.7
)
Balance at June 30, 2014
$
7,339.7

$
24.6

$
(16.4
)
$
1.9

$
—

$
10.1

$
774.3

$
8,124.1

$
18.7

$
8,142.8

 
 
 
 
 
 
 
 
 
 
 
Balance at January 1, 2015
$
7,347.3

$
23.2

$
(24.9
)
$
—

$
(1.2
)
$
(2.9
)
$
(630.3
)
$
6,714.1

$
18.7

$
6,732.8

Net loss
—

—

—

—

—

—

(159.7
)
(159.7
)
—

(159.7
)
Accumulated other comprehensive income, net of income tax (Note 8)
—

—

10.6

0.2

—

10.8

—

10.8

—

10.8

Transactions with owners
 
 
 
 
 
 
 
 
 
 
Convertible debentures exercised (Note 12)
9.6

—

—

—

—

—

—

9.6

—

9.6

Issued on acquisition of mineral interests (Note 4)
26.7

0.2

—

—

—

0.2

—

26.9

—

26.9

Issued on vesting of restricted share units (Note 14)
8.8

(8.8
)
—

—

—

(8.8
)
—

—

—

—

Issued on public offering (net of issue costs)
227.9

—

—

—

—

—

—

227.9

—

227.9

Restricted share units (Note 14)
—

6.5

—

—

—

6.5

—

6.5

—

6.5

Share cancellation (Note 14)
(0.3
)
0.3

—

—

—

0.3

—

—

—

—

Dividends
—

—

—

—

—

—

(28.4
)
(28.4
)
—

(28.4
)
Balance at June 30, 2015
$
7,620.0

$
21.4

$
(14.3
)
$
0.2

$
(1.2
)
$
6.1

$
(818.4
)
$
6,807.7

$
18.7

$
6,826.4

 
The accompanying notes are an integral part of the condensed interim consolidated financial statements.



6

YAMANA GOLD INC.
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Six Months Ended June 30, 2015
(With Comparatives as at December 31, 2014 and for the Three and Six Months Ended June 30, 2014)
(Tabular amounts in millions of United States Dollars unless otherwise noted, unaudited)


1.    BASIS OF PREPARATION AND PRESENTATION

These Condensed Interim Consolidated Financial Statements of Yamana Gold Inc. (the "Company"), including comparative figures, have been prepared in accordance with International Accounting Standard 34 Interim Financial Reporting (IAS 34) using the accounting principles consistent with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). These Condensed Interim Consolidated Financial Statements do not include all disclosures required by IFRS for annual audited consolidated financial statements and accordingly should be read in conjunction with the Company’s Annual Audited Consolidated Financial Statements for the year ended December 31, 2014 prepared in accordance with IFRS as issued by the IASB.

These Condensed Interim Consolidated Financial Statements were authorized for issuance by the Board of Directors of the Company on July 30, 2015.


2.     CRITICAL ACCOUNTING POLICIES AND ESTIMATES

These Condensed Interim Consolidated Financial Statements have been prepared on the basis of and using the accounting policies, methods of computation and presentation consistent with those applied and disclosed in Notes 3 and 5 to the Company’s Annual Consolidated Financial Statements for the year ended December 31, 2014.

In preparing the consolidated financial statements in accordance with IFRS, management is required to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses for the period end. Critical accounting estimates represent estimates that are uncertain and for which changes in those estimates could materially impact the Company's consolidated financial statements. Actual future outcomes may differ from present estimates. Management reviews its estimates and assumptions on an ongoing basis using the most current information available.

The critical judgments and key sources of estimation uncertainties in the application of accounting policies during the three and six months ended June 30, 2015 are the same as those disclosed in Note 4 to the Company's Annual Consolidated Financial Statements for the year ended December 31, 2014.


3.    RECENT ACCOUNTING PRONOUNCEMENTS

The IASB or the International Financial Reporting Interpretations Committee (“IFRIC”) issue pronouncements that are mandatory for the Company to implement. Pronouncements that are not applicable to the Company have been excluded from this note. The following pronouncements have been issued but are not yet effective:

(a)
IFRS 9 Financial Instruments - The standard is effective for annual reporting periods beginning January 1, 2018 for public entities. The Company is assessing the impact of this Standard.
(b)
IFRS 15 Revenue from Contracts with Customers - The final standard on revenue from contracts with customers was issued on May 28, 2014 and is effective for annual reporting periods beginning on or after January 1, 2017 with early adoption permitted. Entities have the option of using either a full retrospective or a modified retrospective approach to adopt the guidance. On April 28, 2015 the IASB published an Exposure Draft proposing a one-year deferral of the effective date of IFRS 15 to January 1, 2018. The Company is assessing the impact of this Standard.
(c)
The following amendments from the IASB's Annual Improvements to IFRSs 2012-14 Cycle are effective January 1, 2016. The Company is assessing the impact of these amendments:
•
Changes in methods of disposal with respect to non-current assets held for sale and discontinued operations (amendments to IFRS 5 Non-current Assets Held for Sale and Discontinued Operations)
•
Disclosure of information elsewhere in the interim financial report (amendments to IAS 34 Interim Financial Reporting)


7



4.    ACQUISITION AND DISPOSITION OF MINERAL INTERESTS

a) Acquisition of 50% interest of Osisko Mining Corporation ("Osisko")

On June 16, 2014, the Company and Agnico Eagle Mines Limited ("Agnico") completed the joint acquisition of 100% of all issued and outstanding common shares of Osisko.  Osisko operated Canadian Malartic in the Abitibi Gold Belt, immediately south of the Town of Malartic located in the province of Quebec, Canada. Additionally, Osisko conducted advanced exploration activities at the Kirkland Lake and Hammond Reef properties in Northern Ontario, Canada and additional exploration projects located in the Americas. The acquisition supports the Company’s strategy, adding another high quality, high margin cornerstone asset that increases the sustainable production level and is expected to contribute to cash flow.

Total consideration paid by Yamana was $1.47 billion which consisted of $0.46 billion in cash and $1.01 billion in Yamana shares based on a Yamana share price of $8.18 (C$8.88) per share.

Under the terms of the Agreement, each outstanding common share of Osisko was exchanged for: (i) C$2.09 in cash; (ii) 0.26471 of a Yamana common share (a value of C$2.35 based on the closing price of C$8.88 for Yamana shares on the Toronto Stock Exchange as of June 16, 2014); (iii) 0.07264 of an Agnico common share (a value of C$2.64 based on the closing price of C$36.29 for Agnico shares on the Toronto Stock Exchange as of June 16, 2014); and (iv) one common share of a newly formed company, Osisko Gold Royalties Ltd. ("Osisko Gold") that commenced trading on the Toronto Stock Exchange.

