TIDMAUY
RNS Number : 6530Q
Yamana Gold Inc.
29 October 2021
YAMANA GOLD REPORTS STRONG THIRD QUARTER 2021 RESULTS WITH A
STEP CHANGE INCREASE IN CASH FLOWS, STANDOUT QUARTERS FROM CANADIAN
MALARTIC, JACOBINA, EL PEÑÓN AND AN EXCEPTIONAL QUARTER FROM CERRO
MORO
TORONTO, October 29, 2021 - YAMANA GOLD INC. (TSX:YRI; NYSE:AUY;
LSE:AUY) ("Yamana" or "the Company") is herein reporting its
financial and operational results for the third quarter of 2021.
With strong results from operations , the Company remains well
positioned to achieve guidance for the year of 1,000,000 gold
equivalent ounces ("GEO") (2) , underpinned by momentum at Canadian
Malartic, Jacobina and El Peñón, as well as a strong fourth quarter
performance expected at El Peñón and Cerro Moro, as previously
guided.
THIRD QUARTER HIGHLIGHTS
Financial Results - Strong Cash Flows, Increase to Mine
Operating Earnings
-- Net earnings(3) were $27.0 million or $0.03 per share basic
and diluted. Adjusted net earnings(1, 3) were $69.7 million or
$0.07 per share basic and diluted.
-- Mine operating earnings were $154.0 million and increased quarter-over-quarter by 8%.
-- Cash flows from operating activities were $190.6 million and
cash flows from operating activities before net change in working
capital (1) were $202.9 million, representing sharp increases from
second quarter results of 24% and 21% respectively.
-- Free cash flow before dividends and debt repayments(1) was $81.6 million and increased 59% quarter-over-quarter.
-- Cash and cash equivalents totalled $460.2 million (8) and the
Company has $750.0 million in available credit.
Three months ended September
30
(In millions of United States Dollars) 2021 2020
---------------------------------------------------- ----------------- -----------------
Net Free Cash Flow (1) $ 139.2 $ 185.5
Free Cash Flow before Dividends and Debt Repayments
(1) $ 81.6 $ 156.9
---------------------------------------------------- --- ------------ -----------
Operating Results - Standout Quarters from Canadian Malartic,
Jacobina and El Peñón, Exceptional Quarter from Cerro Moro
-- As previously guided, production is weighted at 53% for the
second half of the year, with the fourth quarter being the
strongest quarter, expected to exceed 270,000 GEO (2) produced.
Consequently, with a strong third quarter, the Company remains well
positioned to achieve guidance for the year of 1,000,000 GEO (2) ,
underpinned by the momentum at Canadian Malartic, Jacobina and El
Peñón, as well as a strong fourth quarter performance expected at
El Peñón and Cerro Moro.
-- GEO (2) production was 256,464, including 225,556 ounces of
gold, and 2.27 million ounces of silver. This marks the second
highest all-time GEO (2) production total for Yamana mines (4) , on
the back of exceptional gold production. The Company expects
record-breaking GEO (2) production in the fourth quarter, as gold
is expected to reach an all-time quarterly high.
-- Standout gold production from Canadian Malartic with 86,803
ounces, Jacobina with 47,373 ounces and El Peñón with 50,229
ounces. Further, Cerro Moro had an exceptional quarter producing
19,261 ounces of gold which increased approximately 33% from the
second quarter and with stronger production expected in the fourth
quarter from higher grades.
-- Silver production was 2,273,183 ounces with both El Peñón and
Cerro Moro recording their highest quarterly silver production
totals of the year, with stronger production expected in the fourth
quarter from higher grades at both mines anticipated.
-- El Peñón third quarter GEO (2) production was 62,545, a 19%
increase above its second quarter GEO (2) production. As previously
guided, El Peñón is well positioned to meet its annual production
guidance with approximately 31% of annual gold production for the
operation expected for the fourth quarter.
-- Cerro Moro produced 37,853 GEO (2) during the quarter with
98,406 GEO (2) produced year to date, a significant increase versus
the comparative prior year-to-date period of 89,472 GEO (2) .
-- Minera Florida produced 21,890 ounces of gold, and is
expected to meet its annual production guidance with a strong
fourth quarter underpinned by a strong start in October.
-- Cash costs(1) and all-in sustaining costs ("AISC")(1) for the
quarter were $702 and $1,041 per GEO (2) , respectively, which on a
consolidated basis were lower than the second quarter and the
comparative period. The Company recorded standout September
performances at several mines with per GEO (2) costs for those
mines during the month being the lowest month of the quarter by a
considerable margin. Further, consolidated AISC (1) on a per GEO
(2) basis for September was approximately 10% lower than the
quarterly average, which positions the Company to deliver its
lowest per GEO(2) cost of the year during the fourth quarter.
