YAMANA GOLD INC. (TSX:YRI; NYSE:AUY; LSE:AUY) (“Yamana” or “the
Company”) is herein reporting its financial and operational results
for the second quarter of 2021. Strong cash flow and production
during the quarter were underpinned by all-time quarterly high
production at Jacobina and Canadian Malartic as well as standout
quarters from Minera Florida and El Peñón.
In a separate announcement published today, the
Company reported significant progress on the Phase 2 expansion of
Jacobina as well as strong exploration results that expand the
operation’s mineral resource inventory and support the phased
expansion, underscoring Jacobina’s exceptional long-term growth
potential and ability to further extend strategic mine life. For
additional details, please see the press release titled: 'Yamana
Gold Reports Significant Progress on Phase 2 Expansion at Jacobina
and Strong Exploration Results for the Operation' available on the
Company's website at www.yamana.com.
SECOND QUARTER HIGHLIGHTS
Financial Results - Strong Cash Flows Further Strengthen
Cash Balances and Balance Sheet Driving Latest Increase in
Dividend
- Adjusted net earnings(2, 4) were
$70.7 million or $0.07 per share basic and diluted.
- Earnings before taxes of $87.3
million increased significantly in relation to the comparative
period earnings before taxes of $9.7 million.
- A non-cash accounting deferred
income tax expense of $145.3 million, predominantly associated with
an increase in income tax rates in Argentina as applied to certain
non-producing assets (namely Suyai and MARA) reduced earnings for
the period as under accounting principles, the difference between
accounting carrying values and tax basis requires recalculation
although not payment of deferred income taxes. Future cash payments
associated with the deferred income tax liability are not expected.
This has resulted in a net loss(4) for accounting purposes of $43.9
million or $0.05 per share basic and diluted although no cash
impact.
- Strong cash flows from operating
activities of $153.5 million and cash flows from operating
activities before net change in working capital(2) of $167.8
million with free cash flow before dividends and debt repayments(2)
of $51.2 million.
- With production and costs in line
with plan for the first half of the year, the Company anticipates
stronger production, lower unit costs, and increased cash flow in
the third and fourth quarters.
- Cash and cash equivalents of $702.0
million, and available credit of $750.0 million, for total
available liquidity of approximately $1.5 billion. Cash balances
include $223.4 million available for utilization by the MARA
Project. The remainder of cash and cash equivalents of
$478.6 million, along with further liquidity and incoming cash
flows is expected to be more than sufficient to fully fund the
Company's business and capital allocation objectives.
- As announced today, the Company is raising its annual dividend
to $0.12 per share, representing a nearly 15% increase from the
previous level and a cumulative increase of 500% from the second
quarter of 2019. The dividend increase reflects improved cash flows
and increased cash balances, along with other realized and
anticipated strengthening of the Company's financial
position.
|
Three months ended June 30 |
(In millions of United States Dollars) |
2021 |
2020 |
Net
Free Cash Flow (2) |
$ |
96.3 |
|
$ |
60.3 |
|
Free Cash Flow before Dividends
and Debt Repayments (2) |
$ |
51.2 |
|
$ |
38.2 |
|
Decrease in Net Debt (2) |
$ |
22.8 |
|
$ |
101.1 |
|
Operating Results - Record Production at Jacobina and
Canadian Malartic, Standout Quarters from Minera Florida and
El
Peñón
- Gold equivalent ounce ("GEO")(1)
production was 241,341, including gold production of 217,402
ounces, and silver production of 1.63 million ounces.
- Jacobina and Canadian Malartic
production reached all-time quarterly highs, with total production
of 47,503 and 92,106 ounces of gold, respectively.
- Minera Florida also had a standout
quarter, producing 23,813 ounces of gold.
- El Peñón was ahead of plan for the
first half of the year and is well positioned for the third and
fourth quarters with approximately 57% of annual production for the
operation expected in those quarters.
- Cerro Moro produced 25,313 GEO(1),
a significant increase versus the comparative prior year period of
15,451 GEO(1).