Certain assets of Osisko were transferred to Osisko Gold, the shares of which were distributed to Osisko shareholders as part of the transaction. The following was transferred to Osisko Gold: (i) a 5% net smelter royalty (“NSR”) on Canadian Malartic; (ii) C$157 million cash; (iii) a 2% NSR on the Upper Beaver-Kirkland Lake assets, the Hammond Reef project, and certain other exploration properties; (iv) all assets and liabilities of Osisko in its Guerrero camp; and (v) other investments.

In summary, following the completion of the acquisition, the Company and Agnico each own (A) 50% of Osisko and its mining assets (excluding the Osisko Gold assets), including the Kirkland Lake Properties, the Hammond Reef Properties and other exploration properties, and (B) a 50% interest in the Canadian Malartic General Partnership ("CMGP") which holds Canadian Malartic.

The Company has recognized its interest in the assets, liabilities, revenues and expenses of Osisko in accordance with the Company’s rights and obligations prescribed by the transaction, as the joint arrangement was determined to be a joint operation under IFRS. In accordance with the Company’s accounting policy, the Company has recognized the identifiable assets and liabilities, subject to the exceptions in IFRS 3, at fair value at its proportionate 50% share, and the residual has been recognized as goodwill.

Total consideration paid by the Company was as follows:
 
 
Cash
$
462.7

Issue of Yamana common shares: 123,620,781 shares (at C$8.88 per share)
1,011.8

Purchase consideration
$
1,474.5


The following table summarizes the total preliminary fair values of assets and liabilities acquired reported in the Company's Annual Consolidated Financial Statements for the year ended December 31, 2014 and the final fair values during the first half of 2015:
 
Preliminary
Adjustments
Final
Cash
$
59.2

$
—

$
59.2

Net working capital acquired
29.7

(36.1
)
(6.4
)
Property, plant and equipment (including mineral interests)
1,662.9

(215.2
)
1,447.7

Long-term liabilities
(123.1
)
22.9

(100.2
)
Deferred income taxes
(414.1
)
142.8

(271.3
)
 
1,214.6

(85.6
)
1,129.0

Goodwill
259.9

85.6

345.5

Net identifiable assets
$
1,474.5

$
—

$
1,474.5

 

The following table summarizes the Company's restated and previously reported December 31, 2014 consolidated balance sheet:

8

 
December 31, 2014 (Restated)
December 31, 2014
Inventories
$
299.5

$
307.0

Property, plant and equipment (including mineral interests)
$
10,927.6

$
11,142.8

Goodwill and intangibles
$
411.0

$
325.4

Other financial liabilities
$
204.8

$
199.1

Deferred income taxes
$
2,513.2

$
2,656.0


Goodwill of $345.5 million was recognized primarily as a result of the deferred tax liability recognized on the excess of the fair value of the acquired assets over their corresponding tax bases. The total amount of goodwill that is expected to be deductible for tax purposes is $nil.

Acquisition related costs totaled $27.1 million and have been recognized as an expense and included in other expenses in the consolidated statement of operations.

Adjustments to the preliminary fair values previously reported include the fair value of net working capital acquired, property, plant and equipment, long-term liabilities and deferred income taxes of $36.1 million, $215.2 million, $22.9 million and $142.8 million, respectively. As a result of these adjustments, goodwill increased by $85.6 million. The adjustments in the current period are the result of changes in estimates and model assumptions from new information obtained about circumstances that existed as of the acquisition date and the related tax impact attributable to the related assets and liabilities adjusted.

On March 19, 2015, the Company and Agnico through CMGP jointly acquired the remaining 30% interest in the Malartic CHL prospect from Abitibi Royalties Inc. (“Abitibi”) for a total consideration of approximately C$57 million in shares and a 3.0% net smelter return royalty on the Malartic CHL prospect. The Company issued a total of 3,549,695 common shares at $3.63 (C$4.63) for its portion of the consideration.  Following the completion of the transaction, CMGP holds a 100% interest in the Malartic CHL prospect. In accordance with the terms of concurrent agreements, each of the parties released and discharged the others with respect to all proceedings previously commenced by Abitibi with respect to the Malartic CHL prospect, all without admission of any further liability by any party.

b) Disposition of Mineral Interests

During the fourth quarter of 2014, the Company formalized its decision to divest Ernesto Pau-a-Pique which is a non-core asset and has presented the assets and liabilities as held for sale and the operating results have been presented separately from continuing operations.  Total net loss for the three and six month periods ended June 30, 2015 was $0.8 million and $17.4 million (2014 - net loss of $10.6 million and $8.8 million). As at June 30, 2015 assets held for sale totaled $21.9 million (December 31, 2014 - $19.5 million) and liabilities held for sale totaled $22.7 million (December 31, 2014 - $27.1 million).

c) Acquisition of Mega Precious Metals Inc.

On June 22, 2015, the Company acquired all of the issued and outstanding common shares of Mega Precious Metals Inc. ("Mega Precious"). Mega Precious was a Canadian-based exploration company with a high quality pipeline of projects located in the mining-friendly jurisdictions of Manitoba, Northwestern Ontario and Nunavut. The most significant and advanced project is the Monument Bay gold/tungsten project located in northeastern Manitoba.

The transaction is expected to advance the Company’s strategy to expand its presence in Canada as the significant existing mineral resource base at Monument Bay and North Madsen projects, in particular, provide an opportunity for further exploration to meaningfully increase the potential of these assets.

Total consideration paid for the acquisition of Mega Precious was $14.5 million (C$17.8 million) which consisted of approximately $0.2 million in cash, $14.0 million in Yamana common shares (4,366,675 shares) and transaction costs. Under the terms of the Agreement, each Mega Precious shareholder received $0.068 per share comprised of C$0.001 in cash and 0.02092 of a Yamana common share for each Mega common share held.

As part of the acquisition and included in the total consideration paid, the Company acquired the Pacific Road convertible notes totaling $2.4 million, and issued 744,187 Yamana common shares at $3.21 (C$3.94) per share, which concurrently terminated the Pacific Road Agreement.

9


The acquisition was accounted for as a purchase of assets and assumption of liabilities. The transaction did not qualify as a business combination under IFRS 3, Business Combinations, as significant inputs, processes, and outputs that together constitute a business were not identified. The fair value of the assets acquired and liabilities assumed were based upon their fair value as at the date of acquisition. Transaction costs were capitalized in accordance with the Company's policy.