-- Year-to-date costs have had a modest impact from inflationary
pressures, which are expected to continue during the fourth
quarter. For the full year, the Company expects upwards of $20 per
GEO (2) of inflationary pressure on costs not originally
anticipated at the start of the year. (2) Nonetheless, costs for
the fourth quarter will be well below the average costs experienced
on a year-to-date basis due to the strong production
anticipated.
Strengthening the Company's Financial Position, Improving
Financial Resilience and Increasing Financial Flexibility
-- Yamana believes that a strong financial position and
financial resilience also requires a manageable debt maturity
profile, and the Company has taken advantage of current market
conditions to improve terms of its outstanding notes by increasing
tenor and reducing carrying costs. As such, during the quarter,
Yamana completed its offering of $500 million aggregate principal
amount of its 2.630% Senior Notes due August 15, 2031.
-- Yamana used the net proceeds from the offering, together with
cash on hand, to fund the redemptions of its 4.76% Series C Senior
Notes due 2022, its 4.91% Series D Senior Notes due 2024, its 4.78%
Series B Senior Notes due 2023 and its 4.950% Senior Notes due
2024.
-- The completion of the offering of the Senior 2031 Notes and
the subsequent redemption of the shorter-term maturity notes
represents the culmination of significant debt reduction efforts
initiated in 2019. Yamana's outstanding gross debt was reduced by
$222.1 million during the quarter to $772.8 million, which compares
to $1.85 billion outstanding in the second quarter of 2019.
-- Interest on the Senior 2031 Notes is set at 2.630% as
compared to a weighted average interest of 4.83% for the existing
notes, which reduces the Company's annual interest carrying charges
by approximately $21.6 million per annum compared to the second
quarter of 2021, or roughly $60 million per annum lower compared to
the second quarter of 2019.
Capital Returns
-- On July 29, 2021, the Company announced a normal-course
issuer bid ("NCIB") to purchase up to 48,321,676 common shares of
the Company, representing up to 5% of the Company's current issued
and outstanding common shares, in open-market transactions through
the facilities of the Toronto Stock Exchange ("TSX"), the New York
Stock Exchange (the "NYSE") and alternative Canadian trading
systems. The Company believes that the market price of its common
shares does not currently represent their full value and growth
prospects and views purchases of common shares as an attractive
investment comparable to its investments in its portfolio of
exploration and development stage assets. During the quarter, the
Company repurchased, and subsequently cancelled, a total of
3,321,276 common shares for approximately C$18 million since the
initiation of the share repurchase program.
Health, Safety and Sustainable Development
-- The Company's Total Recordable Injury Rate was 0.68 (6) for
the first nine months of 2021. This is an increase from the full
year 2020 result and primarily reflects low-energy incidents. In
response, the company initiated campaigns across all operations
focused on reducing the most common injuries that have occurred so
far in 2021.
-- As of October 5, 2021 approximately 95% (7) of our employees
have received at least one dose of a COVID-19 vaccine, with
approximately 60% (7) being fully vaccinated, with the expectation
of a company-wide double-vaccination rate of over 90% (7) expected
in the fourth quarter.
-- The Company completed Human Rights Risk Assessments at all
sites in line with the Voluntary Principles on Security and Human
Rights.
-- The Company approved a Responsibility Policy covering all
HSSD elements, as well as 8 supporting Statements of Commitment
covering Human Rights, Safety and Health, Environmental Protection,
Social Performance, Tailings Management, Government Relations,
Security and Common Elements.
-- The Company established its emissions baseline year (2019)
and began evaluation of three science-based temperature targets; a
2degC scenario, a well-below 2degC scenario and a 1.5degC scenario
compared to pre-industrial levels. The Company also performed
climate risk, adaptation and abatement workshops with each
operation to progress on establishing preliminary,
operations-specific roadmaps that describe abatement projects,
estimated costs and schedules. These actions will help ensure that
its long-range GHG reduction efforts are supported by practical and
operationally focused short, medium and long-term actions to
achieve the targets.
