YAMANA GOLD INC. (TSX:YRI; NYSE:AUY) (“Yamana” or “the Company”) is
herein reporting its financial and operational results for the
third quarter 2018. Adjusted Earnings(1) excluding certain
items (see below), was $23.6 million or $0.02 per share. Net
loss from operations attributable to Yamana equityholders for the
three months ended September 30, 2018, was $81.3 million or $0.09
per share basic and diluted. This includes certain non-cash
and other items that may not be reflective of current and ongoing
operations reduced the Company’s net income by $104.9 million,
or $0.11 per share basic and diluted. Excluding these items
would result in Adjusted Earnings referred to above.
The most notable item is a non-cash accounting
carrying value reduction totalling $75.0 million on an after-tax
basis ($89.0 million on a gross basis) in respect of the sale of
the Gualcamayo mine (refer to the Company’s press release dated
October 25, 2018, announcing the sale for additional
details). A summary of these items is included in the table
on page 4 of this press release.
Gold equivalent ounce (“GEO”)(2) production from
Yamana Mines(3) for the third quarter was 279,464, including
246,788 ounces of gold and 2.55 million ounces of silver.
Total Yamana gold production(4) was 268,842
ounces. The Company also produced 28.6 million pounds
of copper.
The Company is increasing its guidance for
production to 920,000 ounces of gold, from the initially guided
900,000 ounces of gold for Yamana Mines based on the strong
production through the first nine months of 2018. Notably,
Cerro Moro, which had its first full quarter of commercial
production in the third quarter of 2018, provided significant
contributions to the overall performance with production run-rates
already at the levels needed to meet guidance both for 2018 and
2019 and, also with costs in line with the levels guided for both
years.
Full year silver production guidance is 7.55
million ounces compared to original guidance of 8.15 million
ounces. The reduction in silver production guidance is
attributable to lower than planned silver production from El
Peñón.
With higher-than-plan gold production in the
first nine months of 2018, GEO production for 2018 is expected to
exceed the initially guided 1.013 million ounces(5) as increased
gold production is forecast to more than offset lower-than-expected
silver production. When providing guidance the silver to gold
ratio was 72:1, which has since increased to a level closer to
80:1, however, the Company expects to meet original GEO guidance
despite this change.
Based on Chapada's strong performance to date
and forecast improvements into the fourth quarter of the 2018, the
Company is increasing full year guidance for copper production to
approximately 125 million pounds compared to 120 million pounds
initially guided.
Third quarter costs for Yamana Mines included
all-in sustaining costs (“AISC”) on a by-product basis (1) of $739
per GEO; cash costs on a by-product basis (1) of $482 per GEO; and
total cost of sales of $1,018 per GEO.
Co-product and by-product costs and AISC for
2018 are now expected to be below previously guided ranges.
All cost metrics are benefiting from higher production, operational
efficiencies and the impact of the depreciation of local
currencies. Refer to page 6 of this press release for
additional information on costs by metal on a co-product and
by-product basis.
Cash flows from operating activities for the
third quarter were $64.5 million and cash flows from operating
activities before net change in working capital (1) were $86.6
million. Cash flows in the third quarter were affected by
lower prices for gold and silver compared to the second quarter of
2018 and the third quarter of 2017, and lower prices for copper
compared to the second quarter of 2018.