Total consideration paid by the Company was as follows:

10

 
 
Cash
$
0.2

Issue of Yamana common shares: 4,366,675 shares at $3.21 (C$3.94) per share
14.0

Transaction costs
0.3

Purchase consideration
$
14.5


The following table summarizes the total fair value of assets acquired and liabilities assumed:
 
 
Cash
$
2.0

Exploration and evaluation assets
15.4

Other assets acquired
0.2

Liabilities acquired
(3.1
)
Net identifiable assets
$
14.5



5.    FINANCE INCOME AND EXPENSE

 
For the three months ended June 30,
For the six months ended June 30,
 
2015
2014
2015
2014
Interest and other income
$
0.5

$
0.4

$
1.2

$
0.7

Net realized gain on convertible debt
4.5

—

4.7

—

Gain on derivatives
1.7

—

1.7

—

Net foreign exchange gain
—

—

—

1.5

Finance income
$
6.7

$
0.4

$
7.6

$
2.2

 
 
 
 
 
Unwinding of discounts on provisions
$
(4.1
)
$
(3.4
)
$
(8.5
)
$
(6.5
)
Interest expense on long-term debt
(24.2
)
(12.0
)
(48.3
)
(14.6
)
Loss on derivatives
—

—

(2.0
)
—

Net foreign exchange loss
(22.3
)
(5.3
)
(0.3
)
—

Amortization of deferred financing, bank, financing fees and other
(0.6
)
(4.1
)
(4.2
)
(7.4
)
Finance expense
$
(51.2
)
$
(24.8
)
$
(63.3
)
$
(28.5
)
Net finance expense
$
(44.5
)
$
(24.4
)
$
(55.7
)
$
(26.3
)


11

6.    INCOME TAXES

Tax expense is recognized based on management's best estimate of the average annual income tax rate expected for the full financial year multiplied by the pre-tax income of the interim reporting period.

The following table reconciles income taxes calculated at statutory rates with the income tax expense in the Condensed Interim Consolidated Statements of Operations:

 
For the three months ended June 30,
For the six months ended June 30,
 
2015
2014
2015
2014
Loss before income taxes
$
(32.1
)
$
(22.9
)
$
(65.8
)
$
(38.8
)
Canadian statutory tax rate (%)
26.5
%
26.5
%
26.5
%
26.5
%
 
 
 
 
 
Expected income tax recovery
(8.5
)
(6.1
)
(17.4
)
(10.3
)
Impact of (lower)/higher foreign tax rates (i)
(6.9
)
(10.3
)
35.5

(23.9
)
Change in tax rates (ii)
2.5

—

2.5

—

Permanent differences
3.0

0.2

(33.7
)
11.7

Unused tax losses and tax offsets not recognized in deferred tax assets
6.1

1.7

9.7

(13.9
)
Unrealized foreign exchange losses in tax
(19.8
)
(10.1
)
76.7

28.9

Tax effects of translation in foreign operations
(2.4
)
(13.7
)
(11.2
)
(16.7
)
True-up of tax provisions in respect of prior years
0.6

(7.8
)
2.4

(7.9
)
Withholding taxes
0.9

2.6

3.3

5.0

Mining taxes on profit
2.4

3.1

11.7

3.7

Other
(3.0
)
1.8

(3.0
)
0.3

Income tax (recovery)/expense
$
(25.1
)
$
(38.6
)
$
76.5

$
(23.1
)
 
 
 
 
 
Income tax (recovery)/expense is represented by:
 
 
 
 
Current income tax (recovery)/expense
$
(3.1
)
$
46.3

$
30.4

$
72.0

Deferred income tax (recovery)/expense
(22.0
)
(84.9
)
46.1

(95.1
)
Net income tax (recovery)/expense
$
(25.1
)
$
(38.6
)
$
76.5

$
(23.1
)

(i)    The Company operates in multiple foreign tax jurisdictions that have tax rates that differ from the Canadian statutory rate.
(ii)    In June 2015, the Ontario government eliminated the Ontario Resources Tax Credit that was available to mining companies. This change impacted the Company's deferred tax liability in the quarter.


7.    EARNINGS (LOSS) PER SHARE
 
 
For the three months ended June 30,
For the six months ended June 30,
 
2015
2014
2015
2014
Weighted average number of common shares - basic (000's)
938,900

772,565

926,377

763,014

Weighted average number of dilutive potential shares (i)
—

1,037

—

—

Weighted average number of common shares - diluted (000's)
938,900

773,602

926,377

763,014

 
 
 
 
 
Net (loss)/earnings from continuing operations attributable to Yamana equity holders
$
(7.0
)
$
15.7

$
(142.3
)
$
(15.7
)
Net (loss)/earnings per share from continuing operations attributable to Yamana equity holders - basic and diluted
$
(0.01
)
$
0.02

$
(0.15
)
$
(0.02
)
 
 


 
 
Net (loss)/earnings attributable to Yamana Gold Inc. equity holders
$
(7.8
)
$
5.1

$
(159.7
)
$
(24.5
)
Net (loss)/earnings per share attributable to Yamana Inc. equity holders - basic and diluted
$
(0.01
)
$
0.01

$
(0.17
)
$
(0.03
)


12

(i) Effect of dilutive securities - the potentials shares attributable to stock options, restrictive share units, and convertible debt were anti-dilutive in the three-and six-month periods ended June 30, 2015 and in the six-month period ended June 30, 2014.


8.    ACCUMULATED OTHER COMPREHENSIVE INCOME
 
 
For the three months ended June 30,
For the six months ended June 30,
 
2015
2014
2015
2014
Net change in unrealized gains on available-for-sale securities:
 
 
 
 
Change in fair value
$
(0.1
)
$
(0.4
)
$
0.2

$
2.0

Reclassification of losses recorded in earnings
—

—

—

(0.2
)
 
$
(0.1
)
$
(0.4
)
$
0.2

$
1.8

Net change in fair value of hedging instruments
 
 
 
 
Change in fair value
11.8

21.4

1.8

43.8

Reclassification of losses recorded in earnings
—

—

12.6

—

Tax impact
(3.1
)
5.9

(3.8
)
5.9

 
$
8.7

$
27.3

$
10.6

$
49.7

Accumulated other comprehensive income attributable to equity shareholders
$
8.6

$
26.9

$
10.8

$
51.5



9.    FAIR VALUE MEASUREMENT

The Company’s financial instruments include cash and cash equivalents, trade and other receivables, investments, trade and other payables, long-term debt and derivative assets (liabilities). The carrying values of cash and cash equivalents, trade and other receivables, trade and other payables approximate their fair values due to the relatively short-term nature of these instruments. Adjustments recognized in the balance sheet relating to concentrate sales are fair valued based on published and observable prices. Fair values of derivatives were based on published and observable market prices for similar instruments and on market closing prices at period end.

