YAMANA GOLD INC. (TSX:YRI; NYSE:AUY) (“Yamana” or “the Company”) is
herein reporting its financial and operational results for the
second quarter of 2020. The Company posted strong quarterly
production and free cash flow while further reducing net
debt.
SECOND QUARTER HIGHLIGHTS
Strong Adjusted Net Earnings and Cash
Flows, Further Reduction in Net Debt
- Adjusted net earnings(1) of $63.3
million or $0.07 per share basic and diluted compared to adjusted
net earnings of $19.8 million or $0.02 per share basic and diluted
a year earlier.
- Net earnings were nil or nil per
share basic and diluted compared to net earnings of $14.1 million
or $0.01 per share basic and diluted a year earlier.(1)
- Strong quarterly cash flows from
operating activities of $92.2 million and cash flow from operating
activities before net change in working capital of $118.1 million,
reflecting the impact of strong production, strong precious metal
prices, and the positive impact of foreign exchange movements on
costs.
- Normalized for the $19.2 million in
outflows associated with COVID-19 related temporary suspensions,
standby and other incremental costs, cash flows from operating
activities before net change in working capital would have been
$137.3 million. While cash flows were lower than in the first
quarter, the difference is mostly accounted for by the lower
production from mines whose operations were temporarily suspended.
On a per unit of production basis, more margin and cash flows were
generated in the second quarter than in the first quarter.
- Net free cash flow(2) of $60.3
million and free cash flow before dividends and debt repayments(2)
of $38.3 million, adjusted for the costs incurred in association
with COVID-19. Without normalizing for the impact of temporary
suspensions, standby and other incremental COVID-19 cost outflows,
net free cash flow(2) and free cash flow before dividends and debt
repayments would have been $41.1 million and $19.1 million
respectively.
- Net debt(3) decreased by $101.1
million in the quarter. As of June 30, 2020, net debt(3) was $768.0
million.
- In June, the Company repaid $100.0
million of the $200.0 million drawn during the first quarter out of
its $750.0 million revolving credit facility. The draw during the
first quarter was performed as a precaution due to the uncertainty
around the COVID-19 pandemic. The Company currently has no plans to
utilize the remaining $100.0 million drawn on its revolving credit
facility, and expects to repay these funds by the end of the
year.
- As of June 30, 2020, the Company
had cash and cash equivalents of $324.8 million.
|
Three months ended June 30 |
(In millions of United
States Dollars) |
2020 |
2019 |
Net Free Cash Flow(2) |
$ |
60.3 |
|
$ |
119.5 |
|
Free Cash Flow before Dividends
and Debt Repayments(2) |
$ |
38.3 |
|
$ |
50.6 |
|
Decrease in Net Debt(3) |
$ |
(101.1 |
) |
$ |
(9.3 |
) |
(All amounts are
expressed in United States Dollars unless otherwise indicated)(See
end notes at the end of this press release) |
Production Exceeds Plan at Jacobina, El
Peñón, Minera Florida and Canadian Malartic
- Gold production of 164,141 ounces
was above plan, following exceptional performances from Jacobina,
El Peñón, Minera Florida, and Canadian Malartic, which all exceeded
their production plan, and despite the government-mandated
temporary suspension of operations at Canadian Malartic.
- Silver production of 2,007,809
ounces was also above plan, following a strong performance from El
Peñón.
- Gold equivalent ounce ("GEO")(4)
production of 183,582 ounces exceeded plan, at costs also better
than plan, despite the GEO ratio being higher at 105.14 than that
guided at 98.85.
Costs Better Than Plan
- As a result of the strong
performances from Jacobina, El Peñón, Minera Florida and Canadian
Malartic, second quarter unitary costs were better than plan, with
total cost of sales and cash costs of $1,146 and $715 per GEO,
respectively, compared to $1,146 and $696 per GEO in 2019.
- All-in sustaining costs ("AISC")(3)
for the quarter were $1,125 per GEO sold, compared to $986 per GEO
sold in the same period in 2019. While cash costs were relatively
unchanged, higher planned sustaining capital per ounce
year-over-year resulted in an increase in AISC over the comparative
period.
- Costs were positively impacted by
foreign exchange movements as a result of the Canadian Dollar,
Brazilian Real, Argentine Peso and Chilean Peso all weakening
against the US Dollar.
DIVIDEND INCREASED BY FURTHER 12%; FOURTH
INCREASE ANNOUNCED IN PAST YEAR
Subsequent to quarter end, the Company announced
it is increasing its annual dividend by a further 12% to $0.07 per
share, marking the fourth dividend increase announced by the
Company in the past year for a cumulative increase of 250%. The
increases are part of a gradual and progressive approach to
dividend increases, as the Company’s cash balances continue to grow
from increasing cash flows and successful initiatives to monetize
its portfolio of non-producing assets and financial instruments. At
the new annual dividend rate, the dividend paid will be above $70
per GEO, in line with the Company's target of between $50 and $100
per GEO.
For more information, please see the press
release issued July 23, 2020, titled: 'Yamana Gold Raises Dividend
By Further 12%; Fourth Dividend Increase Announced by the Company
in the Past Year for a Cumulative Increase of 250%’, available on
the Company's website at www.yamana.com.
LONDON STOCK EXCHANGE
LISTING
Subsequent to quarter end, the Company announced
it is advancing the application process for listing on the Main
Market of the London Stock Exchange ("LSE"). This would add another
senior exchange for trading of the Company's shares and should
further improve institutional investments and liquidity. The
Company intends for its common shares to begin trading on the LSE’s
Main Market in the next few months.
For more information, please see the press
release issued July 20, 2020, titled: 'Yamana Gold Announces its
Intention to List on the Main Market of the London Stock Exchange',
available on the Company's website at www.yamana.com.
RAMP-UP OF CANADIAN MALARTIC AND CERRO
MORO
Both Cerro Moro and Canadian Malartic resumed
mining activities in April 2020 following the temporary suspensions
of operations in March due to government-ordered restrictions
related to COVID-19. The gradual resumption towards full mining
activities occurred over the second quarter and complied with the
recommendations of governments and public health officials, with
full attention to the health and safety of returning employees,
contractors, and suppliers.
At Canadian Malartic, the ramp-up progressed
faster than expected, and mill throughput in each of May and June
exceeded 60,000 tonnes per day ("tpd"), partially offsetting the
impacts from the downtime and lower production rates during the
ramp-up in April.
