YAMANA GOLD INC. (TSX:YRI; NYSE:AUY; LSE:AUY) (“Yamana” or “the
Company”) reports its financial and operational results for the
third quarter of 2020. The Company posted strong quarterly
production and impressive financial performance with increased
earnings, EBITDA, cash flow and free cash flow(3) and
continuing increases in cash balances.
THIRD QUARTER HIGHLIGHTS
Strong Adjusted Net Earnings(1)
and Cash Flows, Further Reduction in Net
Debt(3)
- Adjusted net earnings(1) of $92.9 million or $0.10 per share
basic and diluted compared to adjusted net earnings of $49.5
million or $0.05 per share basic and diluted a year earlier.
- Net earnings were $55.6 million or $0.06 per share basic and
diluted compared to net earnings of $201.3 million or $0.21 per
share basic and diluted a year earlier.(1)
- Strong cash flows from operating activities of $215.0 million
and cash flow from operating activities before net change in
working capital of $199.0 million reflect the impact of strong
production, strong precious metals prices and the positive impact
of foreign exchange on the costs of the Company.
- If adjusted for margins associated with the sales of Barnat
pre-commercial production of approximately $13.5 million which are
disclosed as a credit to expansionary capital and investing cash
outflows, and for the $8.6 million of costs incurred in association
with COVID-19, normalized cash flows from operating activities and
normalized cash flows from operating activities before net change
in working capital(3) would have been approximately $237.1 million
and $221.1 million, respectively.
- Cash flows from operating activities is at multi-year highs
which includes periods with considerably more production from mines
that have since been divested or discontinued.
- To ensure consistency of and prospects for cash flows, the
Company compares cash flows in a particular quarter with the
average of cash flows in the preceding three quarters. This measure
is looked at on a rolling basis quarter over quarter. Continuing
with a recent trend, cash flow from operating activities and net
free cash flow(3) for the quarter exceeded the averages of such
cash flows for the preceding three quarters by 52% and 103%,
respectively, thereby further demonstrating the strength and
resilience of the cash flow generation capacity of the
Company.
- Net free cash flow(2) of $185.5 million and free cash flow
before dividends and debt repayments(2) of $156.8 million,
representing increases of 107% and 316% from the comparative prior
year quarter.
- Net debt(3) decreased by $148.9 million to $619.1
million, which advances and the Company’s objective of achieving a
positive net cash(3) position which is now well ahead of
schedule. The Company ended the quarter with a leverage ratio
of under 0.8x, ahead of schedule in relation to the Company's
previously stated objectives.
- As at September 30, 2020, the Company had cash and cash
equivalents of $474.2 million, an increase of $149.4 million from
June 30, 2020. The Company has sufficient cash on hand and
liquidity through its current balances and incoming cash flows to
fully manage its business and fund growth without having to borrow.
This includes, but is not limited to obligations related to the
Jacobina plant expansions, development of the Odyssey underground
project at Canadian Malartic, generative exploration, development
of the integrated Agua Rica and Alumbrera project, and further
balance sheet improvements, while having excess funds to dedicate
to possible other opportunities and dividend increases.
- With its preliminary operating results reported in October, the
Company increased its 2020 production guidance to 915,000 gold
equivalent ounces ("GEO")(4) from the previous guidance of 890,000
GEO, representing an increase of 3%. Gold production and silver
production guidance have increased from previous guidance by
approximately 1% and 6%, respectively.
|
Three months ended September 30 |
(In millions of United States Dollars) |
2020 |
|
|
2019 |
|
Net Free Cash Flow(2) |
$ |
185.5 |
|
|
$ |
89.5 |
|
Free Cash Flow before Dividends
and Debt Repayments(2) |
$ |
156.8 |
|
|
$ |
37.7 |
|
Decrease in Net Debt(3) |
$ |
(148.9 |
) |
|
$ |
(810.3 |
) |
(All amounts are expressed in United States
Dollars unless otherwise indicated)(See end notes on page 13)
Subsequent Events: Announced Dividend
Increase; Completed London Listing; Repaid Credit
Facility
- The Company announced it has increased its annual dividend by a
further 50% to $0.105 per share, for shareholders of record at the
close of business on December 31, 2020. At the new rate, the
dividend will be 425% higher than the rate just 18 months
ago.
- On October 13, the Company completed its listing and began
trading on the Main Market of the London Stock Exchange, adding
another senior exchange for trading of the Company's shares and
further expanding its public market profile.
- On October 23, the outstanding $100.0 million on the $750.0
million credit facility was repaid. This follows the repayment of
the initial $100.0 million in June of the $200.0 million drawn
during the first quarter of 2020 as a precaution due to the
uncertainty around COVID-19.
Strong quarterly production
results
- Above plan gold production of 201,772 ounces was underpinned by
standout production from Jacobina, Canadian Malartic, El Peñón, and
Minera Florida.
- Above plan silver production of 3,040,341 ounces was
underpinned by an exceptionally strong performance from El Peñón,
which greatly exceeded plan with mine sequencing favouring mining
of higher silver grade zones.
- GEO(4) production of 240,466 ounces exceeded plan as a result
of strong gold and silver production.
- All-in sustaining costs ("AISC")(3) for the quarter of $1,096
per GEO, which was well below plan and in line with annual
guidance.
- Total cost of sales and cash costs(3) of $1,186 and $723 per
GEO, respectively, which were well below plan and in line with
annual guidance.
- Cash costs(3) remained consistent with the second quarter, as
secondary development ramped up commensurate to the increase in
production, therefore maintaining a similar cost per ounce.
- For the fourth quarter, which is expected to be the strongest
production quarter of the year, the cost per ounce is expected to
decrease.
- With sustaining capital deferrals in the second quarter while
certain operations ramped up from temporary suspensions due to
COVID-19 restriction, sustaining capital increased in the third
quarter as expected and in line with the Company's AISC(3) guidance
of $1,020 to $1,060 per GEO for the second half of 2020.