There were no material differences between the carrying value and fair value of non-current assets and liabilities. The fair value was calculated by discounting the future cash flows by a discount factor based on an interest rate of 5% which reflects the Company's own credit risk. Fair values of available-for-sale securities were calculated based on current and available market information. As at June 30, 2015, total debt has a carrying value of $1.9 billion (December 31, 2014 — $2.0 billion), which is comprised of a revolving facility, senior debt notes and assumed debt with fair values of $259.8 million, $1.6 billion and $53.7 million, respectively (December 31, 2014 — $410.1 million, $1.5 billion and $105.2 million).

The Company assesses its financial instruments and non-financial contracts on a regular basis to determine the existence of any embedded derivatives which would be required to be accounted for separately at fair value and to ensure that any embedded derivatives are accounted for in accordance with the Company’s policy. As at June 30, 2015, there were no embedded derivatives requiring separate accounting other than concentrate sales.
The fair value hierarchy establishes three levels to classify the inputs to valuation techniques used to measure fair value. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs are quoted prices in markets that are not active, quoted prices for similar assets or liabilities in active markets, inputs other than quoted prices that are observable for the asset or liability (for example, interest rate and yield curves observable at commonly quoted intervals, forward pricing curves used to value currency and commodity contracts and volatility measurements used to value option contracts), or inputs that are derived principally from or corroborated by observable market data or other means. Level 3 inputs are unobservable (supported by little or no market activity). The fair value hierarchy gives the highest priority to Level 1 inputs and the lowest priority to Level 3 inputs.
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In assessing the fair value of a particular contract, the market participant would consider the credit risk of the counterparty to the contract. Consequently, when it is appropriate to do so, the Company adjusts its valuation models to incorporate a measure of credit risk.

13

The following table summarizes the classification and fair value of derivative related assets and liabilities:
Fair Value Measurements at June 30, 2015
Level 1
 Input
Level 2
 Input
Level 3
 Input
Aggregate
Fair Value
Assets:
 
 
 
 
 
Available-for-sale securities
$
4.0

$
—

$
—

$
4.0

 
Derivative related assets (forward contracts) (i)
—

14.0

—

14.0

 
 
$
4.0

$
14.0

$
—

$
18.0

Liabilities:
 
 
 
 
 
Derivative related liabilities (forward contracts) (i)
—

28.9

—

28.9

 
 
$
—

$
28.9

$
—

$
28.9


(i) Forward contracts are recorded as current assets and current liabilities.
The following table summarizes the classification and fair value of derivative related assets and liabilities:
Fair Value Measurements at December 31, 2014
Level 1
 Input
Level 2
 Input
Level 3
 Input
Aggregate
Fair Value
Assets:
 
 
 
 
 
Available-for-sale securities
$
3.4

$
—

$
—

$
3.4

 
Derivative related assets (forward contracts) (i)
—

10.8

—

10.8

 
 
$
3.4

$
10.8

$
—

$
14.2

Liabilities:
 
 
 
 
 
Convertible debentures
$
23.7

$
—

$
—

$
23.7

 
Derivative related liabilities (forward contracts) (i)
—

36.6

—

36.6

 
 
$
23.7

$
36.6

$
—

$
60.3


(i) Forward contracts are recorded as current assets and current liabilities.

The following table summarizes unrealized derivative gains (losses):
 
For the three months ended June 30,
For the six months ended June 30,
 
2015
2014
2015
2014
Non-hedge derivatives
 
 
 
 
Commodity contracts - non-hedge derivatives
$
(0.2
)
$
—

$
3.1

$
—

 
$
(0.2
)
$
—

$
3.1

$
—

Hedge instruments
 
 
 
 
Currency contracts
$
7.8

$
21.4

$
6.0

$
43.8

 
$
7.8

$
21.4

$
6.0

$
43.8


The following table summarizes realized derivative gains (losses):
 
For the three months ended June 30,
For the six months ended June 30,
 
2015
2014
2015
2014
Commodity contracts
$
5.2

$
(0.2
)
$
11.9

$
(0.2
)
Currency contracts
(14.4
)
(4.4
)
(26.1
)
(9.4
)
 
$
(9.2
)
$
(4.6
)
$
(14.2
)
$
(9.6
)

Included in cost of sales excluding depletion, depreciation and amortization, are realized losses in the amount of $2.8 million and $10.9 million for the three and six month periods ended June 30, 2015, respectively (2014 — $5.0 million and $10.0 million realized losses) with respect to currency derivative contracts.


14

The hedging reserve net balance as at June 30, 2015 is negative $14.3 million (December 31, 2014 — negative $24.9 million), of which the Company estimates that approximately $14.3 million of net losses will be reclassified to earnings over the next twelve months. The cash flow currency hedge for the three-month and six-month periods ended June 30, 2015 recorded losses of $6.6 million and $33.2 million, respectively (2014 — losses of $5.0 million and $11.8 million, respectively).

The Company’s sales are predominantly denominated in United States Dollars. The Company is primarily exposed to currency fluctuations relative to the United States Dollar as a portion of the Company’s operating costs and capital expenditures are denominated in foreign currencies; predominately the Brazilian Real, the Argentine Peso, the Chilean Peso, the Mexican Peso and the Canadian Dollar. Monetary assets denominated in foreign currencies are also exposed to foreign currency fluctuations. These potential currency fluctuations could have a significant impact on production costs and thereby the profitability of the Company.

The following table summarizes the details of the currency hedging program as at June 30, 2015:
 
(Amount in millions)
Brazilian Real to USD
Year of 
Settlement
Brazilian
Real
Notional
Amount
Weighted
Average
Contract
Rate
Market rate as at
June 30, 2015
2015
259.5
2.2828
3.1030


10.    INVENTORIES

As at,
June 30,
2015
December 31,
2014
Product inventories
$
60.6

$
56.6

Metal in circuit and gold in process
79.5

71.2

Ore stockpiles
52.7

63.1

Materials and supplies
109.9

108.6

 
$
302.7

$
299.5


The amount of inventories recognized as an expense during the three month and six month periods ended June 30, 2015 were $272.3 million and $552.2 million, respectively (2014 - $243.3 million and $452.2 million) and is included in cost of sales. As at June 30, 2015, a total charge of $1.1 million was recorded to adjust inventory to net realizable value (2014 - $2.4 million) which is included in cost of sales.