OPERATING RESULTS SUMMARY
Three months ended September 30, 2021
-------------------
Gold Silver GEO(2) Production Cash Cost(1) AISC(1)
Production Production per GEO(2) per GEO(2)
Sold Sold
------------------- ----------- ----------- ----------------- ------------ -----------
Canadian Malartic
(50%) 86,803 - 86,803 $687 $887
Jacobina 47,373 - 47,373 $518 $722
Cerro Moro 19,261 1,370,486 37,853 $966 $1,422
El Peñón 50,229 902,698 62,545 $631 $885
Minera Florida 21,890 - 21,890 $917 $1,239
----------- ----------- ----------------- ------------ -----------
Total 225,556 2,273,183 256,464 $702 $1,041
------------------- ----------- ----------- ----------------- ------------ -----------
For the three months ended September 30, 2020
-------------------
Gold Silver GEO(2) Production Cash Cost(1) AISC(1)
Production Production per GEO(2) per GEO(2)
Sold Sold
------------------- ----------- ----------- ----------------- ------------ -----------
Canadian Malartic
(50%)(5) 76,398 - 76,398 $736 $973
Jacobina 44,080 - 44,080 $565 $754
Cerro Moro 18,818 1,679,342 40,380 $849 $1,307
El Peñón 39,322 1,360,999 56,454 $665 $906
Minera Florida 23,153 - 23,153 $936 $1,210
----------- ----------- ----------------- ------------ -----------
Total 201,772 3,040,341 240,466 $723 $1,096
------------------- ----------- ----------- ----------------- ------------ -----------
OPERATIONS UPDATE
Canadian Malartic
Canadian Malartic had a strong third quarter in line with plan,
after an exceptional second quarter due to higher grade, delivering
quarterly production that exceeded plan. Third quarter results
benefited from higher grade and recoveries compared to the third
quarter of 2020 from ore deeper in the Malartic pit with overall
production greatly exceeding the comparative period by 14% due to
the prior year's COVID-related temporary challenges. Throughout the
course of 2021, the mine continued the transition from the Malartic
pit to the Barnat pit. Canadian Malartic expects to complete the
final 7,000 meters of topographic drilling at Barnat during
October, while overburden removal was completed earlier this year
as planned. As previously disclosed, the Company expects that the
higher strip ratio seen in Barnat will normalize over the following
years as the mine sequencing progresses. 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 ounces of gold mineral reserves
on a 50% basis.
Cash costs (1) of $687 per GEO (2) and AISC (1) of $887 per GEO
(2) were lo wer year over year, a result of higher production and
fixed production costs being distributed over more ounces in the
current quarter.
Jacobina
Jacobina had an exceptional third quarter and exceeded its
production plan with quarterly gold production of 47,373 ounces,
closely approximating the record-setting production established in
the second quarter of 2021. Mill throughput for the quarter was
well above plan, with recovery rates and grade as expected.
The Jacobina processing plant continues to exceed expectations,
at nearly 7,500 tonnes per day ("tpd") over the full third quarter
of 2021, a 4% increase compared to the previous quarter. This
aligns with the previously mentioned target throughput of 7,500 tpd
for the second half of 2021, which represents the permitted
operational processing rate. A new daily throughput record of 8,842
tonnes was achieved in September during a trial to test the
processing plant capacity. Mining rates increased by 9% compared to
the previous quarter, with the underground mine on track to sustain
7,500 tpd by year end. The ongoing success reflects a simplified
approach to complete the Phase 2 expansion, which will be achieved
through incremental debottlenecking of the processing plant and
tailings management system, combined with other operational
improvements and without requiring the installation of an
additional ball mill. This approach is expected to significantly
reduce capital expenditures, improve energy efficiency, and de-risk
the project execution.
Third quarter cash costs (1) of $518 per GEO (2) and AISC (1) of
$722 per GEO (2) were better than annual cost guidance ranges and
lower than the comparative prior year period, a result of higher
production from the aforementioned increased mill throughput, and
fixed production costs being distributed over more ounces in the
current quarter. September was a strong month for Jacobina with the
lowest per GEO (2) costs of the quarter for the operation, and AISC
(1) on a per GEO (2) basis approximately 12% lower than the average
quarterly cost. Underground mine development work is in line with
the mine plan at 1,500 metres per month, to sustain the current
production rates and operational flexibility.
Cerro Moro
Cerro Moro third quarter GEO (2) production was 37,853, with
gold production of 19,261 ounces and silver production of 1,370,486
ounces, a 50% increase to the second quarter's production. Silver
production of 1,370,486 ounces increased by 86% compared to the
second quarter, and is expected to further increase during the
fourth quarter. In the third quarter, gold and silver recoveries
were impacted by high clay content causing sedimentation and
clarification challenges in the countercurrent decantation ("CCD")
circuit. Actions to improve the CCD circuit performance include
implementation of a feed blending control system, drilling of new
wells to improve the processing water quality, and trials of new
and improved reagents. As a result, gold and silver recoveries
improved in the second half of September and are expected to
average approximately 93% in the fourth quarter.
The opening of more mining faces and resultant increase in mill
feed coming from higher-grade underground ore, continued in the
quarter with Zoe contributions becoming more prevalent. This trend
will continue during the fourth quarter, expected to be the
strongest production quarter of the year, with most of the ore to
plant coming from Escondida Far West, Zoe, Escondida Central and
Escondida West. Over the past year, Cerro Moro has optimized the
operation of the processing plant to increase daily throughput to
approximately 1,100 tpd, a rate experienced in the first quarter.
The mine saw linear development rates continue to improve during
the quarter; these improvements will continue throughout the
remainder of the year, further supporting the much higher second
half of 2021 production profile.
Cash costs (1) and AISC (1) during the third quarter were $966
per GEO (2) , and $1,422 per GEO (2) , respectively. September was
a strong month for Cerro Moro with the lowest per GEO (2) costs of
the quarter for the operation, and AISC (1) on a per GEO (2) basis
approximately 14% lower than the quarterly cost. With increased
fourth quarter production, the Company expects costs to be
commensurately lower than those observed on a year-to-date
basis.
