YAMANA GOLD INC. (TSX:YRI; NYSE:AUY; LSE:AUY) (“Yamana” or “the
Company”) is herein reporting its financial and operational results
for the first quarter of 2021.
FIRST QUARTER HIGHLIGHTS
Financial Results - Strong Earnings and Cash Flows
Further Strengthening Cash Balances and Balance Sheet
- Net earnings(4) of $54.7 million or
$0.06 per share basic and diluted compares well to net earnings(4)
of $45.0 million or $0.05 per share basic and diluted a year
earlier.
- Adjusted net earnings(2, 4) were
$67.2 million or $0.07 per share basic and diluted compared to
adjusted net earnings(2, 4) of $47.2 million or $0.05 per share
basic and diluted a year earlier.
- Cash flows from operating
activities were $160.2 million and net free cash flow(2) was $123.5
million, in line or above the averages of the preceding three
quarters, further demonstrating the strength and resilience of the
cash flow generation capacity of the Company.
- Cash flows from operating
activities before net change in working capital(2) were $183.4
million, and free cash flow before dividends and debt repayments(2)
was $76.0 million.
- As at March 31, 2021, the Company
had cash and cash equivalents of $678.1 million, and available
credit of $750.0 million, for total available liquidity of
approximately $1.4 billion. Cash balances include $222.8 million
available for utilization by the MARA Project. The remainder of
cash and cash equivalents of $455.3 million, along with further
liquidity and incoming cash flows, is more than sufficient to fully
manage the Company's business and available for the Company's
capital allocation objectives.
- The Company's quarterly dividend
rate of $0.02625 per share (annual $0.105 per share) is 110% higher
than the same quarter in 2020 and 425% than the same quarter in
2019.
|
|
Three months ended March 31 |
|
(In millions of United States Dollars) |
|
2021 |
|
2020 |
|
Net Free Cash Flow (2) |
$ |
123.5 |
|
$ |
91.1 |
| Free Cash Flow before Dividends
and Debt Repayments (2) |
$ |
76.0 |
|
$ |
38.9 |
|
Decrease in Net Debt (2) |
$ |
26.6 |
|
$ |
20.0 |
(See end notes at end of press release)
Production Results - Standout Quarters from Canadian
Malartic and Minera Florida
- Gold equivalent ounce ("GEO")(1)
production was 231,988 GEO(1), including gold production of 201,117
ounces and silver production of 2.13 million ounces, both in line
with plan.
- Canadian Malartic and Minera
Florida had standout quarters, producing 89,550 ounces and 20,818
ounces of gold, respectively, both above plan.
- At Jacobina, production reached an
all-time monthly high in March, with total production in line with
plan for the quarter.
- Silver production of 1,309,103
ounces at Cerro Moro exceeded plan with mine sequencing during the
quarter favouring mining of higher silver grade zones.
- The Company expects to continue its
established trend of delivering stronger production in the second
half of the year along with quarterly sequential increases in
production.
Solid Costs and Margins
- Cash costs(2) and all-in sustaining
costs ("AISC")(2) were $698, and $1,045 per GEO(1), respectively,
which on a consolidated basis were in line or better than plan, and
consistent with the comparative period.
- Mine operating earnings of $149.5
million increased by $50.2 million or 51% in relation to the
comparative prior year quarter. The increase is related to the
strong precious metal price environment and strong operational
performances from the mines resulting in higher gold production at
comparable costs.
Jacobina Optimization Project; Hydraulic
Backfill Plant to Proceed
- The Company has identified
opportunities to further optimize the results and recoveries
achieved in the Phase 1 optimization with a modest investment. As
part of this initiative, the Falcon concentrator and cyclones were
installed during the first quarter, and the Knelson concentrator is
scheduled to be installed in the second quarter of 2021, with an
objective to optimize gold recovery at the higher throughput
rate.
- The Company is advancing the Phase
2 expansion at Jacobina, for an increase in throughput to 8,500
tonnes per day ("tpd"). The Company expects to provide an update
regarding capex and development schedule in mid-2021 once studies
are finalized to facilitate permitting.
- The Company has also begun a
conceptual study on a Phase 3 expansion, which would increase
throughput to 10,000 tpd at modest further capital
requirements.
- The Company has adopted a
comprehensive Jacobina life-of-mine tailings management strategy
that reduces surface disposition of tailings, with underground
tailings disposal as backfill.
- The Company has initiated several
studies to ensure long-term sustainability and reduce the
environmental footprint of the operation. Work conducted in 2020
confirmed that both paste backfill and hydraulic backfill are
technically feasible options for disposal of tailings into
underground voids, thereby minimizing the quantity of tailings
stored on surface.
- In March 2021, Jacobina completed a
feasibility study for the installation of a hydraulic backfill
plant. The initial capital cost for establishing the backfill
system is estimated at $8 million.
- The Company has decided to move
forward with the hydraulic backfill plant project and is in the
permitting phase.
- A conceptual study is underway to
evaluate further opportunities for a dry stack tailings facility
and/or a paste backfill plant in parallel to the hydraulic backfill
plant, which could provide opportunities in the future for
additional storage of tailings to support future mineral reserve
development.
- Existing surface tailings capacity
and backfill will be sufficient for life of mine production at
Jacobina at the planned increased processing rates.
Canadian Malartic Underground
Construction Decision; Drilling Identifies Potentially Significant
Extension to East Gouldie Zone
- Impressive technical study results
were obtained in early February of 2021, and the Company and its
partner made a positive construction decision of the Odyssey
project at Canadian Malartic. An NI 43-101 technical report for the
Canadian Malartic operation was completed in March 2021, which
includes a full summary of the Odyssey underground project.
- The project demonstrates robust
economics, a significant increase in mineral resources, and a mine
life extension to at least 2039.
- Whereas the Company had originally
considered a production platform conservatively in the range of
450,000 ounces per year, the mine now supports an expected
increased annual gold production of 500,000 to 600,000 ounces on a
100% basis.
- Exploration drilling conducted on
the Rand property in the first quarter targeted the projected down
plunge extension of the East Gouldie zone, with the first hole
testing an area located greater than one kilometre to the east of
and down plunge of the current East Gouldie inferred mineral
resource.
- Drill hole RD21-4680A, intersected
2.7 grams per tonne (“g/t”) of gold over an estimated true width of
10.9 metres at 1,995 metres depth, including 3.1 g/t over 7.2
metres, indicating excellent down plunge growth potential.
