YAMANA GOLD INC. (TSX: YRI; NYSE: AUY) (“Yamana” or “the Company”)
announces preliminary second quarter
2020 results, with gold production of 164,141
ounces and silver production of 2.01 million
ounces. Total gold equivalent ounce (“GEO”) production during
the quarter was 183,582 GEO. Overall production and
production from most mines exceeded plan and the production for the
quarter implied in the Company’s annual guidance.
The quarter was highlighted
by exceptional operational
performances from Jacobina, El Peñón, Canadian
Malartic, and Minera Florida, all of which exceeded
planned production targets.
Furthermore, in line with prior
guidance, the Company expects to generate increasing
production, improving costs and significant cash flows in
the second half of the year, sequentially increasing over
the third and fourth quarters. As previously guided,
production is expected to weight into the second half of the year,
with 54% of production expected in the second half compared to 46%
in the first half.
The Company reiterates its 2020 production
guidance, which was revised on April 30, 2020, to reflect the
temporary suspensions at Canadian Malartic and Cerro Moro due to
government restrictions related to COVID-19.
Production is currently tracking above guidance
and, as the year progresses, the Company will evaluate further
updates to production guidance, likely in the third quarter.
The Company further strengthened its
balance sheet by continuing to lower net
debt by approximately $100 million, and repaid $100
million borrowed in March 2020 on the Company’s revolving credit
facility in connection with COVID-19 matters. Net debt at the end
of the quarter was below $769 million.
Second Quarter 2020 Production
Results
|
Second Quarter 2020 Preliminary Production |
GEO Production (oz.) |
183,582 |
Gold Production (oz.) |
164,141 |
Silver Production (oz.) |
2,007,809 |
The above totals are based on a GEO ratio of
105.14:1 for the quarter, which was higher than what the Company
assumed in its revised outlook. GEO includes gold plus silver with
silver converted to a gold equivalent ratio that is calculated
based on quarterly average market prices.
Second Quarter 2020 Production By Mine
Mine-by-Mine |
Second Quarter 2020 Preliminary Production |
Gold (oz.) |
|
El Peñón |
35,760 |
Canadian Malartic (50%) |
56,785(1) |
Jacobina |
45,646 |
Cerro Moro |
8,175 |
Minera Florida |
17,775 |
Yamana Mines |
164,141 |
Silver (oz.) |
|
El Peñón |
1,277,238 |
Cerro Moro |
730,571 |
Yamana Mines |
2,007,809 |
- Includes pre-commercial ounces from Barnat of approximately
2,600 ounces.
Production was delivered at costs better than
plan for the second quarter.
All-in sustaining costs ("AISC") for the quarter
were $1,125 per GEO sold on higher production
and, as previously indicated, were impacted in the second
quarter by the demobilization and ramp-ups of
Cerro Moro and Canadian Malartic along with the
implementation of precautionary safety
measures related to
COVID-19 across all operations. This impact
was partially offset by the ongoing
benefits from weaker foreign exchange rates. AISC
steadily improved during the quarter to $1,061 per GEO in June as
the ramp up of operations after the temporary suspensions and
implementation of COVID-19 protocols and new safety and health
protocols, continued.
The Company also indicated that it would update
its costs guidance as the impacts of COVID-19 were better
understood. With a better understanding of those impacts, the
Company now updates AISC guidance for the second half of the year
to be in the range of $1,020 to $1,060 per GEO. Further, the
fourth quarter is expected to have the best cost profile, in line
with the strongest expected production. At Cerro Moro, the
ongoing interprovincial travel restrictions and its impact on a
reduced workforce may further impact consolidated
costs. However, improvements to these logistical matters in
the second half of the year and better than planned performance
from other mines due to cost improvements is expected to offset
those impacts.
COVID-19 Related Costs
COVID-19 related costs, which are not included in AISC, can
be divided into two major categories:
- Temporary suspension and standby costs, including those
associated with placing certain mines in care and maintenance and
subsequent ramp-up of those operations, and the underutilization of
labour and contractors in relation to the pre-COVID mine
plans.
- Incremental costs resulting
from COVID-19 including community support, additional
personal protective equipment acquisitions, higher
transportation costs, and overtime costs resulting from
lower headcount levels on site to accommodate social
distancing.
The Company anticipates that suspension and
standby costs will be minimized prospectively for the balance of
the year as the mines return to full production levels anticipated
at the beginning of the year. Further, the Company is
assessing if any incremental COVID-19 costs are expected
to become normal-course in a COVID-19 world. However, those costs
are expected to be at levels lower than those experienced in
the second quarter. The Company also anticipates that some of these
increases may be offset by efficiencies gained during the period.