At Cerro Moro, ongoing government restrictions
over interprovincial travel have extended the length of the
operational ramp-up. While the restrictions have extended the
ramp-up period, they have also resulted in potential long-term
improvements to the operation relating to efficiencies as the mine
continued operating with a reduced workforce during the
quarter.
2020 GUIDANCE
The Company reiterates its 2020 production
guidance of 890,000 GEO, comprised of 786,000 ounces of gold and
10,250,000 ounces of silver. Production is currently tracking above
guidance and, as the year progresses, the Company will evaluate
further updates to production guidance. The Company has updated
AISC guidance for the second half of the year, with AISC expected
to be in the range of $1,020 to $1,060 per GEO. Further, the fourth
quarter is expected to have the best cost profile, in line with the
stronger expected production. At Cerro Moro, the ongoing
interprovincial travel restrictions and its impact on a reduced
workforce may further impact consolidated costs, although improved
travel logistics in the second half of the year and better than
planned performance from other mines is expected to offset those
possible impacts.
COVID-19 RELATED COSTS
As indicated with preliminary results released
on July 13, 2020, the Company incurred $19.2 million in COVID-19
related costs during the quarter. These costs can be divided into
two major categories:
- Temporary suspension and standby
costs including those associated with placing certain mines in care
and maintenance and subsequent ramp-up of those operations, and the
underutilization of labour and contractors in relation to the
pre-COVID mine plans.
- Other incremental costs resulting
from COVID-19 including community support, additional personal
protective equipment acquisitions, higher transportation costs, and
overtime costs resulting from lower headcount levels on site to
accommodate social distancing.
COVID-19 costs are disclosed as part of mine
operating earnings as 'temporary suspension, standby and other
incremental COVID-19 costs'. The Company anticipates that
suspension and standby costs will be minimized prospectively for
the balance of the year as the mines return to full production
levels anticipated at the beginning of the year. Further, the
Company is assessing if any incremental COVID-19 costs are expected
to become normal-course in a COVID-19 world. However, those costs
are expected to be at levels lower than those experienced in the
second quarter. The Company also anticipates that some of these
increases may be offset by efficiencies gained during the period.
The breakdown of the expenditures incurred during the quarter are
as follows:
(In millions of United States
Dollars, totals may not add due to rounding, unaudited) |
Temporary suspensionand standby costs |
Other incrementalCOVID-19 costs |
Total |
Canadian Malartic |
$ |
1.9 |
$ |
0.4 |
$ |
2.3 |
Jacobina |
0.4 |
0.8 |
1.2 |
Cerro Moro |
7.4 |
2.0 |
9.4 |
El Peñón |
0.9 |
1.5 |
2.4 |
Minera Florida |
2.7 |
1.2 |
3.9 |
Total |
$ |
13.3 |
$ |
5.9 |
$ |
19.2 |
Summary of
Certain Non-Cash and Other Items Included in Net
Earnings |
(In
millions of United States Dollars, except per share amounts, totals
may not add due to rounding, unaudited) |
Three Months Ended June 30 |
2020 |
2019 |
Non-cash unrealized foreign exchange losses |
$ |
7.0 |
|
$ |
1.2 |
|
Share-based
payments/mark-to-market of deferred share units |
23.6 |
|
(0.8 |
) |
Mark-to-market gains on
derivative contracts, investments and other assets |
(2.3 |
) |
(6.9 |
) |
Temporary suspension and
standby costs |
13.3 |
|
— |
|
Other incremental COVID-19
costs |
5.9 |
|
— |
|
Other provisions, write-downs
and adjustments |
5.5 |
|
3.8 |
|
Non-cash tax on unrealized
foreign exchange gains |
11.8 |
|
(35.1 |
) |
Income tax effect of
adjustments |
(11.3 |
) |
0.9 |
|
One-time tax adjustments |
9.8 |
|
42.6 |
|
Total adjustments -
increase to earnings |
$ |
63.3 |
|
$ |
5.7 |
|
Total adjustments - increase to earnings per
share |
$ |
0.07 |
|
$ |
0.01 |
|
Note: For the three months ended June 30, 2020, net earnings would
be adjusted by an increase of $63.3 million (2019: increase of $5.7
million). |
STRATEGIC DEVELOPMENTS, CONSTRUCTION
DEVELOPMENTS AND ADVANCED STAGE PROJECTS
Agua Rica Feasibility Study Advancement
and Integration Agreement
The Company has advanced the integration of the
Agua Rica project with Minera Alumbrera Limited ("Alumbrera")
pursuant to the integration agreement dated March 7, 2019, entered
into by the Company, Glencore International AG and Newmont
Corporation (collectively the “Parties”), whereby the Agua Rica
project would be developed and operated using the existing
infrastructure and facilities of Alumbrera. The integration would
give the Company 56.25% ownership in the joint Agua Rica and
Alumbrera project ("Integrated Project"), which carries
significantly less development risk, as certain infrastructure
would not need to be constructed. The integration is expected to be
completed in the third quarter, after which the Integrated Project
would be managed as a combined operation. In addition to the
considerable infrastructure, tailings system and processing plant
available, there is also significant cash in the treasury at
Alumbrera.
The Parties believe the integration of the Agua
Rica project and the Alumbrera mine has significant merit. Given
the proximity to the extensive mineral resource of Agua Rica with
the existing infrastructure of Alumbrera, this provides the
potential to realize significant synergies for the development and
operation of Agua Rica. This approach will create a unique
high-quality and low-risk brownfield project, with an optimized
environmental footprint, that will bring significant value to
shareholders, local communities and stakeholders. Agua Rica hosts a
large scale, long life copper mineral resource with associated
gold, silver, and molybdenum while the Alumbrera infrastructure is
of significant scale and configuration that is ideally suited for
the integration plan.
The Parties established a technical committee
("Technical Committee") which is now advancing towards a full
Feasibility Study of the Integrated Project, with updated mineral
reserve, production and project cost estimates. It has also
obtained an Exploration Permit from the local authorities in order
to conduct field work for the Feasibility Study and collect
additional information for the Integrated Project Environmental
Impact Assessment ("EIA"). The results of the Feasibility Study are
expected during 2021.
After a strategic review, the Company has
concluded that Agua Rica represents an excellent development and
growth project which the Company intends to continue to advance
through the development process through the Company's controlling
interest in the project and through its participation in the
Technical Committee.
