YAMANA GOLD INC. (TSX:YRI; NYSE:AUY; LSE:AUY) (“Yamana” or “the
Company”) is herein reporting its financial and operational results
for the third quarter of 2021. With strong results from operations,
the Company remains well positioned to achieve guidance for the
year of 1,000,000 gold equivalent ounces ("GEO")(2), underpinned by
momentum at Canadian Malartic, Jacobina and El Peñón, as well as a
strong fourth quarter performance expected at El Peñón and Cerro
Moro, as previously guided.
THIRD QUARTER
HIGHLIGHTS
Financial Results - Strong Cash Flows, Increase to Mine
Operating Earnings
- Net earnings(3) were $27.0 million
or $0.03 per share basic and diluted. Adjusted net earnings(1, 3)
were $69.7 million or $0.07 per share basic and diluted.
- Mine operating earnings were $154.0
million and increased quarter-over-quarter by 8%.
- Cash flows from operating
activities were $190.6 million and cash flows from operating
activities before net change in working capital(1) were $202.9
million, representing sharp increases from second quarter results
of 24% and 21% respectively.
- Free cash flow before dividends and
debt repayments(1) was $81.6 million and increased 59%
quarter-over-quarter.
- Cash and cash equivalents totalled
$460.2 million(8) and the Company has $750.0 million in available
credit.
|
Three months ended September 30 |
(In millions of United States Dollars) |
2021 |
2020 |
Net Free Cash Flow (1) |
$ |
139.2 |
|
$ |
185.5 |
|
Free Cash Flow before Dividends and Debt Repayments (1) |
$ |
81.6 |
|
$ |
156.9 |
|
(See end notes on at end of press release)
Operating Results - Standout Quarters from Canadian
Malartic, Jacobina and El Peñón, Exceptional
Quarter from Cerro Moro
- As previously guided, production is
weighted at 53% for the second half of the year, with the fourth
quarter being the strongest quarter, expected to exceed 270,000
GEO(2) produced. Consequently, with a strong third quarter, the
Company remains well positioned to achieve guidance for the year of
1,000,000 GEO(2), underpinned by the momentum at Canadian Malartic,
Jacobina and El Peñón, as well as a strong fourth quarter
performance expected at El Peñón and Cerro Moro.
- GEO(2) production was 256,464,
including 225,556 ounces of gold, and 2.27 million ounces of
silver. This marks the second highest all-time GEO(2) production
total for Yamana mines(4), on the back of exceptional gold
production. The Company expects record-breaking GEO(2) production
in the fourth quarter, as gold is expected to reach an all-time
quarterly high.
- Standout gold production from
Canadian Malartic with 86,803 ounces, Jacobina with 47,373 ounces
and El Peñón with 50,229 ounces. Further, Cerro Moro had an
exceptional quarter producing 19,261 ounces of gold which increased
approximately 33% from the second quarter and with stronger
production expected in the fourth quarter from higher grades.
- Silver production was 2,273,183
ounces with both El Peñón and Cerro Moro recording their highest
quarterly silver production totals of the year, with stronger
production expected in the fourth quarter from higher grades at
both mines anticipated.
- El Peñón third quarter GEO(2)
production was 62,545, a 19% increase above its second quarter
GEO(2) production. As previously guided, El Peñón is well
positioned to meet its annual production guidance with
approximately 31% of annual gold production for the operation
expected for the fourth quarter.
- Cerro Moro produced 37,853 GEO(2)
during the quarter with 98,406 GEO(2) produced year to date, a
significant increase versus the comparative prior year-to-date
period of 89,472 GEO(2).
- Minera Florida produced 21,890
ounces of gold, and is expected to meet its annual production
guidance with a strong fourth quarter underpinned by a strong start
in October.
- Cash costs(1) and all-in sustaining
costs ("AISC")(1) for the quarter were $702 and $1,041 per GEO(2),
respectively, which on a consolidated basis were lower than the
second quarter and the comparative period. The Company recorded
standout September performances at several mines with per GEO(2)
costs for those mines during the month being the lowest month of
the quarter by a considerable margin. Further, consolidated AISC(1)
on a per GEO(2) basis for September was approximately 10% lower
than the quarterly average, which positions the Company to deliver
its lowest per GEO(2) cost of the year during the fourth
quarter.
- Year-to-date costs have had a modest impact from inflationary
pressures, which are expected to continue during the fourth
quarter. For the full year, the Company expects upwards of $20 per
GEO(2) of inflationary pressure on costs not originally anticipated
at the start of the year.(2) Nonetheless, costs for the fourth
quarter will be well below the average costs experienced on a
year-to-date basis due to the strong production anticipated.
Strengthening the Company's Financial
Position, Improving Financial Resilience and Increasing Financial
Flexibility
- Yamana believes that a strong
financial position and financial resilience also requires a
manageable debt maturity profile, and the Company has taken
advantage of current market conditions to improve terms of its
outstanding notes by increasing tenor and reducing carrying costs.
As such, during the quarter, Yamana completed its offering of $500
million aggregate principal amount of its 2.630% Senior Notes due
August 15, 2031.
- Yamana used the net proceeds from
the offering, together with cash on hand, to fund the redemptions
of its 4.76% Series C Senior Notes due 2022, its 4.91% Series D
Senior Notes due 2024, its 4.78% Series B Senior Notes due 2023 and
its 4.950% Senior Notes due 2024.
- The completion of the offering of
the Senior 2031 Notes and the subsequent redemption of the
shorter-term maturity notes represents the culmination of
significant debt reduction efforts initiated in 2019. Yamana’s
outstanding gross debt was reduced by $222.1 million during the
quarter to $772.8 million, which compares to $1.85 billion
outstanding in the second quarter of 2019.
- Interest on the Senior 2031 Notes
is set at 2.630% as compared to a weighted average interest of
4.83% for the existing notes, which reduces the Company’s annual
interest carrying charges by approximately $21.6 million per annum
compared to the second quarter of 2021, or roughly $60 million per
annum lower compared to the second quarter of 2019.
Capital Returns
- On July 29, 2021, the Company
announced a normal-course issuer bid (“NCIB”) to purchase up to
48,321,676 common shares of the Company, representing up to 5% of
the Company’s current issued and outstanding common shares, in
open-market transactions through the facilities of the Toronto
Stock Exchange (“TSX”), the New York Stock Exchange (the “NYSE”)
and alternative Canadian trading systems. The Company believes that
the market price of its common shares does not currently represent
their full value and growth prospects and views purchases of common
shares as an attractive investment comparable to its investments in
its portfolio of exploration and development stage assets. During
the quarter, the Company repurchased, and subsequently cancelled, a
total of 3,321,276 common shares for approximately C$18 million
since the initiation of the share repurchase program.
Health, Safety and Sustainable
Development
- The Company's Total Recordable
Injury Rate was 0.68(6) for the first nine months of 2021. This is
an increase from the full year 2020 result and primarily reflects
low-energy incidents. In response, the company initiated campaigns
across all operations focused on reducing the most common injuries
that have occurred so far in 2021.
- As of October 5, 2021 approximately
95%(7) of our employees have received at least one dose of a
COVID-19 vaccine, with approximately 60%(7) being fully vaccinated,
with the expectation of a company-wide double-vaccination rate of
over 90%(7) expected in the fourth quarter.
- The Company completed Human Rights
Risk Assessments at all sites in line with the Voluntary Principles
on Security and Human Rights.
- The Company approved a
Responsibility Policy covering all HSSD elements, as well as 8
supporting Statements of Commitment covering Human Rights, Safety
and Health, Environmental Protection, Social Performance, Tailings
Management, Government Relations, Security and Common
Elements.
- The Company established its
emissions baseline year (2019) and began evaluation of three
science-based temperature targets; a 2°C scenario, a well-below 2°C
scenario and a 1.5°C scenario compared to pre-industrial levels.