- The Company remains well positioned
to achieve guidance for the year of 1,000,000 GEO(1), underpinned
by strong momentum at Jacobina, Canadian Malartic and Minera
Florida, as well as an anticipated strong second half of the year
at El Peñón and Cerro Moro, as previously guided.
- Cash costs(2) and all-in sustaining
costs ("AISC")(2) were $720 and $1,081 per GEO(1), respectively,
which were in line with plan and as guided.
- Year-to-date costs are in line with
or better than plan, with minimal impact from inflationary
pressures. The Company expects per GEO(1) costs to improve in the
second half of the year as higher production is expected.
Inflationary pressures have been mostly absent, although more
recently the Company has begun observing inflationary pressures on
certain consumables, namely steel which impacts grinding media
costs, higher diesel and other oil-based derivative prices, as well
as higher ammonium nitrate prices which impact the cost of
explosives, among other less significant items. These higher
prices, along with stronger foreign exchange rates than those
realized earlier in the year, are expected to have an impact on
costs and partially offset the per GEO(1) cost decreases resulting
from higher production in the second half of the year, were they to
persist for the balance of 2021. At this point, while the Company
believes it is reasonable to assume that some of these inflationary
pressures will persist for the balance of the year, their impact on
the Company’s cost structure is uncertain, although it is not
expected to be significant.
Health Safety and Sustainable
Development
- The Company's Total Recordable
Injury Rate was 0.58(5) for the first six months of 2021.
- Our climate action strategy
advanced during the quarter with work to determine the baseline
year and data compilation to develop abatement scenarios.
- The Company was ranked 31st in
Corporate Knights magazine list of Canada’s Best 50 Corporate
Citizens and first amongst Canadian mining companies. The Best 50
rankings are generated based on an evaluation of 8 environmental
metrics, 5 social metrics, 6 governance metrics and 3 economic
factors.
- The Company released its annual
Material Issues Report and Global Reporting Initiative Report in
June. These reports cover a variety of sustainability related
topics and provides detailed data on the Company’s strong
environmental, social and governance (ESG) performance.
Summary of Certain Non-Cash and Other
Items Included in Net Loss(4)
(In
millions of United States Dollars, except per share amounts, totals
may not add due to rounding) |
Three months ended June 30 |
2021 |
2020 |
Realized and unrealized foreign exchange losses(4) |
$ |
9.1 |
|
|
$ |
7.0 |
|
|
Share-based
payments/mark-to-market of deferred share units |
1.2 |
|
|
23.6 |
|
|
Mark-to-market gains on
derivative contracts, investments and other assets |
(0.3 |
) |
|
(2.3 |
) |
|
Gain on discontinuation of the
equity method of accounting |
(9.2 |
) |
|
— |
|
|
Temporary suspension, standby
and other incremental COVID-19 costs |
12.7 |
|
|
19.2 |
|
|
Other provisions, write-downs
and adjustments(4) |
5.3 |
|
|
5.5 |
|
|
Non-cash tax on unrealized
foreign exchange (gains) losses |
(13.4 |
) |
|
11.8 |
|
|
Income tax effect of
adjustments(4) |
(1.5 |
) |
|
(11.3 |
) |
|
One-time tax
adjustments(4) |
110.7 |
|
|
9.8 |
|
|
Total
adjustments(4) (i) |
$ |
114.6 |
|
|
$ |
63.3 |
|
|
Total adjustments - increase to
earnings(4) per
share |
$ |
0.12 |
|
|
$ |
0.07 |
|
|
(i) For the three
months ended June 30, 2021, net loss(4) would be adjusted by an
increase of $114.6 million (2020 - increase of $63.3 million).
Earnings before taxes of $87.3 million increased
significantly in relation to the comparative period earnings before
taxes of $9.7 million. A non-cash accounting deferred income tax
expense of $145.3 million, predominantly associated with an
increase in income tax rates in Argentina as applied to certain
non-producing assets (namely Suyai and MARA) reduced earnings for
the period as under accounting principles, the difference between
accounting carrying values and tax basis requires recalculation
although not payment of deferred income taxes. Future cash payments
associated with the deferred income tax liability are not expected.