The breakdown of the expenditures incurred during the quarter are
as follows:
(US Dollars in millions) |
Suspension and Standby Costs |
Incremental COVID-19 Costs |
Total |
Cerro Moro |
7.5 |
2 |
9.5 |
Canadian Malartic (50%) |
1.5 |
0.5 |
2 |
El Peñón |
1 |
1.5 |
2.5 |
Minera Florida |
3 |
1 |
4 |
Jacobina |
0.5 |
1 |
1.5 |
Total |
13.5 |
6 |
19.5 |
Operational Highlights
- Jacobina
maintained its strong operational performance,
posting a sixth consecutive quarter of record-setting gold
production at 45,646 ounces. The strong results
reflect both higher grade
and further increases to throughput, which
averaged 6,853 tonnes per day (“tpd”), well above the Phase 1
target of 6,500 tpd. With Phase 1 now complete, further
optimization will continue for the remainder of the year before the
initiation of Phase 2.
- El Peñón delivered another strong quarter, with both
gold and silver production higher than plan, primarily due to
processing higher grade ore.
- At Canadian Malartic, the ramp-up of
operations following the temporary suspension due to
government restrictions related to
COVID-19 progressed faster than
expected, with mill
throughput driving production ahead
of plan.
- At Minera Florida, production was better than plan,
benefiting from higher feed grade and increased tonnes
processed, largely as a result of continuing improvements in
productivity, with contributions from the Pataguas and Don
Leopoldo mining zones in the second quarter.
- Production at Cerro Moro was impacted by ongoing
interprovincial travel restrictions that resulted in Cerro Moro
operating with a significantly reduced workforce during the
quarter. The operation is implementing new efficiency
measures and adding additional
accommodations in its mine camp that facilitate social
distancing and allow it to safely increase the number of
workers per shift. While temporary travel restrictions had an
impact on the ramp-up of operations, the ramp-up was steady and did
progress, with production in June at almost 50% more than the
preceding month.
- Consolidated GEO production, excluding pre-commercial ounces
from Barnat of approximately 2,600 ounces (50% basis), exceeded
sales by roughly 4,200 ounces, mainly due to Canadian
Malartic. During the first quarter, upon placing the plant at
Canadian Malartic on care and maintenance, inventory levels were
reduced resulting in higher sales compared with production for the
period during which the operation was on care and maintenance. In
the second quarter, with the resumption of operations, this impact
was reversed and finished goods inventory was returned to
normal levels, which resulted in production exceeding sales during
the second quarter.
Canadian Malartic: Ramp-up Completed Faster Than
Expected
Canadian Malartic resumed operations on April
15, 2020, following the Government of Quebec’s decision to
designate mining activities as an essential service. The
remobilization occurred with full attention to the health and
safety of returning employees, contractors, and suppliers and
complied with the recommendations of the Quebec Department of
Public Health and the province’s Committee on Standards, Equity,
and Occupational Safety. The ramp-up progressed faster than
expected and mill throughput in both May and June exceeded 60,000
tpd, partially offsetting the impacts from the downtime and lower
production rates during the ramp-up in April.
The Company continues to advance studies
related to the underground mineral resources at Canadian Malartic,
and it is continuing exploration efforts with
10 diamond drill rigs to define and expand
underground mineral resources. The resources have
increased and the Company, along with its partner, have increased
the exploration budget. Installation of surface
infrastructure and development of an exploration ramp into Odyssey
and East Malartic, with the purpose of eventually mining their
respective upper zones and providing further exploration
access to allow drilling in tighter spacing, remains
on track to begin in 2020.
Cerro Moro: Achieving Operational
Efficiencies
While ongoing government
restrictions on interprovincial travel
have extended the length of the operational ramp-up,
impacting production for the quarter, they have also
resulted in potential long-term improvements
to operational efficiency, as the mine
continued operating with a significantly reduced
workforce during the
quarter. Despite operating with 48% of its
regular work force during June, the
mine achieved 77% of its target tonnage
rate and 62% of its planned development rate. During the
ramp-up period, Cerro
Moro also began implementing a series of
initiatives to improve efficiency and production, including
optimizing mine sequencing, improvements to drill and blast
processes, and a review of mine
design aimed at lowering costs and
accelerating development of high grade zones. While the
impacts due to the travel restrictions are expected to be
temporary, the benefits from improvements to operational
efficiencies are expected to be long-term.
While temporary travel restrictions had an
impact on the ramp-up of operations, the ramp-up was steady and did
progress, with production in June at almost 50% more than the
preceding month.
Liquidity Update
As a precaution, and given the uncertainty
around the global pandemic, the Company drew down $200 million of
its $750 million revolving credit facility in March 2020, as
previously disclosed. In June 2020, the Company repaid
$100 million of the amount so borrowed.
