YAMANA GOLD INC. (TSX:YRI; NYSE:AUY) (“Yamana” or “the Company”) is
herein providing details on recently executed additions to the
Company’s foreign exchange hedging program and the potential
impacts of the announced imposition of an export tax in
Argentina. In aggregate, the Company continues to be well
positioned to generate a step change in cash flow in 2019.
Commented Daniel Racine, President and Chief
Executive Officer: “We manage our business holistically and recent,
significant depreciation in several of the currencies for which we
are exposed has provided a strategic entry to lock-in the improving
outlook for certain in-country operating costs relative to
forecasts. Consistent with our prior practices, we have
executed foreign exchange options contracts that we expect to
underpin cash flows and increase our confidence in delivering
planned improvements to cash flows. This program, coupled
with continued strong production momentum at our operations,
including at Cerro Moro which is ramping up as planned, positions
us well through 2018 and more significantly into 2019.
“While the Company’s favourable positioning
relative to production and costs bodes well for the near and medium
term, Argentina’s export tax has the potential to offset a portion
of these benefits. Our view is that the announced tax is not
effective before being approved by the legislature. To date,
no legislation has been introduced in the Federal Congress to make
the proposed tax effective and give it constitutional
sanction. We are also evaluating the impact of our fiscal
stability pacts on the proposed tax as those pacts limit taxes to
those set forth in the pacts. Clearly, we understand the
objective of fiscal stability in the country and that the proposed
tax is directed toward that objective. As such, we are
working within established channels to seek a constructive
resolution to this matter on many fronts including if and how the
tax, if and when enacted as legislation, would apply. In the
meantime, we realize that on balance the currency improvements are
net positive and we expect to deliver the step change in cash flow
that we have signalled.”
FOREIGN EXCHANGE HEDGING
Over the past number of years, the Company has
used options contracts and other arrangements to lock-in beneficial
movements in foreign exchange rates and commodity prices at
opportune moments. Consistent with this approach, the Company
has entered into option contracts relating to a portion of its
exposure to Brazilian reais in 2019.
The Company has entered into two sets of zero
cost collar contracts as follows:
- For the period from January to December 2019, with an average
call and put strike price of R$3.75 and R$4.74 per US dollar,
respectively, totalling R$348 million evenly split by month;
and
- For the period from July to December 2019, with an average call
and put strike price of R$3.75 and R$4.87 per US dollar,
respectively, totalling R$135 million evenly split by month.
The Company is currently undertaking its annual
budget process and is providing the following table for
illustrative purposes only. This table presents 2018
assumptions and the current spot foreign exchange rates.
|
2018 Assumptions |
Spot (1) |
C$/US$ |
1.28 |
1.31 |
BRL/US$ |
3.25 |
4.15 |
CLP/US$ |
615.00 |
695.00 |
ARS/US$ |
21.00 |
38.00 |
1. As at September 11, 2018.
The Company expects the depreciation of various
currencies to provide savings on total co-product cash costs per
unit of gold, silver and copper of at least $50, $1.00, and $0.25,
respectively.
These savings in 2019 are expected to more than
offset any cumulative impact through 2020 on the Company’s cost
associated with Argentina’s export tax as it was
announced.
ARGENTINA EXPORT TAX
On September 4, 2018, the Argentinian Executive
Branch issued Executive Order No. 793/2018 establishing an export
tax of 12% over all goods exported from Argentina, applicable from
September 4, 2018, to December 31, 2020. The tax is capped at
AR$ 4 per U.S. dollar for bullions and unrefined gold, and at AR$ 3
per U.S. dollar for unrefined silver and zinc, copper and precious
metal ores and their concentrates. This action was part of a
larger plan that included other austerity measures and invoking an
International Monetary Fund assistance loan.
The Argentine Constitution prohibits the
Executive Branch from creating taxes, and establishes that it can
only exercise the legislative authority expressly delegated by the
Federal Congress. The basis for such delegation must be
narrowly defined, including the minimum and maximum tax rates. The
Company has been advised that the aforementioned export tax exceeds
the limits set forth by the Argentine Constitution for the exercise
of legislative authority by the Executive Branch, and that it is,
therefore, unconstitutional. To date, the Executive Branch
has not indicated when and if legislation will be proposed to the
Federal Congress for approval.
The Company’s indirect subsidiaries Minas
Argentinas S.A. and Estelar Resources Limited S.A. will challenge
the constitutionality of Executive Order No. 793/2018 by filing an
action for the protection of constitutional rights pursuant to
Article 43 of the Argentine Constitution, and an application for an
injunction in order for the Argentine government to refrain from
collecting this tax.