The net loss(4) of $43.9 million or $0.05 per share basic and
diluted, compared to nil or nil per share basic and diluted in the
comparative prior year quarter, was impacted by $110.7 million of
non-cash income tax items attributable to Yamana Gold Inc. equity
holders, primarily driven by the aforementioned tax rate change.
Adjusting items of $114.6 million(4), that management believes may
not be reflective of current and ongoing operations, and which may
be used to adjust or reconcile input models in consensus estimates,
decreased net loss(4) for the current period.
OPERATIONS UPDATE
Canadian Malartic
Canadian Malartic had an exceptional second
quarter, with production exceeding plan due to higher grade and
recoveries from the ore found deeper in the Malartic pit.
Throughout the course of 2021 the mine will continue its transition
from the Malartic pit to the Barnat pit. Canadian Malartic remains
on track to complete topographic drilling and blasting at Barnat by
the third quarter of 2021, while overburden removal was completed
during the first quarter as planned. The Company expects higher
stripping than previous years in association with Barnat, and this
increased stripping is expected to normalize over the following
years. 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.
Jacobina
Jacobina exceeded its production plan, and
posted record-setting quarterly gold production at 47,503 ounces
during the second quarter. Mill throughput for the quarter was well
above plan, with recovery rates and grade as expected. Throughput
averaged 7,500 tonnes per day ("tpd") in May and approximately
7,200 tpd over the full second quarter, a 5% increase compared to
the previous quarter.
During the first quarter, a new Falcon
concentrator and cyclone bank were installed, while an additional
Knelson concentrator was installed on grinding line two in the
second quarter. Other initiatives include an increase in the
diameter of the pipeline feeding the tailings storage facility from
10 to 16 inches to relieve pipe pressures thereby increasing design
limits. Throughput for the balance of the year is expected to
increase to rates above those experienced in the second quarter to
approximately 7,500 tpd which represents the permitted operational
point.
Additionally, the Jacobina processing team
continued to fine-tune the operation of the plant, optimizing the
aperture of the crushers and sizing of the screens to reduce the
feed size of material entering the ball mills, thereby improving
milling performance. Furthermore, a new combination of mill liners
and grinding balls allowed an increase in throughput while
maintaining grinding size.
Cerro Moro
Cerro Moro second quarter GEO(1) production was
25,313, with gold production of 14,488 ounces and silver production
of 736,823 ounces, a significant increase as compared to 15,451
GEO(1) in the prior year period. During a period of adverse weather
conditions limiting travel to site and impacting shift changes, the
Company made certain health, safety and other site improvements
originally slated for the second half of the year, which will
benefit future quarters. The opening of more mining faces and
transition to more mill feed coming from underground ore, at higher
grades than the open pit ore, continued in the quarter with Zoe
contributions becoming more prevalent. This trend will continue
throughout the second half of 2021, with most of the ore to plant
coming from Escondida Far West, Zoe, Escondida Central and
Escondida West.
The Company expects higher gold production in
the second half of the year, with increases in grade. Over the past
year, Cerro Moro has optimized the operation of the processing
plant to increase daily throughput to approximately 1,100 tpd as
seen in the first quarter. The mine saw linear development continue
during the quarter and will continue to improve throughout the
year, further supporting the much higher second half of 2021
production profile.
The Company is evaluating construction of a heap
leach operation, a lower-cost processing alternative, that would
facilitate the processing of lower-grade mineral reserves,
potentially extending mine life. The evaluation is in the early
stages with a preliminary study completed, and metallurgical lab
testing currently underway. Yamana has submitted 8 samples
consisting of 800 kg each to a prominent 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 results after 81 days of leaching have
been reported and five of the zones tested 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 reported 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 a targeted
drilling program with the objective of defining a heap-leachable
inventory of 5 million tonnes 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. In the second half of the year, Yamana will undertake
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 second quarter, with
GEO(1) production of 52,607, including gold production of 39,492
ounces and silver production of 891,255 ounces, compared to 47,925
GEO(1) in the prior year period. The higher grade La Paloma,
Quebrada Colorada Sur and Pampa Campamento Deep sectors zones will
come into production in the second half of the year, contributing
to higher planned production in the third and fourth quarters. The
Company observed strong grades at El Peñón in June, with 4.29 g/t
gold and 117.8 g/t silver. These grades were achieved ahead of
plan, and trending towards the higher grades that are anticipated
to be continuously observed in the third and fourth quarters. The
Company expects that a strong second half of 2021 will account for
approximately 57% of gold and silver production at El Peñón. 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 for increased mine production.