Third quarter cash flows were net of
amortization of deferred revenue, $41.7 million of which were
related to deferred revenue recognized attributable to deliveries
under the Company’s copper advanced sales program during the
quarter. Deliveries under the Company's copper advanced sales
program began during the quarter and will continue until
mid-2019. If not for the timing difference of cash proceeds
attributable to this transaction, the Company’s cash flows from
operating activities before net change in working capital would
have been higher by those amounts during the quarter as
follows:
(In millions of US Dollars, unless otherwise
noted) |
For the three months ended |
|
Illustration of impact due to copper
advanced sales program |
March 31, 2018 |
June 30, 2018 |
September 30, 2018 |
December 31, 2018 (2) |
March 31, 2019(2) |
June 30, 2019(2) |
Cumulative impact |
Copper pounds to be delivered per contract
(millions) |
|
|
13.2 |
10.7 |
8.2 |
8.2 |
40.3 |
Cash flows from operating activities before
net change in working capital (1) |
$206.4 |
$157.5 |
$86.6 |
n/a |
n/a |
n/a |
|
Impact due to copper advanced sales
program |
(125.0) |
— |
41.7 |
33.7 |
25.1 |
24.9 |
— |
Cash flows from operating activities before
net change in working capital, normalized due to copper advanced
sales program (1) |
$81.4 |
$157.5 |
$128.3 |
n/a |
n/a |
n/a |
|
- A cautionary note regarding non-GAAP financial measures is
included in Section 10: Non-GAAP Financial Measures and Additional
Subtotals in Financial Statements of this MD&A. Adjusted
operating cash flows are adjusted for payments not reflective of
current period operations and advance payments received pursuant to
metal purchase agreements.
- For illustration purposes only; the Company intends to provide
information each subsequent period reflecting the impact due to
copper advanced sales program over its term.
The balance sheet as at September 30, 2018,
includes cash and cash equivalents of $120.7 million, and available
credit of $685.0 million, for total liquidity to the Company of
$805.7 million. Net debt(5) as at September 30, 2018, was
$1.66 billion.
(All amounts are expressed in United States Dollars unless
otherwise indicated.)
- Refers to a non-GAAP financial measure or an additional line
item or subtotal in financial statements as described at the end of
this press release. Reconciliations for all non-GAAP
financial measures are available at http://www.yamana.com/Q32018
and in Section 1 and Section 10 of the Company’s third quarter 2018
Management’s Discussion & Analysis, which has been filed on
SEDAR.
- Gold equivalent ounces include gold plus silver at a ratio of
78.0:1.
- Yamana Mines include Chapada, El Peñón, Canadian Malartic,
Minera Florida, Jacobina and Cerro Moro.
- Total production includes production from Gualcamayo.
- Includes gold plus silver at a ratio of 72:1 as per guidance
provided in press release on February 15, 2018.
Refers to a non-GAAP financial measure or an additional line
item or subtotal in financial statements as described at the end of
this press release. Reconciliations for all non-GAAP
financial measures are available at http://www.yamana.com/Q32018
and in Section 1 and Section 10 of the Company’s third quarter 2018
Management’s Discussion & Analysis, which has been filed on
SEDAR.
Summary of Certain Non-Cash and Other
Items Included in Net (Loss) Earnings and Adjusted Earnings per
Share
(In United States Dollars, per
share amounts may not add due to rounding, unaudited) |
Three Months Ended Sept.
30 |
2018 |
2017 |
Net (loss) earnings attributable to Yamana
equityholders |
(81.3) |
45.7 |
Non-cash unrealized foreign exchange
losses |
7.4 |
11.5 |
Share-based payments/mark-to-market on
deferred share units |
1.2 |
3.4 |
Mark-to-market on derivative contracts |
3.3 |
(3.3) |
Mark-to-market losses on investments |
2.8 |
0.3 |
Revision in estimates and liabilities
including contingencies |
(1.1) |
(3.2) |
Impairment of non-operational mineral
properties held for sale |
89.0 |
— |
Reorganization costs |
2.7 |
1.9 |
Other provisions, write-downs and
adjustments |
10.2 |
(29.5) |
Non-cash tax on unrealized foreign exchange
losses |
78.6 |
0.5 |
Income tax effect of adjustments and other
one-time tax adjustments |
(89.2) |
1.8 |
Total adjustments - increase to earnings
attributable to Yamana equityholders |
104.9 |
(16.6) |
Adjusted Earnings attributable to Yamana
equityholders (i) |
23.6 |
29.1 |
|
|
|
(Loss) earnings per share attributable to
Yamana equityholders |
(0.09) |
0.05 |
Total adjustments - increase to earnings
per share attributable to Yamana equityholders |
0.11 |
(0.01) |
Adjusted earnings per share attributable to
Yamana equityholders (i) |
0.02 |
0.04 |
(i) Refers to a non-GAAP financial measure or an additional line
item or subtotal in financial statements as described at the end of
this press release. Reconciliations for all non-GAAP
financial measures are available at http://www.yamana.com/Q32018
and in Section 1 and Section 10 of the Company’s third quarter 2018
Management’s Discussion & Analysis, which has been filed on
SEDAR.