The Company also performed climate risk, adaptation and abatement
workshops with each operation to progress on establishing
preliminary, operations-specific roadmaps that describe abatement
projects, estimated costs and schedules. These actions will help
ensure that its long-range GHG reduction efforts are supported by
practical and operationally focused short, medium and long-term
actions to achieve the targets.
OPERATING RESULTS SUMMARY
|
Three months ended September 30, 2021 |
GoldProduction |
SilverProduction |
GEO(2)
Production |
Cash Cost(1)per
GEO(2) Sold |
AISC(1)per
GEO(2) Sold |
Canadian Malartic (50%) |
86,803 |
— |
86,803 |
$687 |
$887 |
Jacobina |
47,373 |
— |
47,373 |
$518 |
$722 |
Cerro Moro |
19,261 |
1,370,486 |
37,853 |
$966 |
$1,422 |
El Peñón |
50,229 |
902,698 |
62,545 |
$631 |
$885 |
Minera Florida |
21,890 |
— |
21,890 |
$917 |
$1,239 |
Total |
225,556 |
2,273,183 |
256,464 |
$702 |
$1,041 |
|
For the three months ended September 30, 2020 |
GoldProduction |
SilverProduction |
GEO(2)
Production |
Cash Cost(1)per
GEO(2) Sold |
AISC(1)per
GEO(2) Sold |
Canadian Malartic (50%)(5) |
76,398 |
— |
76,398 |
$736 |
$973 |
Jacobina |
44,080 |
— |
44,080 |
$565 |
$754 |
Cerro Moro |
18,818 |
1,679,342 |
40,380 |
$849 |
$1,307 |
El Peñón |
39,322 |
1,360,999 |
56,454 |
$665 |
$906 |
Minera Florida |
23,153 |
— |
23,153 |
$936 |
$1,210 |
Total |
201,772 |
3,040,341 |
240,466 |
$723 |
$1,096 |
OPERATIONS UPDATE
Canadian Malartic
Canadian Malartic had a strong third quarter in
line with plan, after an exceptional second quarter due to higher
grade, delivering quarterly production that exceeded plan. Third
quarter results benefited from higher grade and recoveries compared
to the third quarter of 2020 from ore deeper in the Malartic pit
with overall production greatly exceeding the comparative period by
14% due to the prior year's COVID-related temporary challenges.
Throughout the course of 2021, the mine continued the transition
from the Malartic pit to the Barnat pit. Canadian Malartic expects
to complete the final 7,000 meters of topographic drilling at
Barnat during October, while overburden removal was completed
earlier this year as planned. As previously disclosed, the Company
expects that the higher strip ratio seen in Barnat will normalize
over the following years as the mine sequencing progresses.
Additionally, the Company is undertaking the required pit pushback
to obtain the optimized ounces as per the revised open pit design,
which resulted in an increase of approximately 150,000 ounces of
gold mineral reserves on a 50% basis.
Cash costs(1) of $687 per GEO(2) and AISC(1) of
$887 per GEO(2) were lower year over year, a result of higher
production and fixed production costs being distributed over more
ounces in the current quarter.
Jacobina
Jacobina had an exceptional third quarter and
exceeded its production plan with quarterly gold production of
47,373 ounces, closely approximating the record-setting production
established in the second quarter of 2021. Mill throughput for the
quarter was well above plan, with recovery rates and grade as
expected.
The Jacobina processing plant continues to
exceed expectations, at nearly 7,500 tonnes per day ("tpd") over
the full third quarter of 2021, a 4% increase compared to the
previous quarter. This aligns with the previously mentioned target
throughput of 7,500 tpd for the second half of 2021, which
represents the permitted operational processing rate. A new daily
throughput record of 8,842 tonnes was achieved in September during
a trial to test the processing plant capacity. Mining rates
increased by 9% compared to the previous quarter, with the
underground mine on track to sustain 7,500 tpd by year end. The
ongoing success reflects a simplified approach to complete the
Phase 2 expansion, which will be achieved through incremental
debottlenecking of the processing plant and tailings management
system, combined with other operational improvements and without
requiring the installation of an additional ball mill. This
approach is expected to significantly reduce capital expenditures,
improve energy efficiency, and de-risk the project execution.
Third quarter cash costs(1) of $518 per GEO(2)
and AISC(1) of $722 per GEO(2) were better than annual cost
guidance ranges and lower than the comparative prior year period, a
result of higher production from the aforementioned increased mill
throughput, and fixed production costs being distributed over more
ounces in the current quarter. September was a strong month for
Jacobina with the lowest per GEO(2) costs of the quarter for the
operation, and AISC(1) on a per GEO(2) basis approximately 12%
lower than the average quarterly cost. Underground mine development
work is in line with the mine plan at 1,500 metres per month, to
sustain the current production rates and operational
flexibility.
Cerro Moro
Cerro Moro third quarter GEO(2) production was
37,853, with gold production of 19,261 ounces and silver production
of 1,370,486 ounces, a 50% increase to the second quarter's
production. Silver production of 1,370,486 ounces increased by 86%
compared to the second quarter, and is expected to further increase
during the fourth quarter. In the third quarter, gold and silver
recoveries were impacted by high clay content causing sedimentation
and clarification challenges in the countercurrent decantation
("CCD") circuit. Actions to improve the CCD circuit performance
include implementation of a feed blending control system, drilling
of new wells to improve the processing water quality, and trials of
new and improved reagents. As a result, gold and silver recoveries
improved in the second half of September and are expected to
average approximately 93% in the fourth quarter.
The opening of more mining faces and resultant
increase in mill feed coming from higher-grade underground ore,
continued in the quarter with Zoe contributions becoming more
prevalent. This trend will continue during the fourth quarter,
expected to be the strongest production quarter of the year, with
most of the ore to plant coming from Escondida Far West, Zoe,
Escondida Central and Escondida West. Over the past year, Cerro
Moro has optimized the operation of the processing plant to
increase daily throughput to approximately 1,100 tpd, a rate
experienced in the first quarter. The mine saw linear development
rates continue to improve during the quarter; these improvements
will continue throughout the remainder of the year, further
supporting the much higher second half of 2021 production
profile.
Cash costs(1) and AISC(1) during the third
quarter were $966 per GEO(2), and $1,422 per GEO(2), respectively.
September was a strong month for Cerro Moro with the lowest per
GEO(2) costs of the quarter for the operation, and AISC(1) on a per
GEO(2) basis approximately 14% lower than the quarterly cost. With
increased fourth quarter production, the Company expects costs to
be commensurately lower than those observed on a year-to-date
basis.
As previously disclosed, the Company is
evaluating construction of a heap leach circuit, a lower-cost
processing alternative, that would facilitate the processing of
lower-grade mineralization, potentially extending Cerro Moro's mine
life. The evaluation is in the early stages with a preliminary
study completed, and metallurgical lab testing currently underway.
Yamana has submitted several 800 kg samples to a well-respected
laboratory in Canada to run column tests, to evaluate the potential
for heap leach recovery from near surface vein mineralization.
Samples were collected from prior quarter diameter drill holes and
surface trench saw-cut bedrock samples. Preliminary leach test
results indicate that five zones returned results suggesting
recoveries of over 70% could be achieved. Studies are ongoing and
full results with reagent consumption and effects of grain size on
recovery will be obtained before year end. The results indicate
good potential for leaching of both oxidized near-surface vein
material, zones with hypogene oxides (hematite) and some low
sulphide gold-bearing veins. Following the positive preliminary
metallurgical results, Yamana has planned and approved a dedicated
and targeted oxides drilling program with the objective of defining
a heap-leachable inventory of 5 Mt by the end of 2022. In the first
half of 2021, Yamana also completed a scoping study for a plant
expansion using a more energy-efficient comminution configuration.