Standout Performances at Jacobina, El
Peñón, Minera Florida and Canadian Malartic; Cerro Moro Mine and
Plant Operating at Full Capacity; Positive Exploration Results
Delivered Across Operations
Canadian Malartic
Canadian Malartic's standout production
performance exceeded plan for the third quarter of 2020 due to
higher mill throughput and feed grade. The transition to and
ramp-up of the Barnat deposit, along with record throughput which
resulted in the feed of ore that would have otherwise been
stockpiled, caused some feed grade variation and impacted
recoveries. Despite such impact, recovery for the quarter was in
line with the metallurgical model. The successful ramp-up of the
deposit resulted in Barnat declaring commercial production on
September 30, 2020. During the quarter, Barnat produced 13,305
ounces of pre-commercial production gold on a 50% basis and
meaningful contributions are expected to begin in the fourth
quarter. On a 50% basis, a total of $7.2 million of expansionary
capital expenditures was spent during the third quarter on the
Barnat Extension Project. The remaining extension work in 2020 is
focused on overburden stripping and topographic excavation
continuing according to plan.
The main focus of exploration during the third
quarter was to provide support for an aggressive infill drill
program at East Gouldie, where twelve diamond drill rigs completed
38,000 metres. For more information on exploration at Canadian
Malartic during the quarter, please see the 'Canadian Malartic
Underground' section on page 8 and press release issued October 28,
2020, titled 'Yamana Gold Provides An Update On Exploration
Activities At Canadian Malartic'.
Jacobina
Jacobina once again exceeded its production plan
and prior year results with gold production of 44,080 ounces for
the third quarter of 2020. Recovery rates and grade for the third
quarter were both in line with plan, and were higher than the
comparative quarter. Higher production resulted from increased
throughput compared to plan, with mill processing achieving a
higher than planned steady-state 6,800 tonnes per day ("tpd").
Approximately 5,225 metres of drilling were
completed in the quarter at Jacobina, including 200 metres of
infill drilling to convert inferred mineral resources to indicated
mineral resources, and 5,025 metres of exploratory drilling
dedicated to defining new inferred mineral resources. Drilling
activity focused on the new inferred resources program was
completed at Canavieiras Sul and Canavieiras Central connector zone
and at João Belo Sul, bringing the year-to-date total drilled to
8,111 metres. Exploration drilling carried out at Canavieiras Sul
and Central during the quarter continued to return positive results
from Maneira reef, extending mineralization 60 metres southward
from the last intersection at Canavieiras Central and 150 metres
north from Canavieiras Sul, confirming new potential mineral
resource along a 300-metre strike length linking the two areas. In
addition, drilling returned positive results from the MU, LVL and
LU reefs in the sector, extending good grade mineralization over
150 metres from the current Canavieiras Sul model. The exploration
drift linking Canavieiras Sul with Canavieiras Central is now
operational and provides access to further drilling setups.
Cerro Moro
The Cerro Moro mine and processing plant were
operating at full capacity as of September 30, 2020, after
a longer ramp-up of operations following a temporary
suspension due to inter-provincial travel restrictions related to
COVID-19 which impacted availability of workers travelling from out
of province. Cerro Moro's plant has now returned to its optimized
1,000-1,150 tpd throughput, which is expected to be maintained
going forward.
Silver dominated the quarter for Cerro Moro
resulting from strong, silver feed grades and recoveries. The
transition to underground ore at higher grades than the open pit
ore continued in the quarter and will continue in the fourth
quarter, with most of the ore to plant from the Escondida Far West,
Zoe, Escondida Central and Escondida West underground mines. With
grade and production anticipated to increase substantially, costs
are also expected to decrease, thereby bringing Cerro Moro's cost
more in line with the Company's average. With linear development
improvements, mine flexibility will also increase and create
operational efficiencies.
Exploration drilling in the quarter targeted the
Escondida-Zoe structural corridor, with both infill drilling and
testing new exploration targets based on new interpretations of the
plunge of the mineralized envelope, as well as a number of targets
in the core mine and district, including Michelle North, Bella
Vista, Angostina, Lucia and the newly discovered Roger zone at
Naty. Drilling down plunge at Zoe intersected visually positive
results and initial encouraging results at Michelle and Roger
indicate potential for additional resources in these sectors. Roger
is a recently identified northwest striking splay of the Naty vein
with two new positive drill intercepts. Ongoing drilling will test
the geometry and strike length of the structure for possible
resource addition.
In a further significant exploration
achievement, surface work has identified a new target, the Selene
vein, in the north with promising surface samples traced for over
11,000 metres on surface. The Selene vein has a significantly
longer strike length than any other target identified on the
property to date and is more typical of some other veins in the
Deseado Massif low sulphidation vein district. Sections of the vein
have reported surface assays with between 1.0 g/t and 15.0 g/t of
gold from selected grab and chip samples, providing drill ready
targets expected to be drilled in the fourth quarter. The
exploration drilling program will be expanded during the fourth
quarter as infill drilling is completed and a fifth drill rig has
since been added.
The metallurgical PQ ore drill program was
completed at Michele, Michele Ext, Carlita and Tres Lomas and
samples have been sent to Bureau Vertias for column leach tests as
part of an ongoing evaluation of near-surface oxide and low-sulfide
material potentially suitable for low cost open pit extraction and
processing.
El Peñón
El Peñón had a strong third quarter, with strong
gold production and silver production greatly exceeding plan,
primarily due to processing higher grade silver ore. Higher gold
grades are anticipated in the fourth quarter due to increased
underground production and lower stockpile reclaim, as well as
mining from higher gold grade sectors. Silver grade and production
were higher than plan due to processing ore from the Al Este sector
in the underground mine, which is a high grade silver area, however
this higher silver grade was temporary as a result of mining
sequence and is expected to normalize in the fourth quarter.