During the second quarter, the Company brought
funds into treasury from both the sale of
its Equinox Gold shares for C$120 million and
the sale of its royalty portfolio, which included cash
consideration of $10 million. Consequently, given these corporate
sales and the generation of free cash flows in the quarter, the
Company made the decision to repay $100 million of the
drawn funds with cash on hand, allowing it to continue to
maintain roughly $200 million in excess of its customary minimum
cash position. Cash as at the end of the quarter was in
excess of $320 million. The Company expects to repay the
remaining $100 million of the drawn funds before the
end of 2020. As previously disclosed, these funds were drawn, and
maintained, as a precautionary measure given some uncertainties
created by COVID-19. As also previously disclosed, the
Company does not intend to use these funds.
The Company has sufficient cash on hand and
available credit and liquidity to fully manage its business. At the
present time, the Company has no pending scheduled debt repayment
or significant capital commitments.
Net Debt Continues to
Decline
Net debt decreased during the quarter by
approximately $100 million with net debt now below $769
million. This compares to first quarter net debt of $869.1 million
and represents a further improvement of over $15 million
as compared to the pro forma net debt that was disclosed to account
for the sale of the Company’s shares of Equinox Gold, which closed
on April 15, 2020. Net debt would have been further reduced if
certain costs associated with COVID-19 had not been incurred, and
as some of those costs will no longer be incurred, net debt is
expected to decline further in the upcoming quarters which also
coincides with higher production in those quarters.
About YamanaYamana Gold Inc. 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 Relations416-815-0220
1-888-809-0925 Email: 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 and within the meaning of the United States Private
Securities Litigation Reform Act of 1995. Forward-looking
information includes, but is not limited to information with
respect to the Company’s strategy, plans or future financial or
operating performance including guidance and liquidity and the
impact of the coronavirus. Forward-looking statements are
characterized by words such as “plan", “expect”, “budget”,
“target”, “project”, “intend”, “believe”, “anticipate”, “estimate”
and other similar words, or statements that certain events or
conditions “may” or “will” occur. Forward-looking statements are
based on the opinions, assumptions and estimates of management
considered reasonable at the date the statements are made, and are
inherently subject to a variety of risks and uncertainties and
other known and unknown factors that could cause actual events or
results to differ materially from those projected in the
forward-looking statements. These factors include unforeseen
impacts on guidance, liquidity, cash flow, monetization
initiatives, and available residual cash, an inability to maintain
a cash reserve fund balance that can support current or future
dividend increases, the outcome of various planned technical
studies, production and exploration, development, optimizations and
expansion plans at the Company's projects, changes in national and
local government legislation, taxation, controls or regulations
and/or change in the administration of laws, policies and
practices, and the impact of general business and economic
conditions, global liquidity and credit availability on the timing
of cash flows and the values of assets and liabilities based on
projected future conditions, fluctuating metal prices (such as
gold, silver and zinc), currency exchange rates (such as the
Brazilian Real, the Chilean Peso and the Argentine Peso versus the
United States Dollar), the impact of inflation, possible variations
in ore grade or recovery rates, changes in the Company’s hedging
program, changes in accounting policies, changes in mineral
resources and mineral reserves, risks related to asset
dispositions, risks related to metal purchase agreements, risks
related to acquisitions, changes in project parameters as plans
continue to be refined, changes in project development,
unanticipated costs and expenses, higher prices for fuel, steel,
power, labour and other consumables contributing to higher costs
and general risks of the mining industry, failure of plant,
equipment or processes to operate as anticipated, unexpected
changes in mine life, final pricing for concentrate sales,
unanticipated results of future studies, seasonality and
unanticipated weather changes, costs and timing of the development
of new deposits, success of exploration activities, permitting
timelines, government regulation and the risk of government
expropriation or nationalization of mining operations, risks
related to relying on local advisors and consultants in foreign
jurisdictions, environmental risks, unanticipated reclamation
expenses, risks relating to joint venture or jointly owned
operations, title disputes or claims, limitations on insurance
coverage, timing and possible outcome of pending and outstanding
litigation and labour disputes, risks related to enforcing legal
rights in foreign jurisdictions, as well as those risk factors
discussed or referred to herein and in the Company's Annual
Information Form filed with the securities regulatory authorities
in all provinces of Canada and available at www.sedar.com, and
the Company’s Annual Report on Form 40-F filed with the United
States Securities and Exchange Commission. Although the
Company has attempted to identify important factors that could
cause actual actions, events or results to differ materially from
those described in forward-looking statements, there may be other
factors that cause actions, events or results not to be
anticipated, estimated or intended. There can be no assurance
that forward-looking statements will prove to be accurate, as
actual results and future events could differ materially from those
anticipated in such statements. The Company undertakes no
obligation to update forward-looking statements if circumstances or
management’s estimates, assumptions or opinions should change,
except as required by applicable law. The reader is cautioned not
to place undue reliance on forward-looking statements. The
forward-looking information contained herein is presented for the
purpose of assisting investors in understanding the Company’s
expected financial and operational performance and results as at
and for the periods ended on the dates presented in the Company’s
plans and objectives and may not be appropriate for other
purposes.
All amounts are expressed in United States Dollars unless
otherwise indicated.
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