15

11.    PROPERTY, PLANT AND EQUIPMENT

 
Mining property costs subject
to depletion
(i)
Mining property costs not subject to depletion
(ii)
Land, building,
plant & equipment 

Total

Cost, January 1, 2014
$
3,761.2

$
7,105.1

$
1,999.7

$
12,866.0

Adjustment of opening balance for assets held for sale
(13.3
)
(306.1
)
—

(319.4
)
Additions
1,189.3

576.4

536.0

2,301.7

Reclassification, transfers and other non-cash movements
486.0

(449.2
)
(29.0
)
7.8

Change in decommissioning, restoration & similar liabilities
3.3

0.8

(0.1
)
4.0

Disposals
(5.9
)
(22.9
)
(23.5
)
(52.3
)
Cost, December 31, 2014
$
5,420.6

$
6,904.1

$
2,483.1

$
14,807.8

Adjustment of purchase price allocation during measurement period
(352.6
)
(89.2
)
226.6

(215.2
)
Additions
48.1

121.7

7.7

177.5

Reclassification, transfers and other non-cash movements
393.5

(442.6
)
79.9

30.8

Change in decommissioning, restoration & similar liabilities
(5.4
)
—

—

(5.4
)
Disposals
(0.1
)
(0.4
)
(9.2
)
(9.7
)
Cost, June 30, 2015
$
5,504.1

$
6,493.6

$
2,788.1

$
14,785.8

 
 
 
 
 
Accumulated depreciation,
January 1, 2014
$
1,267.8

$
557.3

$
780.1

$
2,605.2

Adjustment of opening balance for assets held for sale
—

(175.0
)
—

(175.0
)
Depreciation for the year
307.4

—

191.3

498.7

Impairment
166.4

586.5

—

752.9

Reclassification, transfers and other non-cash movements
—

—

7.8

7.8

Disposal
(0.6
)
—

(24.0
)
(24.6
)
Accumulated depreciation,
December 31, 2014
$
1,741.0

$
968.8

$
955.2

$
3,665.0

Adjustment of purchase price allocation during measurement period
(48.8
)
—

48.8

—

Depreciation for the period
163.9

—

98.7

262.6

Reclassification, transfers and other non-cash movements
—

(28.5
)
28.3

(0.2
)
Disposal
—

—

(7.8
)
(7.8
)
Accumulated depreciation,
June 30, 2015
$
1,856.1

$
940.3

$
1,123.2

$
3,919.6

 
 
 
 
 
Carrying value, December 31, 2014
$
3,679.6

$
5,935.3

$
1,527.9

$
11,142.8

Carrying value, December 31, 2014 (Restated)
$
3,278.2

$
5,846.1

$
1,803.3

$
10,927.6

Carrying value, June 30, 2015
$
3,648.0

$
5,553.3

$
1,664.9

$
10,866.2


(i)
The following table shows the reconciliation of capitalized stripping costs incurred in the production phase:
As at,
June 30,
2015
December 31, 2014
Balance, beginning of period
$
252.3

$
181.3

Additions
29.8

94.7

Amortization
(9.0
)
(23.7
)
Balance, end of period
$
273.1

$
252.3


(ii)
Mining property costs not subject to depletion include: capitalized mineral reserves and exploration potential acquisition costs, capitalized exploration & evaluation costs, capitalized development costs, assets under construction, capital projects and acquired mineral resources at operating mine sites. The composition for the comparative period has been revised to conform to the refined composition categories adopted in the current period. Mining property costs not subject to depletion are composed of the following:

16

As at,
June 30,
2015
December 31,
2014
Projects with mineral reserves
$
2,083.8

$
2,125.5

Exploration potential
3,457.6

3,720.6

Assets under construction
11.9

—

Total
$
5,553.3

$
5,846.1



12.    LONG-TERM DEBT

As at,
June 30,
2015
December 31,
2014
$500 million senior debt notes, issued on June 25, 2014
$
494.8

$
494.6

$300 million senior debt notes, issued on June 10, 2013
298.4

298.3

$500 million senior debt notes, issued on March 23, 2012
497.5

497.2

$270 million senior debt notes, issued on December 18, 2009
254.6

254.6

$1 billion revolving facility (ii)
259.8

410.1

Long-term debt assumed from 50% interest of Canadian Malartic (Note 4(a)) (iii)
53.7

105.2

Total debt
$
1,858.8

$
2,060.0

Less: current portion of long-term debt
$
(16.4
)
$
(34.6
)
Long-term debt (i)
$
1,842.4

$
2,025.4


(i)
Balances are net of transaction costs of $15.3 million, net of amortization (December 31, 2014 - $15.1 million). No changes have been made to any of the terms disclosed in the Annual Consolidated Financial Statements for the year ended December 31, 2014.
(ii) During the six months ended June 30, 2015, the Company repaid $350.0 million and drew $200.0 million on its revolving facility and extended the maturity date to May 29, 2020.
(iii) On June 30, 2015, the senior unsecured convertible debentures with principal outstanding of $75.0 million (the Company's share of C$37.5 million), a November 2017 maturity date and a 6.875% interest rate were converted. In accordance with the arrangement, the Company's share of the redemption consideration included 3,176,520 Yamana common shares and cash consideration of approximately $13.3 million (C$16.5 million), including an early conversion amount of which, C$12.5 million was previously set aside as restricted cash.

The following is a schedule of long-term debt principal repayments which includes corporate debt, the revolving facility, and debt assumed from the 50% interest in Canadian Malartic which is neither corporate nor guaranteed by the Company: 
 
Long-term Debt
2015
7.1

2016
98.7

2017
18.8

2018
111.5

2019
183.5

2020
350.0

2021
—

2022
200.0

2023
265.0

2024
640.0

 
$
1,874.6


The Company will, from time to time, repay balances outstanding on its revolving credit and intends to renew the credit facility upon maturity in 2020.



17

13.    OTHER PROVISIONS AND LIABILITIES

As at,
June 30,
2015
December 31, 2014
Provision for repatriation taxes payable
$
66.5

$
72.8

Provision for taxes
15.9

19.8

Other provisions and liabilities (i)
106.4

114.5

Other provisions and liabilities
$
188.8

$
207.1

 
 
 
Current
$
6.5

$
69.4

Non-current
182.3

137.7

Other provisions and liabilities
$
188.8

$
207.1


(i)
Other provisions and liabilities include provisions relating to legal proceedings, silicosis and other. In 2004, a former director of Northern Orion (now named 0805346 B.C. Ltd.) commenced proceedings in Argentina against Northern Orion claiming damages in the amount of $177.0 million for alleged breaches of agreements to participate in half of the acquisition of Alumbrera entered into with the plaintiff. On August 22, 2008, the courts issued a first-instance judgment rejecting the claim.  The plaintiff appealed and on May 22, 2013, the appellate court overturned the first-instance decision although weighted the chance of the plaintiff’s ability to participate in 50% of Alumbrera at 15%.  The matter was remanded to the first-instance court to determine the value following a series of appeals. In December 2014 the court appointed valuator delivered an assessment order of the value of lost opportunity to the plaintiff at $244 million. On February 27, 2015 0805346 B.C. Ltd. was awarded an annulment of the $244 million valuation order. On March 18, 2015 the plaintiff filed an appeal of the annulment decision award which will be heard by the National Commercial Appeals Court. In the opinion of 0805346 B.C. Ltd. advisors, the appeal was incorrectly allowed and the plaintiff’s chances of success are remote. In addition, on January 7, 2015, 0805346 B.C. Ltd. initiated a criminal complaint against the court-appointed valuator, based on the egregious errors contained in his valuation. Once all appeal procedures are exhausted, a new valuator will be appointed to determine the award.