- As Canadian Malartic transitions
from open pit to underground mining, underground production will
offset a significant portion of the corresponding decline in open
pit production. Production from open pit mining from 2021 through
2028 is expected to be approximately 3.9 million ounces (100%
basis) with annual production trending lower on a yearly basis to
approximately 123,000 ounces (100% basis) by 2028. Underground
production will start in 2023 and increase yearly, adding
approximately 932,000 ounces (100% basis) during the 2023-2028
construction period—at cash costs(2) of $800 per ounce—including
approximately 385,000 ounces (100% basis) by 2028.
- Net proceeds from the sale of the
932,000 ounces (100% basis) of underground production would
significantly reduce the external cash requirements for the
construction of the Odyssey project which, assuming the gold price
used in the financial analysis for the project of $1,550 per ounce,
would reduce the projected capital requirements in half.
MARA Project Advances
- Subsequent to the signing of the
integration agreement on December 17, 2020, the MARA Joint Venture
held by the Company (56.25%), Glencore International AG (25%) and
Newmont Corporation (18.75%) continues to engage with local
communities and stakeholders, advance the Feasibility Study and
project’s permitting process.
- After obtaining all required
permits from the respective authorities and conducting citizen
participation and social consultation seminars, the MARA Project
started exploration activities at the site. The primary field
activities being performed include additional rock sampling and
studies to update the environmental baseline for the Environmental
and Social Impact Assessment (“ESIA”) and a drilling campaign to
collect data for geotechnical and metallurgical studies that will
be incorporated into the updated Feasibility Study.
- A Technical Committee comprised of
members of the Company, Glencore International AG and Newmont
Corporation continues to provide oversight of the Feasibility
Study, which will provide updated mineral reserves, production and
project cost estimates for the project.
- The MARA Project will rely on
processing ore from the Agua Rica mine at the Alumbrera plant in
the Catamarca Province of Argentina. The new project design
minimizes the environmental footprint of the project in
consideration of the input of the local stakeholders and creates
one of the lowest capital intensity projects in the copper
industry.
- Key technical results related to
the Feasibility Study are expected during 2021. While the Company
continues to advance the Feasibility Study, it notes that a
considerable amount of information in the Pre-Feasibility Study is
already at Feasibility Study level mostly as a result of the
Integration Transaction. The updated Feasibility Study and ESIA are
expected to be completed in 2022.
CLIMATE CHANGE ACTION
As a continuation of Yamana’s commitment to a
low-carbon future, the Company announced during the quarter that it
has formally adopted a board-approved climate action strategy. The
strategy is underpinned by adoption of two high-level targets: a
science-based 2°C scenario compared to pre-industrial level and an
aspirational net-zero 2050 target. The targets will be supported by
the foundational work being performed throughout 2021 by the newly
established multi-disciplinary Climate Working Group, to determine
our emissions baseline, develop the Greenhouse Gas (“GHG”)
abatement pathways required to achieve the science-based 2°C
scenario and establish preliminary, operations-specific roadmaps
that describe abatement projects, estimated costs and schedules.
These actions will help ensure that our long-range GHG reduction
efforts are supported by practical and operationally focused short,
medium and long-term actions to achieve the targets.
Summary of Certain Non-Cash and Other
Items Included in Net Earnings(4)
| (In
millions of United States Dollars, except per share amounts, totals
may not add due to rounding) |
Three months ended March 31 |
|
|
2021 |
|
|
2020 |
|
|
Non-cash unrealized foreign exchange losses (gains) |
$ |
3.6 |
|
|
$ |
(11.5 |
) |
| Share-based
payments/mark-to-market of deferred share units |
(3.2 |
) |
|
(0.5 |
) |
| Mark-to-market (gains) losses
on derivative contracts, investments and other assets |
(0.6 |
) |
|
2.7 |
|
| Gain on discontinuation of the
equity method of accounting |
(1.1 |
) |
|
(21.3 |
) |
| Temporary suspension, standby
and other incremental COVID-19 costs |
8.2 |
|
|
3.5 |
|
| Other provisions, write-downs
and adjustments |
0.7 |
|
|
2.6 |
|
| Non-cash tax on unrealized
foreign exchange losses |
6.5 |
|
|
30.6 |
|
| Income tax effect of
adjustments |
— |
|
|
(1.1 |
) |
| One-time tax adjustments |
(1.6 |
) |
|
(4.4 |
) |
| Total adjustments
(i) |
$ |
12.5 |
|
|
$ |
0.6 |
|
|
Total adjustments - increase to earnings(4) per
share |
$ |
0.01 |
|
|
$ |
— |
|
(i) For the three months ended March 31,
2021, net earnings(4) would be adjusted by an increase of $12.5
million (2020 - increase of $0.6 million).
OPERATIONS UPDATE
Canadian Malartic
Canadian Malartic had an exceptional first
quarter, producing 89,550 ounces of gold, which exceeded plan and
greatly exceeded the comparative period in 2020, due to higher
grades and recoveries from the ore found deeper in the Malartic
pit. Additionally, during the month of January, the mine achieved
record tonnes mined in a month. Canadian Malartic completed the
overburden removal at Barnat during the first quarter as planned,
with topographic drilling and blasting on track to be completed by
the third quarter of 2021 as planned. Throughout the course of 2021
the mine will continue its transition from the Malartic pit to the
Barnat pit. The Company expects higher stripping than previous
years in association with Barnat, and this increased stripping is
expected to normalize over the following years. Additionally, the
Company is undertaking the required pit pushback to obtain the
optimized ounces as per the revised open pit design, which resulted
in an increase of approximately 150,000 of gold mineral reserves on
a 50% basis, as announced during the fourth quarter.
Jacobina
Production of 43,102 ounces of gold during the
first quarter was in line with plan and comparable to the same
period in 2020, with the operation achieving a record monthly
production during March of 16,348 ounces. Mill throughput for the
quarter was above plan, with recovery rates and grade as expected.
Given the success of the Phase 1 optimization, the Company has
begun to further optimize Phase 1 with the goal of optimizing gold
recovery at 96% to 97% while maintaining the higher throughput
rate. During the first quarter, the tailings disposal pipeline was
optimized to allow for additional throughput. In addition, the
Falcon gravimetric concentrator and cyclones were installed and
commissioned, while the Knelson gravimetric concentrator is on
schedule to be commissioned in the second quarter, both of these
improvements are expected to increase the recovery of gold in the
gravity circuit.
Cerro Moro
Production of 16,210 ounces of gold and 1.31
million ounces of silver was in line with plan for the first
quarter, as the mine returned to a more normalized activity
following COVID-19 challenges in the prior year. Silver once again
dominated the quarter for Cerro Moro, resulting from strong silver
feed grades, fully offsetting the reduction in gold production,
ultimately resulting in GEO achieving plan. The mine and processing
plant are currently running at full capacity, however, COVID-19
continues to present a risk of further disruptions, particularly
during the first half of the year. The opening of more mining faces
and transition to more mill feed coming from underground ore, at
higher grades than the open pit ore, continued in the quarter with
Zoe contributions becoming more prevalent in the second half of
March. This trend will continue throughout 2021, with most of the
ore to plant coming from Escondida Far West, Zoe, Escondida Central
and Escondida West.