As previously disclosed, the Co mpany is evaluating construction
of a heap leach circuit, a lower-cost processing alternative, that
would facilitate the processing of lower-grade mineralization,
potentially extending Cerro Moro's mine life. The evaluation is in
the early stages with a preliminary study completed, and
metallurgical lab testing currently underway. Yamana has submitted
several 800 kg samples to a well-respected laboratory in Canada to
run column tests, to evaluate the potential for heap leach recovery
from near surface vein mineralization. Samples were collected from
prior quarter diameter drill holes and surface trench saw-cut
bedrock samples. Preliminary leach test results indicate that five
zones returned results suggesting recoveries of over 70% could be
achieved. Studies are ongoing and full results with reagent
consumption and effects of grain size on recovery will be obtained
before year end. The results indicate good potential for leaching
of both oxidized near-surface vein material, zones with hypogene
oxides (hematite) and some low sulphide gold-bearing veins.
Following the positive preliminary metallurgical results, Yamana
has planned and approved a dedicated and targeted oxides drilling
program with the objective of defining a heap-leachable inventory
of 5 Mt by the end of 2022. In the first half of 2021, Yamana also
completed a scoping study for a plant expansion using a more
energy-efficient comminution configuration. The study indicated
that a doubling of plant throughput to approximately 2,200 tpd
could potentially be achieved with modest capital investment and
would significantly reduce processing costs per tonne. During the
fourth quarter, Yamana will undertake further metallurgical testing
to confirm the assumption of the scoping study before advancing to
the next level of engineering.
El Peñón
El Peñón had a strong third quarter, with GEO (2) production of
62,545, including gold production of 50,229 ounces, and 902,698
ounces of silver. GEO (2) production greatly exceeded second
quarter GEO (2) production of 52,607 by 19%. The higher grade La
Paloma, Quebrada Colorada Sur and Pampa Campamento Deep sectors
zones came into production during the third quarter, contributing
to higher planned production which will continue in the fourth
quarter, as previously guided. The Company continues to expect that
the strong second half of 2021 will account for approximately 57%
of gold and silver production at El Peñón; silver-rich zones will
be mined in the fourth quarter. The first step to unlock the
opportunity to leverage the existing processing capacity at the
mine and increase production is to establish additional mining
sectors. The development of La Paloma, Quebrada Colorada Sur and
Pampa Campamento Deep is an important component of that strategy;
accessing those new areas will provide increased mining
flexibility.
Cash costs (1) of $631 per GEO (2) was in line with guidance and
lower than the comparative period, while AISC (1) of $885 per GEO
(2) was lower than the comparative period, as a result of the
current period's planned and previously disclosed higher
development rates that have facilitated access to additional mining
areas in the second half of the year. September was a strong month
for El Peñón with the lowest per GEO (2) costs of the quarter for
the operation, with AISC (1) on a per GEO (2) basis approximately
12% lower than the quarterly average, which positions the Company
to deliver its lowest cost of the year during the fourth quarter.
With the ongoing focus on increasing mine development rates, El
Peñón has increased the number of available underground production
zones which are expected to support the current level of mine
production and feed grades going forward. Mine development is
currently occurring at a rate that exceeds 3,000 metres per month.
Costs per GEO (2) have improved compared to the first half of the
year, and are anticipated to further improve in the fourth quarter
to commensurately higher production.
Minera Florida
Minera Florida had gold production of 21,890 ounces during the
third quarter, and a strong start to the fourth quarter, and due to
mine sequencing is expected to meet or exceed plan. Linear
development, to increase mining flexibility, continues to advance
ahead of plan. Minera Florida is already seeing improved
operational efficiency and reduced haulage distances as a result of
re-establishing the Marisol ore pass from the 850 level to the 620
level. Widening of the final ore pass at Fantasma/Polvorin is
underway and scheduled for completion by the end of October, which
is expected to further reduce haulage distances and possibly allow
for optimizing the hauling fleet. Internalization of mining
activities, ongoing optimization of the haulage infrastructure, and
increasing disposal storage of development waste into underground
voids will further improve mine productivity going forward. A
review of the processing plant in the first quarter identified
several opportunities to increase recovery. Management is
prioritizing these opportunities, focusing on the initiatives that
can be implemented quickly with minimal investment.
Consistent with the 10-year outlook, the plant de-bottlenecking
study and preparation of the environmental and social impact
assessment ("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 with incremental adjustments. An upgrade of the
crushing circuit would be required to achieve 100,000 tonnes per
month.
Cash costs (1) and AISC (1) during the third quarter were $917
per GEO (2) , and $1,239 per GEO (2) respectively. Costs are
expected to improve in the fourth quarter due to higher grades, and
higher silver and zinc by-product credits. In addition to the
aforementioned plant improvements, the Company completed a
processing plan earlier in the year, which identified opportunities
to implement cost control initiatives; these are currently under
consideration and may positively impact future costs.