14.    SHARE CAPITAL
 
The Company is authorized to issue an unlimited number of common shares at no par value and a maximum of eight million first preference shares. There were no first preference shares issued or outstanding as at June 30, 2015 (2014: nil).
For the six months ended June 30,
2015
2014
 
Number of
 
Number of
 
Issued and outstanding - 946,348,046 common shares
common shares
Amount
common shares
Amount
(December 31, 2014 - 878,052,814 common shares):
(000’s)
(in millions)
(000’s)
(in millions)
Balance, as at January 1,
878,053

$
7,347.3

753,303

$
6,320.1

Public offering (net of issue costs)(i)
56,465

227.9

—

—

Issued on acquisition of mineral interests (Note 4)
7,916

26.7

123,620

1,011.8

Convertible debentures exercised (Note 12 (iii))
3,177

9.6

—

—

Issued on vesting of restricted share units
777

8.8

685

8.9

Share cancellation (ii)
(40
)
(0.3
)
(96
)
(1.1
)
Balance, end of period
946,348

$
7,620.0

877,512

$
7,339.7


(i)
During the six months ended June 30, 2015, the Company closed on a bought deal offering of 49.1 million common shares at a share price of C$5.30 per share for gross proceeds of approximately C$260.2 million (the "Offering"). The shares were offered by way of a short-form prospectus in all of the provinces of Canada. In addition, the Company granted to the underwriters an option (the “Over-Allotment Option”) to purchase from the Company up to an additional 7.4 million common shares at a price of C$5.30 per share for a total of 56.5 million common shares, on the same terms and conditions as the Offering, exercisable any time, in whole or in part, until the date that was 30 days after and including the closing date (February 3, 2015) of the Offering. The Over-Allotment Option was exercised in full, bringing the total gross proceeds to the Company of C$299.3 million.
(ii)
During the six months ended June 30, 2015, the Company cancelled 40,249 common shares relating to entitlement from un-exchanged predecessor shares following the expiry of the period of surrender for a previous acquisition.
(iii)
The Company has a dividend reinvestment plan to provide holders of common shares a simple and convenient method to purchase additional common shares by electing to automatically reinvest all or any portion of cash dividends paid on common shares held by the plan participant without paying any brokerage commissions, administrative costs or other service charges. During the period ended June 30, 2015, a total of 15,038,564 shares have subscribed to the plan.





15.    SHARE-BASED PAYMENTS

The total compensation relating to share-based payments for the three and six-month periods ended June 30, 2015 were an expense of $nil and $5.1 million, respectively (2014 - $4.2 million and $9.5 million) and is comprised of the following: 
 
For the three months ended June 30,
For the six months ended June 30,
 
2015
2014
2015
2014
Equity-settled plans
$
2.3

$
3.6

$
6.5

$
7.3

Cash-settled plans
(2.3
)
0.6

(1.4
)
2.2

Total expense recognized as compensation expense
$
—

$
4.2

$
5.1

$
9.5

 
As at,
June 30, 2015
December 31, 2014
Total carrying amount of liabilities for cash-settled arrangements
$
13.5

$
14.8


The following table summarizes the equity instruments outstanding related to share-based payments as at:
As at (In thousands)
June 30, 2015
December 31, 2014
Options (i)(ii)
2,881

1,570

Restricted Share Units ("RSU") (i)
1,519

1,972

Deferred Share Units ("DSU")
3,231

3,074

Performance Share Units ("PSU") (iii)
1,258

1,347


(i)
For the three and six months ending June 30, 2015, these items have not been included in the weighted average number of shares (refer to Note 7) as they are anti-dilutive.
(ii)
During the six months ended June 30, 2015, 1,360,804 options were granted at a weighted average exercise price of C$5.30 per share. The options granted had a fair value of C$1.71 at grant date which has been estimated using the Black-Scholes pricing model based on the following assumptions:

Dividend yield
1.34
%
Expected volatility (based on the historical volatility of the Company's shares)
50.74
%
Risk-free interest rate
0.95% to 0.99%

Expected life
1 to 3 years

Expected forfeiture rate
10
%

(iii)
The PSU plan with a June 30, 2017 expiry was amended during the six-month period ended June 30, 2015 for a revised total of 575,263 PSU at a fair value of $0.20 per unit. During the six months ended June 30, 2015, the Company granted 683,103 PSU at a fair value of $3.53 per unit with a performance period ending December 31, 2017. The fair value of PSU granted was determined using a probability weighted analysis using a Monte Carlo simulation.


16.    CAPITAL MANAGEMENT

The Company’s objectives in managing capital are to ensure sufficient liquidity to pursue its strategy of organic growth combined with strategic acquisitions, to ensure the externally imposed capital requirements relating to its long-term debt are being met, and to provide returns to its shareholders. The Company defines capital that it manages as net worth, which is comprised of total shareholders’ equity and debt obligations (net of cash and cash equivalents). Refer to Long-term Debt Note 12 and Share Capital Note 14 for a quantitative summary of these items.

The Company has the following externally imposed financial covenants on certain of its debt arrangements:
(a)
Tangible net worth of at least $2.3 billion.
(b)
Maximum net total debt (debt less cash) to tangible net worth of 0.75.
(c)
Leverage ratio (net total debt/EBITDA) to be less than or equal to 3.5:1.

Not meeting these capital requirements could result in a condition of default by the Company. As at June 30, 2015, the Company has met all of the externally imposed financial covenants.