The Jacobina Optimization Project
The Phase 1 optimization project, whose
objective is to stabilize throughput at a sustainable 6,500 tpd,
was completed in June. The project has exceeded expectations, with
an average plant throughput of 6,853 tonnes per day ("tpd")
achieved in the second quarter. Given the success of Phase 1, the
Company is assessing whether the results of Phase 1 can be further
optimized with incremental improvements to plant throughput,
without affecting gold recoveries of 96% to 97%.
In parallel to the incremental optimization of
Phase 1, the Company is studying the increase in throughput to
8,500 tpd, referred to as the Phase 2 optimization. A
pre-feasibility study ("PFS") for Phase 2 was completed in April
with positive results. The throughput increase is expected to be
achieved through the installation of an additional grinding line
and incremental upgrades to the crushing and gravity circuits. If
implemented, the Phase 2 expansion is expected to increase annual
gold production to approximately 230,000 ounces per year, reduce
costs, and generate significantly more cash flow and attractive
returns. The total capital cost of the Phase 2 expansion is
estimated at $57 million, of which $35 million is for the
processing plant, $14 million is for underground mining, and $8
million is for infrastructure.
Detailed engineering for the Phase 2
optimization is scheduled to commence in the third quarter, with a
feasibility study to be completed by mid-2021. However, it is the
Company's intention to optimize and stabilize the additional
milling rate improvements that were originally included in Phase 1,
which are now considered as incremental optimizations beyond Phase
1, before proceeding to Phase 2.
Separately, Jacobina is studying the
installation of a backfill plant to allow up to 2,000 tpd of
tailings to be deposited in underground voids. Preliminary results
indicate that the project has the potential to reduce environmental
footprint, extend the life of the existing tailings storage
facility, and improve mining recovery, resulting in an increased
conversion of mineral resources to mineral reserves. The current
backfill system design includes a tailings classification plant,
located close to the existing processing plant, and two backfill
preparation plants at the Joao Belo and Morro do Vento mines. The
Company is advancing the backfill project to a feasibility study,
to be completed in early 2021.
Canadian Malartic (50% interest),
Exploration Ramp into Odyssey and East Malartic and the Ramp-up of
the Barnat Deposit
The Company continues to advance studies related
to the underground mineral resources at Canadian Malartic, and the
main focus of exploration during the second quarter was to provide
support for an aggressive infill drill program at East Gouldie,
with 10 diamond drill rigs to define and expand underground mineral
resources. The Company, along with its partner, has increased the
exploration budget due to positive exploration drilling results to
C$15.0 million from C$12.5 million, at 50%. The C$5.0 million
increase on a 100% basis, will allow for approximately 17,000 more
exploration metres to be drilled with a target to complete 126,000
metres of drilling by year end. The Company and its partner have
now authorized the construction of surface infrastructure and an
exploration ramp into Odyssey and East Malartic, with the purpose
of eventually mining their respective upper zones and providing
further exploration access to allow drilling in tighter spacing to
continue studies with greater detail. With governmental approval
already in hand, construction of surface infrastructure and
the portal in preparation for development of the ramp is
expected to begin in August of 2020, with a budget of C$6.0 million
for the remainder of the year on a 50% basis. The objective is
to commence development of the ramp in the fourth quarter, which is
anticipated to take approximately two years to complete. The new
ramp will provide the ability to carry out ore bulk sampling of up
to 40,000 tonnes of ore. A further update, including an update on
exploration, will be provided in the third quarter.
The ramp-up of the Barnat deposit is expected to
continue throughout 2020, with meaningful contributions to begin in
2021. On a 50% basis, expansionary capital expenditures related to
the Canadian Malartic Extension Project were $4.6 million during
the second quarter. The Highway 117 road deviation has been
completed and opened to traffic, with the remaining extension work
focused on overburden and rock stripping expected to be completed
in 2021.
OTHER INITIATIVES - STRATEGIC, OPTIMIZATION AND
MONETIZATION
Suyai Option Agreement
On April 28, 2020, the Company entered into a
definitive option agreement pursuant to which it granted
Consultores Asset Management S.A. (“CAM”), a privately held
portfolio management and capital markets company based in
Argentina, owned by Messrs. Eduardo Elsztain and Saul Zang, the
right to acquire up to a maximum 40% interest in a joint venture
formed to hold the Suyai Project. CAM's portfolio includes the
biggest real estate company in the country, NASDAQ-listed
international agricultural companies, along with banking and mining
investments. The group has successfully led the development of
significant construction projects.
An initial amount of $2.0 million was received
by the Company to secure the option. CAM will assume responsibility
for all environmental, social, and governance (“ESG”) matters,
including leading the permitting efforts aimed to advance the
project through its different stages of development.
By fulfilling certain obligations and achieving
certain milestones, mostly relating to ESG matters, and by paying
$31.6 million in various installments in addition to the
proportionate expenses, on or before December 31, 2024, CAM has the
right to earn the aforementioned maximum interest in the resulting
joint venture formed to hold the Suyai Project. The Company
believes there is considerable value, far in excess of cash value,
in fulfilling the obligations and achieving the milestones relating
to ESG matters which would advance the Suyai project. Yamana would
hold the remaining 60% of the joint venture.
Sale of Royalty Portfolio Assets
On May 27, 2020, the Company completed the sale
of its portfolio of royalty interests and the contingent payment to
be received upon declaration of commercial production at the Deep
Carbonates Project (“DCP”) at the Gualcamayo gold mine (together,
the “Royalty Portfolio”) for total consideration on closing of the
transaction of $64.2 million.
The consideration was comprised of $10 million
in cash, a deferred cash payment fair valued at $10.8 million due
to the convertible nature of the financial instrument ("Deferred
Cash Payment"), and a $43.4 million share position in Nomad Royalty
Company Ltd. (formerly, Guerrero Ventures Inc.) (“Nomad”) at a
price of C$0.90 per share with a lock-up period of six months from
the transaction date.
Prior to closing of the transaction, Nomad
elected to pay $10.0 million of the cash consideration through a
deferred cash payment. Under this election, Yamana will receive
interest at 3% per annum calculated and payable on a quarterly
basis, and the Deferred Cash Payment may be converted at any time,
in whole or in part, by the holder into shares of Nomad at C$0.90
per share. The Deferred Cash Payment is due for payment in full at
the end of two years. Nomad may pay the Deferred Cash Payment in
full at the end of one year, subject to additional payment by Nomad
equal to 5% of the Deferred Cash Payment, and the right of Yamana
to convert the Deferred Cash Payment into shares of Nomad at a
price of C$0.90 per share. The instrument creating the Deferred
Cash Payment can be transferred to a third party at any time.