CONSTRUCTION, DEVELOPMENT AND ADVANCED STAGE PROJECTS
The Wasamac Project Update and Positive Exploration Results
On July 19, 2021, the Company announced the results of several
studies on the Company's wholly-owned Wasamac project in the
Abitibi-Témiscamingue Region of Quebec, Canada, intended to
corroborate diligence reviews conducted by the Company on its
purchase of the project in early 2021, and update a historical
feasibility study. These studies updated the baseline technical and
financial aspects of the Wasamac project that now underpin the
decision to advance the project to production. The results from all
studies were consistent with the Company's conclusions in its
diligence reviews relating to the purchase of Wasamac and, in some
cases, are better than the conclusions from those reviews.
Yamana expects to receive all approvals, permits and
certificates of authorization required for project construction by
the third quarter of 2024. Construction time to processing plant
commissioning is estimated at approximately two-and-a-half years,
with the underground crusher and conveyor system scheduled for
commissioning six months later. First gold production is scheduled
for the fourth quarter of 2026, with commercial production
anticipated in the fourth quarter of 2027. The Company has already
identified opportunities to accelerate the production ramp-up and
decrease the processing plant construction timeline, which would
improve significantly over the feasibility study's base case
production profile. To increase the level of confidence in
metallurgical and ge omechanical assumptions, Yamana is considering
the execution of an underground bulk sample, which could commence
earlier on a separate environmental permit. The bulk sample would
require ramp access to the underground mineralization.
Exploration activities continued to ramp up at Wasamac during
the third quarter, including continued exploration and geotechnical
drilling, and initiation of infill drilling on the Wasamac resource
on September 14 with three drill rigs currently operating and a
fourth rig planned to be added later in the year. Results are
pending for infill holes completed to date.
Exploration drilling during the third quarter totaled 3,648
metres, including 3,084 metres in 6 holes testing the newly defined
West 117 Wasa shear target concept and 564 metres in one drill hole
testing a magnetic anomaly (Wildcat South) south of the Wildcat
target. Both targets were generated from a recently completed,
property wide high-resolution (25 metre) helicopter-borne magnetic
survey covering 2,992 line-kilometres. The initial drill hole
completed at the South Wildcat target, located approximately 300
metres south of Wildcat, intersected a 30 metre wide
chlorite-sericite altered, pyritic shear zone. Drilling completed
at West 117 Wasa intersected mostly narrow, rhyolite-hosted shear
zones. Assays are pending for these drill holes. In addition to
infill and exploration drilling, geotechnical drilling continued in
the third quarter, with completion of 1,758 metres in four drill
holes. Drilling year to date on the Wasamac property totals 13,087
metres in 32 holes.
Exploration results received in the third quarter, included
3,112 metres in 13 drill holes completed at the Wildcat target,
where visually positive intervals in most holes, with visible gold
in two drill holes, has been reported. Highlights from these
initial drill holes at Wildcat were previously reported in the
September 13, 2021 press release 'Yamana Gold Reports Positive
Initial Exploration Drill Results at Wasamac; Provides an Update on
Its Generative Exploration Program'.
Additional ongoing exploration work completed during the third
quarter included integration of the high-resolution magnetic survey
data over the Wasamac property with similar survey data covering
the recently acquired Francoeur property, west of Wasamac, as part
of an ongoing program of integration of exploration data to form a
combined Wasamac-Francoeur exploration platform on which to advance
drill targeting. Additional ongoing work included sampling of
select, previously unassayed, historic drill hole intervals hosting
stockwork style mineralization, to assess for their potential to
contribute to the mineral resource base.
There is excellent potential for significant future exploration
success and mineral resource conversion, with the Wasamac deposit
remaining open at depth and along strike. The planned infill and
exploration drilling campaign has the potential to generate
additional mineral reserves that would sustain a 200,000-ounce
production level for an extended period and support a strategic
mine life of more than 15 years. Preliminary plans include 120,000
metres of drilling in 2021 and 2022 with a budget of $15 million
over the two-year period.
The Wasamac project further solidifies the Company's long-term
growth profile with a top-tier gold project in Quebec's
Abitibi-Témiscamingue Region, where Yamana has deep operational and
technical expertise and experience. Yamana's average annual gold
production in Quebec, including production from Wasamac and the
Odyssey underground at Canadian Malartic, has the potential to
increase to approximately 500,000 ounces by 2028, and continue at
this level through 2041.
The Odyssey Project Advancing on Schedule
Yamana and Agnico Eagle Mines Ltd., who each hold a 50% interest
in the Canadian Malartic General Partnership, owner and operator of
the Canadian Malartic mine, announced a positive construction
decision for the Odyssey underground project at Canadian Malartic
on February 11, 2021.