For a full discussion of Yamana’s operational and financial
results, please refer to the Company’s third quarter 2018
Management’s Discussion & Analysis and Condensed Consolidated
Interim Financial Statements, which have been filed on SEDAR and
are also available on the Company’s website.
KEY STATISTICS
Key operating and financial statistics for the
third quarter 2018 are outlined in the following tables.
Financial Summary
(In millions of United
States Dollars except for shares and per share amounts, and per
metal amounts by unit, unaudited) |
Three Months Ended Sept.
30 |
2018 |
2017 (Restated) |
Revenue |
416.8 |
493.4 |
Cost of sales excluding depletion,
depreciation and amortization |
(233.5) |
(279.0) |
Depletion, depreciation and amortization
("DDA") |
(109.4) |
(108.0) |
Total cost of sales |
(342.9) |
(387.0) |
Mine operating earnings |
73.9 |
106.4 |
General and administrative expenses |
(20.7) |
(28.5) |
Exploration and evaluation expenses |
(2.5) |
(4.9) |
Net (loss)/earnings |
(81.3) |
41.5 |
Net (loss)/earnings attributable to Yamana
Gold equityholders |
(81.3) |
45.7 |
Net (loss)/earnings per share - basic and
diluted(1) |
(0.09) |
0.05 |
Cash flows from operating activities |
64.5 |
149.8 |
Cash flows from operating activities before
net change in working capital |
86.6 |
135.8 |
Revenue per ounce of gold |
1,183 |
1,264 |
Revenue per ounce of silver |
15.16 |
16.64 |
Revenue per pound of copper |
2.80 |
2.43 |
Average realized gold price per ounce |
1,213 |
1,278 |
Average realized silver price per
ounce |
15.14 |
16.66 |
Average realized copper price per
pound |
2.93 |
2.89 |
- For the three months ended September 30, 2018, the
weighted average numbers of shares outstanding, basic and diluted
was 949,114 thousand.
Cost Summary
|
Three Months Ended Sept.
30 |
Gold |
2018 |
2017 |
Total cost of sales per ounce sold - Yamana Mines |
$989 |
$950 |
Total cost of sales per ounce sold - Total Yamana |
$998 |
$999 |
Total cost of sales per ounce sold - consolidated |
$998 |
$1,022 |
Co-product cash costs per ounce produced - Yamana Mines |
$618 |
$608 |
Co-product cash costs per ounce produced - Total Yamana |
$650 |
$672 |
All-in sustaining co-product costs per ounce produced - Yamana
Mines |
$824 |
$834 |
All-in sustaining co-product costs per ounce produced - Total
Yamana |
$849 |
$874 |
By-product cash costs per ounce produced - Yamana Mines |
$484 |
$407 |
All-in sustaining by-product costs per ounce produced - Yamana
Mines |
$745 |
$668 |
Silver |
2018 |
2017 |
Total cost of sales per ounce sold |
$17.15 |
$14.15 |
Co-product cash costs per ounce produced |
$7.93 |
$10.53 |
All-in sustaining co-product costs per ounce produced |
$10.16 |
$13.70 |
By-product cash costs per ounce produced |
$5.96 |
$8.64 |
All-in sustaining by-product costs per ounce produced |
$8.89 |
$12.24 |
Copper |
2018 |
2017 |
Total cost of sales per copper pound sold |
$1.80 |
$1.63 |
Co-product cash costs per pound of copper produced |
$1.64 |
$1.35 |
All-in sustaining costs per pound of copper produced |
$2.03 |
$1.44 |
Production Summary
|
Three Months Ended Sept.