18



17.    SUPPLEMENTARY CASH FLOW INFORMATION

(a)
Non-Cash Investing and Financing Transactions
 
For the three months ended June 30,
For the six months ended June 30,
 
2015
2014
2015
2014
Interest capitalized to assets under construction
$
2.0

$
3.6

$
2.8

$
18.5

Issue of common shares on vesting of RSU
$
5.3

$
6.7

$
8.8

$
8.9

Issue of common shares on acquisition of mineral interests
$
14.0

$
1,011.8

$
26.7

$
1,011.8

Issue of common shares on convertible debentures exercised
$
9.6

$
—

$
9.6

$
—

 
(b)
Net Change in Non-Cash Operating Working Capital
 
For the three months ended June 30,
For the six months ended June 30,
 
2015
2014
2015
2014
Net decrease/(increase) in:
 
 
 
 
Trade and other receivables
$
23.2

$
(5.9
)
$
28.7

$
(16.3
)
Inventories
(19.9
)
(5.0
)
(9.3
)
(21.6
)
Other assets
(11.9
)
42.2

(21.7
)
35.9

Net increase/(decrease) in:
 
 
 
 
Trade payable and other payables
21.7

59.6

(73.3
)
30.7

Other liabilities
(30.1
)
(98.3
)
(33.4
)
(110.0
)
Movement in above related to foreign exchange
(8.9
)
1.4

(10.9
)
12.1

Net change in non-cash working capital
$
(25.9
)
$
(6.0
)
$
(119.9
)
$
(69.2
)

(i) Change in non-cash working capital items are net of items related to Property, Plant and Equipment.

(c)
Cash and cash equivalents are comprised of the following:
 
For the six months ended June 30,
 
2015
2014
Cash at bank
$
108.4

$
169.6

Bank short-term deposits
10.7

4.4

Total cash and cash equivalents of continuing operations
$
119.1

$
174.0



18.    SEGMENTED INFORMATION
 
The Company which produces primarily gold, and to a lesser extent silver and copper, bases its operating segments on the way information is reported and used by the Chief Operating Decision Makers ("CODM"). The Company has five core reportable operating segments which include the following mines:

•
Chapada mine in Brazil,
•
El Peñón mine in Chile,
•
Gualcamayo mine in Argentina,
•
Mercedes mine in Mexico, and
•
Canadian Malartic mine in Canada (50% interest).

The Company aggregates and discloses the financial results of non-reportable operating segments having similar economic characteristics, which are reviewed by the CODM and include, but are not limited to: Jacobina, Brio Gold Inc., and Ernesto/Pau-

19

a-Pique (discontinued operations) mines in Brazil, the Minera Florida mine in Chile, the Alumbrera mine (12.5% interest) in Argentina, other exploration properties and corporate entities as these operating segments do not meet the quantitative thresholds to qualify as reportable operating segments and nor do any individually, based on their materiality, assist in more informed judgments about the entity as a whole, its performance or prospects for future net cash flows.

(a)
Information about assets and liabilities

Property, plant and equipment referred to below consist of land, buildings, equipment, mining properties subject to depletion and mining properties not subject to depletion which include assets under construction and exploration and evaluation costs.

As at June 30, 2015
Chapada
El Peñón
Gualcamayo
Mercedes
Canadian Malartic
Corporate and other
Total
Property, plant and equipment
$
621.2

$
2,001.9

$
1,237.1

$
736.4

$
1,436.3

$
4,833.3

$
10,866.2

Goodwill and intangibles
$
—

$
9.3

$
1.5



$
345.5

$
53.6

$
409.9

Investment in associate
$
—

$
—

$
—

$
—

$
—

$
55.6

$
55.6

Non-current assets
$
624.3

$
1,710.1

$
1,237.1

$
736.1

$
1,803.2

$
5,395.9

$
11,506.7

Total assets
$
738.4

$
1,792.3

$
1,391.7

$
782.5

$
1,877.9

$
5,641.7

$
12,224.5

Total liabilities
$
225.3

$
533.4

$
461.5

$
200.7

$
375.5

$
3,601.7

$
5,398.1


As at December 31, 2014
Chapada
El Peñón
Gualcamayo
Mercedes
Canadian Malartic
Corporate and other
Total
Property, plant and equipment
$
621.5

$
2,004.1

$
1,099.0

$
745.7

$
1,447.7

$
5,009.6

$
10,927.6

Goodwill and intangibles
$
—

$
10.2

$
1.5

$
—

$
345.5

$
53.8

$
411.0

Investment in associate
$
—

$
—

$
—

$
—

$
—

$
66.6

$
66.6

Non-current assets
$
636.7

$
2,053.7

$
1,100.6

$
745.7

$
1,816.7

$
5,271.9

$
11,625.3

Total assets
$
731.7

$
2,122.9

$
1,242.0

$
791.1

$
1,885.4

$
5,628.7

$
12,401.8

Total liabilities
$
232.5

$
556.2

$
471.8

$
206.4

$
425.7

$
3,776.4

$
5,669.0


(b)
Information about profit and loss
For the three months ended June 30, 2015
Chapada
El Peñón
Gualcamayo
Mercedes
Canadian Malartic
Corporate and other (v)
Total (iii)
Revenues (iv)
$
107.9

$
98.9

$
40.5

$
23.3

$
86.3

$
98.1

$
455.0

Cost of sales excluding
depletion, depreciation and amortization
(54.0
)
(54.1
)
(31.1
)
(19.4
)
(43.7
)
(70.0
)
(272.3
)
Gross margin excluding depletion, depreciation and amortization
53.9

44.8

9.4

3.9

42.6

28.1

182.7

Depletion, depreciation and amortization
(10.4
)
(40.8
)
(3.3
)
(10.7
)
(27.6
)
(31.5
)
(124.3
)
Segment income/(loss)
$
43.5

$
4.0

$
6.1

$
(6.8
)
$
15.0

$
(3.4
)
$
58.4

Equity loss from associate
 
$
(6.6
)
Other expenses (i)
 
$
(83.9
)
Loss before taxes
 
$
(32.1
)
Income tax expense
 
25.1

Loss from continuing operations
 
$
(7.0
)
Loss from discontinued operation
 
$
(0.8
)
Net loss
 
$
(7.8
)


20

For the three months ended June 30, 2014
Chapada
El Peñón
Gualcamayo
Mercedes
Canadian Malartic (ii)
Corporate and other
Total (iii)
Revenues (iv)
$
114.2

$
133.8

$
63.6

$
32.7

$
21.9

$
77.6

$
443.8

Cost of sales excluding depletion, depreciation and amortization
(63.8
)
(52.4
)
(36.1
)
(19.2
)
(16.6
)
(55.2
)
(243.3
)
Gross margin excluding depletion, depreciation and amortization
50.4

81.4

27.5

13.5

5.3

22.4

200.5

Depletion, depreciation and amortization
(11.5
)
(36.0
)
(20.9
)
(11.5
)
(5.1
)
(34.7
)
(119.7
)
Segment income/(loss)
$
38.9

$
45.4

$
6.6

$
2.0

$
0.2

$
(12.3
)
$
80.8

Equity earnings from associate
 
$
0.3

Other expenses (i)
 