The development of La Paloma, Quebrada Colorada Sur and Pampa
Campamento Deeps is an important component of that strategy, and
accessing those new areas will provide increased mining
flexibility.
Minera Florida
Minera Florida had a strong second quarter, with
production above plan and prior year production. Linear development
that is in line with the mine's strategy of increasing flexibility
continues to advance ahead of plan, and exploration results
continued to demonstrate extensions of identified areas of
mineralization and new discoveries. The positive results were
primarily due to increased tonnes processed, largely as a result of
continuing improvements in productivity with contributions from the
Pataguas and Don Leopoldo mining zones, and processing tonnes were
supplemented from lower grade ore and stockpiles. The Company is
now reactivating and optimizing formerly decommissioned ore passes,
with two ore passes already re-established, and an additional ore
pass at Satellite Fantasma-Polvorin scheduled to commence
construction in August. The ore passes are expected to further
reduce haulage distance and increase operational flexibility as a
result of additional haulage routes. Ongoing initiatives to improve
development cycle times have now increased underground development
beyond the previous rates of 1,200-1,300 metres per month,
achieving 1,344 metres in June, at a lower unit cost, bringing
forward access to new production levels and unlocking additional
mining sectors. Internalization of mining activities, ongoing
optimization of the haulage network, and increasing disposal of
development waste into underground voids will further improve mine
productivity going forward. A review of the processing plant in the
first quarter has identified several opportunities for increased
recovery and reduced operating costs. Management is currently in
the process of prioritizing these opportunities, focusing on the
initiatives that can be implemented quickly with minimal
investment.
In line 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 through incremental adjustments. An upgrade
of the crushing circuit would be required to achieve 100,000 tonnes
per month.
CONSTRUCTION, DEVELOPMENT AND ADVANCED
STAGE PROJECTS
Jacobina Phased Optimization With Lower
Capital Requirements
As reported in a separate announcement today,
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. Today's announcement also includes a
highly positive exploration update for Jacobina that supports the
phased expansion and underscores the operation's exceptional
long-term growth potential and ability to further extend strategic
mine life.
The success reflects a simplified approach to
complete the Phase 2 expansion, which will be achieved through
incremental debottlenecking of the processing plant and tailings
system combined with operational improvements, without requiring
the installation of an additional ball mill. This approach, which
follows a similar approach to that which has been the basis for the
quarter-over-quarter success of Jacobina over the past several
years, significantly reduces capital expenditures, improves energy
efficiency, and de-risks the project. Capital expenditures are
expected to be significantly lower than the original planned
capital estimated in the Phase 2 pre-feasibility study, an amount
not exceeding $15 million to $20 million. 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. With the Phase 2 expansion now underway with a simpler process
at reduced capital costs, the Company will now pursue 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.
For additional details, please see the press
release titled: 'Yamana Gold Reports Significant Progress on Phase
2 Expansion at Jacobina and Strong Exploration Results for the
Operation' available on the Company's website at
www.yamana.com.
The Wasamac Project Update and Positive
Development Decision
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 Wasamac 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. 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 expects to receive all 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 planned
for the fourth quarter of 2027, however, the Company has already
identified opportunities to improve the production ramp-up and
decrease the processing plant construction period, 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 recommendation for an underground bulk sample, which could
commence earlier on a separate environmental permit. The bulk
sample would require ramp access to the underground mineralization.
As part of the studies, the following optimization highlights were
provided:
- Mineral reserves of 1.91 million
gold ounces at an unchanged average gold grade of 2.56 g/t for an
initial mine life of 10 years.
- Rapid production ramp-up in first
year followed by sustained gold production of approximately 200,000
ounces per year for at least the next four years. Including the
ramp-up phase, average annual production for the first five years
of operation is expected to be 184,000 ounces.