Upon completion of the sale transaction, Yamana
held approximately 13% of the outstanding shares of Nomad. As
Yamana will be represented on Nomad's board of directors, the
Company concluded that it has significant influence over Nomad, and
the investment has been accounted for as an investment in associate
using the equity method.
As at July 22, the implied fair value of the
consideration received in the transaction totalled $102.6 million,
due to the appreciation of Nomad's share price from C$0.90 to
C$1.53.
Sale of Equinox Units
On April 15, 2020, the Company sold 12,000,000
Units of Equinox Gold for gross proceeds of C$120.0 million. Each
Unit consists of one common share of Equinox owned by the Company
and one-half of a common share purchase warrant, each full warrant
entitling the holder thereof to acquire one additional common share
of Equinox owned by the Company at an exercise price of C$13.50 for
a term of 9 months. Upon completion of the sale, Yamana held
7,236,380 Equinox Shares, representing approximately 3.35% of the
issued and outstanding Equinox Shares, on a non-diluted basis. As
at June 30, 2020, the share price of Equinox had appreciated to
C$15.18 and the warrants were in-the-money. In the event all
warrants were exercised on that date, the total additional gross
proceeds to the Company would have been C$81.0 million.
Agua de la Falda, Chile
The Company continues to pursue development and
strategic initiatives for the 57.6% held Agua de la Falda joint
venture with Codelco, located in northern Chile, near El Salvador
in the Atacama region. While the historical Jeronimo Feasibility
Study focused on maximizing gold production from the sulphide
deposits, the Company completed the study of a low capital starter
project based on the remaining oxide inventory in heap leach pads
and open pits with positive results and quick payback. The Company
is also evaluating exploration plans with its partner on the highly
prospective claims surrounding the mine, where early-stage targets
for both gold and copper mineralization have been identified.
Re-logging of historical holes and exploratory drilling support the
potential to extend the gold oxide mineralization, as well as the
potential for copper/gold deposits within the joint venture claims.
Agua de la Falda has processing capacity and infrastructure already
installed, and it is in the vicinity of the El Salvador Division of
Codelco.
EXPLORATION
During the second quarter, exploration drilling
and related field activities were impacted by COVID-19 related
restrictions in most jurisdictions, with most projects halted in
March and/or April. Exploration experienced a gradual ramp up at
the end of the second quarter with drilling activities in Brazil
reinitiated at Ivolândia to test the near surface oxide targets,
and with the resource expansion and exploration program at Lavra
Velha. Ramp up to drilling was also initiated at Borborema, where
new drilling as well as an airborne geophysical survey testing
copper-gold rock and soil anomalies for new geophysical targets is
expected to take place early in the third quarter. Exploration in
Chile on projects located north of the El Peñón mine returned
encouraging initial surface and drilling results, with follow up
drilling expected in the third quarter.
Monument Bay, Canada
At Monument Bay, the Company is further
advancing the project with internal technical and economic
assessments considering the project as an underground mine rather
than an open pit mine. While resources would be reduced from
current levels, this would be an economically attractive
alternative with lower required capital investment, a reduced
environmental footprint and significant exploration potential for
increases in mineral resources down plunge and in satellite surface
areas. A new high-grade geological model is being evaluated while
several well-defined high-grade zones along a 4 kilometre strike
length of the deposit have been identified. An expansion drill
program on these targets is planned to begin this year and extend
into next year.
Diamond drilling during the first half of 2020
focused on shallow infill testing of the higher grade zones
projected to surface, with several good intercepts received in the
second quarter, confirming the orientation of higher grade
mineralization and providing additional targets for follow up
drilling in the second half of 2020. Property wide exploration was
expanded in 2019 and continued during the first quarter of 2020
utilizing a heli-portable RC drill rig to sample overburden glacial
till and top-of-bedrock, with drilling completed on a 1,000-metre
grid covering roughly two thirds of the property area. Results
received during the second quarter for both geochemical gold and
pathfinder elements in the till as well as top of bedrock gold and
other indicator element anomalies are successfully delineating
target areas for follow up RC and eventually diamond drilling,
which is anticipated to take place during the 2020-2021 field
season. This exploration methodology opens up the little-explored
remainder of the Monument Bay property to exploration and
represents a significant step forward toward advancing this
prospective land package. In 2020, the drilling program will be
augmented with evaluation of other exploration methods, including
pilot test work of a number of geophysical techniques including IP
and CSAMT, as warranted.
Domain, Canada
The Domain project is located near Oxford Lake
in northeast Manitoba, comprising a 20,000-hectare property that is
100%-controlled by the Company. Interpretation of regional airborne
magnetics together with government geological survey till
geochemistry support a highly prospective environment for folded
iron formation hosted gold. The Company's property surrounds three
claims totaling 576 hectares that are under a joint venture
agreement with New Dimension Resources, which holds a 29.6%
interest. The joint venture claims cover an area of historic
drilling with significant gold intercepts hosted by iron formation
that includes intervals reported by Rolling Rock Resources in 2008
and New Dimension Resources in 2017.
The Company recently signed an exploration
agreement with the Bunibonibee Cree Nation (“BCN”) that provides a
framework for a cooperative, mutually respectful agreement
supporting the advancement of exploration within the Traditional
Territory of the BCN while providing employment and business
opportunities to the BCN.
KEY STATISTICS
Key financial and operating statistics for the
second quarter 2020 are outlined in the following tables.