Several key processes and activities progressed as planned
during the third quarter:
Underground ramp development is ahead of schedule with 1,118
linear metres of development in 2021 now completed (for a total of
2,054 metres including lateral development).
Development of the exploration ramp is anticipated to take
approximately two years to complete, with the first drilling
platform established in early July. The platform provides diamond
drilling access to the upper part of Odyssey south (between surface
and 160 meters of depth) and infilled drilling of the
mineralization.
Underground construction is progressing well, with explosives
storage and dining rooms on schedule.
Odyssey human resources ramp-up is on target, with over 300
employees and contractors hired in a variety of functions including
mine development, surface construction and resource
development.
Construction of the left-turn lane on Provincial Highway 117 has
been completed.
Decree amendment and the mining lease process continue to be on
target for the first quarter of 2022 and fourth quarter of 2022
respectively.
During the second quarter, the shaft collar construction was
completed. The headframe's slipform pour started in September, with
structural steel installation expected to be initiated in November,
and completed during the fourth quarter. The hoist room
construction and interior design are expected to be completed
within one year.
Shaft sinking is expected to start October 2022, with the
sinking hoist expected to be delivered during the second quarter of
2022, on schedule. Lastly, the auxiliary hoist is under
construction and is also expected to be delivered as planned during
the second quarter of 2022.
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.
Jacobina Processing Capacity Optimization and Expansion
The Company has made significant progress on the Phase 2
expansion to increase daily throughput to 8,500 tpd and raise
production to 230,000 ounces per year. The Company expects to
achieve the Phase 2 rate of 8,500 tpd by implementing a simplified
approach of debottlenecking and incremental operational
improvements, without requiring the installation of an additional
ball mill. This approach is expected to significantly reduce
capital expenditures, increases energy efficiency, and de-risk the
project. As such, capital costs for the plant expansion are
expected to be in the range of $15 million to $20 million,
significantly lower than the original planned capital estimated in
the Phase 2 pre-feasibility study. Successful trials conducted at
Jacobina during the prior quarters demonstrate that the processing
plant can consistently and reliably achieve a daily operating
throughput above 8,000 tonnes per day, significantly higher than
nameplate capacity. A new daily throughput record of 8,842 tonnes
was achieved in September during a trial to test the processing
plant capacity. Permitting for Phase 2 is ongoing with expected
completion in mid-2022. Subject to successful completion of
required permit modifications, Jacobina would begin processing at
the new Phase 2 rate by the second half of 2023.
As previously presented in the Company's 10-year production
outlook, Yamana is evaluating a further expansion at Jacobina to
increase throughput to 10,000 tpd, referred to as Phase 3.
Engineering for the Phase 3 expansion to 10,000 tpd will advance in
parallel with the Phase 2 expansion, and the processing model will
continue to be updated to integrate with operational data from
Phase 2, with a feasibility study for Phase 3 scheduled for
completion in 2023. The Company is pursuing the Phase 3 expansion
as part of a comprehensive plan which aligns the processing plant,
underground mine, tailings strategy, and permitting, while managing
capital expenditure and cash flow.
The Company is further evaluating the strategic options and
direction related to Jacobina and the significant exploration that
is available along the greenstone belt in which the mine is
located. Jacobina is being envisioned as a complex of multiple
mines, and more emphasis is being placed on regional and generative
exploration, to work towards the strategic plan of Jacobina being a
400,000 ounce-plus operation.
The Jacobina mine is part of the Jacobina district, for which
geological evidence and tectonic reconstruction suggest strong
affinities with similar gold districts in West and South Africa,
which host exceptionally large gold deposits, including the
prolific Witwatersrand Basin and the Tarkwa mine. Gold
mineralization at Jacobina is hosted by the Serra do Corrego
Formation, preserved within the Jacobina belt, for a strike length
of over ninety kilometers. The mine complex consists of six mining
areas exploiting economic mineralization within a nine-kilometer
long mineralized belt extending from João Belo in the south to
Canavieiras Norte in the north. As at December 31, 2020, past gold
production from the mine complex was slightly over two million
ounces, with mineral reserves of 2.81 million ounces of gold and
total mineral resources of 5.0 million ounces of gold, indicating
the world class size of the current known deposit. Since 2019, the
Company has started systematic exploration of its 77,800 hectare
land package that covers 155 kilometers of exploration potential
along the north-south trending belt. This work has defined a
fourteen-kilometer long belt of gold-bearing conglomerate located
north of the mine complex and has also extended the known
mineralized reefs south of João Belo in a continuous area extending
2,200 metres south of the limits of the João Belo mine. Further
areas have been identified both to the north and further south
during reconnaissance exploration programs. Work will continue to
define mineralized reefs exposed on surface and follow up with
widely spaced drill testing targeting both extensions of the mine
complex and new standalone mine targets. Consequently, the Company
sees significant opportunities to grow its regional presence and
continue to build the world-class Jacobina Complex.