The availability of personnel is anticipated to
improve as we move through 2021 and the transition to the
underground ore will increase mining flexibility, particularly in
the second half of 2021. This is expected to account for higher
gold production than the first half with the ore milled returning
to reserve grade. Over the past year, Cerro Moro has optimized the
operation of the processing plant to increase daily throughput to
approximately 1,100 tpd. The mine saw improved linear development
performance during the quarter and will continue to improve
throughout the year, further supporting the much higher second half
of 2021 production profile.
El Peñón
El Peñón produced 31,437 ounces of gold and
816,144 ounces of silver in the first quarter. The higher grade La
Paloma, Quebrada Colorada Sur and Pampa Campamento Deep sectors
zones will come into production in the second half of the year,
contributing to higher planned production in the third and fourth
quarters. Consequently, the Company expects that the second half of
2021 will account for 60% of gold and silver production at El
Peñón, as considered in the 2021 budget and the guidance provided
in the fourth quarter of 2020. The first step to unlock the
opportunity to leverage on the existing processing capacity at the
mine and increase production is to establish additional mining
sectors for increased mine production. The development of La
Paloma, Quebrada Colorada Sur and Pampa Campamento Deeps is an
important component of that strategy, and accessing those new areas
will provide increased mining flexibility.
Minera Florida
Minera Florida had a standout first quarter,
with production above plan, particularly in the month of March,
linear development advancing well, and ahead of plan, and
exploration results continuing to demonstrate extensions of
identified areas of mineralization and new discoveries. The
positive results were primarily due to increased tonnes processed,
largely as a result of continuing improvements in productivity with
contributions from the Pataguas and Don Leopoldo mining zones. Mine
management has recently taken actions to improve mechanical
availability, and the Company is now reactivating and optimizing
formerly decommissioned ore passes, with two out of three now
re-established. The final ore pass at Marisol is now scheduled for
completion by the mid-2021, and is expected to further reduce
haulage distance and increase operational flexibility as a result
of additional haulage routes. Ongoing initiatives to improve
development cycle times has the potential to increase underground
development beyond the current rate of 1,200-1,300 metres per month
at a lower unit cost, bringing forward access to new production
levels and unlocking additional mining sectors. Internalization of
mining activities, ongoing optimization of the haulage network, and
increasing disposal of development waste into underground voids
will further improve mine productivity going forward. A review of
the processing plant in the first quarter has identified several
opportunities for increased recovery and reduced operating costs.
Management is currently in the process of prioritizing these
opportunities, focusing on the initiatives that can be implemented
quickly with minimal investment.
In line with the 10-year outlook, the plant
de-bottlenecking study and preparation of the ESIA are advancing on
schedule, with the objective to increase throughput from 74,500 to
100,000 tonnes per month, which would increase annual gold
production to approximately 120,000 ounces. Preliminary studies
indicate that the capacity of the processing plant can be increased
to approximately 90,000 tonnes per month through incremental
adjustments. An upgrade of the crushing circuit would be required
to achieve 100,000 tonnes per month.
CONSTRUCTION, DEVELOPMENT AND ADVANCED
STAGE PROJECTS
Jacobina, Brazil - Phased Expansion
Advancing; Hydraulic Backfill Plant to Proceed
The Phase 1 optimization project was completed
in mid-2020. The project has exceeded expectations, with a higher
than planned steady state of approximately 6,800 tpd achieved in
the second and third quarters of 2020, as well as the first quarter
of 2021. 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 of 2020 for the expansion of the gravity concentration
circuit, with commissioning scheduled and on-track, with the Falcon
concentrator and cyclones already installed, and the Knelson
concentrator scheduled to be installed in the second quarter of
2021, with an objective to optimize gold recovery at the higher
throughput rate.In addition to the incremental optimization of
Phase 1, the Company is advancing the Phase 2 expansion at
Jacobina, for an increase in throughput to 8,500 tpd. The Company
is currently in the engineering phase, with permitting underway.
The throughput increase will be achieved through the installation
of an additional grinding line and incremental upgrades to the
crushing and gravity circuits. The Phase 2 expansion is expected to
increase annual gold production to approximately 230,000 ounces per
year, representing a 28% increase from current levels, reduce
costs, and generate significantly more cash flow and attractive
returns. The Company expects to provide an update regarding capex
and development schedule in mid-2021 once studies are finalized to
facilitate permitting.
The Company has also begun a conceptual study on
a Phase 3 expansion, which would increase throughput to 10,000 tpd,
utilize the existing grinding line, while expanding crushing and
leaching circuits and adding additional mining equipment and
infrastructure. Additional concept studies are ongoing to further
optimize tailings management to ensure sufficient tailings
capacity, either on surface or underground, for decades of
production and to accommodate the strategic throughput target of
10,000 tpd after completion of Phase 3.
The Company has adopted a comprehensive Jacobina
life-of-mine tailings management strategy that reduces surface
disposition of tailings, with underground tailings disposal as
backfill. The Company has initiated several studies to ensure
long-term sustainability and reduce the environmental footprint of
the operation. Test work conducted in 2020 confirmed that both
paste backfill and hydraulic backfill are technically feasible
options for disposal of tailings into underground voids, thereby
minimizing the quantity of tailings stored on surface.
Additionally, use of backfill is expected to improve underground
stope stability and minimize the requirements to leave behind
pillars in ore, resulting in increased mining recovery and reduced
dilution.
As a first step, a hydraulic backfill plant
provides a relatively simple and low capital cost solution for
underground deposition of 2,000 tonnes of dry tailings per day,
with the extra advantage that hydraulic backfill can be placed into
historic voids with minimal cement content, significantly reducing
the operating cost. Utilization of historic voids for backfilling
will also allow Jacobina to gradually introduce backfill into the
mining sequence without impacting the production rate of the mine.