30 |
Gold Ounces |
2018 |
2017 |
Chapada |
27,080 |
38,782 |
El Peñón |
35,746 |
44,466 |
Canadian Malartic (50%) |
88,603 |
82,097 |
Jacobina |
35,368 |
34,838 |
Minera Florida |
21,909 |
23,089 |
Cerro Moro |
38,083 |
— |
Yamana Mines |
246,788 |
223,272 |
Gualcamayo |
22,054 |
34,183 |
TOTAL |
268,842 |
257,455 |
|
Three Months Ended Sept.
30 |
Silver Ounces |
2018 |
2017 |
El Peñón |
892,461 |
1,088,921 |
Cerro Moro |
1,656,550 |
— |
TOTAL |
2,549,011 |
1,088,921 |
|
Three Months Ended Sept. 30 |
Copper Pounds |
2018 |
2017 |
Chapada (millions of pounds) |
28.6 |
37.1 |
TOTAL (millions of pounds) |
28.6 |
37.1 |
THIRD QUARTER 2018 CONFERENCE CALL
The Company will host a conference call and
webcast on Friday, October 26, 2018, at 9:00 a.m. ET.
Third Quarter 2018 Conference Call
Details
Toll Free (North
America): |
|
1-866-223-7781 |
|
|
Toronto Local and
International: |
|
416-340-2218 |
|
|
Webcast: |
|
www.yamana.com |
|
|
|
|
|
|
|
Conference
Call Replay |
|
|
|
|
|
|
|
Toll Free (North
America): |
|
1-800-408-3053 |
|
|
Toronto Local and
International: |
|
905-694-9451 |
|
|
Passcode: |
|
7856108 |
|
|
The conference call replay will be available
from 12:00 p.m. ET on October 26, 2018, until 11:59 p.m. ET on
November 9, 2018.
Qualified Persons
Scientific and technical information contained
in this press release relating to operations at Chapada, Canadian
Malartic and Jacobina has been reviewed and approved by Yohann
Bouchard (Senior Vice President, Operations); and relating to
operations at El Peñón, Cerro Moro, Minera Florida and Gualcamayo
has been reviewed and approved by Esteban Chacon (Manager,
Technical Services). Each of Messrs. Bouchard and Chacon 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 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 the
production and exploration, the impact of declaring commercial
production, 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 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.
NON-GAAP FINANCIAL MEASURES AND ADDITIONAL LINE
ITEMS AND SUBTOTALS IN FINANCIAL STATEMENTS
The Company has included certain non-GAAP
financial measures to supplement its Condensed Consolidated Interim
Financial Statements, which are presented in accordance with IFRS,
including the following:
- Cash costs per ounce produced on a co-product and by-product
basis, for gold and silver;
- Co-product cash costs per pound of copper produced;
- All-in sustaining costs per ounce produced on a co-product and
by-product basis, for gold and silver;
- All-in sustaining co-product costs per pound of copper
produced;
- Net debt;
- Average realized price per ounce of gold/silver sold;
- Average realized price per pound of copper sold; and
- Adjusted earnings or loss and Adjusted earnings or loss per
share.
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.
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. Cash costs
figures are calculated in accordance with a standard developed by
The Gold Institute, which was a worldwide association of suppliers
of gold and gold products and included leading North American gold
producers. The Gold Institute ceased operations in 2002, but
the standard remains the generally accepted standard of reporting
cash costs of production in North America. Adoption of the standard
is voluntary and the cost measures presented herein may not be
comparable to other similarly titled measures of other
companies.
The measure of cash costs, 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 co-product and by-product cash costs per ounce of gold or
silver produced, co-product cash costs per pound of copper
produced, co-product and by-product AISC per ounce of gold or
silver produced and co-product AISC per pound of copper produced 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 is not necessarily indicative
of operating costs, operating profit or cash flows presented under
IFRS.
By-Product and Co-Product Cash
CostsCash 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 the Company’s underlying cash
costs of operations. Cash costs are computed on a weighted
average basis, net of by-product sales and on a co-product basis as
follows:
Cash costs of gold and silver on a
by-product basis - shown on a per ounce basis.