Exploration drilling of approximately 24,965
metres in 74 drill holes was completed during the third quarter,
testing 17 sectors. Positive results from Colorada Sur, Pampa
Campamento, and El Valle indicate good potential in these areas,
which remain open for discovery of additional resources. Drill
highlights from these target areas include: drill hole SNX0973,
14.3 g/t of gold and 502 g/t of silver over a horizontal width of
1.0 metres at Colorada Sur; and hole UIP0009, 24.0 g/t of gold and
234.0 g/t of silver over a horizontal width of 2.80 metres at Pampa
Campamento. For detailed drill results, please see the press
release issued September 8, 2020, available on the Company's
website at http://www.yamana.com. The Colorada Sur discovery, which
is the southern extension of the highly productive La Colorada Vein
system, one of the principal veins complexes at El Peñón, is
expected to be significant. The recently defined mineralization
remains open at depth, between ore shoots and towards the
south.
District exploration continues to build on
previous exploration targets with over 3,000 soil and rock samples
collected and approximately 2,843 metres of scout drilling in 11
holes completed. Most drilling results are pending, with
encouraging initial results including geochemical anomalies grading
up to 80.0 g/t of silver and 0.9 g/t of gold in individual core
samples. Surface sampling continues to generate new gold and
pathfinder soil and rock anomalies, providing good drill targets
for follow-up this year and in 2021.
Minera Florida
Minera Florida had a strong third quarter, with
production increasing 30% quarter over quarter. Positive results
were primarily due to higher feed grade and increased tonnes
processed, largely as a result of continuing improvements in
productivity with contributions from the Pataguas and Don Leopoldo
mining zones. Recent optimizations made to the processing plant
have demonstrated improvements to the recovery rate. Further
studies suggest that with additional improvements to the leaching
circuit, expected recovery rates could increase and reach up to
94%. Additionally, processing rates continue to benefit from mill
optimization initiatives.
Exploration activities continued to ramp up
significantly in the third quarter with 14,952 metres of total
drilling in 83 drill holes completed, representing approximately
78% of planned full-year infill and new resource drilling.
Approximately 7,507 metres of infill drilling was completed at
eight targets, including Pedro Valencia, Fantasma, Juan Pablo,
Maqui, Polvorín, Tribuna, Don Leopoldo and Patagua Norte, dedicated
to converting inferred mineral resources to measured and indicated
mineral resources. High-grade new intercepts were encountered at
the intersection of the Patagua and Don Leopoldo veins and at the
Polvorín vein. Exploration drilling included approximately 7,445
metres, completed in 37 drill holes testing eight targets,
including Satélite PVS, Fantasma, Juan Pablo, Maqui, Polvorín,
Tribuna, Don Leopoldo and Patagua Norte, dedicated to the discovery
of new deposits or definition of new inferred mineral resources.
Good results were returned from the La Flor and Polvorín Oeste
veins, developing new targets at depth and to the north and south
of the known zone, at Patagua, opening up a 250-metre corridor
(Queseria block) east of the extent of development, and at the Don
Leopoldo Sur vein.
Summary of Certain Non-Cash and Other Items Included in
Net Earnings
Net earnings for the three months ended
September 30, 2020, were $55.6 million or $0.06 per share basic and
diluted. Earnings were negatively impacted by $37.3 million of
items that management believes may not be reflective of current and
ongoing operations and which may be used to adjust or reconcile
input models in consensus estimates. Significant and unusual
adjusting items in the quarter include:
- A $4.2 million loss on the revaluation of the Company's
monetary assets and liabilities, owing to movements in local
currencies in multiple jurisdictions where the Company
operates;
- A $5.1 million loss on the mark-to-market of the Company's
outstanding equity instruments related to share-based payments in
association with Performance Share Units and Deferred Share Units,
resulting from an increase in share price;
- An $8.6 million expense, representing costs incurred by the
Company as a result of COVID-19-related temporary suspensions,
standby or reductions at certain operations, and direct incremental
costs associated with operating under COVID-19 related
restrictions. Costs were incurred predominantly at Cerro Moro due
to government imposed restrictions on activity, and also in Chile
and Brazil due to health authority regulations for temporary
workforce reductions, and/or to promote social distancing;
- $8.7 million of non-cash tax losses on unrealized foreign
exchange gains and $12.8 million of tax losses on non-routine
transactions and adjustments.
(In
millions of United States Dollars, except per share amounts, totals
may not add due to rounding, unaudited) |
Three months ended September 30 |
2020 |
|
|
2019 |
|
Non-cash unrealized foreign exchange losses |
$ |
4.2 |
|
|
$ |
17.1 |
|
Share-based
payments/mark-to-market of deferred share units |
5.1 |
|
|
9.0 |
|
Mark-to-market (gains) losses
on derivative contracts, investments and other assets and
liabilities |
(1.5 |
) |
|
1.6 |
|
Gain on sale of subsidiaries
and other assets |
(1.8 |
) |
|
(284.6 |
) |
Share of one-off provision
recorded against deferred income tax assets of associate |
— |
|
|
13.0 |
|
Financing costs paid on early
note redemption |
— |
|
|
35.0 |
|
Temporary suspension and
standby costs |
2.9 |
|
|
— |
|
Other incremental COVID-19
costs |
5.7 |
|
|
— |
|
Other provisions, write-downs
and adjustments (i) |
6.1 |
|
|
28.8 |
|
Non-cash tax on unrealized
foreign exchange gains |
8.7 |
|
|
36.7 |
|
Income tax effect of
adjustments |
(4.9 |
) |
|
(0.8 |
) |
One-time tax adjustments |
12.8 |
|
|
(7.6 |
) |
Total adjustments -
increase (decrease) to earnings |
$ |
37.3 |
|
|
$ |
(151.8 |
) |
Total adjustments - increase (decrease) to earnings per
share |
$ |
0.04 |
|
|
$ |
(0.16 |
) |
(i) This balance includes, among other things,
revisions in estimates and write-downs & provisions, or
reversals of provisions, for items such as tax credits and legal
contingencies.