$
(104.0
)
Loss before taxes
 
$
(22.9
)
Income tax recovery
 
38.6

Earnings from continuing operations
 
$
15.7

Loss from discontinued operation
 
$
(10.6
)
Net earnings
 
$
5.1


(i)
Other expenses is comprised of general and administrative expense of $32.0 million (2014 -$36.6 million), exploration and evaluation expense of $4.0 million (2014 - $4.3 million), net finance expense of $44.5 million (2014 - $24.4 million), other operating expenses of $3.4 million (2014 -$38.7 million).
(ii)
Canadian Malartic acquisition closed June 16, 2014.
(iii)
During the period ended June 30, 2015, the Company revised the reportable operating segment information about profit and loss to align with the information reported and used by the CODM. The comparative period has been revised to conform with the presentation adopted in the current period.
(iv)
Gross revenues are derived from sales of gold of $349.1 million (2014 - $320.0 million) and to a lesser extent silver of $38.0 million (2014 - $43.9 million) and copper of $91.9 million (2014 - $89.1 million).
(v)
Included in the aggregated other non-reporting operating segments are the exploration properties acquired in the Mega transaction (Note 4(c)).

For the six months ended June 30, 2015
Chapada
El Peñón
Gualcamayo
Mercedes
Canadian Malartic
Corporate and other (v)
Total (iii)
Revenues (iv)
$
195.5

$
207.2

$
93.5

$
56.0

$
162.2

$
198.6

$
913.0

Cost of sales excluding
depletion, depreciation and amortization
(113.7
)
(106.2
)
(68.9
)
(40.8
)
(83.5
)
(139.1
)
(552.2
)
Gross margin excluding depletion, depreciation and amortization
81.8

101.0

24.6

15.2

78.7

59.5

360.8

Depletion, depreciation and amortization
(21.9
)
(70.6
)
(23.7
)
(20.0
)
(52.6
)
(73.4
)
(262.2
)
Segment income/(loss)
$
59.9

$
30.4

$
0.9

$
(4.8
)
$
26.1

$
(13.9
)
$
98.6

Equity loss from associate
 
$
(11.0
)
Other income/(expenses) (i)
 
$
(153.4
)
Loss before taxes
 
$
(65.8
)
Income tax expense
 
(76.5
)
Loss from continuing operations
 
$
(142.3
)
Loss from discontinued operation
 
$
(17.4
)
Net loss
 
$
(159.7
)


21

For the six months ended June 30, 2014
Chapada
El Peñón
Gualcamayo
Mercedes
Canadian Malartic (ii)
Corporate and other
Total (iii)
Revenues (iv)
$
203.6

$
247.8

$
109.5

$
64.3

$
21.9

$
150.7

$
797.8

Cost of sales excluding depletion, depreciation and amortization
(120.0
)
(101.5
)
(73.0
)
(35.3
)
(16.6
)
(105.8
)
(452.2
)
Gross margin excluding depletion, depreciation and amortization
83.6

146.3

36.5

29.0

5.3

44.9

345.6

Depletion, depreciation and amortization
(21.7
)
(71.6
)
(42.3
)
(21.2
)
(5.1
)
(69.7
)
(231.6
)
Segment income/(loss)
$
61.9

$
74.7

$
(5.8
)
$
7.8

$
0.2

$
(24.8
)
$
114.0

Equity earnings from associate
 
$
1.4

Other expenses (i)
 
$
(154.2
)
Loss before taxes
 
$
(38.8
)
Income tax recovery
 
23.1

Loss from continuing operations
 
$
(15.7
)
Loss from discontinued operation
 
$
(8.8
)
Net Loss
 
$
(24.5
)

(i)
Other expenses is comprised of general and administrative expense of $61.5 million (2014 -$68.1 million), exploration and evaluation expense of $9.4 million (2014 - $8.9 million), net finance expense of $55.7 million (2014 - $26.3 million), other operating expenses of $26.8 million (2014 - $50.9 million).
(ii)
Canadian Malartic acquisition closed June 16, 2014.
(iii)
During the period ended June 30, 2015, the Company revised the reportable operating segment information about profit and loss to align with the information reported and used by the CODM. The comparative period has been revised to conform with the presentation adopted in the current period.
(iv)
Gross revenues are derived from sales of gold of $709.4 million (2014 - $570.4 million) and to a lesser extent silver of $78.8 million (2014 - $88.9 million) and copper of $169.0 million (2014 - $171.5 million).
(v)
Included in the aggregated other non-reporting operating segments are the exploration properties acquired in the Mega transaction (Note 4(c)).

Capital expenditures
Chapada
El Peñón
Gualcamayo
Mercedes
Canadian Malartic
Corporate and other
Total
For the three months ended June 30, 2015
$
15.3

$
22.8

$
4.7

$
7.7

$
13.1

$
38.1

$
101.7

For the three months ended June 30, 2014
$
33.7

$
32.9

$
14.9

$
12.0

$
2.8

$
92.0

$
188.3

 
 
 
 
 
 
 
 
For the six months ended June 30, 2015
$
27.0

$
40.8

$
7.5

$
12.1

$
23.9

$
66.2

$
177.5

For the six months ended June 30, 2014
$
40.9

$
64.7

$
21.0

$
24.9

$
2.8

$
171.6

$
325.9



19.    CONTRACTUAL COMMITMENTS
 
Construction and Service Contracts
As at,
June 30,
2015
December 31,
2014
Within 1 year
$
480.3

$
470.5

Between 1 to 3 years
355.8

385.2

Between 3 to 5 years
66.5

68.9

After 5 years
0.1

1.8

 
$
902.7

$
926.4



22

Operating Leases
 
The aggregate amount of minimum lease payments under non-cancellable operating leases are as follows:
As at,
June 30,
2015
December 31,
2014
Within 1 year
$
7.9

$
6.2

Between 1 to 3 years
10.7

7.6

Between 3 to 5 years
1.2

1.8

After 5 years
—

—

 
$
19.8

$
15.6



20.    CONTINGENCIES
 
Due to the size, complexity and nature of the Company’s operations, various legal and tax matters arise in the ordinary course of business. The Company accrues for such items when a liability is both probable and the amount can be reasonably estimated.  In the opinion of management, these matters will not have a material effect on the Consolidated Financial Statements of the Company.
 
In December 2012, the Company received assessments from the Brazilian federal tax authorities disallowing certain deductions relating to debentures for the years 2007 to 2010. The Company believes that these debentures were issued on commercial terms permitted under applicable laws and is challenging these assessments. As such, the Company does not believe it is probable that any amounts will be paid with respect to these assessments with the Brazilian authorities and the amount and timing of any assessments cannot be reasonably estimated.



*************




23
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