YAMANA GOLD INC. (TSX:YRI; NYSE:AUY) (“Yamana” or the “Company”)
herein provides its updated 2020 production outlook.
Production Outlook
The Company has revised total gold, silver and
gold equivalent ounce (“GEO”) production expectations for 2020 as a
result of the impact of COVID-19. Gold has had an exceptionally
strong performance as a hedge against risk and the current negative
interest rate yield environment, in relation to silver price, which
has significantly increased the GEO ratios observed in the market,
vis-à-vis initial guidance. Consequently, this increase in GEO
ratio, which results in silver production being accounted for as
less ounces in gold equivalent terms, has an impact to GEO guidance
that is disproportionate to the impact experienced in gold and
silver production because of COVID-19. The remainder of the change
is attributable to the impact of COVID-19, in relation to the
temporary suspension of operations, ramp up and resulting changes
to the mine plans for the remainder of the year.
For 2020, revised production guidance is
as follows:
(000's ounces) |
2019 Actual |
2020 Original Guidance |
2020 Revised Guidance |
Total gold production (i) |
848 |
|
857 |
|
786 |
|
Total silver production |
10,640 |
|
11,500 |
|
10,250 |
|
Total GEO production (i)(ii) |
972 |
|
990 |
|
890 |
|
Reconciliations of revised guidance to initial guidance
follow:
Charts accompanying this announcement is
available
at:http://ml.globenewswire.com/Resource/Download/595a56e8-d9f6-4d57-b158-09c744aba4achttp://ml.globenewswire.com/Resource/Download/14ff6cc4-6b2a-49bd-b80a-cccd1f420d1ahttp://ml.globenewswire.com/Resource/Download/1c6926cd-0b2c-4f33-97d9-12d7f48e5561
The expected production shortfall from original
guidance to revised guidance is approximately 8%, excluding the
aforementioned GEO impact. The revised production guidance at Cerro
Moro and Canadian Malartic in relation to initial guidance
coincides with the number of weeks that those operations have been
either in suspension of operations or gradual resumption of
operations, as compared to the number of weeks in the year of
normal operations.
The Company does not currently anticipate any
changes to guidance for 2021 or 2022.
The Company notes that despite the revised
production expectations for 2020, gross margins are expected to
benefit from the stronger than budgeted gold prices and the
positive impact of foreign exchange on the cost structure of the
Company, partly offset by lower silver prices.
Actual production for the year ended December
31, 2019 includes comparative operations, which comprise those
mines in the Company's portfolio as of December 31, 2019. The
Company notes that it guides on GEO production and costs based on a
particular assumption of gold and silver prices.
The Company looks at production within a range
of +/- 3%, and the guidance values noted below reflect the
mid-point of this production range for the 2020 period. While the
Company normally provides a smaller guidance range, the Company has
increased the range this year given the uncertainties presented by
COVID-19.
The Company previously guided that 46% of
production would occur in the first half of the year, which it
expected to be approximately evenly split between the first and
second quarters based on the GEO ratio forecast in its original
production guidance. Production in the first quarter achieved this
target. Due to the impact of COVID-19, the Company now expects the
resumption of normal operations in the second half of the year,
with the new production percentage in the second half to be 55% of
total annual production.
The following table presents mine-by-mine
production results for 2019, original guidance and revised
expectations for 2020.
(000's ounces) |
Gold |
Silver |
GEO (ii) |
2019 Actual |
2020 Original |
2020 Revised Guidance |
2019 Actual |
2020 Original |
2020 Revised Guidance |
2019 Actual |
2020 Original |
2020 Revised Guidance |
Canadian Malartic (50%) (i) |
335 |
|
330 |
|
275 |
|
— |
|
— |
|
— |
|
335 |
|
330 |
|
275 |
|
Jacobina |
159 |
|
162 |
|
168 |
|
— |
|
— |
|
— |
|
159 |
|
162 |
|
168 |
|
Cerro Moro |
121 |
|
117 |
|
96 |
|
6,323 |
|
7,500 |
|
6,250 |
|
195 |
|
204 |
|
160 |
|
El Peñón |
160 |
|
162 |
|
162 |
|
4,317 |
|
4,000 |
|
4,000 |
|
210 |
|
209 |
|
202 |
|
Minera Florida |
74 |
|
86 |
|
85 |
|
— |
|
— |
|
— |
|
74 |
|
86 |
|
85 |
|
- Included in full year 2019 production figures are 3,137 gold
ounces of pre-commercial production, related to the Company's 50%
interest in the Canadian Malartic mine's Barnat deposit. Excluded
in full year 2019 production figures are 52,311 gold ounces
produced at the Chapada mine, which was disposed of in July
2019.