In addition, the Gualcamayo and Cerro Moro,
owned by Minas Argentinas S.A. and Estelar Resources Limited S.A.,
respectively, are entitled to tax stability pursuant to Argentina’s
Mining Investments Law No. 24,196. Such tax stability
entitles Minas Argentinas S.A. and Estelar Resources Limited S.A.
to recover taxes in excess of their overall tax burden at the time
of the filing of their feasibility studies, in 2007 for Gualcamayo
and 2012 for Cerro Moro.
About Yamana
Yamana is a Canadian-based gold producer with
significant gold production, gold 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 existing operating mine
expansions and optimization initiatives, development of new mines,
the advancement of its exploration properties and, at times, by
targeting other gold consolidation opportunities with a primary
focus in the Americas.
FOR FURTHER INFORMATION PLEASE CONTACT:Investor Relations and
Corporate Communications416-815-02201-888-809-0925Email:
investor@yamana.com
CAUTIONARY NOTE REGARDING FORWARD-LOOKING
STATEMENTS: This news release contains or
incorporates by reference “forward-looking statements” and
“forward-looking information” under applicable Canadian securities
legislation within the meaning of the United States Private
Securities Litigation Reform Act of 1995. Forward-looking
information includes, but is not limited to information with
respect to the Company’s optimization and expansion plans,
strategy, other plans or future financial or operating performance.
Forward-looking statements are characterized by words such as
“plan,” “expect”, “budget”, “target”, “project”, “intend”,
“believe”, “anticipate”, “estimate” and other similar words, or
statements that certain events or conditions “may” or “will” occur.
Forward-looking statements are based on the opinions, assumptions
and estimates of management considered reasonable at the date the
statements are made, and are inherently subject to a variety of
risks and uncertainties and other known and unknown factors that
could cause actual events or results to differ materially from
those projected in the forward-looking statements. These
factors include the Company’s expectations in connection with its
foreign exchange hedging program, the production and exploration,
the progression of the ramp up at Cerro Moro, development and
expansion plans at the Company's projects being met, the impact of
proposed optimizations at the Company's projects, changes in
national and local government legislation, taxation, controls or
regulations (including a new Argentine export tax) and/or changes
in the administration or laws, policies and practices, and the
impact of general business and economic conditions, global
liquidity and credit availability on the timing of cash flows and
the values of assets and liabilities based on projected future
conditions, fluctuating metal prices (such as gold, copper, silver
and zinc), currency exchange rates (such as the Brazilian real, the
Chilean peso, and the Argentine peso versus the United States
dollar), the impact of inflation, possible variations in ore grade
or recovery rates, changes in the Company’s hedging program,
changes in accounting policies, changes in Mineral Resources and
Mineral Reserves, risks related to asset disposition, risks related
to metal purchase agreements, risks related to acquisitions,
changes in project parameters as plans continue to be refined,
changes in project development, construction, production and
commissioning time frames, unanticipated costs and expenses, higher
prices for fuel, steel, power, labour and other consumables
contributing to higher costs and general risks of the mining
industry, failure of plant, equipment or processes to operate as
anticipated, unexpected changes in mine life, final pricing for
concentrate sales, unanticipated results of future studies,
seasonality and unanticipated weather changes, costs and timing of
the development of new deposits, success of exploration activities,
permitting timelines, government regulation and the risk of
government expropriation or nationalization of mining operations,
risks related to relying on local advisors and consultants in
foreign jurisdictions, environmental risks, unanticipated
reclamation expenses, risks relating to joint venture operations,
title disputes or claims, limitations on insurance coverage and
timing and possible outcome of pending and outstanding litigation
and labour disputes, risks related to enforcing legal rights in
foreign jurisdictions, as well as those risk factors discussed or
referred to herein and in the Company's Annual Information Form
filed with the securities regulatory authorities in all provinces
of Canada and available at www.sedar.com, and the Company’s Annual
Report on Form 40-F filed with the United States Securities
and Exchange Commission. Although the Company has attempted
to identify important factors that could cause actual actions,
events or results to differ materially from those described in
forward-looking statements, there may be other factors that cause
actions, events or results not to be anticipated, estimated or
intended. There can be no assurance that forward-looking
statements will prove to be accurate, as actual results and future
events could differ materially from those anticipated in such
statements. The Company undertakes no obligation to update
forward-looking statements if circumstances or management’s
estimates, assumptions or opinions should change, except as
required by applicable law. The reader is cautioned not to place
undue reliance on forward-looking statements. The forward-looking
information contained herein is presented for the purpose of
assisting investors in understanding the Company’s expected
financial and operational performance and results as at and for the
periods ended on the dates presented in the Company’s plans and
objectives and may not be appropriate for other purposes.
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