In March 2021, Jacobina completed a feasibility study for the
installation of a hydraulic backfill plant. A tailings
classification plant will be installed at the existing processing
plant, at which 3,000 to 3,500 tpd of tailings will be classified
using cyclones to produce 2,000 tpd of hydraulic backfill material
with less than 10% passing 10 µm (micrometres). After filtering,
the tailings will be stockpiled and fed to the Morro do Vento
backfill plant or trucked using existing mining trucks to backfill
preparation plant at João Belo mine. From the two backfill
preparation plants, hydraulic backfill will be distributed to the
underground stopes mostly under gravity. Minimal pumping will be
required. Backfill will be placed either in existing undergrounds
voids from historical production or in new voids as part of the
mining sequence. The total volume of existing voids with the Morro
do Vento and João Belo mines is estimated at approximately 7.7
million cubic metres, of which approximately 1.9 million cubic
metres is readily accessible. Minimal binder will be required for
filling the existing voids, whereas 3-5% binder content will be
required for stopes to be vertically exposed within the future
mining sequence. The total backfill cycle is expected to take 42
days including barricade construction, filling, drainage, and
curing. Approximately 1 tonne of dry tailings is required to fill 2
tonnes of in-situ mined ore. The initial capital cost for
establishing the backfill system is estimated at $8 million. The
project will extend the life of the existing tailings storage
facility by approximately two-and-a-half years at a processing rate
of 8,500 tpd. The Company has decided to move forward with the
hydraulic backfill plant and is in the permitting phase. The permit
required for the backfill project is separate from the one required
for the Phase 2 expansion, although both are being pursued
simultaneously.
Additionally, a conceptual study is underway to
evaluate further opportunities for a dry stack tailings facility
and/or a paste backfill plant in parallel to the hydraulic backfill
plant, which could provide opportunities in the future for
additional storage of tailings to support future mineral reserve
development.
Existing surface tailings capacity and backfill
will be sufficient for life of mine production at Jacobina at the
planned increased processing rates.
Canadian Malartic (50% interest), Canada
- Odyssey Project Approved; Drilling Identifies Potentially
Significant Extension to East Gouldie Zone
Impressive technical study results were obtained
in early February of 2021, and the Company and its partner made a
positive construction decision of the Odyssey project at Canadian
Malartic, with first production from the Odyssey South deposit
expected in 2023. An NI 43-101 technical report for the Canadian
Malartic operation was completed in March 2021, which includes a
full summary of the Odyssey underground project. The project
demonstrates robust economics, a significant increase in mineral
resources, and a mine life extension to at least 2039. As Canadian
Malartic transitions from open pit to underground mining,
underground production will offset a significant portion of the
corresponding decline in open pit production. On a 100% basis,
production from open pit mining from 2021 through 2028 is expected
to be approximately 3.9 million ounces with annual production
trending lower on a yearly basis to approximately 123,000 ounces by
2028. Underground production will start in 2023 and increase
yearly, adding approximately 932,000 ounces (100% basis) during the
2023-2028 construction period—at cash costs(2) of $800 per
ounce—including approximately 385,000 ounces (100% basis) by
2028.
Whereas the Company had originally considered a
production platform conservatively in the range of 450,000 ounces
per year, the mine plan now supports annual gold production of
500,000 to 600,000 ounces on a 100% basis when fully ramped.
Further extension of the mine life beyond 2039 provides additional
upside, with several opportunities under evaluation. The project
mine plan currently only includes 0.4 million ounces of the
project’s 0.8 million ounces of Indicated Mineral Resources and 6.9
million ounces of the project’s 13.5 million ounces of Inferred
Mineral Resources. The upside is expected to be realized through
infill drilling to improve geological confidence, exploration
drilling to extend known deposits and make new discoveries and
engineering, especially close to historical underground excavations
and at depth at East Malartic.
Construction of surface infrastructure and the
portal in preparation for development of the ramp started in August
2020. The Company and its partner completed the construction of the
mine office and surface facilities in the fourth quarter of 2020,
to support the development, and further advanced the development of
the exploration ramp into Odyssey and East Malartic. The
exploration ramp is designed to mine their respective upper zones
and provide further exploration access to allow tighter drill
spacing to further define the mineral resource base. These
activities are coincident with headframe construction and shaft
sinking. The new ramp will also provide the ability to carry out
bulk sampling of 40,000 tonnes of mineralization. The budget for
the ramp on a 50% (and 100%) basis is $11.7 million ($23.4 million)
for 2021. Ramp development work advanced according to plan during
the first quarter of 2021. Development of the exploration ramp is
anticipated to take approximately two years to complete, with the
first drilling platform to be established in the third quarter of
2021. Additionally, the production shaft location has been prepared
to facilitate initiation of shaft collar construction.
A 2.3 kilometre geotechnical hole in the shaft
area has been completed, and detailed engineering has begun in
relation to the shaft and headframe. The shaft is envisioned to
have a 6.4-metre diameter and be 1.8 kilometres deep, with a
hoisting capacity of approximately 20,000 tpd. As noted, the
Company’s current expectation is that production from Odyssey South
will begin in 2023 from the ramp, while the Company sinks the shaft
to East Gouldie, with a goal to start production from East Gouldie
in 2027. The Odyssey project will utilize a transverse long hole
stoping mining method with primary and secondary stopes and paste
backfill to fill the voids, a proven mining method in the region.
On a 100% basis, average annual payable gold production is expected
to be approximately 545,400 ounces from 2029 to 2039 with total
cash costs per ounce of approximately $630 per ounce. Sustaining
capital from 2029 to 2039 is expected on a 50% (and 100%) basis to
average approximately $27.9 million ($55.8 million) per year.
The project requires modest capital in any given
year which is manageable and fully funded using Canadian Malartic's
cash on hand and free cash flow generation, and no external funding
is required. Initial capital expenditures and other growth capital
expenditures, on a 50% (and 100%) basis, are as follows in millions
of dollars: $56.9 ($113.8), $102.0 ($204.0) and $68.4 ($136.8) for
2021 through 2023 respectively, an average of $81.9 ($163.8) per
year from 2024 through 2026, and $104.5 ($209.0) and $90.2 ($180.3)
during 2027 and 2028, respectively. Furthermore, gold production
during the 2021 to 2028 construction period is expected to start in
2023 and total on a 50% (and 100%) basis 466,000 (932,000) ounces
at cash costs of approximately $800 per ounce. Although the
aforementioned costs do not include any offsetting net proceeds
from pre-commercial production due to upcoming amendments to the
relevant accounting standard(i), which represents a practical
consequence of IFRS application, net proceeds from the sale of
these ounces would significantly reduce the cash requirements for
the construction of the project which, assuming the gold price used
in the financial analysis for the project of $1,550 per ounce,
would reduce the projected capital requirements in half.
The main focus of exploration during the first
quarter was to provide support for an aggressive infill drill
program at East Gouldie, where ten diamond drill rigs completed
23,400 metres of a 141,400 metres planned 2021 program. The main
objective of the 2021 drilling program is to infill the core area
of the inferred resource to 75 metre drill spacing from the current
150 metres spacing, as well as to provide further step out and
exploration drilling. Exploration also continued on Rand and East
Amphi with 7,500 metres drilled in the quarter.