- GEO assumes gold ounces plus the equivalent of silver ounces
using a ratio of 86.02 for 2019, a ratio of 86.10 for the original
2020 guidance, and a ratio of 98.85 for the revised 2020
guidance.
At Jacobina, guidance is being increased to
168,000 ounces of gold from 162,000 ounces due to strong
operational results. The operation met the Phase 1 optimization
objective of stabilizing plant throughput at 6,500 tonnes per day
("tpd") in the first quarter, which is a full quarter ahead of
schedule. For more information, please see the Company’s first
quarter financial and operational results press release issued
earlier today and available on the Company’s website at
www.yamana.com.
The Company has completed the Phase 2
pre-feasibility study ("PFS"), which would increase throughput to
between 7,500 and 8,500 tpd. Preliminary results point to a total
capital cost of $57.0 million, of which $35.0 million is related to
the processing plant, $14.0 million for underground mining and $8.0
million for infrastructure. If implemented, it is expected that the
Phase 2 expansion would ramp up annual gold production to 230,000
ounces and reduce operating costs with a positive impact on cash
flow at Jacobina.
The additional production from Phase 2 is not
included in guidance. A more complete disclosure on the project and
PFS will follow in May, along with the publishing of a 43 - 101
report.
At El Peñón, the change in guidance is entirely
attributable to the change in the GEO ratio, as gold and silver
production guidance has not changed. The increase in production
guidance at Jacobina offsets this impact.
Four factors impact production and guidance for
the mines that were put into temporary suspension of operations.
The following graphs depict a reconciliation of the change in
guided production at Cerro Moro and Canadian Malartic, the two
operations so impacted, which have since begun the gradual
resumption towards full mining activities. These factors are as
follows:
- GEO Ratio - A change in the GEO ratio from that initially
guided. Due to the relative over-performance of gold price to
silver price, silver production is accounted for as less ounces in
gold equivalent terms. This reconciling item does not in itself
change gold or silver production. Without the COVID-19 impact
detailed below, previous gold and silver production would remain
unaffected.
- Temporary Suspension - The impact of nil or reduced production
from the temporary suspension of operations during the period from
March to April.
- Ramp-up - The impact of reduced production during the second
quarter, in relation to the progressive return of employees and
remobilization during the planned ramp-up period at operations that
were temporarily suspended, as well as the impact of certain social
distancing guidelines.
- Change in Mine Plan - The impact of mine sequencing changes due
to delays associated with COVID-19, which pushed some of the
originally guided production for this year, mostly planned for the
fourth quarter, into later periods.
The following reconciles the current production
guidance to production guidance provided earlier this year for
Cerro Moro:
A chart accompanying this announcement is
available
at:http://ml.globenewswire.com/Resource/Download/3b3b8a14-6936-43f1-94ee-88259a8b14fa
- GEO Ratio - As previously noted, this reconciling item does not
in itself change gold or silver production, and without the
COVID-19 factors detailed below the previous gold and silver
production would remain unaffected.
- Temporary Suspension - Overall, this reconciling item is
comprised of several time periods during which production was
limited or nil. The impact of the temporary suspension and care and
maintenance began on March 20, 2020, when travel bans were imposed
and self-isolation was mandated throughout the country of
Argentina, and extended into late April.
- While on April 3, 2020 mining was designated an essential
service and the official suspension was lifted, certain activities
needed to be resumed and implemented in consultation with
provincial and national governments, such as logistics, permitting,
travel arrangements and transportation requirements. Further,
precautionary health and safety measures which comply with the
recommendations of the government were implemented, including the
following; staged return of workers for the Company's large
population of out-of-province employees and contractors returning
to site, enhanced screening of all individuals entering the mine,
including temperature checks, mandatory social distancing, enhanced
sanitization and disinfecting, and preparedness planning in the
event of a suspected or confirmed case of COVID-19. The
remobilization of the full complement of workforce was completed in
late April. In the period from the designation of mining as an
essential service to late April when the full remobilization of
workforce occurred, the operation continued to be on full care and
maintenance.