Financial
Summary |
|
Three Months Ended June 30 |
(In millions of United States
Dollars, except for per share and per unit amounts, unaudited) |
2020 |
2019 |
Revenue |
$ |
303.4 |
|
$ |
463.5 |
|
Cost of sales excluding
depletion, depreciation and amortization |
(126.3 |
) |
(244.1 |
) |
Depletion, depreciation and
amortization |
(76.3 |
) |
(122.4 |
) |
Total cost of sales |
(202.6 |
) |
(366.5 |
) |
Temporary suspension, standby
and other incremental COVID-19 costs |
(19.2 |
) |
— |
|
Mine operating earnings |
81.6 |
|
97.0 |
|
General and administrative
expenses |
(25.4 |
) |
(16.8 |
) |
Exploration and evaluation
expenses |
(2.9 |
) |
(2.7 |
) |
Net earnings |
— |
|
14.1 |
|
Net earnings per share - basic
and diluted (i) |
— |
|
0.01 |
|
Cash flow generated from
operations after changes in non-cash working capital |
92.2 |
|
147.6 |
|
Cash flow from operations
before changes in non-cash working capital |
118.1 |
|
156.0 |
|
Cash flows from (used in)
investing activities |
48.5 |
|
(111.9 |
) |
Cash flows used in financing
activities |
(140.4 |
) |
(52.0 |
) |
Revenue per ounce of gold |
$ |
1,713 |
|
$ |
1,325 |
|
Revenue per ounce of
silver |
$ |
16.83 |
|
$ |
15.00 |
|
Average realized gold price
per ounce |
$ |
1,713 |
|
$ |
1,307 |
|
Average
realized silver price per ounce |
$ |
16.83 |
|
$ |
15.03 |
|
(i) For the three months ended June 30, 2020,
the weighted average numbers of shares outstanding was 951,457,120
(basic) and 953,196,090 (diluted). |
Operating
Summary |
Costs |
Three Months Ended June 30 |
(In United States
Dollars) |
2020 |
2019 |
Per GEO(4) sold |
|
|
Total cost of sales |
$ |
1,146 |
$ |
1,146 |
Cash Costs(3) |
$ |
715 |
$ |
696 |
AISC(3) |
$ |
1,125 |
$ |
986 |
|
Three Months Ended June 30 |
Gold Ounces |
2020 |
2019 |
Canadian Malartic (50%) |
56,785 |
84,311 |
Jacobina |
45,646 |
38,951 |
Cerro Moro |
8,175 |
29,643 |
El Peñón |
35,760 |
34,646 |
Minera Florida |
17,775 |
16,293 |
TOTAL |
164,141 |
203,844 |
|
Three Months Ended June 30 |
Silver Ounces |
2020 |
2019 |
Cerro Moro |
730,571 |
1,328,251 |
El Peñón |
1,277,238 |
843,585 |
TOTAL |
2,007,809 |
2,171,836 |
For a full discussion of Yamana’s operational
and financial results, please refer to the Company’s second quarter
2020 Management’s Discussion and Analysis, which is available on
the Company's website at www.yamana.com, and on SEDAR at
www.sedar.com.
The Company will host a conference call and
webcast on Friday, July 24, 2020, at 9:00 a.m. ET.
Second Quarter 2020 Conference
Call
Toll Free (North America): |
1-800-273-9672 |
Toronto Local and International: |
416-340-2216 |
Webcast: |
www.yamana.com |
Conference Call Replay
Toll Free (North America): |
1-800-408-3053 |
Toronto Local and International: |
905-694-9451 |
Passcode: |
7455213# |
The conference call replay will be available
from 12:00 p.m. ET on July 24, 2020, until 11:59 p.m. ET on August
14, 2020.
Qualified Persons
Scientific and technical information contained
in this news release has been reviewed and approved by Sébastien
Bernier (P. Geo and Senior Director, Geology and Mineral
Resources). Sébastien Bernier is an employee of Yamana Gold Inc.
and a "Qualified Person" as defined by Canadian Securities
Administrators' National Instrument 43-101 - Standards of
Disclosure for Mineral Projects.
About Yamana
Yamana is a Canadian-based precious metals
producer with significant gold and silver production, development
stage properties, exploration properties, and land positions
throughout the Americas, including Canada, Brazil, Chile and
Argentina. Yamana plans to continue to build on this base through
expansion and optimization initiatives at existing operating mines,
development of new mines, the advancement of its exploration
properties and, at times, by targeting other consolidation
opportunities with a primary focus in the Americas.
FOR FURTHER INFORMATION, PLEASE
CONTACT:
Investor Relations and Corporate Communications
416-815-02201-888-809-0925Email: investor@yamana.com
End Notes
(1) Earnings for the three months ended June 30,
2020, were negatively impacted by $63.3 million of items that
management believes may not be reflective of current and ongoing
operations, and which may be used to adjust or reconcile input
models in consensus estimates. For a complete list of adjustments,
refer to 'Section 3: Review of Financial Results' in the Company's
Management's Discussion and Analysis ("MD&A").
(2) The Company has included certain non-GAAP
performance measures in this press release. Detailed
reconciliations for the cash flow metrics can be found at the end
of this press release.
(3) A cautionary note regarding non-GAAP
performance measures as well as detailed reconciliations are
included in 'Section 10: Non-GAAP Performance Measures' of the
Company's MD&A.
(4) GEO includes gold plus silver with silver
converted to a gold equivalent at a ratio of 105.14:1 for the
second quarter. The GEO ratio is calculated based on average market
prices.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING
STATEMENTS: This news release contains or incorporates by reference
“forward-looking statements” and “forward-looking information”
under applicable Canadian securities legislation and within the
meaning of the United States Private Securities Litigation Reform
Act of 1995. Forward-looking information includes, but is not
limited to information with respect to the Company’s strategy,
plans or future financial or operating performance including
guidance and liquidity and the impact of the coronavirus.
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 unforeseen impacts on guidance, liquidity, cash flow,
monetization initiatives, and available residual cash, an inability
to maintain a cash reserve fund balance that can support current or
future dividend increases, the outcome of various planned technical
studies, production and exploration, development, optimizations and
expansion plans 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 and zinc), currency exchange rates (such as the
Brazilian Real, the Chilean Peso and the Argentine Peso versus the
United States Dollar), the impact of inflation, possible variations
in ore grade or recovery rates, changes in the Company’s hedging
program, changes in accounting policies, changes in mineral
resources and mineral reserves, risks related to asset
dispositions, risks related to metal purchase agreements, risks
related to acquisitions, changes in project parameters as plans
continue to be refined, changes in project development,
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 or jointly owned
operations, title disputes or claims, limitations on insurance
coverage, timing and possible outcome of pending and outstanding
litigation and labour disputes, risks related to enforcing legal
rights in foreign jurisdictions, as well as those risk factors
discussed or referred to herein and in the Company's Annual
Information Form filed with the securities regulatory authorities
in all provinces of Canada and available at www.sedar.com, and
the Company’s Annual Report on Form 40-F filed with the United
States Securities and Exchange Commission. Although the
Company has attempted to identify important factors that could
cause actual actions, events or results to differ materially from
those described in forward-looking statements, there may be other
factors that cause actions, events or results not to be
anticipated, estimated or intended. There can be no assurance
that forward-looking statements will prove to be accurate, as
actual results and future events could differ materially from those
anticipated in such statements. The Company undertakes no
obligation to update forward-looking statements if circumstances or
management’s estimates, assumptions or opinions should change,
except as required by applicable law. The reader is cautioned not
to place undue reliance on forward-looking statements. The
forward-looking information contained herein is presented for the
purpose of assisting investors in understanding the Company’s
expected financial and operational performance and results as at
and for the periods ended on the dates presented in the Company’s
plans and objectives and may not be appropriate for other
purposes.