- Average life of mine (“LOM”) gold
production of 169,000 ounces per year with average throughput of
7,000 tpd.
- Optimized mining method and mining
sequence, utilizing a combination of longitudinal and transverse
stoping with paste fill, which resulted in a higher production
rate, reduced dilution, and a 26% reduction in LOM development
metres.
- Initial capital cost is expected to
be relatively modest for a 7,000 tpd underground operation, at
approximately $416 million. The Company undertook extensive due
diligence relating to the acquisition of Wasamac and identified
several opportunities for optimizations and improvements; the
updated studies confirmed the opportunities for optimizations.
- The Company plans to fully fund
development with available cash and cash flows.
- Total LOM sustaining capital
estimated at $318 million primarily for underground mine
development and mobile equipment.
- LOM cash costs(2) and AISC(2) of
$640 per ounce and $828 per ounce, respectively, remaining well
below the Company average, reflecting the application of more
conservative cost assumptions to de-risk the project and align with
Yamana's benchmark costs.
- Robust project economics including
net present value (“NPV”) of $254 million with an after-tax
internal rate of return (“IRR”) of 16.1% at $1,550 per ounce of
gold and NPV of $470 million and after-tax IRR of 24% at $1,850 per
ounce of gold based on mineral reserves and excluding future upside
potential from encouraging exploration prospects.
- As of 2028, Yamana’s average annual
gold production in Quebec, including production from Wasamac and
the Odyssey underground at Canadian Malartic, is expected to climb
to approximately 450,000-500,000 ounces and remain at this level
through 2035.
- Wasamac is designed as a modern
underground operation with a small footprint and minimal
infrastructure on the south of the Route 117 highway. Tailings will
be deposited underground as paste fill and in a filtered dry-stack
tailings storage facility approximately six kilometres northwest of
the processing plant.
- Use of an underground conveyor,
electric mining equipment and high-efficiency ventilation fans to
minimize carbon emissions, with further electrification planned as
new technology becomes commercially available between now and
project execution.
- Using a conveyor rather than diesel
trucks to transport ore to surface is expected to reduce CO2
emissions by more than 2,200 tonnes per year, equivalent to taking
500 cars off the road. Over the LOM, the Company expects to reduce
CO2 emissions by more than 20,000 tonnes.
There is excellent potential for significant
future exploration success and mineral resource conversion, with
the Wasamac deposit remaining open at depth and along strike. A
planned infill and exploration drilling campaign to generate
additional mineral reserves has the potential to 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.
Lastly, there are further optimization and life
extension opportunities for further conversion of mineral resources
to mineral reserves is expected through engineering, especially
surrounding the historic mining zone, the utilization of the full
design capacity of 7,500 tpd that could increase annual gold
production, additional metallurgical drilling and test work to be
carried out to evaluate the potential increase in gold recovery
through the installation of a flotation and concentrate leach
circuit and opportunities to accelerate the project execution plan
to bring forward first gold production. Future infill drilling
programs will include assaying for silver, which has the potential
to improve project economics and reduce AISC.(2)
Acquisition of Francoeur, Arntfield and
Lac Fortune Properties
On June 21, 2021, the Company entered into a
Definitive Purchase Agreement to acquire the Francoeur, Arntfield
and Lac Fortune properties from Globex Mining Enterprises Inc.
(“Globex”). The Francoeur property is located adjacent to Yamana’s
Wasamac project and covers the western extension of the Wasa shear
zone. This acquisition adds six kilometers of highly prospective
strike length for exploration efforts to increase overall resources
adjacent to a major asset and to extend the Wasamac mine life.
The property also covers several historical gold
producers located along the shear zone and notwithstanding past
production, exploration will build on a historical drill database
of 1,024 drill holes by drilling several high potential targets
with significant gold intercepts located outside of the
historically mined areas as well as extending known mineral
resources. Wasamac, Francoeur and Arntfield have recorded past
production of over 720,000 ounces of gold, with Francoeur and
Arntfield contributing ounces at a grade of 6.2 g/t and 4 g/t of
gold, respectively.(6) Further, Francoeur currently has a historic
mineral resource of approximately 66,600 ounces of gold at a grade
of 6.5 g/t of gold in the measured and indicated categories.