- Ramp-Up - The ramp-up is also comprised of several time
periods, the first being from late April until early May, during
which a rapid resumption of mining operations will occur. Although
production will resume in this period, it will initially be
limited. The plan will include the gradual startup of mining and
milling, although not at full capacity. The second period will
extend into mid-June, and mining and milling rates will gradually
increase over that time frame. A stockpile will also be accumulated
during this period, to provide processing flexibility for later
periods as noted below. Thereafter, the operation is expected to be
at full capacity. There is an opportunity to improve on production
plans in the event that the ramp-up of this latter period
progresses more efficiently than anticipated. A longer time frame
has been allocated to this ramp-up to ensure health and safety
protocols relating to temperature checks and social distancing are
complied with.
- Change in Mine Plan - In this period which is expected to
extend into mid-June, a stockpile will be accumulated, and for
certain periods this will limit the processing of ore. While the
stockpile is not necessary for the immediate needs of the
operation, it is considered necessary to provide processing
flexibility in future periods. Further, as a result of the
suspension and gradual resumption of operations, higher grade ore
which was planned for mining and processing late in the year will
be deferred into future periods, as part of normal mine
sequencing.
The following reconciles the current production
guidance to production guidance provided earlier this year for
Canadian Malartic:
A chart accompanying this announcement is
available
at: http://ml.globenewswire.com/Resource/Download/35b6e3dc-50fa-49c2-aa74-fbcaff6d0f5c
- Temporary Suspension - The impact of the temporary suspension
occurred from March 24, 2020 to the date of resumption of mining
operations on April 15, 2020, following the Government of Quebec’s
decision to designate mining as an essential service, thereby
authorizing the resumption of mining activities. During this
period, the operation was in care and maintenance and no production
occurred.
- Ramp-up - Processing operations began within a few days of
re-mobilizing work crews after the government order allowing for
resumption of mining activities. The ramp up-up period is expected
to be between two and four weeks with the implementation of health
and safety protocols that include temperature checks, conducting
surveys and social distancing. Mill throughput since April 22,
2020, has been at 60,000 tpd with gold grades ranging from 0.65 to
0.70 grams per tonne, as low grade stockpile is being processed
along with run-of-mine ore. The Company's guidance assumes a
ramp-up at the longer end of the range, and any efficiency in such
process would result in an increase in production above guidance
levels.
- Change in Mine Plan - Changes in the mine plan result from a
disciplined approach to proper mine management and sequencing. A
significant component of this reconciling item involves the
deferral of processing some of the highest grade ore, originally
planned to be mined and processed during the fourth quarter, and in
particular in December, due to delays in mine sequencing caused by
the temporary suspension and gradual ramp-up. In addition, a
scheduled mill maintenance shut-down has been assumed to require
more time than normal. While such maintenance is normally performed
in four days, it is expected to require longer to accommodate
social distancing protocols given the high number of work force
required during such maintenance shut-downs. To the extent that the
maintenance can be performed more efficiently, it will benefit
production.
Cost Outlook
The Company continues to assess the impact of
COVID-19 on costs in relation to guidance assumptions previously
provided in February, and expects to provide revised cost guidance
at a later date. The Company expects there to be an impact as it
develops ways to manage efforts with communities and mine sites,
particularly in the second quarter. As aforementioned however, cash
flows are expected to benefit from the stronger than anticipated
gold prices and the positive impact of foreign exchange on the cost
structure of the Company, partly offset by lower silver prices.
During the current year, costs have been
impacted as follows:
- The revised expected GEO ratio of 98.85 is significantly higher
than that originally guided. A larger GEO ratio results in total
costs being divided over less GEO ounces and increasing the overall
cost per unit reported, despite having no impact on actual overall
cost structure. The expected impact of the GEO ratio change on
AISC(i) is an increase of approximately $20 per GEO.
- Weaker than guided foreign exchange rates being observed have
resulted in a tail-wind being provided to costs that partially
compensate for the increase in cost associated with the higher GEO
ratio. The expected impact of the foreign exchange depreciation on
AISC(i) is a decrease of approximately $35 per GEO.