CAUTIONARY NOTE TO UNITED STATES INVESTORS
CONCERNING ESTIMATES OF MEASURED, INDICATED AND INFERRED MINERAL
RESOURCESThis news release has been prepared in accordance with the
requirements of the securities laws in effect in Canada, which
differ in certain material respects from the disclosure
requirements of United States securities laws contained in Industry
Guide 7. The terms “mineral reserve”, “proven mineral reserve”
and “probable mineral reserve” are Canadian mining terms as defined
in accordance with Canadian National Instrument 43-101 Standards of
Disclosure for Mineral Projects (“NI 43-101”) and the Canadian
Institute of Mining, Metallurgy and Petroleum (the “CIM”) - CIM
Definition Standards on Mineral Resources and Mineral Reserves,
adopted by the CIM Council, as amended. These definitions differ
from the definitions in the disclosure requirements promulgated by
the Securities and Exchange Commission (the “Commission”) contained
in Industry Guide 7. Under Industry Guide 7 standards, a
“final” or “bankable” feasibility study is required to report
mineral reserves, the three-year historical average price is used
in any mineral reserve or cash flow analysis to designate mineral
reserves and the primary environmental analysis or report must be
filed with the appropriate governmental authority.
In addition, the terms “mineral resource”,
“measured mineral resource”, “indicated mineral resource” and
“inferred mineral resource” are defined in and required to be
disclosed by NI 43-101. However, these terms are not defined
terms under Industry Guide 7. Investors are cautioned not to
assume that any part or all of the mineral deposits in these
categories will ever be converted into mineral
reserves. “Inferred mineral resources” have a great amount of
uncertainty as to their existence, and great uncertainty as to
their economic and legal feasibility. It cannot be assumed that all
or any part of an inferred mineral resource will ever be upgraded
to a higher category. Under Canadian rules, estimates of inferred
mineral resources may not form the basis of feasibility or
pre-feasibility studies, except in rare cases. Investors are
cautioned not to assume that all or any part of an inferred mineral
resource exists or is economically or legally
mineable. Disclosure of “contained ounces” in a mineral
resource is permitted disclosure under Canadian regulations. In
contrast, issuers reporting pursuant to Industry Guide 7 report
mineralization that does not constitute “mineral reserves” by
Commission standards as in place tonnage and grade without
reference to unit measures.
Accordingly, information contained in this news
release may not be comparable to similar information made public by
U.S. companies reporting pursuant to Industry Guide 7.
NON-GAAP FINANCIAL MEASURES AND ADDITIONAL LINE
ITEMS AND SUBTOTALS IN FINANCIAL STATEMENTS
The Company has included certain non-GAAP
performance measures to supplement its Condensed Consolidated
Interim Financial Statements, which are presented in accordance
with IFRS, including the following:
- Cash costs per GEO sold;
- All-in sustaining costs per GEO sold;
- Net debt;
- Net free cash flow;
- Free cash flow available for dividends and debt repayment;
- Average realized price per ounce of gold/silver sold; and
- Adjusted earnings
The Company believes that these measures,
together with measures determined in accordance with IFRS, provide
investors with an improved ability to evaluate the underlying
performance of the Company. Non-GAAP financial measures do not have
any standardized meaning prescribed under IFRS, and therefore they
may not be comparable to similar measures employed by other
companies. The data is intended to provide additional information
and should not be considered in isolation or as a substitute for
measures of performance prepared in accordance with IFRS.
Management's determination of the components of non-GAAP and
additional measures are evaluated on a periodic basis influenced by
new items and transactions, a review of investor uses and new
regulations as applicable. Any changes to the measures are duly
noted and retrospectively applied as applicable.
For definitions and descriptions of the non-GAAP
measures, other than those noted and reconciled below and
additional subtotals in financial statements, refer to Section 10:
Non-GAAP Financial Measures and Additional Line Items or Subtotals
in Financial Statements of the Company's MD&A for the three
months ended June 30, 2020.
GEO PRODUCTION AND SALES
Production and sales of silver are treated as a
gold equivalent in determining a combined precious metal production
or sales unit, commonly referred to as gold equivalent ounces
("GEO"). Specifically, guidance GEO produced are calculated by
converting silver production to its gold equivalent using relative
gold/silver metal prices at an assumed ratio and adding the
converted silver production expressed in gold ounces to the ounces
of gold production. Actual GEO production and sales calculations
are based on an average realized gold to silver price ratio for the
relevant period.
CASH COSTS AND ALL-IN SUSTAINING COSTS
The Company discloses “Cash Costs” because it
understands that certain investors use this information to
determine the Company’s ability to generate earnings and cash flows
for use in investing and other activities. The Company believes
that conventional measures of performance prepared in accordance
with IFRS do not fully illustrate the ability of its operating
mines to generate cash flows. The measures, as determined under
IFRS, are not necessarily indicative of operating profit or cash
flows from operating activities.
The measure of Cash Costs and All-in Sustaining
Costs (AISC), along with revenue from sales, is considered to be a
key indicator of a company’s ability to generate operating earnings
and cash flows from its mining operations. This data is furnished
to provide additional information and is a non-GAAP financial
measure. The terms Cash Costs per GEO sold and AISC per GEO sold do
not have any standardized meaning prescribed under IFRS, and
therefore they may not be comparable to similar measures employed
by other companies. Non-GAAP financial measures should not be
considered in isolation as a substitute for measures of performance
prepared in accordance with IFRS and are not necessarily indicative
of operating costs, operating profit or cash flows presented under
IFRS.