The study indicated that a doubling of plant throughput to
approximately 2,200 tpd could potentially be achieved with modest
capital investment and would significantly reduce processing costs
per tonne. During the fourth quarter, Yamana will undertake further
metallurgical testing to confirm the assumption of the scoping
study before advancing to the next level of engineering.
El Peñón
El Peñón had a strong third quarter, with GEO(2)
production of 62,545, including gold production of 50,229 ounces,
and 902,698 ounces of silver. GEO(2) production greatly exceeded
second quarter GEO(2) production of 52,607 by 19%. The higher grade
La Paloma, Quebrada Colorada Sur and Pampa Campamento Deep sectors
zones came into production during the third quarter, contributing
to higher planned production which will continue in the fourth
quarter, as previously guided. The Company continues to expect that
the strong second half of 2021 will account for approximately 57%
of gold and silver production at El Peñón; silver-rich zones will
be mined in the fourth quarter. The first step to unlock the
opportunity to leverage the existing processing capacity at the
mine and increase production is to establish additional mining
sectors. The development of La Paloma, Quebrada Colorada Sur and
Pampa Campamento Deep is an important component of that strategy;
accessing those new areas will provide increased mining
flexibility.
Cash costs(1) of $631 per GEO(2) was in line
with guidance and lower than the comparative period, while AISC(1)
of $885 per GEO(2) was lower than the comparative period, as a
result of the current period's planned and previously disclosed
higher development rates that have facilitated access to additional
mining areas in the second half of the year. September was a strong
month for El Peñón with the lowest per GEO(2) costs of the quarter
for the operation, with AISC(1) on a per GEO(2) basis approximately
12% lower than the quarterly average, which positions the Company
to deliver its lowest cost of the year during the fourth quarter.
With the ongoing focus on increasing mine development rates, El
Peñón has increased the number of available underground production
zones which are expected to support the current level of mine
production and feed grades going forward. Mine development is
currently occurring at a rate that exceeds 3,000 metres per month.
Costs per GEO(2) have improved compared to the first half of the
year, and are anticipated to further improve in the fourth quarter
to commensurately higher production.
Minera Florida
Minera Florida had gold production of 21,890
ounces during the third quarter, and a strong start to the fourth
quarter, and due to mine sequencing is expected to meet or exceed
plan. Linear development, to increase mining flexibility, continues
to advance ahead of plan. Minera Florida is already seeing improved
operational efficiency and reduced haulage distances as a result of
re-establishing the Marisol ore pass from the 850 level to the 620
level. Widening of the final ore pass at Fantasma/Polvorin is
underway and scheduled for completion by the end of October, which
is expected to further reduce haulage distances and possibly allow
for optimizing the hauling fleet. Internalization of mining
activities, ongoing optimization of the haulage infrastructure, and
increasing disposal storage of development waste into underground
voids will further improve mine productivity going forward. A
review of the processing plant in the first quarter identified
several opportunities to increase recovery. Management is
prioritizing these opportunities, focusing on the initiatives that
can be implemented quickly with minimal investment.
Consistent with the 10-year outlook, the plant
de-bottlenecking study and preparation of the environmental and
social impact assessment ("ESIA") are advancing on schedule, with
the objective to increase throughput from 74,500 to 100,000 tonnes
per month, which would increase annual gold production to
approximately 120,000 ounces. Preliminary studies indicate that the
capacity of the processing plant can be increased to approximately
90,000 tonnes per month with incremental adjustments. An upgrade of
the crushing circuit would be required to achieve 100,000 tonnes
per month.
Cash costs(1) and AISC(1) during the third
quarter were $917 per GEO(2), and $1,239 per GEO(2) respectively.
Costs are expected to improve in the fourth quarter due to higher
grades, and higher silver and zinc by-product credits. In addition
to the aforementioned plant improvements, the Company completed a
processing plan earlier in the year, which identified opportunities
to implement cost control initiatives; these are currently under
consideration and may positively impact future costs.
CONSTRUCTION, DEVELOPMENT AND ADVANCED
STAGE PROJECTS
The Wasamac Project Update and Positive
Exploration Results
On July 19, 2021, the Company announced the
results of several studies on the Company’s wholly-owned Wasamac
project in the Abitibi-Témiscamingue Region of Quebec, Canada,
intended to corroborate diligence reviews conducted by the Company
on its purchase of the project in early 2021, and update a
historical feasibility study. These studies updated the baseline
technical and financial aspects of the Wasamac project that now
underpin the decision to advance the project to production. The
results from all studies were consistent with the Company’s
conclusions in its diligence reviews relating to the purchase of
Wasamac and, in some cases, are better than the conclusions from
those reviews.
Yamana expects to receive all approvals, permits
and certificates of authorization required for project construction
by the third quarter of 2024. Construction time to processing plant
commissioning is estimated at approximately two-and-a-half years,
with the underground crusher and conveyor system scheduled for
commissioning six months later. First gold production is scheduled
for the fourth quarter of 2026, with commercial production
anticipated in the fourth quarter of 2027. The Company has already
identified opportunities to accelerate the production ramp-up and
decrease the processing plant construction timeline, which would
improve significantly over the feasibility study’s base case
production profile. To increase the level of confidence in
metallurgical and geomechanical assumptions, Yamana is considering
the execution of an underground bulk sample, which could commence
earlier on a separate environmental permit. The bulk sample would
require ramp access to the underground mineralization.
Exploration activities continued to ramp up at
Wasamac during the third quarter, including continued exploration
and geotechnical drilling, and initiation of infill drilling on the
Wasamac resource on September 14 with three drill rigs currently
operating and a fourth rig planned to be added later in the year.
Results are pending for infill holes completed to date.
Exploration drilling during the third quarter
totaled 3,648 metres, including 3,084 metres in 6 holes testing the
newly defined West 117 Wasa shear target concept and 564 metres in
one drill hole testing a magnetic anomaly (Wildcat South) south of
the Wildcat target. Both targets were generated from a recently
completed, property wide high-resolution (25 metre)
helicopter-borne magnetic survey covering 2,992 line-kilometres.
The initial drill hole completed at the South Wildcat target,
located approximately 300 metres south of Wildcat, intersected a 30
metre wide chlorite-sericite altered, pyritic shear zone. Drilling
completed at West 117 Wasa intersected mostly narrow,
rhyolite-hosted shear zones. Assays are pending for these drill
holes. In addition to infill and exploration drilling, geotechnical
drilling continued in the third quarter, with completion of 1,758
metres in four drill holes. Drilling year to date on the Wasamac
property totals 13,087 metres in 32 holes.
Exploration results received in the third
quarter, included 3,112 metres in 13 drill holes completed at the
Wildcat target, where visually positive intervals in most holes,
with visible gold in two drill holes, has been reported. Highlights
from these initial drill holes at Wildcat were previously reported
in the September 13, 2021 press release 'Yamana Gold Reports
Positive Initial Exploration Drill Results at Wasamac; Provides an
Update on Its Generative Exploration Program'.
Additional ongoing exploration work completed
during the third quarter included integration of the
high-resolution magnetic survey data over the Wasamac property with
similar survey data covering the recently acquired Francoeur
property, west of Wasamac, as part of an ongoing program of
integration of exploration data to form a combined
Wasamac-Francoeur exploration platform on which to advance drill
targeting. Additional ongoing work included sampling of select,
previously unassayed, historic drill hole intervals hosting
stockwork style mineralization, to assess for their potential to
contribute to the mineral resource base.
There is excellent potential for significant
future exploration success and mineral resource conversion, with
the Wasamac deposit remaining open at depth and along strike. The
planned infill and exploration drilling campaign has the potential
to generate additional mineral reserves that would sustain a
200,000-ounce production level for an extended period and support a
strategic mine life of more than 15 years. Preliminary plans
include 120,000 metres of drilling in 2021 and 2022 with a budget
of $15 million over the two-year period.