Mineralization along the Wasa shear zone has been exposed in
trenches recently completed by Globex and is very similar in
character to the Wasamac resource mineralization indicating the
strong exploration potential of the property. Given the proximity
to the Canadian Malartic mine of another block acquired as part of
the transaction, which has several positive historical drill
intercepts, consideration is being given for a potential transfer
into the Canadian Malartic General Partnership exploration program,
which would modestly decrease the acquisition cost for the
Company.
The Odyssey Project Advancing on
Schedule
The Company and its partner announced a positive
construction decision for the Odyssey project at Canadian Malartic
on February 11, 2021.
The Company and its partner note that several
key processes and activities are progressing as planned:
- Overburden excavation and grouting
were completed to prepare for construction of the production shaft
and headframe.
- Underground ramp development is
ahead of schedule with approximately 764 linear metres of
development now completed during 2021 (1,587 linear metres total).
Development of the exploration ramp is anticipated to take
approximately two years to complete, with the first drilling
platform established in early July.
- Underground ramp development is
currently ahead of schedule.
- Odyssey human resources ramp-up is
progressing on target, with over 200 employees and contractors
hired in a variety of functions including mine development, surface
construction and resource development.
- Permitting is advancing as
expected, with the approval of Provincial Highway 117’s left-turn
lane construction for 2021 signed by the Minister. Construction is
currently underway and is expected to be completed by the end of
the year. Decree amendment analysis and mining leases are currently
under discussion with the relevant authorities.
- During the second quarter, the
shaft collar construction was completed, and engineering progress
occurred on the headframe and hoist rooms, paste plant, power
line/substation and surface workshop/warehouse. The headframe and
hoist room construction is slated to begin in the third quarter of
2021.
- Procurement progressed well during
the quarter, with the main highlights being the purchase of the
sinking hoist, contract for the auxiliary hoist being awarded, and
tenders sent for the service hoist, production hoist. Lastly, the
first bids for tender for the mobile underground fleet have been
received and are being analyzed.
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.
MARA Project Continuing
Progress
The MARA Joint Venture held by the Company
(56.25%), Glencore International AG (25%) and Newmont Corporation
(18.75%) continues to advance engagement with local communities and
stakeholders, advance the feasibility study and the Project's
permitting process. The feasibility study, which will provide
updated mineral reserves, production and project cost estimates for
the Project, is being overseen by the Technical Committee comprised
of members of the three companies. Key technical results are
expected during 2021, and the Company notes that a considerable
amount of information in the pre-feasibility study is already at
feasibility study level, mostly as a result of the Integration
Transaction. The full feasibility study report and submission of
the ESIA are expected in late 2022.
After obtaining all required permits from the
respective authorities including citizen participation and social
consultation seminars, the MARA Project began activities at site.
Work continued to progress well during the quarter, including
environmental base line studies and sampling, as well as
geotechnical, hydrological and other field engineering activities.
The metallurgical drilling program at the Agua Rica site is well
underway, reaching 1,410 meters in 7 drillholes by the end of the
second quarter, with the remaining drillholes to be completed early
in the third quarter. The drilling activities will continue with
the geotechnical program to support the feasibility study, and the
Company is reviewing a drilling program for resource delineation
and resource expansion drilling for later in the year. Confirmatory
metallurgical test-work for the newly collected samples is being
advanced at two prominent laboratories in British Columbia,
Canada.
The MARA Project will rely on processing ore
from the Agua Rica site at the Alumbrera plant in the Catamarca
Province of Argentina. The project design minimizes the
environmental footprint of the project in consideration of the
input of the local stakeholders, and MARA is planned to be a
multi-decade, low cost copper-gold operation with annual production
in the first 10 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 poses one of
the lowest capital intensity of the comparable projects globally.
The MARA Project represents both a significant strategic value
opportunity and a solid development and growth project, which the
Company intends to continue to advance through the development and
value realization process, through Yamana’s controlling interest in
the project.