Cash Costs include mine site operating costs
such as mining, processing, administration, production taxes and
royalties which are not based on sales or taxable income
calculations, but are exclusive of amortization, reclamation,
capital, development and exploration costs. The Company believes
that such measure provides useful information about its underlying
Cash Costs of operations. Cash Costs are computed on a weighted
average basis as follows:
- Cash Costs per GEO sold - The total
costs used as the numerator of the unitary calculation represent
Cost of Sales excluding DDA, net of treatment and refining charges.
These costs are then divided by GEO sold. Non-attributable costs
will be allocated based on the relative value of revenues for each
metal, which will be determined annually at the beginning of each
year.
AISC figures are calculated in accordance with a
standard developed by the World Gold Council (“WGC”) (a
non-regulatory, market development organization for the gold
industry). Adoption of the standard is voluntary and the cost
measures presented herein may not be comparable to other similarly
titled measures of other companies.
AISC per sold seeks to represent total
sustaining expenditures of producing and selling GEO from current
operations. The total costs used as the numerator of the unitary
calculation represent Cash Costs (defined above) and includes cost
components of mine sustaining capital expenditures including
stripping and underground mine development, corporate and mine-site
general and administrative expense, sustaining mine-site
exploration and evaluation expensed and capitalized and accretion
and amortization of reclamation and remediation. AISC do not
include capital expenditures attributable to projects or mine
expansions, exploration and evaluation costs attributable to growth
projects, income tax payments, borrowing costs and dividend
payments. Consequently, this measure is not representative of all
of the Company's cash expenditures. In addition, the calculation of
AISC does not include depletion, depreciation and amortization
expense as it does not reflect the impact of expenditures incurred
in prior periods.
- AISC per GEO sold - reflect
allocations of the aforementioned cost components on the basis that
is consistent with the nature of each of the cost component to the
GEO production and sales activities.
NET DEBT
The Company uses the financial measure "Net
Debt", which is a non-GAAP financial measure, to supplement
information in its Consolidated Financial Statements. The Company
believes that in addition to conventional measures prepared in
accordance with IFRS, the Company and certain investors and
analysts use this information to evaluate the Company’s
performance. The non-GAAP financial measure of net debt does not
have any standardized meaning prescribed under IFRS, and therefore
it may not be comparable to similar measures employed by other
companies. The data is intended to provide additional information
and should not be considered in isolation or as a substitute for
measures of performance prepared in accordance with IFRS.
Net Debt is calculated as the sum of the current
and non-current portions of long-term debt net of the cash and cash
equivalent balance as at the balance sheet date. A reconciliation
of Net Debt at June 30, 2020 and December 31, 2019 is provided in
Section 10: of the MD&A for the three months ended June 30,
2020, which has been filed on SEDAR.
NET FREE CASH FLOW AND FREE CASH FLOW BEFORE
DIVIDENDS AND DEBT REPAYMENT
The Company uses the financial measure "Net Free
Cash Flow" and "Free Cash Flow before Dividends and Debt
Repayments", which are non-GAAP financial measures, to supplement
information in its Consolidated Financial Statements. Net Free Cash
Flow and Free Cash Flow do not have any standardized meaning
prescribed under IFRS, and therefore may not be comparable to
similar measures employed by other companies. The Company believes
that in addition to conventional measures prepared in accordance
with IFRS, the Company and certain investors and analysts use this
information to evaluate the Company’s performance with respect to
its operating cash flow capacity to meet non-discretionary outflows
of cash or to meet dividends and debt repayments. The presentation
of Net Free Cash Flow and Free Cash Flow before Dividends and Debt
Repayments are not meant to be a substitute for the cash flow
information presented in accordance with IFRS, but rather should be
evaluated in conjunction with such IFRS measures.
Net free cash flow is calculated as cash flows
from operating activities adjusted for advance payments received
pursuant to metal purchase agreements and other cash flows not
related to current period production, less non-discretionary items
such as sustaining capital expenditures, interest paid, payment of
lease liabilities, and cash used in other financing activities. A
reconciliation of Net Free Cash Flow is provided in Section 10: of
the MD&A for the three months ended June 30, 2020 and
comparable period of 2019 which has been filed on SEDAR.
Free Cash Flow before Dividends and Debt
Repayment begins with Net Free Cash Flow and further adjusts for
discretionary and other items that affect cash flow available for
dividend and debt repayments such as expansionary and exploration
capital expenditures, cash flows used in other investing
activities, and the effect of foreign exchange on non-USD
denominated cash. A reconciliation of Free Cash Flow before
Dividends and Debt Repayment is provided below:
Reconciliation of Cash Flows from Operating Activities to non-GAAP
Measures |
Three Months Ended June 30 |
(In millions of United States
Dollars) |
2020 |
2019 |
Cash flows from operating activities |
$ |
92.2 |
|
$ |
147.6 |
|
Adjustments to operating cash flows: |
|
|
Amortization of deferred revenue (i) |
3.9 |
|
32.8 |
|
Temporary suspension and standby costs |
13.3 |
|
— |
|
Other incremental COVID-19 costs |
5.9 |
|
— |
|
Non-discretionary items related to the current period |
|
|
Sustaining capital expenditures |
(26.5 |
) |
(43.7 |
) |
Interest paid |
(22.5 |
) |
(12.0 |
) |
Payment of lease liabilities |
(4.0 |
) |
(2.2 |
) |
Cash used in other financing activities |
(2.0 |
) |
(3.0 |
) |
Net free cash
flow |
$ |
60.3 |
|
$ |
119.5 |
|
Discretionary and other items
impacting cash flow available for dividends and debt
repayments |
|
|
Expansionary and exploration capital expenditures |
$ |
(23.1 |
) |
$ |
(42.5 |
) |
Cash flows used in other investing activities |
(0.3 |
) |
(26.3 |
) |
Effect of foreign exchange of non-USD denominated cash |
1.3 |
|
(0.1 |
) |
Free cash flow available for dividends and debt repayments |
$ |
38.3 |
|
$ |
50.6 |
|
AVERAGE REALIZED METAL PRICES
The Company uses the financial measures "average
realized gold price" and "average realized silver price" which are
non-GAAP financial measures, to supplement in its Consolidated
Financial Statements. Average realized price does not have any
standardized meaning prescribed under IFRS, and therefore they may
not be comparable to similar measures employed by other companies.