Covid-19 Related Costs
The Company incurred $8.6 million in COVID-19
related costs during the quarter including $2.9 million in
temporary suspension and standby costs. The Company anticipates
that suspension and standby costs will be minimized prospectively
for the balance of the year as the mines return to full production
levels anticipated at the beginning of the year. Further, the
Company is assessing if any incremental COVID-19 costs are expected
to become normal-course in a COVID-19 world. However, those costs
are expected to be at levels lower than those experienced this
quarter. The Company also anticipates that some of these increases
may be offset by efficiencies gained during the period.
STRATEGIC DEVELOPMENTS, CONSTRUCTION
DEVELOPMENTS AND ADVANCED STAGE PROJECTS
Agua Rica Feasibility Study Advancement
and Integration Agreement
The Company continued to advance the integration
of Agua Rica with Minera Alumbrera Limited ("Alumbrera") pursuant
to the 2019 integration agreement entered into by the Company,
Glencore International AG and Newmont Corporation (collectively the
“Parties”), whereby the Agua Rica project would be developed and
operated using the existing infrastructure and facilities of
Alumbrera. The integration gives the Company 56.25% ownership
in the joint Agua Rica and Alumbrera project ("Integrated
Project"), which carries significantly less development risk, as
certain infrastructure would not need to be constructed.
The integration is expected to be completed in
the fourth quarter, after which, the Integrated Project would be
managed as a combined operation. In addition to the considerable
infrastructure, tailings system and processing plant available,
there is also significant cash in the treasury at Alumbrera.
The Parties established a technical committee
which is now advancing a full Feasibility Study of the Integrated
Project, with updated mineral reserve, production and project cost
estimates. The results of the Feasibility Study are expected during
2021.
The Jacobina Optimization
Project
The Phase 1 optimization project, whose
objective was to stabilize throughput at a sustainable 6,500 tpd,
was completed in June of 2020. The project has exceeded
expectations, with an average plant throughput of approximately
6,800 tpd achieved in both the second and third quarters. The
Company has identified opportunities to further optimize the
results and recoveries achieved in Phase 1 with a modest
investment. Consequently, works commenced in the third quarter for
the expansion of the gravity concentration circuit, with
commissioning scheduled for mid-2021 and with an objective to
optimize gold recovery at the higher throughput rate.
In addition to the incremental optimization of
Phase 1, the Company is studying the increase in throughput to
8,500 tpd, referred to as the Phase 2 optimization. If implemented,
the Phase 2 expansion is expected to increase annual gold
production to approximately 230,000 ounces per year, reduce costs,
and generate significantly more cash flow and attractive returns.
The Company is currently working on the Phase 2 feasibility study,
scheduled for completion in mid-2021.
Separately, Jacobina is studying the
installation of a backfill plant to allow up to 2,000 tpd of
tailings to be deposited in underground voids. Preliminary results
indicate that the project has the potential to improve the way in
which the Company manages the environment and environmental impact,
extend the life of the existing tailings storage facility, and
improve mining recovery, resulting in an increased conversion of
mineral resources to mineral reserves. The Company is advancing the
backfill project to a feasibility study, to be completed in early
2021.
Canadian Malartic (50%
interest)
The Company continues to advance studies related
to the underground project at Canadian Malartic, and the main focus
of exploration during the third quarter was to provide support for
an aggressive infill drill program at East Gouldie, where twelve
diamond drill rigs completed 38,000 metres, designed to expand the
mineral resource envelope with a 150 metre drill spacing. These
twelve drill rigs are employed to define and expand underground
mineral resources, with a target to complete 112,000 metres of
definition drilling by year end. The drilling has established 44
new pierce points in a mineralized body 1,400 metres long and that
extends from 700 metres below surface to 1,900 metres below
surface. The pierce points include multiple stacked intercepts in
two closely spaced parallel zones, East Gouldie North and South. A
thirteenth drill rig is completing a vertical geotechnical drill
hole in the area of a proposed shaft to access the mineralized
zone. The Company and its partner have started the construction of
surface infrastructure and an exploration ramp into Odyssey and
East Malartic, with the purpose of eventually mining their
respective upper zones and providing further exploration access to
allow drilling in tighter spacing to continue studies to a greater
detail. The new ramp will also provide the ability to carry out
bulk sampling of up to 40,000 tonnes of ore. With governmental
approval already in hand, construction of surface infrastructure
and the portal in preparation for development of the ramp started
in August of 2020, with a budget of C$6.0 million for 2020 on a 50%
basis. The objective is to commence development of the ramp in the
fourth quarter, which is anticipated to take approximately two
years to complete. Exploration on the consolidated land package
during the quarter resulted in an expansion of a mineralized zone
in the East Amphi mine area, with some positive step out drilling
on the Nessie zone, including the discovery of a deep zone
subparallel to Nessie. Shallow drilling on the northern part of the
Rand property has also indicated a new mineralized area located in
sedimentary rocks north of the Piche Group. This area will see
further exploration in the fourth quarter.
Equinox Shares Partial Disposal
During the third quarter, the Company sold
1,200,000 Equinox shares for proceeds of approximately C$20.5
million. Yamana now holds 6,000,000 Equinox shares, representing
approximately 2.5% of the issued and outstanding shares, on a
non-diluted basis.
GENERATIVE EXPLORATION PROGRAM AND STRATEGY
Exploration on the most prospective properties
is a key to unlocking and creating value for shareholders. The
Company has built significant land positions including projects
that are at different stages of advancement in prospective mineral
districts in all countries where it has producing assets, and it is
pursuing advancing this portfolio through exploration projects in
these countries. This effort allows for the rapid advancement of
the highest value projects, while at the same time moving the most
promising early-stage properties up the exploration pipeline. The
following are key elements and objectives of the generative
exploration program:
- Target the Company’s most advanced exploration projects while
retaining the flexibility to prioritize other projects in the
portfolio as and when merited by drill results.