- In association with COVID-19, costs are also expected to be
impacted by inefficiencies attributable to demobilization,
ramp-ups, and the temporary workforce safety measures put in place.
A proportion of the fixed component of the Company's cost
structure, results in a higher cost per ounce basis due to the
effect of lower ounces as the Company continues to bear such fixed
costs. Although costs will be most significantly impacted during
the second quarter, the Company expects that consolidated AISC for
the full year may be in the range of 5% higher than previously
guided.
The Company notes that the above cost
assumptions are based on a preliminary estimate and on conservative
input assumptions. The Company will continue to monitor costs and
believes the cost profile may be improved as the year
progresses.
The Company also expects capital to be scaled to
the new guidance platform, and benefit from natural deferrals in
capital spend in association with delays related to COVID-19 both
from a sustaining and expansionary capital expenditure perspective.
The expected reduction in capital spend for the year is between $15
million and $20 million.
Total depletion, depreciation, and amortization
(“DDA”) is re-guided at $470 million for 2020, in association with
the reduction in quantities sold. The revised guidance compares to
initial guidance of $500 million, and prior year DDA of $471.7
million.
While the Company continues to assess and review
whether overhead expenses can be reduced, it continues to pay all
salaries and to incur all overhead expenses during the temporary
suspension of certain operations, and during the period of
resumption of such operations. Further, adherence to health and
safety protocols and engagement with local communities, government
and other stakeholders is expected to require more corporate time
and effort. However, the Company does not expect that G&A will
exceed previous guidance, as some cost savings will be realized due
to significant travel expense reductions and certain other overhead
costs being minimized where possible.
Despite the impact to production and costs from
COVID-19, the Company’s cash flow generation will benefit from the
response of gold prices to the unprecedented uncertainty.
- A cautionary note regarding non-GAAP performance measures is
included in Section 10: Non-GAAP Performance Measures.
GUIDANCE ASSUMPTIONS
Key assumptions, in relation to the above
revised guidance, are presented in the table below.
|
2019 Actual |
2020 Original Guidance |
2020 Revised Guidance |
GEO Ratio |
86.02 |
|
86.10 |
|
98.85 |
|
Gold |
$ |
1,392 |
|
$ |
1,550 |
|
$ |
1,635 |
|
Silver |
$ |
16.20 |
|
$ |
18.00 |
|
$ |
16.54 |
|
(i) 2019 metal
prices and exchange rates shown in the table above are the average
metal prices and exchange rates for the year ended December 31,
2019.
Guidance is being provided based on what
is known at the present time. There continue to be uncertainties
that may have an impact on operations, thereby affecting production
and costs guidance.
About Yamana
Yamana is a Canadian-based precious metals
producer with significant gold and silver production, development
stage properties, exploration properties, and land positions
throughout the Americas, including Canada, Brazil, Chile and
Argentina. Yamana plans to continue to build on this base through
expansion and optimization initiatives at existing operating mines,
development of new mines, the advancement of its exploration
properties and, at times, by targeting other consolidation
opportunities with a primary focus in the Americas.
FOR FURTHER INFORMATION, PLEASE CONTACT:Investor
RelationsCall: 416-815-0220Call: 1-888-809-0925Email:
investor@yamana.com
CAUTIONARY NOTE REGARDING FORWARD-LOOKING
STATEMENTS: This news release 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
guidance with respect to future financial or operating performance
continued advancements at Chapada, Jacobina, Canadian Malartic,
Cerro Moro, El Peñón and Minera Florida, expected production and
costs, future work and exploration programs, and the potential for
future expansions and additions to mineral resources and mineral
reserves. 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, changes in
national and local government legislation, taxation, controls or
regulations and/or changes in the administration or laws, policies
and practices, 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, and the Argentine peso versus
the United States dollar), the impact of inflation, 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 asset disposition,
risks related to metal purchase agreements, risks related to
acquisitions, changes in project parameters as plans continue to be
refined, changes in project development, construction, production
and commissioning time frames, 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, 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
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
guidance may not be appropriate for other purposes.
Yamana Gold (NYSE:AUY)
Historical Stock Chart
From Mar 2024 to Apr 2024
Yamana Gold (NYSE:AUY)
Historical Stock Chart
From Apr 2023 to Apr 2024