East Gouldie, discovered in late 2018 at
underground depths approximately 1.5 kilometres east of the
Canadian Malartic/Barnat open pit and south of the underground East
Malartic and Odyssey zones, has a strike length of approximately
1,400 metres in an east-west direction and dips 60 degrees to the
north, extending from 700 metres to 1,900 metres depth below
surface. Mineralization remains open to depth and to the east. The
zone dips toward the East Malartic zone, and may converge with East
Malartic at depth. As of December 31, 2020, East Gouldie was
estimated to contain inferred mineral resources of 6.4 million
ounces of gold, with Yamana’s 50% interest representing 3.2 million
ounces of gold contained in 31.5 million tonnes grading 3.17 g/t
gold.
Significant new drill intercepts from the East
Gouldie zone are set out in the table below and the drill hole
pierce points shown on the corresponding longitudinal section in
Figure 1. Download a PDF of detailed drill hole results for
Canadian Malartic presented in this press release.
The infill program continues to generate
excellent results demonstrating consistent grades and widths
throughout the mineralized zone, further demonstrating the high
quality nature of the reported inferred resource. Notable infill
results reported as uncapped gold grades over estimated true
widths, include drill hole MEX19-153W, 58.6 metres grading 3.7 g/t
of gold, including 11.2 metres grading 7.0 g/t of gold; hole
MEX20-166A, reporting 22.6 metres grading 6.4 g/t of gold,
including 6.8 metres grading 8.7 g/t of gold; and drill hole
MEX20-191W, 13.7 metres grading 11.2 g/t of gold, including a 7.1
metres interval grading 17.7 g/t of gold.
Drilling beyond the inferred resource to the
east has also produced excellent results, notably in drill hole
MEX20-193 which intersected two closely spaced estimated true width
intervals of 4.3 g/t of gold over 8.7 metres and 6.7 g/t of gold
over 6.3 metres (uncapped), demonstrating the potential for further
resource growth east of the current resources.
Table 1: 2020-Q4 through 2021-Q1 infill drilling
highlights, East Gouldie zone, selected for estimated true width
intervals greater than 25.0 gram*metres (gold g/t (uncapped)
multiplied by estimated true width in metres).
|
Hole |
Including |
From (m) |
To (m) |
Estimated True Width (m) |
Gold Uncapped (g/t) |
Gold Capped* (g/t) |
|
MEX19-153W |
|
1777 |
1851 |
58.6 |
3.7 |
3.7 |
|
incl. |
1806 |
1820 |
11.2 |
7.0 |
7.0 |
|
MEX20-166A |
|
1717 |
1743 |
22.6 |
6.4 |
6.3 |
|
incl. |
1721 |
1725 |
3.2 |
13.1 |
13.0 |
|
incl. |
1733 |
1741 |
6.8 |
8.7 |
8.5 |
|
MEX20-177W |
|
1384 |
1402 |
16.6 |
3.4 |
3.4 |
|
MEX20-182W |
|
1659 |
1671 |
10.6 |
3.3 |
3.2 |
|
MEX20-185W |
|
1815 |
1827 |
9.6 |
3.7 |
3.7 |
|
MEX20-191W |
|
1543 |
1557 |
13.7 |
11.2 |
8.6 |
|
incl. |
1547 |
1554 |
7.1 |
17.7 |
12.7 |
|
MEX20-192W |
|
1751 |
1761 |
8.4 |
8.4 |
5.9 |
|
|
1771 |
1782 |
9.4 |
4.8 |
4.6 |
|
MEX20-193 |
|
1794 |
1804 |
8.7 |
4.3 |
4.3 |
|
|
1815 |
1822 |
6.3 |
6.7 |
6.2 |
|
MEX20-193WA |
|
1744 |
1759 |
13.3 |
3.8 |
3.8 |
|
* capped @ 15 g/t |
|
|
|
|
|
|
Exploration drilling conducted on the Rand
property in the first quarter targeted the projected down plunge
extension of the East Gouldie zone, with the first hole testing an
area located greater than one kilometre to the east of and down
plunge of the current East Gouldie inferred mineral resource. Drill
hole RD21-4680A, the initial hole into this target, generated
excellent results, intersecting 2.7 g/t gold over an estimated true
width of 10.9 metres at 1,995 metres depth, including 3.1 g/t over
7.2 metres at 1,993 metres depth. This mineralized interval is
located on the projection of the East Gouldie plane and exhibits a
similar mineralization style to East Gouldie, with disseminated
pyrite associated with sheared and altered metasedimentary rock.
This new intercept is located 970 metres east of the easternmost
drill hole completed to date into the East Gouldie mineralized
envelope and 1,150 metres from the current eastern limit of the
East Gouldie mineral resources reported at year-end 2020. The
Company considers this result significant as it opens the
possibility for significant expansion of the East Gouldie zone to
the east.
The above intercept in hole RD21-4680A is within
the Canadian Malartic property and only 120 metres west of the
boundary with the contiguous Rand Malartic property. Exploration
will continue with wide step out drilling planned on both the Rand
Malartic and Canadian Malartic properties to define the extent of
the new mineralized zone in this area.
Figure 1: Canadian Malartic long section
looking north, highlighting 2020/2021 drilling results for the East
Gouldie zone listed in Table I and discussed in
text.https://www.globenewswire.com/NewsRoom/AttachmentNg/31e1c51c-f0ea-448f-9792-4f183ae6d975
The Partnership acquired a 100% interest in the
262-hectare Rand Malartic property in March 2019 from NSR Resources
for $5 million, with NSR Resources retaining a 2% net smelter
return royalty that can be bought back in its entirety by the
Partnership for $7 million prior to March 26, 2022.
In 2021, the Company expects to spend $11.9
million (50% basis) for 141,400 metres (100% basis) of exploration
and conversion drilling on the Odyssey underground project to
improve confidence in the mineral resource and to refine the
geological model. The Company expects to spend a further $3.2
million (50% basis) on 32,000 metres (100% basis) of exploration
drilling in 2021 to test other regional targets at Canadian
Malartic, including the Rand Malartic and East Amphi
properties.
|
(i) |
The amendment to IAS 16: Property, Plant and Equipment: Proceeds
before Intended Use, effective from 2022, prohibits entities from
deducting amounts received from selling items produced from the
cost of property, plant and equipment while the Company is
preparing the asset for its intended use. |
MARA Project (Agua Rica and Alumbrera
Integration), Argentina
On December 17, 2020, the Company completed the
integration with Glencore and Newmont and a new joint venture, the
MARA Joint Venture, was formed to manage, develop and operate the
project. Yamana holds a controlling ownership interest in the MARA
Project at 56.25%. Glencore holds a 25.00% interest and Newmont
holds an 18.75% interest. Yamana has been appointed manager of the
MARA Joint Venture and will continue to lead the engagement with
local, provincial, and national stakeholders, and completion of the
Feasibility Study and ESIA for the MARA Project. A MARA Project
Joint Venture Technical Committee ("Technical Committee") has been
formed, comprised of representatives of the three shareholder
companies.