The Wasamac project further solidifies the
Company’s long-term growth profile with a top-tier gold project in
Quebec’s Abitibi-Témiscamingue Region, where Yamana has deep
operational and technical expertise and experience. Yamana’s
average annual gold production in Quebec, including production from
Wasamac and the Odyssey underground at Canadian Malartic, has the
potential to increase to approximately 500,000 ounces by 2028, and
continue at this level through 2041.
The Odyssey Project Advancing on
Schedule
Yamana and Agnico Eagle Mines Ltd., who each
hold a 50% interest in the Canadian Malartic General Partnership,
owner and operator of the Canadian Malartic mine, announced a
positive construction decision for the Odyssey underground project
at Canadian Malartic on February 11, 2021.
Several key processes and activities progressed
as planned during the third quarter:
- Underground ramp development is
ahead of schedule with 1,118 linear metres of development in 2021
now completed (for a total of 2,054 metres including lateral
development).
- Development of the exploration ramp
is anticipated to take approximately two years to complete, with
the first drilling platform established in early July. The platform
provides diamond drilling access to the upper part of Odyssey south
(between surface and 160 meters of depth) and infilled drilling of
the mineralization.
- Underground construction is
progressing well, with explosives storage and dining rooms on
schedule.
- Odyssey human resources ramp-up is
on target, with over 300 employees and contractors hired in a
variety of functions including mine development, surface
construction and resource development.
- Construction of the left-turn lane
on Provincial Highway 117 has been completed.
- Decree amendment and the mining
lease process continue to be on target for the first quarter of
2022 and fourth quarter of 2022 respectively.
- During the second quarter, the
shaft collar construction was completed. The headframe's slipform
pour started in September, with structural steel installation
expected to be initiated in November, and completed during the
fourth quarter. The hoist room construction and interior design are
expected to be completed within one year.
- Shaft sinking is expected to start
October 2022, with the sinking hoist expected to be delivered
during the second quarter of 2022, on schedule. Lastly, the
auxiliary hoist is under construction and is also expected to be
delivered as planned during the second quarter of 2022.
As Canadian Malartic transitions from open pit
to underground mining, underground production will offset a
significant portion of the corresponding decline in open pit
production. Production from open pit mining from 2021 through 2028
is expected to be approximately 3.9 million ounces (100% basis)
with annual production trending lower on a yearly basis to
approximately 123,000 ounces (100% basis) by 2028. Underground
production will start in 2023 and increase yearly, adding
approximately 932,000 ounces (100% basis) during the 2023-2028
construction period—at cash costs(2) of $800 per ounce—including
approximately 385,000 ounces (100% basis) by 2028.
Net proceeds from the sale of the 932,000 ounces
(100% basis) of underground production would significantly reduce
the external cash requirements for the construction of the Odyssey
project which, assuming the gold price used in the financial
analysis for the project of $1,550 per ounce, would reduce the
projected capital requirements in half.
Jacobina Processing Capacity
Optimization and Expansion
The Company has made significant progress on the
Phase 2 expansion to increase daily throughput to 8,500 tpd and
raise production to 230,000 ounces per year. The Company expects to
achieve the Phase 2 rate of 8,500 tpd by implementing a simplified
approach of debottlenecking and incremental operational
improvements, without requiring the installation of an additional
ball mill. This approach is expected to significantly reduce
capital expenditures, increases energy efficiency, and de-risk the
project. As such, capital costs for the plant expansion are
expected to be in the range of $15 million to $20 million,
significantly lower than the original planned capital estimated in
the Phase 2 pre-feasibility study. Successful trials conducted at
Jacobina during the prior quarters demonstrate that the processing
plant can consistently and reliably achieve a daily operating
throughput above 8,000 tonnes per day, significantly higher than
nameplate capacity. A new daily throughput record of 8,842 tonnes
was achieved in September during a trial to test the processing
plant capacity. Permitting for Phase 2 is ongoing with expected
completion in mid-2022. Subject to successful completion of
required permit modifications, Jacobina would begin processing at
the new Phase 2 rate by the second half of 2023.
As previously presented in the Company’s 10-year
production outlook, Yamana is evaluating a further expansion at
Jacobina to increase throughput to 10,000 tpd, referred to as Phase
3. Engineering for the Phase 3 expansion to 10,000 tpd will advance
in parallel with the Phase 2 expansion, and the processing model
will continue to be updated to integrate with operational data from
Phase 2, with a feasibility study for Phase 3 scheduled for
completion in 2023. The Company is pursuing the Phase 3 expansion
as part of a comprehensive plan which aligns the processing plant,
underground mine, tailings strategy, and permitting, while managing
capital expenditure and cash flow.
The Company is further evaluating the strategic
options and direction related to Jacobina and the significant
exploration that is available along the greenstone belt in which
the mine is located. Jacobina is being envisioned as a complex of
multiple mines, and more emphasis is being placed on regional and
generative exploration, to work towards the strategic plan of
Jacobina being a 400,000 ounce-plus operation.
The Jacobina mine is part of the Jacobina
district, for which geological evidence and tectonic reconstruction
suggest strong affinities with similar gold districts in West and
South Africa, which host exceptionally large gold deposits,
including the prolific Witwatersrand Basin and the Tarkwa mine.
Gold mineralization at Jacobina is hosted by the Serra do Corrego
Formation, preserved within the Jacobina belt, for a strike length
of over ninety kilometers. The mine complex consists of six mining
areas exploiting economic mineralization within a nine-kilometer
long mineralized belt extending from João Belo in the south to
Canavieiras Norte in the north. As at December 31, 2020, past gold
production from the mine complex was slightly over two million
ounces, with mineral reserves of 2.81 million ounces of gold and
total mineral resources of 5.0 million ounces of gold, indicating
the world class size of the current known deposit. Since 2019, the
Company has started systematic exploration of its 77,800 hectare
land package that covers 155 kilometers of exploration potential
along the north-south trending belt. This work has defined a
fourteen-kilometer long belt of gold-bearing conglomerate located
north of the mine complex and has also extended the known
mineralized reefs south of João Belo in a continuous area extending
2,200 metres south of the limits of the João Belo mine. Further
areas have been identified both to the north and further south
during reconnaissance exploration programs. Work will continue to
define mineralized reefs exposed on surface and follow up with
widely spaced drill testing targeting both extensions of the mine
complex and new standalone mine targets. Consequently, the Company
sees significant opportunities to grow its regional presence and
continue to build the world-class Jacobina Complex.
MARA Project Advances
The MARA Joint Venture held by the Company
(56.25%), Glencore International AG (25%) and Newmont Corporation
(18.75%) continues to advance the engagement with local communities
and stakeholders, and progress the feasibility study and the
permitting process. The pending feasibility study will provide
updated mineral reserves, production and project capital cost
estimates, is being overseen by the Technical Committee comprised
of members of the three Companies. Key technical results are
expected during 2021, and a considerable amount of information in
the pre-feasibility study is already at feasibility study level as
a result of the Integration. The full feasibility study report and
submission of the ESIA is expected in late 2022.
The MARA Project represents a significant
strategic value opportunity and a solid development and growth
project. The Company intends to pursue all available avenues to
continue to advance and unlock its value through its controlling
interest.
Work on the engineering design, drilling at
site, and furthering of the environmental studies and permitting
continued to progress well during the third quarter. The
metallurgical drilling program at the Agua Rica site was completed,
and all samples were submitted for metallurgical test-work in
Canada. Additionally, geotechnical drilling started and is expected
to continue during the fourth quarter. Next steps include resource
delineation and specific geotechnical drilling for the overland
conveyor tunnel design. Metallurgical test-work is progressing
according to plan, advancing early stages of mechanical preparation
and assaying, while preparing final composites for batch testing
and pilot plant, which is expected to run during the first quarter
of 2022.