The Company believes that in addition to conventional measures
prepared in accordance with IFRS, the Company and certain investors
and analysts use this information to evaluate the Company’s
performance vis-à-vis average market prices of metals for the
period. The presentation of average realized metal prices is not
meant to be a substitute for the revenue information presented in
accordance with IFRS, but rather should be evaluated in conjunction
with such IFRS measure.
Average realized metal price represents the sale
price of the underlying metal before deducting sales taxes,
treatment and refining charges, and other quotational and pricing
adjustments. Average realized prices are calculated as the revenue
related to each of the metals sold, i.e. gold and silver divided by
the quantity of the respective units of metals sold, i.e. gold
ounce and silver ounce. Reconciliations of average realized metal
prices to revenue are provided in Section 10: of the MD&A for
the three months ended June 30, 2020 and comparable period of 2019,
which has been filed on SEDAR.
ADJUSTED EARNINGS OR LOSS AND ADJUSTED EARNINGS
OR LOSS PER SHARE
The Company uses the financial measures
“Adjusted Earnings or Loss” and “Adjusted Earnings or Loss per
share” to supplement information in its Consolidated Annual
Financial Statements. The Company believes that in addition to
conventional measures prepared in accordance with IFRS, the Company
and certain investors and analysts use this information to evaluate
the Company’s performance. The presentation of adjusted measures
are not meant to be a substitute for Net Earnings or Loss or Net
Earnings or Loss per share presented in accordance with IFRS, but
rather should be evaluated in conjunction with such IFRS measures.
Adjusted Earnings or Loss and Adjusted Earnings or Loss per share
are calculated as net earnings excluding non-recurring items, items
not related to or having a disproportionate effect on results for a
particular periods and/or not directly related to the core mining
business such as (a) share-based payments and other compensation,
(b) unrealized foreign exchange (gains) losses related to
revaluation of deferred income tax assets and liabilities on
non-monetary items, (c) unrealized foreign exchange (gains) losses
related to other items, (d) unrealized (gains) losses on
derivatives, (e) impairment losses and reversals on mineral
interests and other assets, (f) deferred income tax expense
(recovery) on the translation of foreign currency inter-corporate
debt, (g) mark-to-market (gains)/ losses on other assets, (h)
one-time tax adjustments to historical deferred income tax balances
relating to changes in enacted tax rates, (i) reorganization costs,
(j) non-recurring provisions, (k) (gains) losses on sale of assets,
(l) any other non-recurring adjustments and the tax impact of any
of these adjustments calculated at the statutory effective rate for
the same jurisdiction as the adjustment. Non-recurring adjustments
from unusual events or circumstances are reviewed from time to time
based on materiality and the nature of the event or circumstance.
Earnings adjustments for the comparative period reflect both
continuing and discontinued operations.
The terms “Adjusted Earnings or Loss” and
“Adjusted Earnings or Loss per share” do not have a standardized
meaning prescribed by IFRS, and therefore the Company’s definitions
are unlikely to be comparable to similar measures presented by
other companies. Management uses these measures for internal
valuation of the core mining performance for the period and to
assist with planning and forecasting of future operations.
Management believes that the presentation of Adjusted Earnings or
Loss and Adjusted Earnings or Loss per share provide useful
information to investors because they exclude non-recurring items,
items not related to or not indicative of current or future
period's results and/or not directly related to the core mining
business and are a better indication of the Company’s profitability
from operations as evaluated by internal management and the board
of directors. The items excluded from the computation of Adjusted
Earnings or Loss and Adjusted Earnings or Loss per share, which are
otherwise included in the determination of Net Earnings or Loss and
Net Earnings or Loss per share prepared in accordance with IFRS,
are items that the Company does not consider to be meaningful in
evaluating the Company’s past financial performance or the future
prospects and may hinder a comparison of its period-to-period
profitability.
ADDITIONAL LINE ITEMS OR SUBTOTALS IN FINANCIAL
STATEMENTS
The Company uses the following additional line
items and subtotals in the Consolidated Financial Statements as
contemplated in IAS 1: Presentation of Financial Statements:
- Gross margin excluding depletion,
depreciation and amortization — represents the amount of revenue in
excess of cost of sales excluding depletion, depreciation and
amortization. This additional measure represents the cash
contribution from the sales of metals before all other operating
expenses and DDA, in the reporting period.
- Mine operating earnings —
represents the amount of revenue in excess of cost of sales
excluding depletion, depreciation and amortization and depletion,
depreciation and amortization.
- Operating earnings — represents the
amount of earnings before net finance income/expense and income tax
recovery/expense. This measure represents the amount of financial
contribution, net of all expenses directly attributable to mining
operations and overheads. Finance income, finance expense and
foreign exchange gains/losses are not classified as expenses
directly attributable to mining operations.
- Cash flows from operating
activities before income taxes paid and net change in working
capital — excludes the payments made during the period related to
income taxes and tax related payments and the movement from
period-to-period in working capital items including trade and other
receivables, other assets, inventories, trade and other payables.
Working capital and income taxes can be volatile due to numerous
factors, such as the timing of payment and receipt. As the Company
uses the indirect method prescribed by IFRS in preparing its
statement of cash flows, this additional measure represents the
cash flows generated by the mining business to complement the GAAP
measure of cash flows from operating activities, which is adjusted
for income taxes paid and tax related payments and the working
capital change during the reporting period.
- Cash flows from operating
activities before net change in working capital — excludes the
movement from period-to-period in working capital items including
trade and other receivables, other assets, inventories, trade and
other payables. Working capital can be volatile due to numerous
factors, such as the timing of payment and receipt. As the Company
uses the indirect method prescribed by IFRS in preparing its
statement of cash flows, this additional measure represents the
cash flows generated by the mining business to complement the GAAP
measure of cash flows from operating activities, which is adjusted
for the working capital change during the reporting period.
The Company’s management believes that their
presentation provides useful information to investors because gross
margin excluding depletion, depreciation and amortization excludes
the non-cash operating cost item (i.e. depreciation, depletion and
amortization), cash flows from operating activities before net
change in working capital excludes the movement in working capital
items, mine operating earnings excludes expenses not directly
associated with commercial production and operating earnings
excludes finance and tax related expenses and income/recoveries.
These, in management’s view, provide useful information of the
Company’s cash flows from operating activities and are considered
to be meaningful in evaluating the Company’s past financial
performance or the future prospects.
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