OTHER INITIATIVES - STRATEGIC,
OPTIMIZATION AND MONETIZATION
As a complement to the advancement of the
internal exploration opportunities, the Company will consider the
acquisition of earlier stage development assets or companies that
align with Yamana's objectives for capital allocation and financial
results, jurisdiction, geology and operational expertise. Such
opportunities will typically be funded through internal resources,
meet minimum return levels that far exceed cost of capital and
would meet the Company's minimum requirements to achieve mineral
reserve and mineral resource inventories, mine life and per year
production rate. Furthermore, preference would be given to
geological and operational characteristics where the Company has an
identified expertise and excellent opportunities for value
enhancement. Such opportunities would also extend an existing
regional presence or lead to that longer-term objective. Although
the Company has an established portfolio of early-to-later-stage
organic growth projects, the Company also considers it prudent to
consider opportunities to extend regional presences in quality
jurisdictions that offer geological and operational synergies and
similarities to its current portfolio of assets. The Company's
recent acquisition of several properties adjacent to the Wasamac
project from Globex Mining is illustrative of this strategy.
From time to time, the Company’s strategy
includes holding investments in prospective companies. This may be
for several reasons such as the disposition of certain assets for
shares or in other cases, resulting from an investment for
portfolio purposes. The ownership of shares in the Nomad Royalty
Company is an example of the former. An investment may also give
the Company an opportunity to further evaluate related
opportunities. Normally, these investments are held through a
cycle, although are otherwise treated as any other portfolio
investments. The acquisition by the Company of 24 million shares of
Ascot Resources Ltd. ("Ascot") during the quarter, representing
6.4% of the outstanding shares, for aggregate consideration of
$16.5 million is an example of the latter. In line with its
investment strategy, the Company also holds interests in other
exploration stage companies in Canada including Quebec and British
Columbia, amongst other prominent areas.
GENERATIVE EXPLORATION
PROGRAM
During the second quarter, exploration drilling
and other field activities continued to ramp up in most
jurisdictions as responses to COVID-19 restrictions were managed
and vaccination campaigns gained a foothold over the COVID-19
spread. Drilling activities continued in Brazil at Lavra Velha,
Jacobina Norte and at the São Francisco discovery at Borborema,
while initial exploration drilling was initiated late in the
quarter at the Colier property. Exploration in Chile in the quarter
included surface work at early stage projects near the El Peñón
mine and elsewhere in preparation for RC scout drilling programs
later in the year. In Argentina, surface work was completed on the
Company’s Las Flechas property, where drilling in 2021 is planned
to test breccia-related high-sulphidation epithermal gold targets.
At Monument Bay, Manitoba, deep drilling continued during the
quarter, designed to test the down plunge projections of modeled,
plunging high-grade zones at the Twin Lakes target, and drilling
was initiated at the recently acquired advanced Wasamac property,
in the Abitibi belt, Quebec.
KEY STATISTICS
Key operating and financial statistics for the
second quarter 2021 are outlined in the following tables.