MARA is the combined project comprised of the
Agua Rica site, Alumbrera site as well as the Alumbrera plant and
ancillary buildings and facilities, and will rely on processing ore
from the Agua Rica mine at the Alumbrera plant. The project design
minimizes the environmental footprint of the project incorporating
the input of local stakeholders. MARA is planned to be a
multi-decade, low cost copper-gold operation with annual production
in the first ten years of 556 million pounds of copper equivalent
and a life of mine annual production of 469 million pounds of
copper equivalent on a 100% basis. MARA will be among the top 25
copper producers in the world when in production, and one of the
lowest capital intensity of the comparable projects globally.
EXPLORATION
During the third quarter, exploration drilling
and other field activities continued to ramp up in most
jurisdictions as COVID-19 restrictions are progressively lifted as
vaccination rates increased. The Company is refocusing its efforts
on regional exploration projects, with greater efforts being placed
on Jacobina and Lavra Velha, which represent the best opportunities
for advancement of the goals of the generative exploration program.
Drilling activities continued in Brazil at Lavra Velha, Jacobina
Norte and at the early stage Colider property. Targets were
advanced at the Company’s Ivolandia project, with collection of
soil and rock samples and geological mapping at several targets. An
airborne geophysical survey will be flown over a 210 square
kilometre area at Ivolandia in early 2022. Exploration in Chile in
the quarter included surface work at early stage projects near the
El Peñón mine and elsewhere, and initial reverse-circulation scout
drilling programs were completed at three projects in the El Peñón
region. In Argentina, permitting and contracting work was
undertaken in preparation for planned drilling on the Company’s Las
Flechas property, where a 1,500-2,000 metre drill program in the
fourth quarter is planned to test breccia-related high-sulphidation
epithermal gold targets. At Monument Bay, Manitoba, results from
the recently completed deep drilling program were integrated into
the project database and are currently being evaluated with
planning for the next steps for the project, and exploration
drilling continued at the recently acquired advanced Wasamac
property, in the Abitibi, Quebec. Initial field work was started on
the recently developed Orogen Royalties Inc. Nevada Alliance and
Raven-Callaghan property option.
FINANCIAL SUMMARY AND KEY
STATISTICS
Key financial statistics for the third quarter
2021 are outlined in the following table.
(In
millions of United States Dollars, except for per share and per
unit amounts) |
Three months ended September 30 |
2021 |
2020 |
Revenue |
$ |
452.2 |
|
|
$ |
439.4 |
|
Cost of sales excluding
depletion, depreciation and amortization |
(177.2 |
) |
|
(166.6 |
) |
Depletion, depreciation and
amortization |
(113.1 |
) |
|
(106.9 |
) |
Total cost of sales |
(290.3 |
) |
|
(273.5 |
) |
Temporary suspension, standby
and other incremental COVID-19 costs |
(7.9 |
) |
|
(8.6 |
) |
Mine operating earnings |
154.0 |
|
|
157.3 |
|
General and administrative
expenses |
(19.5 |
) |
|
(21.4 |
) |
Exploration and evaluation
expenses |
(10.9 |
) |
|
(3.6 |
) |
Net earnings attributable to
Yamana equity holders |
27.0 |
|
|
55.6 |
|
Net earnings(3) per share -
basic and diluted (i) |
0.03 |
|
|
0.06 |
|
Cash flow generated from
operations after changes in non-cash working capital |
190.6 |
|
|
215.0 |
|
Cash flow from operations
before changes in non-cash working capital(2) |
202.9 |
|
|
199.0 |
|
Revenue per ounce of gold |
$ |
1,789 |
|
|
$ |
1,910 |
|
Revenue per ounce of
silver |
$ |
24.23 |
|
|
$ |
24.58 |
|
Average realized gold price
per ounce (2) |
$ |
1,789 |
|
|
$ |
1,910 |
|
Average
realized silver price per ounce (2) |
$ |
24.23 |
|
|
$ |
24.58 |
|
(i) For the three
months ended September 30, 2021, the weighted average number of
shares outstanding was 964,715 thousand (basic and diluted).
Summary of Certain Non-Cash and Other
Items Included in Net Earnings(3)
(In
millions of United States Dollars, except per share amounts, totals
may not add due to rounding) |
Three months ended September 30 |
2021 |
2020 |
Net foreign exchange (gains) losses(3) |
$ |
(16.1 |
) |
|
$ |
4.2 |
|
Share-based
payments/mark-to-market of deferred share units |
3.1 |
|
|
5.1 |
|
Mark-to-market losses (gains)
on derivative contracts, investments and other assets |
1.0 |
|
|
(1.5 |
) |
Gain on sale of subsidiaries,
investments and other assets |
— |
|
|
(1.8 |
) |
Temporary suspension, standby
and other incremental COVID-19 costs |
7.9 |
|
|
8.6 |
|
Early note redemption
premium |
53.3 |
|
|
— |
|
Other provisions, write-downs
and adjustments(3) |
4.0 |
|
|
6.1 |
|
Non-cash tax on unrealized
foreign exchange losses |
7.2 |
|
|
8.7 |
|
Income tax effect of
adjustments(3) |
(16.0 |
) |
|
(4.9 |
) |
One-time tax
adjustments(3) |
(1.6 |
) |
|
12.8 |
|
Total
adjustments(3) (i) |
$ |
42.8 |
|
|
$ |
37.3 |
|
Total adjustments - increase to
earnings(3) per
share |
$ |
0.04 |
|
|
$ |
0.04 |
|
(i) For the three
months ended September 30, 2021, net earnings(3) would be adjusted
by an increase of $42.8 million (2020 - increase of $37.3
million).
For a full discussion of Yamana’s operational
and financial results and mineral reserve and mineral resource
estimates, please refer to the Company’s Management’s Discussion
& Analysis and Condensed Consolidated Interim Financial
Statements for the three and nine months ended September 30, 2021,
and the Company's Management's Discussion & Analysis for the
year ended December 31, 2020, which are available on the Company's
website at www.yamana.com, on SEDAR at www.sedar.com and on EDGAR
at www.sec.gov.
The Company will host a conference call and
webcast on Friday, October 29, 2021, at 9:00 a.m. EDT.
Third Quarter 2021 Conference
Call |
|
|
Toll Free (North America): |
1-800-806-5484 |
Toronto Local and International: |
416-340-2217 |
Toll Free (UK): |
00-80042228835 |
Passcode: |
9398414# |
Webcast: |
www.yamana.com |
|
|
Conference Call Replay |
|
|
Toll Free (North America): |
1-800-408-3053 |
Toronto Local and International: |
905-694-9451 |
Toll Free (UK): |
00-80033663052 |
Passcode: |
7690886# |
The conference call replay will be available
from 12:00 p.m. EDT on October 29, 2021, until 11:59 p.m. EST on
November 29, 2021.
Qualified Persons
Scientific and technical information contained
in this news release has been reviewed and approved by Sébastien
Bernier (P. Geo and Senior Director, Geology and Mineral
Resources). Sébastien Bernier is an employee of Yamana Gold Inc.
and a "Qualified Person" as defined by Canadian Securities
Administrators' National Instrument 43-101 - Standards of
Disclosure for Mineral Projects.
About Yamana
Yamana is a Canadian-based precious metals
producer with significant gold and silver production, development
stage properties, exploration properties, and land positions
throughout the Americas, including Canada, Brazil, Chile and
Argentina. Yamana plans to continue to build on this base through
expansion and optimization initiatives at existing operating mines,
development of new mines, the advancement of its exploration
properties and, at times, by targeting other consolidation
opportunities with a primary focus in the Americas.