- Add new inferred mineral resources of at least 1.5 million
ounces of gold equivalent within the next three years to move at
least one project towards a preliminary economic assessment.
- On a longer term basis, advance at least one project to a
mineral inventory that is large enough to support a mine plan
demonstrating positive economics with annual gold production of
approximately 150,000 ounces for at least eight years.
- Advance both gold-only and copper-gold projects and, in the
latter case, consider joint venture agreements aimed at increasing
mineral resource and advancing the project to development while
Yamana maintains an economic interest in the project.
- Evaluate the acquisition or investment in prospective
exploration opportunities that align with Yamana’s objectives for
capital allocation and financial results, jurisdiction quality,
geology and operational expertise.
The generative exploration program is first
focusing on the most advanced projects in Yamana’s portfolio while
continuing drilling activity at a number of the Company’s highly
prospective earlier stage projects. These project stages are
categorized and defined as follows:
- Tier One - Projects with well-defined gold mineral resources
and opportunities to grow to a potentially economic threshold in
the next three years.
- Tier Two - Projects that have achieved significant drill
intercepts and whose geology along with other factors support rapid
resource growth.
- Tier Three - Highly prospective projects with known
mineralization defined with rock and soil geochemistry that warrant
future drill testing.
The Company is confident that its exploration
pipeline includes projects that can meet its shorter-term objective
of at least one project achieving 1.5 million ounces of gold in the
inferred mineral resource category within three years as well as
its longer-term objective of building at least one gold mineral
resource that can support a mine with annual production of
approximately 150,000 ounces per year for at least eight years.
The Company is focusing its exploration
activities in part on the large land positions held within the
Company, including projects that are at different stages of
advancement in prospective mineral districts in all countries where
it has producing assets and can leverage its technical and
operational expertise, and it is pursuing advancing this portfolio
through exploration projects in these countries. This effort will
allow for the rapid advancement of the highest value projects,
while at the same time moving the most promising early-stage
properties up the exploration pipeline.
As a complement to the advancement of the
internal exploration opportunities, the Company will consider the
acquisition of earlier stage development assets or companies that
align with Yamana’s objectives for capital allocation and financial
results, jurisdiction, geology and operational expertise. Such
opportunities would meet minimum requirements to achieve mineral
reserve and mineral resource inventories of at least 1.5 million
ounces supporting a mine life of at least eight years at a 150,000
ounce per year production rate. Furthermore, preference would be
given to geological and operational characteristics where the
Company has an identified expertise and excellent opportunities for
value enhancement.
Such opportunities would also extend an existing
regional presence or lead to that longer-term objective. Although
the Company has an established portfolio of early-to-later-stage
organic growth projects, the Company also considers it prudent to
consider opportunities to extend regional presences in quality
jurisdictions that offer geological and operational synergies and
similarities to its current portfolio of assets.
During the third quarter, exploration drilling
and related field activities ramped up gradually in most
jurisdictions, as COVID-19 restrictions decreased. The following is
an update of select projects in the Company's generative
exploration program. A full generative exploration update will
follow in the fourth quarter.
Monument Bay, Canada
Exploration at Monument Bay during the third
quarter continued to advance the evaluation and definition of
high-grade ore shoots at depth at the Twin Lakes resources as part
of an assessment considering the project as an underground mine.
Although startup of the 2020 summer field activity at Monument Bay
was impacted by COVID-19 travel restrictions, the drilling program
testing the depth extension of high-grade shoots at Twin Lakes is
ongoing with one drill hole completed, and although assays are
pending, there are visually positive results. A second hole is in
progress. A total of 641 metres were drilled in the quarter and
results are expected in November.
Domain, Canada
The Domain project is located near Oxford Lake
in northeast Manitoba, comprising a 20,000-hectare property that is
100%-controlled by the Company. Interpretation of regional airborne
magnetics together with government geological survey till
geochemistry support a highly prospective environment for folded
iron formation hosted gold.
The Company recently signed an exploration
agreement with the Bunibonibee Cree Nation (“BCN”) that provides a
framework for a cooperative, mutually respectful agreement
supporting the advancement of exploration within the Traditional
Territory of the BCN while providing employment and business
opportunities to the BCN. Planning is underway to guide the
consultation process for an initial field program in the fourth
quarter and an aggressive exploration effort in 2021.
Lavra Velha, Brazil
Lavra Velha is a near surface advanced Tier 1
exploration project located in the Lavra Velha district in Brazil’s
Bahia state. In the third quarter, the near surface mineral
resource expansion and exploration program continued at Lavra
Velha. Drilling in 2020 to the end of the quarter focused on Lavra
Velha South and Southwest zones located immediately south of the
established resource with positive drill results in both areas.
Both mineral resource and exploratory drilling will continue in the
fourth quarter.
Jacobina Norte, Brazil
The Jacobina Norte project, located in Brazil’s
Bahia state just nine kilometres north of the Jacobina mine, is one
of Yamana’s most promising, wholly-owned advancing exploration
projects. Surface work in 2020 has defined a 4.3 kilometre trend at
Barrocão Velho, a high priority target with surface workings and
exposures of mineralized reefs with very limited drilling tests.
Exploratory drilling on this target was initiated late in the third
quarter and will continue to year end on this high priority area.
Further surface exploration is underway and is expected to generate
further drill targets along the 70 kilometre extent of the northern
trend.
Borborema, Brazil
The Borborema project is a 25,000-hectare land
package in the Borborema district in Brazil’s Pernambuco state.
Drilling in the third quarter has extended the core massive
sulphide zone to the east with 800 metres of strike now defined by
drilling and surface exposure. Exploration will expand on the known
intercepts and drill test other copper-gold soil anomalies to
better define the size and nature of the asset.
KEY STATISTICS
Key financial and operating statistics for the
third quarter 2020 are outlined in the following tables.