- The attributable cost for each metal is calculated net of
by-products by applying copper and zinc net revenues, which are
incidental to the production of precious metals, as a credit to
gold and silver ounces produced, thereby allowing the Company’s
management and stakeholders to assess net costs of precious metal
production. These costs are then divided by gold and silver
ounces produced.
Cash costs of gold and silver on a
co-product basis - shown on a per ounce basis.
- Costs directly attributed to gold and silver will be allocated
to each metal. Costs not directly attributed to each metal will be
allocated based on the relative value of revenues which will be
determined annually.
- The attributable cost for each metal will then be divided by
the production of each metal in calculating cash costs per ounce on
a co-product basis for the period.
Cash costs of copper on a co-product
basis - shown on a per pound basis.
- Costs attributable to copper production are divided by
commercial copper pounds produced.
By-Product and Co-Product
AISCAll-in sustaining costs per ounce of gold and silver
produced seeks to represent total sustaining expenditures of
producing gold and silver ounces from current operations, based on
co-product costs or by-product costs, including cost components of
mine sustaining capital expenditures, corporate general and
administrative expense excluding stock-based compensation, and
exploration and evaluation expense. All-in sustaining costs
do not include capital expenditures attributable to projects or
mine expansions, exploration and evaluation costs attributable to
growth projects, income tax payments, financing costs and dividend
payments. Consequently, this measure is not representative of
all of the Company's cash expenditures. In addition, the
calculation of all-in sustaining costs does not include depletion,
depreciation and amortization expense as it does not reflect the
impact of expenditures incurred in prior periods.
All-in sustaining co-product costs reflect
allocations of the aforementioned cost components on the basis that
is consistent with the nature of each of the cost component to the
gold, silver or copper production activities. Similarly,
all-in sustaining by-product costs reflect allocations of the
aforementioned cost components on the basis that is consistent with
the nature of each of the cost component to the gold and silver
production activities but net of by-product revenue credits from
sales of copper and zinc.
A reconciliation of total cost of sales of gold,
silver and copper sold (cost of sales excluding depreciation,
depletion and amortization, plus depreciation, depletion and
amortization) per the Consolidated Financial Statements to
co-product cash costs of gold produced, co-product cash costs of
silver produced, co-product cash costs of copper produced,
co-product AISC of gold produced, co-product AISC of silver
produced, co-product AISC of copper produced, by-product cash costs
of gold produced, by-product cash costs of silver produced,
by-product AISC of gold produced and by-product AISC of silver
produced is provided in Section 10: of the MD&A for the
three and nine months ended September 30, 2018 and comparable
periods of 2017 which has been filed on SEDAR.
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 is provided in Section 10: of the
MD&A as at September 30, 2018, and December 31, 2017 which has
been filed on SEDAR.
AVERAGE REALIZED METAL
PRICES
The Company uses the financial measures "average
realized gold price", "average realized silver price" and "average
realized copper price", which are non-GAAP financial measures, to
supplement information in its Consolidated Financial
Statements. Average realized price does not have any
standardized meaning prescribed under IFRS, and therefore these
measures 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, silver and
copper, divided by the quantity of the respective units of metals
sold, i.e. gold ounce, silver ounce and copper pound.
Reconciliations of average realized metal prices to revenue
provided in Section 10: of the MD&A for the three and nine
months ended September 30, 2018 and comparable periods of 2017,
which has been filed on SEDAR.
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.
- 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.
- Cash flows from operating activities before net change
in working capital, normalized due to copper advanced sales
program —excludes the impact due to the copper advanced
sales program payments and deliveries that results in timing
differences between the cash payment and delivery.
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.
ADJUSTED EARNINGS OR LOSS AND ADJUSTED
EARNINGS OR LOSS PER SHARE FROM CONTINUING OPERATIONS
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 available-for-sale
securities and 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.
Reconciliations of Adjusted Earnings to net
earnings is provided in the body of the press release dated October
25, 2018.
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