FOR FURTHER INFORMATION, PLEASE
CONTACT:Investor Relations and Corporate Communications
416-815-02201-888-809-0925Email: investor@yamana.com
FTI Consulting (UK Public Relations)Sara Powell
/ Ben Brewerton +44 7931 765 223 / +44 203 727
1000Email: Yamana.gold@fticonsulting.com
Credit Suisse (Joint UK Corporate Broker)Ben
Lawrence / David Nangle Telephone: +44 (0) 20 7888 8888
Joh. Berenberg Gossler & Co. KG (Joint UK
Corporate Broker)Matthew Armitt / Jennifer Wyllie / Detlir Elezi
Telephone: +44 (0) 20 3207 7800
Peel Hunt LLP (Joint UK Corporate Broker)Ross
Allister / David McKeown / Alexander AllenTelephone: +44 (0) 20
7418 8900
END NOTES
(1 |
) |
|
A cautionary note regarding non-GAAP performance measures and their
respective reconciliations, as well as additional line items or
subtotals in financial statements is included in Section 11:
Non-GAAP Performance Measures and Additional Subtotals in Financial
Statements in the Company's MD&A for the three and nine months
ended September 30, 2021 and in the 'Non-GAAP Performance Measures'
section below. |
|
|
|
(2 |
) |
|
GEO assumes gold ounces plus the gold equivalent of silver ounces
using a ratio of 73.55 for the three months ended September 30,
2021, and 79.26 for the three months ended September 30, 2020. GEO
calculations for actuals are based on an average market gold to
silver price ratio for the relevant period. Guidance GEO assumes
gold ounces plus the equivalent of silver ounces using a ratio of
72.00 for 2021. |
|
|
|
(3 |
) |
|
Net earnings and adjustments to net earnings represent amounts
attributable to Yamana Gold Inc. equity holders. |
|
|
|
(4 |
) |
|
Yamana mines is defined as Yamana's currently held mines, including
Canadian Malartic, Jacobina, Cerro Moro, El Peñón and Minera
Florida. |
|
|
|
(5 |
) |
|
Included in the 2020 comparative gold production figure is 13,305
of pre-commercial production ounces related to the Company's 50%
interest in the Canadian Malartic mine's Barnat pit, which achieved
commercial production on September 30, 2020. Pre-commercial
production ounces are excluded from sales figures, although
pre-commercial production ounces that were sold during their
respective period of production had their corresponding revenues
and costs of sales capitalized to mineral properties, captured as
expansionary capital expenditures. |
|
|
|
(6 |
) |
|
Calculated on 200,000 exposure hours basis including employees and
contractors. This rate is exclusive of Canadian Malartic, in which
we hold a 50% interest. |
|
|
|
(7 |
) |
|
Vaccination rates are exclusive of Canadian Malartic, in which we
hold a 50% interest. Vaccination rates at Canadian Malartic are in
line with the high Abitibi-Témiscamingue regional rates. |
|
|
|
(8 |
) |
|
Cash balances include $220.2 million available for utilization by
the MARA Project. |
CAUTIONARY NOTE REGARDING FORWARD-LOOKING
STATEMENTS: This news release contains or incorporates by reference
“forward-looking statements” and “forward-looking information”
under applicable Canadian securities legislation and within the
meaning of the United States Private Securities Litigation Reform
Act of 1995. Forward-looking information includes, but is not
limited to information with respect to the Company’s strategy,
plans or future financial or operating performance, results of
feasibility studies, repayment of debt or updates regarding mineral
reserves and mineral resources. Forward-looking statements are
characterized by words such as “plan", “expect”, “budget”,
“target”, “project”, “intend”, “believe”, “anticipate”, “estimate”
and other similar words, or statements that certain events or
conditions “may” or “will” occur. Forward-looking statements are
based on the opinions, assumptions and estimates of management
considered reasonable at the date the statements are made, and are
inherently subject to a variety of risks and uncertainties and
other known and unknown factors that could cause actual events or
results to differ materially from those projected in the
forward-looking statements. These factors include the Company’s
expectations in connection with the production and exploration,
development and expansion plans at the Company's projects discussed
herein being met, the impact of proposed optimizations at the
Company's projects, changes in national and local government
legislation, taxation, controls or regulations and/or change in the
administration of laws, policies and practices, and the impact of
general business and economic conditions, global liquidity and
credit availability on the timing of cash flows and the values of
assets and liabilities based on projected future conditions,
fluctuating metal prices (such as gold, silver, copper and zinc),
currency exchange rates (such as the Canadian Dollar, the Brazilian
Real, the Chilean Peso and the Argentine Peso versus the United
States Dollar), the impact of inflation, possible variations in ore
grade or recovery rates, changes in the Company’s hedging program,
changes in accounting policies, changes in mineral resources and
mineral reserves, risks related to asset dispositions, risks
related to metal purchase agreements, risks related to
acquisitions, changes in project parameters as plans continue to be
refined, changes in project development, construction, production
and commissioning time frames, risks associated with infectious
diseases, including COVID-19, unanticipated costs and expenses,
higher prices for fuel, steel, power, labour and other consumables
contributing to higher costs and general risks of the mining
industry, failure of plant, equipment or processes to operate as
anticipated, unexpected changes in mine life, final pricing for
concentrate sales, unanticipated results of future studies,
seasonality and unanticipated weather changes, costs and timing of
the development of new deposits, success of exploration activities,
permitting timelines, government regulation and the risk of
government expropriation or nationalization of mining operations,
risks related to relying on local advisors and consultants in
foreign jurisdictions, environmental risks, unanticipated
reclamation expenses, risks relating to joint venture operations,
title disputes or claims, limitations on insurance coverage, timing
and possible outcome of pending and outstanding litigation and
labour disputes, risks related to enforcing legal rights in foreign
jurisdictions, as well as those risk factors discussed or referred
to herein and in the Company's Annual Information Form filed with
the securities regulatory authorities in all provinces of Canada
and available at www.sedar.com, and the Company’s Annual Report on
Form 40-F filed with the United States Securities and Exchange
Commission. Although the Company has attempted to identify
important factors that could cause actual actions, events or
results to differ materially from those described in
forward-looking statements, there may be other factors that cause
actions, events or results not to be anticipated, estimated or
intended. There can be no assurance that forward-looking statements
will prove to be accurate, as actual results and future events
could differ materially from those anticipated in such statements.
The Company undertakes no obligation to update forward-looking
statements if circumstances or management’s estimates, assumptions
or opinions should change, except as required by applicable law.
The reader is cautioned not to place undue reliance on
forward-looking statements. The forward-looking information
contained herein is presented for the purpose of assisting
investors in understanding the Company’s expected financial and
operational performance and results as at and for the periods ended
on the dates presented in the Company’s plans and objectives and
may not be appropriate for other purposes.
CAUTIONARY NOTE TO UNITED STATES INVESTORS
CONCERNING ESTIMATES OF MEASURED, INDICATED AND INFERRED MINERAL
RESOURCESThis news release has been prepared in accordance with the
requirements of the securities laws in effect in Canada, which
differ in certain material respects from the disclosure
requirements of United States securities laws contained in Industry
Guide 7. The terms “mineral reserve”, “proven mineral reserve”
and “probable mineral reserve” are Canadian mining terms as defined
in accordance with Canadian National Instrument 43-101 Standards of
Disclosure for Mineral Projects (“NI 43-101”) and the Canadian
Institute of Mining, Metallurgy and Petroleum (the “CIM”) - CIM
Definition Standards on Mineral Resources and Mineral Reserves,
adopted by the CIM Council, as amended. These definitions differ
from the definitions in the disclosure requirements promulgated by
the Securities and Exchange Commission (the “Commission”) contained
in Industry Guide 7. Under Industry Guide 7 standards, a
“final” or “bankable” feasibility study is required to report
mineral reserves, the three-year historical average price is used
in any mineral reserve or cash flow analysis to designate mineral
reserves and the primary environmental analysis or report must be
filed with the appropriate governmental authority.