Financial Summary
|
Three Months Ended September 30 |
(In
millions of United States Dollars, except for per share and per
unit amounts, unaudited) |
2020 |
|
|
2019 |
|
Revenue |
$ |
439.4 |
|
|
$ |
357.8 |
|
Cost of sales excluding
depletion, depreciation and amortization |
(166.6 |
) |
|
(163.4 |
) |
Depletion, depreciation and
amortization |
(106.9 |
) |
|
(112.6 |
) |
Total cost of sales |
(273.5 |
) |
|
(276.0 |
) |
Temporary suspension, standby
and other incremental COVID-19 costs |
(8.6 |
) |
|
— |
|
Mine operating earnings |
157.3 |
|
|
81.8 |
|
General and administrative
expenses |
(21.4 |
) |
|
(21.8 |
) |
Exploration and evaluation
expenses |
(3.6 |
) |
|
(1.8 |
) |
Net earnings |
55.6 |
|
|
201.3 |
|
Net earnings per share - basic
and diluted (i) |
0.06 |
|
|
0.21 |
|
Cash flow generated from
operations after changes in non-cash working capital |
215.0 |
|
|
157.4 |
|
Cash flow from operations
before changes in non-cash working capital |
199.0 |
|
|
152.4 |
|
Cash flows (used in) from
investing activities |
(47.7 |
) |
|
731.9 |
|
Cash flows used in financing
activities |
(17.8 |
) |
|
(884.5 |
) |
Revenue per ounce of gold |
$ |
1,910 |
|
|
$ |
1,481 |
|
Revenue per ounce of
silver |
$ |
24.58 |
|
|
$ |
17.73 |
|
Average realized gold price
per ounce |
$ |
1,910 |
|
|
$ |
1,473 |
|
Average
realized silver price per ounce |
$ |
24.58 |
|
|
$ |
17.10 |
|
(i) For the three months ended September 30,
2020, the weighted average numbers of shares outstanding was
952,479,062 (basic) and 954,525,799 (diluted).
Operating Summary
Costs |
Three Months Ended September 30 |
(In United States Dollars) |
|
2020 |
|
|
2019 |
|
Per GEO(4) sold |
|
|
Total cost of sales |
$ |
1,186 |
|
$ |
1,148 |
|
Cash Costs(3) |
$ |
723 |
|
$ |
674 |
|
AISC(3) |
$ |
1,096 |
|
$ |
1,037 |
|
|
Three Months Ended September 30 |
Gold Ounces Produced |
2020 |
|
2019 |
|
Canadian Malartic (50%) |
76,398 |
|
81,572 |
|
Jacobina |
44,080 |
|
40,157 |
|
Cerro Moro |
18,818 |
|
26,120 |
|
El Peñón |
39,322 |
|
42,713 |
|
Minera Florida |
23,153 |
|
17,590 |
|
TOTAL |
201,772 |
|
208,152 |
|
|
Three Months Ended September 30 |
Silver Ounces Produced |
2020 |
|
2019 |
|
Cerro Moro |
1,679,342 |
|
1,388,220 |
|
El Peñón |
1,360,999 |
|
1,095,935 |
|
TOTAL |
3,040,341 |
|
2,484,155 |
|
For a full discussion of Yamana’s operational
and financial results, please refer to the Company’s third quarter
2020 Management’s Discussion and Analysis, which is available on
the Company's website at www.yamana.com, and on SEDAR at
www.sedar.com.
Third Quarter 2020 Conference
Call
The Company will host a conference call and
webcast on October 30, 2020, at 9:00 a.m. ET.
Toll Free (North America): |
1-800-273-9672 |
Toronto Local and International: |
416-340-2216 |
Webcast: |
www.yamana.com |
|
|
Conference Call Replay |
|
|
|
Toll Free (North America): |
1-800-408-3053 |
Toronto Local and International: |
905-694-9451 |
Passcode: |
8127218# |
The conference call replay will be available
from 12:00 p.m. ET on October 30, 2020, until 11:59 p.m. ET on
November 20, 2020.
Qualified Persons
Scientific and technical information contained
in this news release has been reviewed and approved by Sébastien
Bernier (P. Geo and Senior Director, Geology and Mineral
Resources). Sébastien Bernier is an employee of Yamana Gold Inc.
and a "Qualified Person" as defined by Canadian Securities
Administrators' National Instrument 43-101 - Standards of
Disclosure for Mineral Projects.
About Yamana
Yamana is a Canadian-based 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 Relations and Corporate
Communications 416-815-02201-888-809-0925Email:
investor@yamana.com
Tavistock (UK Public Relations)
Charles Vivian / Emily MossTelephone: +44 7977 297 903 / +44
778 855 4035Email:
yamana@tavistock.co.uk
Peel Hunt LLP (Joint UK Corporate
Broker)Ross Allister / David McKeown / Alexander
AllenTelephone: +44 (0) 20 7418 8900
Berenberg (Joint UK Corporate
Broker)Matthew Armitt / Jennifer Wyllie / Detlir Elezi
Telephone: +44 (0) 20 3207 7800
End Notes
(1) Earnings for the three months ended
September 30, 2020, were negatively impacted by $37.3 million of
items that management believes may not be reflective of current and
ongoing operations, and which may be used to adjust or reconcile
input models in consensus estimates. For a complete list of
adjustments, refer to the "Summary of Certain Non-Cash and Other
Items Included in Net Earnings" found in this press release.
(2) The Company has included certain non-GAAP
performance measures in this press release. Detailed
reconciliations for the cash flow metrics can be found at the end
of this press release.
(3) A cautionary note regarding non-GAAP
performance measures as well as detailed reconciliations are
included in 'Section 11: Non-GAAP Performance Measures' of the
Company's MD&A.
(4) GEO includes gold plus silver with silver
converted to a gold equivalent at a ratio of 79.26:1 for the third
quarter. The GEO ratio is calculated based on average market
prices.