The integration creates significant synergies by
combining existing substantive infrastructure which was formerly
used to process ore from the Alumbrera mine during its mine life,
including processing facilities, a fully permitted tailings storage
facility, pipeline, logistical installations, ancillary buildings,
and other infrastructure, with the future open pit Agua Rica mine.
The result is a de-risked project with a smaller environmental
footprint and improved efficiencies, creating one of the lowest
capital intensity projects in the world as measured by pound of
copper produced and in-situ copper mineral reserves, and creating
significant benefits for the local communities, the province of
Catamarca and Argentina.
On July 19, 2019, the Company announced the
positive results of a Pre-Feasibility Study ("PFS(A)"),
underscoring that the MARA Project is a long life and low-cost
asset with robust economics and opportunities to realize further
value, including converting economic-grade inferred mineral
resources and expanding throughput scenarios aimed to increase
metal production and returns, among other opportunities.
The PFS(A) for the MARA Project considers the
Agua Rica deposit will be mined using a conventional high tonnage
truck and shovel open pit operation. Average life of mine material
moved is expected to be approximately 108 million tonnes per year,
with ore feed of 40 million tonnes per year and average life of
mine strip ratio of 1.66.
Ore extracted from the Agua Rica mine will be
transported from the open pit by truck to the primary crusher area
and then transported via a conventional conveyor to the existing
Alumbrera processing plant. To route the overland conveyor system,
approximately 5.2 kilometres of tunnel development will be required
over the total 35 kilometre conveyor right-of-ways to the Alumbrera
processing plant, where it will feed the existing stacker conveyor
via a new transfer station.
Relatively modest modifications to the circuit
are needed to process the Agua Rica ore to produce copper and
by-products concentrate, which will then be transported to the port
for commercialization. An in-situ blending strategy has been
defined to manage the concentrate quality over certain years of the
mine life, which will allow the project to achieve the desired
targets. Further optimizations to this strategy will be studied in
the next design phase.
The PFS(A) provides the framework for the
preparation and submission of a new ESIA to the authorities of the
Catamarca Province and for the continued engagement with local
stakeholders and communities. The shareholders of the MARA Joint
Venture began the ESIA process in 2019, given the level of
significant detail in the PFS(A).
The Joint Venture Technical Committee advanced optimization
studies in late 2019 and early 2020, the results of which were
compiled as Pre-Feasibility Study B (“PSF(B)”), and is now
advancing a full Feasibility Study on the MARA Project, with
updated Mineral Reserve, production and project cost estimates.
The PFS(B) highlights include:
- Annual ore feed increased to 42
million tonnes per year.
- Annual production for the first 10
full years increased to 556 million pounds of copper equivalent(i)
production.
- Cash costs(2) of $1.32 per pound
and AISC(2) of $1.44 per pound for the first 10 years of
production.
- Initial capital of $2.78 billion.
Initial capital reduced to $2.39 billion if first year of owner
mine fleet purchases are reclassified as sustaining capital, as was
assumed for PFS(A). Total LOM capital spending the same under both
PFS(A) and PFS(B).
- NPV of $1.906 billion and an
increased IRR of 21.2%.(ii)
- PFS(B) reflects the inclusion of a
progressive Argentina export tax with a long-term assumption of
4.3%.
|
(i) |
Copper equivalent metal includes copper with gold, molybdenum, and
silver converted to copper-equivalent metal based on the following
metal price assumptions: $6,614 per tonne of copper, $1,250 per
ounce for gold, $24,250 per tonne for molybdenum, and $18.00 per
ounce for silver. |
|
(ii) |
Assuming metal prices of $3.00 per pound of copper, $1,300 per
ounce of gold price, $18.00 per ounce of silver, $11.00 per pound
of molybdenum and using an 8% discount rate. |
The most recent technical studies indicate that
the processing facility at Alumbrera is capable of processing up to
44.0 million tonnes per year, with minor additional capital
expenditures, which represents a significant upside to the PFS
results. Further tests and studies are planned for the Feasibility
Study stage to confirm and optimize these results. In addition,
opportunities have already been identified in optimizing the mine
pioneering, stripping, sequence and blending, which are expected to
provide further value improvements for the integrated project.
MARA obtained all the permits for advanced
exploration works from the local authorities including programs of
community participation and social consultation, to conduct field
work for the Feasibility Study and collect additional information
for the ESIA. Work in the field has commenced, with baseline and
environmental studies activities progressing during the quarter and
drilling contractor mobilization completed in March. The drilling
campaign aimed to collect samples for geotechnical and
metallurgical studies is currently progressing as planned. Other
Feasibility Study work is ongoing and key technical results are
expected during 2021. While the Company continues to advance the
Feasibility Study, it notes that a considerable amount of
information in the PFS is already at Feasibility Study level mostly
as a result of the integration transaction. The full Feasibility
Study and ESIA completion are expected in 2022.
The estimated expenses for the Company to
advance the project through the Feasibility Study and ESIA are in
the range of $20.0 million to $25.0 million for the next three
years (Yamana's 56.25% interest), representing a manageable and
modest investment in relation to the value creation of advancing
the MARA Project to the next phases of development.
Acquisition of Wasamac Property and
Camflo Property and Mill (Monarch Gold Acquisition)
Completed
On January 21, 2021, the Company completed its
acquisition of the Wasamac property and the Camflo property and
mill.
The addition of the Wasamac project to Yamana’s
portfolio further solidifies the Company’s long-term growth profile
with a top-tier gold project in Quebec’s Abitibi District, a
prolific mining district where Yamana has deep operational and
technical expertise and experience. The deposit has existing proven
and probable mineral reserves of 21.45 million tonnes at 2.56 g/t,
for total proven and probable mineral reserves of 1.8 million
ounces of gold supported by a Feasibility Study previously
completed by Monarch Gold in 2018. The Feasibility Study outlined a
6,000 tpd operation with average gold production of 160,000 ounces
per year.
Building off the work completed to date, Yamana
has commenced an exploration and infill drilling campaign to refine
and expand upon the potential of Wasamac and its development
alternatives.
Following an in-depth review of the 2018
Feasibility Study, Yamana has identified opportunities to optimize
the processing plant design, incorporate increased levels of
automation in the underground mine, and optimize the materials
handling system to sustain a throughput rate of 7,000 tpd. These
opportunities support Yamana’s vision of Wasamac as a low cost
operation with minimal impact on the environment and neighboring
communities and will be reflected in an update of the Feasibility
Study, scheduled for completion in the third quarter of 2021.