In addition, the terms “mineral resource”,
“measured mineral resource”, “indicated mineral resource” and
“inferred mineral resource” are defined in and required to be
disclosed by NI 43-101. However, these terms are not defined
terms under Industry Guide 7. Investors are cautioned not to
assume that any part or all of the mineral deposits in these
categories will ever be converted into mineral
reserves. “Inferred mineral resources” have a great amount of
uncertainty as to their existence, and great uncertainty as to
their economic and legal feasibility. It cannot be assumed that all
or any part of an inferred mineral resource will ever be upgraded
to a higher category. Under Canadian rules, estimates of inferred
mineral resources may not form the basis of feasibility or
pre-feasibility studies, except in rare cases. Investors are
cautioned not to assume that all or any part of an inferred mineral
resource exists or is economically or legally
mineable. Disclosure of “contained ounces” in a mineral
resource is permitted disclosure under Canadian regulations. In
contrast, issuers reporting pursuant to Industry Guide 7 report
mineralization that does not constitute “mineral reserves” by
Commission standards as in place tonnage and grade without
reference to unit measures.
Accordingly, information contained in this news
release may not be comparable to similar information made public by
U.S. companies reporting pursuant to Industry Guide 7.
NON-GAAP PERFORMANCE MEASURES
The Company has included certain non-GAAP
performance measures to supplement its Consolidated Financial
Statements, which are presented in accordance with IFRS, including
the following:
- Cash Costs per GEO sold;
- All-in Sustaining Costs per GEO
sold;
- Net Free Cash Flow and Free Cash
Flow Before Dividends and Debt Repayment
- Average Realized Price per ounce of
gold/silver sold; and
- Adjusted Earnings
The Company believes that these measures,
together with measures determined in accordance with IFRS, provide
investors with an improved ability to evaluate the underlying
performance of the Company. Non-GAAP financial measures do not have
any standardized meaning prescribed under IFRS, and therefore they
may not be comparable to similar measures employed by other
companies. The data is intended to provide additional information
and should not be considered in isolation or as a substitute for
measures of performance prepared in accordance with IFRS.
Management's determination of the components of non-GAAP and
additional measures are evaluated on a periodic basis influenced by
new items and transactions, a review of investor uses and new
regulations as applicable. Any changes to the measures are duly
noted and retrospectively applied as applicable.
For definitions and descriptions of the non-GAAP
measures, other than those noted and reconciled below and
additional subtotals in financial statements, refer to Section 11:
Non-GAAP Financial Measures and Additional Line Items or Subtotals
in Financial Statements of the Company's MD&A for the three and
nine months ended September 30, 2021.
GEO PRODUCTION AND SALES
Production and sales of silver are treated as a
gold equivalent in determining a combined precious metal production
or sales unit, commonly referred to as gold equivalent ounces
("GEO"). Specifically, guidance GEO produced are calculated by
converting silver production to its gold equivalent using relative
gold/silver metal prices at an assumed ratio and adding the
converted silver production expressed in gold ounces to the ounces
of gold production. Actual GEO production and sales calculations
are based on an average realized gold to silver price ratio for the
relevant period.
CASH COSTS AND ALL-IN SUSTAINING
COSTS
The Company discloses “Cash Costs” because it
understands that certain investors use this information to
determine the Company’s ability to generate earnings and cash flows
for use in investing and other activities. The Company believes
that conventional measures of performance prepared in accordance
with IFRS do not fully illustrate the ability of its operating
mines to generate cash flows. The measures, as determined under
IFRS, are not necessarily indicative of operating profit or cash
flows from operating activities.
The measure of Cash Costs and All-in Sustaining
Costs (AISC), along with revenue from sales, is considered to be a
key indicator of a company’s ability to generate operating earnings
and cash flows from its mining operations. This data is furnished
to provide additional information and is a non-GAAP financial
measure. The terms Cash Costs per GEO sold and AISC per GEO sold do
not have any standardized meaning prescribed under IFRS, and
therefore they may not be comparable to similar measures employed
by other companies. Non-GAAP financial measures should not be
considered in isolation as a substitute for measures of performance
prepared in accordance with IFRS and are not necessarily indicative
of operating costs, operating profit or cash flows presented under
IFRS.
Cash Costs include mine site operating costs
such as mining, processing, administration, production taxes and
royalties which are not based on sales or taxable income
calculations, but are exclusive of amortization, reclamation,
capital, development and exploration costs. The Company believes
that such measure provides useful information about its underlying
Cash Costs of operations. Cash Costs are computed on a weighted
average basis as follows:
- Cash Costs per GEO sold - The total
costs used as the numerator of the unitary calculation represent
Cost of Sales excluding DDA, net of treatment and refining charges.
These costs are then divided by GEO sold. Non-attributable costs
will be allocated based on the relative value of revenues for each
metal, which will be determined annually at the beginning of each
year.
AISC figures are calculated in accordance with a
standard developed by the World Gold Council (“WGC”) (a
non-regulatory, market development organization for the gold
industry). Adoption of the standard is voluntary and the cost
measures presented herein may not be comparable to other similarly
titled measures of other companies.
AISC per sold seeks to represent total
sustaining expenditures of producing and selling GEO from current
operations. The total costs used as the numerator of the unitary
calculation represent Cash Costs (defined above) and includes cost
components of mine sustaining capital expenditures including
stripping and underground mine development, corporate and mine-site
general and administrative expense, sustaining mine-site
exploration and evaluation expensed and capitalized and accretion
and amortization of reclamation and remediation. AISC do not
include capital expenditures attributable to projects or mine
expansions, exploration and evaluation costs attributable to growth
projects, income tax payments, borrowing costs and dividend
payments. Consequently, this measure is not representative of all
of the Company's cash expenditures. In addition, the calculation of
AISC does not include depletion, depreciation and amortization
expense as it does not reflect the impact of expenditures incurred
in prior periods.
- AISC per GEO sold - reflect
allocations of the aforementioned cost components on the basis that
is consistent with the nature of each of the cost component to the
GEO production and sales activities.
NET FREE CASH FLOW AND FREE CASH FLOW BEFORE
DIVIDENDS AND DEBT REPAYMENTS
The Company uses the financial measure "Net Free
Cash Flow" and "Free Cash Flow Before Dividends and Debt
Repayment", which are non-GAAP financial measures, to supplement
information in its Consolidated Financial Statements. Net Free Cash
Flow and Free Cash Flow do not have any standardized meaning
prescribed under IFRS, and therefore may not be comparable to
similar measures employed by other companies. The Company believes
that in addition to conventional measures prepared in accordance
with IFRS, the Company and certain investors and analysts use this
information to evaluate the Company’s performance with respect to
its operating cash flow capacity to meet non-discretionary outflows
of cash or to meet dividends and debt repayments. The presentation
of Net Free Cash Flow and Free Cash Flow are not meant to be
substitutes for the cash flow information presented in accordance
with IFRS, but rather should be evaluated in conjunction with such
IFRS measures. Net Free Cash Flow is calculated as cash flows from
operating activities adjusted for advance payments received
pursuant to metal purchase agreements, non-discretionary
expenditures from sustaining capital expenditures and interest paid
related to the current period. Free Cash Flow further deducts
remaining capital expenditures and payments for lease obligations.
Reconciliations of Net Free Cash Flow and Free Cash Flow are
provided below.