MARA Project Advances
The MARA Joint Venture held by the Company (56.25%), Glencore
International AG (25%) and Newmont Corporation (18.75%) continues
to advance the engagement with local communities and stakeholders,
and progress the feasibility study and the permitting process. The
pending feasibility study will provide updated mineral reserves,
production and project capital cost estimates, is being overseen by
the Technical Committee comprised of members of the three
Companies. Key technical results are expected during 2021, and a
considerable amount of information in the pre-feasibility study is
already at feasibility study level as a result of the Integration.
The full feasibility study report and submission of the ESIA is
expected in late 2022.
The MARA Project represents a significant strategic value
opportunity and a solid development and growth project. The Company
intends to pursue all available avenues to continue to advance and
unlock its value through its controlling interest.
Work on the engineering design, drilling at site, and furthering
of the environmental studies and permitting continued to progress
well during the third quarter. The metallurgical drilling program
at the Agua Rica site was completed, and all samples were submitted
for metallurgical test-work in Canada. Additionally, geotechnical
drilling started and is expected to continue during the fourth
quarter. Next steps include resource delineation and specific
geotechnical drilling for the overland conveyor tunnel design.
Metallurgical test-work is progressing according to plan, advancing
early stages of mechanical preparation and assaying, while
preparing final composites for batch testing and pilot plant, which
is expected to run during the first quarter of 2022.
MARA is the combined project comprised of the Agua Rica site,
Alumbrera site as well as the Alumbrera plant and ancillary
buildings and facilities, and will rely on processing ore from the
Agua Rica mine at the Alumbrera plant. The project design minimizes
the environmental footprint of the project incorporating the input
of local stakeholders. MARA is planned to be a multi-decade, low
cost copper-gold operation with annual production in the first ten
years of 556 million pounds of copper equivalent and a life of mine
annual production of 469 million pounds of copper equivalent on a
100% basis. MARA will be among the top 25 copper producers in the
world when in production, and one of the lowest capital intensity
of the comparable projects globally.
EXPLORATION
During the third quarter, exploration drilling and other field
activities continued to ramp up in most jurisdictions as COVID-19
restrictions are progressively lifted as vaccination rates
increased. The Company is refocusing its efforts on regional
exploration projects, with greater efforts being placed on Jacobina
and Lavra Velha, which represent the best opportunities for
advancement of the goals of the generative exploration program.
Drilling activities continued in Brazil at Lavra Velha, Jacobina
Norte and at the early stage Colider property. Targets were
advanced at the Company's Ivolandia project, with collection of
soil and rock samples and geological mapping at several targets. An
airborne geophysical survey will be flown over a 210 square
kilometre area at Ivolandia in early 2022. Exploration in Chile in
the quarter included surface work at early stage projects near the
El Peñón mine and elsewhere, and initial reverse-circulation scout
drilling programs were completed at three projects in the El Peñón
region. In Argentina, permitting and contracting work was
undertaken in preparation for planned drilling on the Company's Las
Flechas property, where a 1,500-2,000 metre drill program in the
fourth quarter is planned to test breccia-related high-sulphidation
epithermal gold targets. At Monument Bay, Manitoba, results from
the recently completed deep drilling program were integrated into
the project database and are currently being evaluated with
planning for the next steps for the project, and exploration
drilling continued at the recently acquired advanced Wasamac
property, in the Abitibi, Quebec. Initial field work was started on
the recently developed Orogen Royalties Inc. Nevada Alliance and
Raven-Callaghan property option.
FINANCIAL SUMMARY AND KEY STATISTICS
Key financial statistics for the third quarter 2021 are outlined
in the following table.
Three months ended
September 30
(In millions of United States Dollars, except for
per share and per unit amounts) 2021 2020
------------ ------------
Revenue $ 452.2 $ 439.4
Cost of sales excluding depletion, depreciation and
amortization (177.2) (166.6)
Depletion, depreciation and amortization (113.1) (106.9)
Total cost of sales (290.3) (273.5)
Temporary suspension, standby and other incremental
COVID-19 costs (7.9) (8.6)
Mine operating earnings 154.0 157.3
General and administrative expenses (19.5) (21.4)
Exploration and evaluation expenses (10.9) (3.6)
Net earnings attributable to Yamana equity holders 27.0 55.6
Net earnings(3) per share - basic and diluted (i) 0.03 0.06
Cash flow generated from operations after changes
in non-cash working capital 190.6 215.0
Cash flow from operations before changes in non-cash
working capital(2) 202.9 199.0
Revenue per ounce of gold $ 1,789 $ 1,910
Revenue per ounce of silver $ 24.23 $ 24.58
Average realized gold price per ounce (2) $ 1,789 $ 1,910
Average realized silver price per ounce (2) $ 24.23 $ 24.58
----------------------------------------------------- --- ------- ------
(i) For the three months ended September 30, 2021, the weighted
average number of shares outstanding was 964,715 thousand (basic
and diluted).