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 and 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, results of
feasibility studies, repayment of debt or updates regarding mineral
reserves and mineral resources. 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 outcome of
various planned technical studies, 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 change in the
administration of 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 dispositions, 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, 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 NOTE TO UNITED STATES INVESTORS
CONCERNING ESTIMATES OF MEASURED, INDICATED AND INFERRED MINERAL
RESOURCESThis news release 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 contained in Industry
Guide 7. 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”) contained
in 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. 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, issuers reporting pursuant to Industry Guide 7 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 news
release may not be comparable to similar information made public by
U.S. companies reporting pursuant to Industry Guide 7.
NON-GAAP FINANCIAL MEASURES AND ADDITIONAL LINE
ITEMS AND SUBTOTALS IN FINANCIAL STATEMENTS
The Company has included certain non-GAAP
performance measures to supplement its Condensed Consolidated
Interim Financial Statements, which are presented in accordance
with IFRS, including the following:
- Cash costs per GEO sold;
- All-in sustaining costs per GEO sold;
- Net debt;
- Net free cash flow;
- Free cash flow available for dividends and debt repayment;
- Average realized price per ounce of gold/silver sold; and
- Adjusted earnings
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 financial 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.
Management's determination of the components of non-GAAP and
additional measures are evaluated on a periodic basis influenced by
new items and transactions, a review of investor uses and new
regulations as applicable. Any changes to the measures are duly
noted and retrospectively applied as applicable.
For definitions and descriptions of the non-GAAP
measures, other than those noted and reconciled below and
additional subtotals in financial statements, refer to Section 10:
Non-GAAP Financial Measures and Additional Line Items or Subtotals
in Financial Statements of the Company's MD&A for the three
months ended September 30, 2020.
GEO PRODUCTION AND SALES
Production and sales of silver are treated as a
gold equivalent in determining a combined precious metal production
or sales unit, commonly referred to as gold equivalent ounces
("GEO"). Specifically, guidance GEO produced are calculated by
converting silver production to its gold equivalent using relative
gold/silver metal prices at an assumed ratio and adding the
converted silver production expressed in gold ounces to the ounces
of gold production. Actual GEO production and sales calculations
are based on an average realized gold to silver price ratio for the
relevant period.
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.
The measure of Cash Costs and All-in Sustaining
Costs (AISC), 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 financial
measure. The terms Cash Costs per GEO sold and AISC per GEO sold do
not have any standardized meaning prescribed under IFRS, and
therefore they may not be comparable to similar measures employed
by other companies. Non-GAAP financial measures should not be
considered in isolation as a substitute for measures of performance
prepared in accordance with IFRS and are not necessarily indicative
of operating costs, operating profit or cash flows presented under
IFRS.
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 its underlying
Cash Costs of operations. Cash Costs are computed on a weighted
average basis as follows:
- Cash Costs per GEO sold - The total costs used as the numerator
of the unitary calculation represent Cost of Sales excluding DDA,
net of treatment and refining charges. These costs are then divided
by GEO sold. Non-attributable costs will be allocated based on the
relative value of revenues for each metal, which will be determined
annually at the beginning of each year.
AISC figures are calculated in accordance with a
standard developed by the World Gold Council (“WGC”) (a
non-regulatory, market development organization for the gold
industry). Adoption of the standard is voluntary and the cost
measures presented herein may not be comparable to other similarly
titled measures of other companies.
AISC per sold seeks to represent total
sustaining expenditures of producing and selling GEO from current
operations. The total costs used as the numerator of the unitary
calculation represent Cash Costs (defined above) and includes cost
components of mine sustaining capital expenditures including
stripping and underground mine development, corporate and mine-site
general and administrative expense, sustaining mine-site
exploration and evaluation expensed and capitalized and accretion
and amortization of reclamation and remediation. AISC do not
include capital expenditures attributable to projects or mine
expansions, exploration and evaluation costs attributable to growth
projects, income tax payments, borrowing costs and dividend
payments. Consequently, this measure is not representative of all
of the Company's cash expenditures. In addition, the calculation of
AISC does not include depletion, depreciation and amortization
expense as it does not reflect the impact of expenditures incurred
in prior periods.
- AISC per GEO sold - reflect allocations of the aforementioned
cost components on the basis that is consistent with the nature of
each of the cost component to the GEO production and sales
activities.
NET DEBT
The Company uses the financial measure "Net
Debt", which is a non-GAAP financial measure, 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 non-GAAP financial measure of net debt does not
have any standardized meaning prescribed under IFRS, and therefore
it 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.
Net Debt is calculated as the sum of the current
and non-current portions of long-term debt net of the cash and cash
equivalent balance as at the balance sheet date. When the cash and
cash equivalent balance exceeds the total debt, the Company is in a
"Net Cash" position. A reconciliation of Net Debt at September 30,
2020 and December 31, 2019 is provided in Section 10: of the
MD&A for the three months ended September 30, 2020, which has
been filed on SEDAR.
NET FREE CASH FLOW AND FREE CASH FLOW BEFORE
DIVIDENDS AND DEBT REPAYMENT
The Company uses the financial measure "Net Free
Cash Flow" and "Free Cash Flow before Dividends and Debt
Repayments", which are non-GAAP financial measures, to supplement
information in its Consolidated Financial Statements. Net Free Cash
Flow and Free Cash Flow do not have any standardized meaning
prescribed under IFRS, and therefore may not be comparable to
similar measures employed by other companies. 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 with respect to
its operating cash flow capacity to meet non-discretionary outflows
of cash or to meet dividends and debt repayments. The presentation
of Net Free Cash Flow and Free Cash Flow before Dividends and Debt
Repayments are not meant to be a substitute for the cash flow
information presented in accordance with IFRS, but rather should be
evaluated in conjunction with such IFRS measures.