Reconciliation of Cash Flows from Operating Activities to
non-GAAP Measures |
Three months ended September 30 |
(In millions of United States Dollars) |
2021 |
2020 |
Cash flows from operating activities |
$ |
190.6 |
|
$ |
215.0 |
|
Adjustments to operating cash
flows: |
|
|
Amortization of deferred revenue |
2.4 |
|
2.3 |
|
Temporary suspension, standby and other incremental COVID-19
costs |
7.9 |
|
8.6 |
|
Legal contingencies included in other cash payments |
— |
|
8.0 |
|
Non-discretionary items
related to the current period |
|
|
Sustaining capital expenditures |
(41.1 |
) |
(38.1 |
) |
Interest paid |
(12.0 |
) |
(5.6 |
) |
Payment of lease liabilities |
(5.7 |
) |
(4.4 |
) |
Cash used in other financing activities |
(2.9 |
) |
(0.3 |
) |
Net free cash flow |
$ |
139.2 |
|
$ |
185.5 |
|
Discretionary and other items
impacting cash flow available for dividends and debt
repayments |
|
|
Expansionary and exploration capital expenditures |
(52.1 |
) |
(23.8 |
) |
Cash flows used in other investing activities |
(4.6 |
) |
(4.7 |
) |
Effect of foreign exchange of non-USD denominated cash |
(0.9 |
) |
(0.1 |
) |
Free cash flow before dividends and debt
repayments |
$ |
81.6 |
|
$ |
156.9 |
|
AVERAGE REALIZED METAL PRICES
The Company uses the financial measures "average
realized gold price" and "average realized silver price", which are
non-GAAP financial measures, to supplement in its Consolidated
Financial Statements. Average realized price does not have any
standardized meaning prescribed under IFRS, and therefore may not
be comparable to similar measures employed by other companies. The
Company believes that in addition to conventional measures prepared
in accordance with IFRS, the Company and certain investors and
analysts use this information to evaluate the Company’s performance
vis-à-vis average market prices of metals for the period. The
presentation of average realized metal prices is not meant to be a
substitute for the revenue information presented in accordance with
IFRS, but rather should be evaluated in conjunction with such IFRS
measure.
Average realized metal price represents the sale
price of the underlying metal before deducting treatment and
refining charges, and other quotational and pricing adjustments.
Average realized prices are calculated as the revenue related to
each of the metals sold, i.e. gold and silver, divided by the
quantity of the respective units of metals sold, i.e. gold ounce
and silver ounce. Reconciliations of average realized metal prices
to revenue are provided in Section 11 of the Company's MD&A for
the three and nine months ended September 30, 2021, which is
available on the Company's website and on SEDAR.
ADJUSTED EARNINGS OR LOSS AND ADJUSTED EARNINGS
OR LOSS PER SHARE
The Company uses the financial measures
“Adjusted Earnings or Loss” and “Adjusted Earnings or Loss per
share” to supplement information in its Consolidated Annual
Financial Statements. The Company believes that in addition to
conventional measures prepared in accordance with IFRS, the Company
and certain investors and analysts use this information to evaluate
the Company’s performance. The presentation of adjusted measures
are not meant to be a substitute for Net Earnings or Loss or Net
Earnings or Loss per share presented in accordance with IFRS, but
rather should be evaluated in conjunction with such IFRS measures.
Adjusted Earnings or Loss and Adjusted Earnings or Loss per share
are calculated as net earnings excluding non-recurring items, items
not related to or having a disproportionate effect on results for a
particular periods and/or not directly related to the core mining
business such as (a) share-based payments and other compensation,
(b) unrealized foreign exchange (gains) losses related to
revaluation of deferred income tax asset and liability on
non-monetary items, (c) unrealized foreign exchange (gains) losses
related to other items, (d) unrealized (gains) losses on
derivatives, (e) impairment losses and reversals on mineral
interests and other assets, (f) deferred income tax expense
(recovery) on the translation of foreign currency inter-corporate
debt, (g) mark-to-market (gains) losses on other assets, (h)
one-time tax adjustments to historical deferred income tax balances
relating to changes in enacted tax rates, (i) reorganization costs,
(j) non-recurring provisions, (k) (gains) losses on sale of assets,
(l) any other non-recurring adjustments and the tax impact of any
of these adjustments calculated at the statutory effective rate for
the same jurisdiction as the adjustment. Non-recurring adjustments
from unusual events or circumstances are reviewed from time to time
based on materiality and the nature of the event or circumstance.
Earnings adjustments for the comparative period reflect both
continuing and discontinued operations.The terms “Adjusted Earnings
or Loss” and “Adjusted Earnings or Loss per share” do not have a
standardized meaning prescribed by IFRS, and therefore the
Company’s definitions are unlikely to be comparable to similar
measures presented by other companies. Management uses these
measures for internal valuation of the core mining performance for
the period and to assist with planning and forecasting of future
operations. Management believes that the presentation of Adjusted
Earnings or Loss and Adjusted Earnings or Loss per share provide
useful information to investors because they exclude non-recurring
items, items not related to or not indicative of current or future
period's results and/or not directly related to the core mining
business and are a better indication of the Company’s profitability
from operations as evaluated by internal management and the board
of directors. The items excluded from the computation of Adjusted
Earnings or Loss and Adjusted Earnings or Loss per share, which are
otherwise included in the determination of Net Earnings or Loss and
Net Earnings or Loss per share prepared in accordance with IFRS,
are items that the Company does not consider to be meaningful in
evaluating the Company’s past financial performance or the future
prospects and may hinder a comparison of its period-to-period
profitability.
ADDITIONAL LINE ITEMS OR SUBTOTALS IN FINANCIAL
STATEMENTS
The Company uses the following additional line
items and subtotals in the Consolidated Financial Statements as
contemplated in IAS 1: Presentation of Financial Statements:
- Gross margin excluding
depletion, depreciation and amortization - represents the
amount of revenue in excess of cost of sales excluding depletion,
depreciation and amortization. This additional measure represents
the cash contribution from the sales of metals before all other
operating expenses and DDA, in the reporting period.
- Mine operating
earnings/loss - represents the amount of revenue in excess
of cost of sales excluding depletion, depreciation and
amortization, depletion, depreciation and amortization, temporary
suspension, standby and other incremental COVID-19 costs, and net
impairment write-downs/reversals.
- Operating
earnings/loss - represents the amount of earnings/loss
before net finance costs, other income/costs and income tax
expense/recovery. This measure represents the amount of financial
contribution, net of all expenses directly attributable to mining
operations and overheads. Finance costs and other income/costs are
not classified as expenses directly attributable to mining
operations.
- Cash flows from operating
activities before income taxes paid and net change in working
capital - excludes the payments made during the period
related to income taxes and tax related payments and the movement
from period-to-period in working capital items including trade and
other receivables, other assets, inventories, trade and other
payables. Working capital and income taxes can be volatile due to
numerous factors, such as the timing of payment and receipt. As the
Company uses the indirect method prescribed by IFRS in preparing
its statement of cash flows, this additional measure represents the
cash flows generated by the mining business to complement the GAAP
measure of cash flows from operating activities, which is adjusted
for income taxes paid and tax related payments and the working
capital change during the reporting period.
- Cash flows from operating
activities before net change in working capital - excludes
the movement from period-to-period in working capital items
including trade and other receivables, other assets, inventories,
trade and other payables. Working capital can be volatile due to
numerous factors, such as the timing of payment and receipt. As the
Company uses the indirect method prescribed by IFRS in preparing
its statement of cash flows, this additional measure represents the
cash flows generated by the mining business to complement the GAAP
measure of cash flows from operating activities, which is adjusted
for the working capital change during the reporting period.
The Company’s management believes that this
presentation provides useful information to investors because gross
margin excluding depletion, depreciation and amortization excludes
the non-cash operating cost item (i.e. depreciation, depletion and
amortization), cash flows from operating activities before net
change in working capital excludes the movement in working capital
items, mine operating earnings excludes expenses not directly
associated with commercial production and operating earnings
excludes finance and tax related expenses and income/recoveries.
These, in management’s view, provide useful information of the
Company’s cash flows from operating activities and are considered
to be meaningful in evaluating the Company’s past financial
performance or the future prospects.
(All amounts are expressed in United States
Dollars unless otherwise indicated.)
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