Further opportunities to increase metallurgical recoveries require
additional metallurgical drilling and test work, and will continue
to be assessed as the project advances.
The Company is in the process of opening a
regional office in the Abitibi region, and is hiring personnel to
manage the permitting process and related studies to update the
feasibility study.
The Company has also developed an exploration
program for the Camflo property which, given the proximity of
Camflo to the Canadian Malartic mine, is being considered for
inclusion in the Canadian Malartic General Partnership exploration
program. Camflo is located adjacent to and north of the Malartic
and Rand properties that host the Malartic deposit and the recent
Odyssey underground discovery. A recent high resolution
airborne magnetic survey of the property has identified three high
priority drill targets with magnetic signatures similar to the
historic Camflo mine. Data compilation has also defined the
presence of a porphyritic stock similar to that which hosted 90% of
the historic ore located 800 metres to east of the mine as an
additional priority exploration target. Camflo was a producing
underground gold mine for 27 years, closing in 1992. It produced
1.65 million ounces of gold from 8,862,240 tonnes of ore
grading at 5.78 g/t and was exploited to a depth of 1,000 metres
below surface.
OTHER INITIATIVES - STRATEGIC,
OPTIMIZATION AND MONETIZATION
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 will typically be funded through internal resources,
meet minimum return levels that far exceed cost of capital and
would meet the Company's minimum requirements to achieve mineral
reserve and mineral resource inventories, mine life and 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.
From time to time, the Company’s strategy
includes holding investments in prospective companies. This may be
for several reasons such as the disposition of certain assets for
shares or in other cases, resulting from an investment for
portfolio purposes. The ownership of shares of Nomad is an example
of the former. An investment may also give the Company an
opportunity to further evaluate related opportunities. Normally,
these investments are held through a cycle, although are otherwise
treated as any other portfolio investments. The acquisition by the
Company of 24 million shares of Ascot Resources Ltd. subsequent to
quarter end, representing 6.4% of the outstanding shares, for
aggregate consideration of $16.5 million is an example of the
latter.
GENERATIVE EXPLORATION
PROGRAM
During the first quarter, exploration drilling
and other field activities continued to ramp up in most
jurisdictions as responses to COVID-19 restrictions were managed
and exploration programs adjusted to best address the restrictions.
Drilling activities continued in Brazil at Lavra Velha, Jacobina
Norte and at the São Francisco discovery at Borborema, extending
copper-(gold) mineralization along strike. Exploration in Chile in
the first quarter included surface work at early-stage projects
near the El Peñón mine and elsewhere in preparation for a reverse
circulation scout drilling programs later in the year. In
Argentina, surface work was completed on the Company’s Las Flechas
property, where drilling in 2021 is planned to test breccia-related
high-sulphidation epithermal gold targets. At Monument Bay in
Manitoba, deep drilling continued during the quarter designed to
test the down plunge projections of modeled, plunging high-grade
zones at the Twin Lakes target.
KEY STATISTICSKey operating and financial
statistics for the first quarter 2021 are outlined in the following
tables.
|
Financial Summary (In millions of United States
Dollars, except for per share and per unit amounts) |
Three months ended March 31 |
|
|
2021 |
|
|
2020 |
|
|
Revenue |
$ |
422.0 |
|
|
$ |
356.5 |
|
| Cost of sales excluding
depletion, depreciation and amortization |
(163.9 |
) |
|
(154.3 |
) |
| Depletion, depreciation and
amortization |
(100.4 |
) |
|
(99.4 |
) |
| Total cost of sales |
(264.3 |
) |
|
(253.7 |
) |
| Temporary suspension, standby
and other incremental COVID-19 costs |
(8.2 |
) |
|
(3.5 |
) |
| Mine operating earnings |
149.5 |
|
|
99.3 |
|
| General and administrative
expenses |
(18.3 |
) |
|
(15.8 |
) |
| Exploration and evaluation
expenses |
(6.1 |
) |
|
(2.6 |
) |
| Net earnings attributable to
Yamana equity holders |
54.7 |
|
|
45.0 |
|
| Net earnings per share - basic
and diluted (i) |
0.06 |
|
|
0.05 |
|
| Cash flow generated from
operations after changes in non-cash working capital |
160.2 |
|
|
129.4 |
|
| Cash flow from operations
before changes in non-cash working capital (ii) |
183.4 |
|
|
164.6 |
|
| Revenue per ounce of gold |
$ |
1,793 |
|
|
$ |
1,589 |
|
| Revenue per ounce of
silver |
$ |
26.78 |
|
|
$ |
18.16 |
|
| Average realized gold price
per ounce (2) |
$ |
1,793 |
|
|
$ |
1,589 |
|
| Average
realized silver price per ounce (2) |
$ |
25.66 |
|
|
$ |
17.47 |
|
|
(i) |
For the three months ended March 31, 2021, the weighted average
number of shares outstanding was 962,071 thousand (basic) and
963,021 thousand (diluted). |
|
(ii) |
Refers to a non-GAAP financial measure or an additional line item
or subtotal in financial statements. Please see the discussion
included at the end of this press release under the heading
“Non-GAAP Financial Measures and Additional Line Items and
Subtotals in Financial Statements”. Reconciliations for all
non-GAAP financial measures are available at www.yamana.com/Q12021
and in Section 11 of the Company’s Management’s Discussion &
Analysis for the three months ended March 31, 2021, which is
available on the Company's website and on SEDAR. |
Production, Financial and Operating
Summary
|
Costs |
Three months ended March 31 |
| (In
United States Dollars) |
|
2021 |
|
2020 |
|
Per GEO sold (1) |
|
|
|
Total cost of sales |
$ |
1,126 |
|
$ |
1,141 |
|
Cash Costs (2) |
$ |
698 |
|
$ |
694 |
|
AISC (2) |
$ |
1,045 |
|
$ |
1,032 |
|
|
Three months ended March 31 |
|
Gold Ounces |
2021 |
|
2020 |
|
Canadian Malartic (50%) (3) |
89,550 |
|
64,763 |
| Jacobina |
43,102 |
|
43,938 |
| Cerro Moro |
16,210 |
|
18,743 |
| El Peñón |
31,437 |
|
42,230 |
| Minera Florida |
20,818 |
|
22,563 |
|
TOTAL |
201,117 |
|
192,238 |
|
|
Three months ended March 31 |
|
Silver Ounces |
2021 |
|
2020 |
|
Cerro Moro |
1,309,103 |
|
1,374,941 |
| El Peñón |
816,144 |
|
1,355,910 |
|
TOTAL |
2,125,247 |
|
2,730,851 |
For a full discussion of Yamana’s operational
and financial results and mineral reserve and mineral resource
estimates, please refer to the Company’s Management’s Discussion
& Analysis and Condensed Consolidated Interim Financial
Statements for the three months ended March 31, 2021, which are
available on the Company's website at www.yamana.com, on SEDAR at
www.sedar.com and on EDGAR at www.sec.gov.