Net free cash flow is calculated as cash flows
from operating activities adjusted for advance payments received
pursuant to metal purchase agreements and other cash flows not
related to current period production, less non-discretionary items
such as sustaining capital expenditures, interest paid, payment of
lease liabilities, and cash used in other financing activities. A
reconciliation of Net Free Cash Flow is provided in Section 10: of
the MD&A for the three months ended September 30, 2020 and
comparable period of 2019 which has been filed on SEDAR.
Free Cash Flow before Dividends and Debt
Repayment begins with Net Free Cash Flow and further adjusts for
discretionary and other items that affect cash flow available for
dividend and debt repayments such as expansionary and exploration
capital expenditures, cash flows used in other investing
activities, and the effect of foreign exchange on non-USD
denominated cash. A reconciliation of Free Cash Flow before
Dividends and Debt Repayment is provided below:
Reconciliation of Cash Flows from Operating Activities to non-GAAP
Measures |
Three Months Ended September 30 |
(In millions of United States Dollars) |
|
2020 |
|
|
|
2019 |
|
Cash flows from operating activities |
$ |
215.0 |
|
|
$ |
157.4 |
|
Adjustments to operating cash flows: |
|
|
Amortization of deferred revenue |
2.3 |
|
|
6.4 |
|
Temporary suspension and standby costs |
2.9 |
|
|
— |
|
Other incremental COVID-19 costs |
5.7 |
|
|
— |
|
Other cash payments |
8.0 |
|
|
8.3 |
|
Non-discretionary items related to the current period |
|
|
Sustaining capital expenditures |
(38.1 |
) |
|
(38.6 |
) |
Interest paid |
(5.6 |
) |
|
(32.2 |
) |
Payment of lease liabilities |
(4.4 |
) |
|
(4.0 |
) |
Cash used in other financing activities |
(0.3 |
) |
|
(7.8 |
) |
Net free cash
flow |
$ |
185.5 |
|
|
$ |
89.5 |
|
Discretionary and other items
impacting cash flow available for dividends and debt
repayments |
|
|
Expansionary and exploration capital expenditures |
$ |
(23.8 |
) |
|
$ |
(44.1 |
) |
Cash flows used in other investing activities |
(4.7 |
) |
|
(8.8 |
) |
Effect of foreign exchange of non-USD denominated cash |
(0.1 |
) |
|
1.1 |
|
Free cash flow available for dividends and debt repayments |
$ |
156.8 |
|
|
$ |
37.7 |
|
AVERAGE REALIZED METAL PRICES
The Company uses the financial measures "average
realized gold price" and "average realized silver price" which are
non-GAAP financial measures, to supplement in its Consolidated
Financial Statements. Average realized price does not have any
standardized meaning prescribed under IFRS, and therefore they may
not be comparable to similar measures employed by other companies.
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 vis-à-vis average market prices of metals for the
period. The presentation of average realized metal prices is not
meant to be a substitute for the revenue information presented in
accordance with IFRS, but rather should be evaluated in conjunction
with such IFRS measure.
Average realized metal price represents the sale
price of the underlying metal before deducting sales taxes,
treatment and refining charges, and other quotational and pricing
adjustments. Average realized prices are calculated as the revenue
related to each of the metals sold, i.e. gold and silver divided by
the quantity of the respective units of metals sold, i.e. gold
ounce and silver ounce. Reconciliations of average realized metal
prices to revenue are provided in Section 10: of the MD&A for
the three months ended September 30, 2020 and comparable period of
2019, which has been filed on SEDAR.
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 Annual
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 non-recurring items, items
not related to or having a disproportionate effect on results for a
particular periods and/or not directly related to the core mining
business such as (a) share-based payments and other compensation,
(b) unrealized foreign exchange (gains) losses related to
revaluation of deferred income tax assets and liabilities 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 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 uses these measures for internal
valuation of the core mining performance for the period and to
assist with planning and forecasting of future operations.
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-recurring items,
items not related to or not indicative of current or future
period's results and/or not directly related to the core mining
business and are a better indication of the Company’s profitability
from operations as evaluated by internal management and the board
of directors. 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.
ADDITIONAL LINE ITEMS OR SUBTOTALS IN FINANCIAL
STATEMENTS
The Company uses the following additional line
items and subtotals in the Consolidated Financial Statements as
contemplated in IAS 1: Presentation of Financial Statements:
- Gross margin excluding depletion, depreciation and amortization
— represents the amount of revenue in excess of cost of sales
excluding depletion, depreciation and amortization. This additional
measure represents the cash contribution from the sales of metals
before all other operating expenses and DDA, in the reporting
period.
- 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 recovery/expense. This
measure represents the amount of financial contribution, net of all
expenses directly attributable to mining operations and overheads.
Finance income, finance expense and foreign exchange gains/losses
are not classified as expenses directly attributable to mining
operations.
- Cash flows from operating activities before income taxes paid
and net change in working capital — excludes the payments made
during the period related to income taxes and tax related payments
and the movement from period-to-period in working capital items
including trade and other receivables, other assets, inventories,
trade and other payables. Working capital and income taxes can be
volatile due to numerous factors, such as the timing of payment and
receipt. As the Company uses the indirect method prescribed by IFRS
in preparing its statement of cash flows, this additional measure
represents the cash flows generated by the mining business to
complement the GAAP measure of cash flows from operating
activities, which is adjusted for income taxes paid and tax related
payments and the working capital change during the reporting
period.
- Cash flows from operating activities before net change in
working capital — excludes the movement from period-to-period in
working capital items including trade and other receivables, other
assets, inventories, trade and other payables. Working capital can
be volatile due to numerous factors, such as the timing of payment
and receipt. As the Company uses the indirect method prescribed by
IFRS in preparing its statement of cash flows, this additional
measure represents the cash flows generated by the mining business
to complement the GAAP measure of cash flows from operating
activities, which is adjusted for the working capital change during
the reporting period.
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 net
change in working capital excludes the movement in working capital
items, mine operating earnings excludes expenses not directly
associated 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.
Yamana Gold (NYSE:AUY)
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