Summary of Certain Non-Cash and Other Items Included in Net
Earnings(3)
Three months ended
September 30
(In millions of United States Dollars, except per
share amounts,
totals may not add due to rounding) 2021 2020
------------- ---------
Net foreign exchange (gains) losses(3) $ (16.1) $ 4.2
Share-based payments/mark-to-market of deferred share
units 3.1 5.1
Mark-to-market losses (gains) on derivative contracts,
investments and other assets 1.0 (1.5)
Gain on sale of subsidiaries, investments and other
assets - (1.8)
Temporary suspension, standby and other incremental
COVID-19 costs 7.9 8.6
Early note redemption premium 53.3 -
Other provisions, write-downs and adjustments(3) 4.0 6.1
Non-cash tax on unrealized foreign exchange losses 7.2 8.7
Income tax effect of adjustments(3) (16.0) (4.9)
One-time tax adjustments(3) (1.6) 12.8
------------- -------
Total adjustments(3) (i) $ 42.8 $ 37.3
--------- ------
Total adjustments - increase to earnings(3) per share $ 0.04 $ 0.04
------------------------------------------------------- --------- ------
(i) For the three months ended September 30, 2021, net earnings
(3) would be adjusted by an increase of $42.8 million (2020 -
increase of $37.3 million).
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
and nine months ended September 30, 2021, and the Company's
Management's Discussion & Analysis for the year ended December
31, 2020, 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 Friday,
October 29, 2021, at 9:00 a.m. EDT.
Third Quarter 2021 Conference Call
Toll Free (North America): 1-800-806-5484
Toronto Local and International: 416-340-2217
Toll Free (UK): 00-80042228835
Passcode: 9398414#
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: 7690886#
The conference call replay will be available from 12:00 p.m. EDT
on October 29, 2021, until 11:59 p.m. EST on November 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
416-815-0220
1-888-809-0925
Email: investor@yamana.com
FTI Consulting (UK Public Relations)
Sara Powell / Ben Brewerton
+44 7931 765 223 / +44 203 727 1000
Email: 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 Allen
Telephone: +44 (0) 20 7418 8900
NOTES
(1) 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 and Additional Subtotals in Financial
Statements in the Company's MD&A for the three and nine months
ended September 30, 2021 and in the 'Non-GAAP Performance Measures'
section below.
(2) GEO assumes gold ounces plus the gold equivalent of silver ounces
using a ratio of 73.55 for the three months ended September 30,
2021, and 79.26 for the three months ended September 30, 2020.
GEO calculations for actuals are based on an average market gold
to silver price ratio for the relevant period. Guidance GEO assumes
gold ounces plus the equivalent of silver ounces using a ratio
of 72.00 for 2021.
(3) Net earnings and adjustments to net earnings represent amounts
attributable to Yamana Gold Inc. equity holders.
(4) Yamana mines is defined as Yamana's currently held mines, including
Canadian Malartic, Jacobina, Cerro Moro, El Peñón and
Minera Florida.
(5) Included in the 2020 comparative gold production figure is 13,305
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.
(6) Calculated on 200,000 exposure hours basis including employees
and contractors. This rate is exclusive of Canadian Malartic,
in which we hold a 50% interest.
(7) Vaccination rates are exclusive of Canadian Malartic, in which
we hold a 50% interest. Vaccination rates at Canadian Malartic
are in line with the high Abitibi-Témiscamingue regional
rates.
(8) Cash balances include $220.2 million available for utilization
by the MARA Project.
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 RESOURCES
This 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 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 and nine months
ended September 30, 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 FREE CASH FLOW AND FREE CASH FLOW BEFORE DIVIDS 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 Three months ended September
to non-GAAP Measures 30
(In millions of United States Dollars) 2021 2020
------------------------------------------------------- ----------------- -----------------
Cash flows from operating activities $ 190.6 $ 215.0
Adjustments to operating cash flows:
Amortization of deferred revenue 2.4 2.3
Temporary suspension, standby and other incremental
COVID-19 costs 7.9 8.6
Legal contingencies included in other cash payments - 8.0
Non-discretionary items related to the current
period
Sustaining capital expenditures (41.1) (38.1)
Interest paid (12.0) (5.6)
Payment of lease liabilities (5.7) (4.4)
Cash used in other financing activities (2.9) (0.3)
----------------- ---------------
Net free cash flow $ 139.2 $ 185.5
Discretionary and other items impacting cash flow
available for dividends and debt repayments
Expansionary and exploration capital expenditures (52.1) (23.8)
Cash flows used in other investing activities (4.6) (4.7)
Effect of foreign exchange of non-USD denominated
cash (0.9) (0.1)
------------------------------------------------------- ----------------- ---------------
Free cash flow before dividends and debt repayments $ 81.6 $ 156.9
======================================================= === ============ ===========
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 and
nine months ended September 30, 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, t emporary 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.
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END
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