The Company will host a conference call and
webcast on Thursday, April 29, 2021, at 8:30 a.m. EDT (12:30 pm
GMT).
|
First Quarter 2021 Conference Call |
|
|
|
Toll Free (North America): |
1-800-898-3989 |
|
Toronto Local and International: |
416-406-0743 |
|
Toll Free (UK): |
00-80042228835 |
|
Passcode: |
1738987# |
|
Webcast: |
www.yamana.com |
|
|
|
|
Conference Call Replay |
|
Toll Free (North America): |
1-800-408-3053 |
|
Toronto Local and International: |
905-694-9451 |
|
Toll Free (UK): |
00-80033663052 |
|
Passcode: |
6103145# |
The conference call replay will be available
from 12:00 p.m. EDT on April 29, 2021, until 11:59 p.m. EDT (3:59
am GMT) on May 29, 2021.
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
FTI Consulting (UK Public Relations)Sara Powell
/ Ben Brewerton +44 7974 201 715 / +44 203 727 1000Email:
Yamana.gold@fticonsulting.com
Credit Suisse (Joint UK Corporate Broker)Ben
Lawrence / David Nangle Telephone: +44 (0) 20 7888 8888
Joh. Berenberg Gossler & Co. KG (Joint UK
Corporate Broker)Matthew Armitt / Jennifer Wyllie / Detlir Elezi
Telephone: +44 (0) 20 3207 7800
Peel Hunt LLP (Joint UK Corporate Broker)Ross
Allister / David McKeown / Alexander AllenTelephone: +44 (0) 20
7418 8900
END NOTES
(1) GEO assumes gold ounces plus the gold
equivalent of silver ounces using a ratio of 68.84 for the three
months ended March 31, 2021, and 94.23 for the three months ended
March 31, 2020.
(2) A cautionary note regarding non-GAAP
performance measures and their respective reconciliations, as well
as additional line items or subtotals in financial statements is
included in Section 11: Non-GAAP Performance Measures in the
Company's MD&A for the three months ended March 31, 2021 and in
the 'Non-GAAP Performance Measures' section below.
(3) Included in the 2020 comparative gold
production figure is 2,974 of pre-commercial production ounces
related to the Company's 50% interest in the Canadian Malartic
mine's Barnat pit, which achieved commercial production on
September 30, 2020. Pre-commercial production ounces are excluded
from sales figures, although pre-commercial production ounces that
were sold during their respective period of production had their
corresponding revenues and costs of sales capitalized to mineral
properties, captured as expansionary capital expenditures.
(4) Net earnings and adjusted net earnings
represent amounts attributable to Yamana Gold Inc. equity
holders.
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 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 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, silver, copper and zinc),
currency exchange rates (such as the Canadian Dollar, 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, risks associated with infectious
diseases, including COVID-19, 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 PERFORMANCE MEASURES
The Company has included certain non-GAAP
performance measures to supplement its Consolidated 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 and Free Cash
Flow Before 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 11:
Non-GAAP Financial Measures and Additional Line Items or Subtotals
in Financial Statements of the Company's MD&A for the three
months ended March 31, 2021.
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. Cash related to
the MARA Project is added back to the net debt calculation on the
basis that the cash is specific to the MARA Project, and not
available to the Company for the purposes of debt reduction.
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 March 31, 2021
and December 31, 2020 is provided in Section 11 of the Company's
MD&A for the three months ended March 31, 2021, which is
available on the Company's website and on SEDAR.
NET FREE CASH FLOW AND FREE CASH FLOW BEFORE
DIVIDENDS AND DEBT REPAYMENTS
The Company uses the financial measure "Net Free
Cash Flow" and "Free Cash Flow Before Dividends and Debt
Repayment", 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 are not meant to be
substitutes 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, non-discretionary
expenditures from sustaining capital expenditures and interest paid
related to the current period. Free Cash Flow further deducts
remaining capital expenditures and payments for lease obligations.
Reconciliations of Net Free Cash Flow and Free Cash Flow are
provided below.
|
Reconciliation of Cash Flows from Operating Activities to
non-GAAP Measures |
Three months ended March 31 |
|
(In millions of United States Dollars) |
|
2021 |
|
|
2020 |
|
|
Cash flows from operating activities |
$ |
160.2 |
|
|
$ |
129.4 |
|
| Adjustments to operating cash
flows: |
|
|
|
Amortization of deferred revenue |
7.5 |
|
|
6.1 |
|
|
Temporary suspension, standby and other incremental COVID-19
costs |
8.2 |
|
|
3.5 |
|
| Non-discretionary items
related to the current period |
|
|
|
Sustaining capital expenditures |
(42.3 |
) |
|
(36.9 |
) |
|
Interest paid |
(5.1 |
) |
|
(5.4 |
) |
|
Payment of lease liabilities |
(3.5 |
) |
|
(4.4 |
) |
|
Cash used in other financing activities |
(1.5 |
) |
|
(1.2 |
) |
| Net free cash flow |
$ |
123.5 |
|
|
$ |
91.1 |
|
| Discretionary and other items
impacting cash flow available for dividends and debt
repayments |
|
|
|
Expansionary and exploration capital expenditures |
$ |
(37.9 |
) |
|
$ |
(30.1 |
) |
|
Cash flows used in other investing activities |
$ |
(9.3 |
) |
|
$ |
(19.6 |
) |
|
Effect of foreign exchange of non-USD denominated cash |
$ |
(0.3 |
) |
|
$ |
(2.5 |
) |
|
Free cash flow before dividends and debt repayments |
$ |
76.0 |
|
|
$ |
38.9 |
|
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 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 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 11 of the Company's MD&A for
the three months ended March 31, 2021, which is available on the
Company's website and 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 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 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/loss - represents the amount of revenue in excess
of cost of sales excluding depletion, depreciation and
amortization, depletion, depreciation and amortization, temporary
suspension, standby and other incremental COVID-19 costs, and net
impairment write-downs/reversals.
- Operating
earnings/loss - represents the amount of earnings/loss
before net finance costs, other income/costs and income tax
expense/recovery. This measure represents the amount of financial
contribution, net of all expenses directly attributable to mining
operations and overheads. Finance costs and other income/costs 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 this
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.
(All amounts are expressed in United States
Dollars unless otherwise indicated.)
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