Financial Summary
(In
millions of United States Dollars, except for per share and per
unit amounts) |
Three months ended June 30 |
2021 |
2020 |
Revenue |
$ |
437.4 |
|
|
$ |
303.4 |
|
|
Cost of sales excluding
depletion, depreciation and amortization |
(173.8 |
) |
|
(126.3 |
) |
|
Depletion, depreciation and
amortization |
(108.6 |
) |
|
(76.3 |
) |
|
Total cost of sales |
(282.4 |
) |
|
(202.6 |
) |
|
Temporary suspension, standby
and other incremental COVID-19 costs |
(12.7 |
) |
|
(19.2 |
) |
|
Mine operating earnings |
142.3 |
|
|
81.6 |
|
|
General and administrative
expenses |
(17.0 |
) |
|
(25.4 |
) |
|
Exploration and evaluation
expenses |
(7.8 |
) |
|
(2.9 |
) |
|
Net (loss) earnings
attributable to Yamana equity holders |
(43.9 |
) |
|
— |
|
|
Net (loss) earnings per share
- basic and diluted (i) |
(0.05 |
) |
|
— |
|
|
Cash flow generated from
operations after changes in non-cash working capital |
153.5 |
|
|
92.2 |
|
|
Cash flow from operations
before changes in non-cash working capital(2) |
167.8 |
|
|
118.1 |
|
|
Revenue per ounce of gold |
$ |
1,817 |
|
|
$ |
1,713 |
|
|
Revenue per ounce of
silver |
$ |
25.96 |
|
|
$ |
16.83 |
|
|
Average realized gold price
per ounce (2) |
$ |
1,817 |
|
|
$ |
1,713 |
|
|
Average
realized silver price per ounce (2) |
$ |
26.05 |
|
|
$ |
16.83 |
|
|
(i) For the three
months ended June 30, 2021, the weighted average number of shares
outstanding was 965,595 thousand (basic and
diluted).Operating Summary
Costs |
Three months ended June 30 |
(In
United States Dollars) |
2021 |
2020 |
Per GEO sold (1) |
|
|
Total cost of sales |
$ |
1,170 |
|
$ |
1,146 |
|
Cash Costs (2) |
$ |
720 |
|
$ |
715 |
|
AISC (2) |
$ |
1,081 |
|
$ |
1,125 |
|
|
Three months ended June 30 |
Gold
Ounces |
2021 |
2020 |
Canadian Malartic (50%) (3) |
92,106 |
|
56,785 |
|
Jacobina |
47,503 |
|
45,646 |
|
Cerro Moro |
14,488 |
|
8,175 |
|
El Peñón |
39,492 |
|
35,760 |
|
Minera Florida |
23,813 |
|
17,775 |
|
TOTAL |
217,402 |
|
164,141 |
|
|
Three months ended June 30 |
Silver
Ounces |
2021 |
2020 |
Cerro Moro |
736,823 |
|
730,571 |
|
El Peñón |
891,255 |
|
1,277,238 |
|
TOTAL |
1,628,078 |
|
2,007,809 |
|
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 six months ended June 30, 2021, 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, July 30, 2021, at 9:00 a.m. ET.
Second 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: |
4990591# |
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: |
1816940# |
The conference call replay will be available
from 12:00 p.m. ET on July 30, 2021, until 11:59 p.m. ET on August
30, 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) GEO assumes gold ounces plus the gold
equivalent of silver ounces using a ratio of 68.01 for the three
months ended June 30, 2021, and 105.14 for the three months ended
June 30, 2020.(2) 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 six months ended June 30, 2021 and in
the 'Non-GAAP Performance Measures' section below.(3) Included in
the 2020 comparative gold production figure is 2,651 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.(4) Net earnings (loss) and
adjustments to net earnings (loss) represent amounts attributable
to Yamana Gold Inc. equity holders.(5) Calculated on 200,000
exposure hours basis including employees and contractors. This
value does not include Canadian Malartic in which we hold a 50%
interest.(6) Historical production for the Francoeur and Arntfield
mines is from the Francoeur NI 43-101 Technical Report published by
Richmont Mines in August 2012; Historical production for the
Wasamac mine is from the Wasamac NI 43-101 Technical Report
published by Monarch Gold in December 2018. Both NI 43-101
Technical Reports are available on SEDAR at www.sedar.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, 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 Debt;
- 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
six months ended June 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 DEBT
The Company uses the financial measure "net
debt", which is a non-GAAP financial performance 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 performance 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. Cash related to
the MARA Project is added back to the net debt calculation on the
basis that the cash is specific to the MARA Project, and not
available to the Company for the purposes of debt reduction.
When the cash and cash equivalent balance
exceeds the total debt, the Company is in a "net cash"
position.
A reconciliation of Net Debt at June 30, 2021
and December 31, 2020 is provided in Section 11 of the Company's
MD&A for the three and six months ended June 30, 2021, which is
available on the Company's website and on SEDAR.
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 June 30 |
(In millions of United States Dollars) |
2021 |
2020 |
Cash flows from operating activities |
$ |
153.5 |
|
|
$ |
92.2 |
|
|
Adjustments to operating cash
flows: |
|
|
Amortization of
deferred revenue |
4.5 |
|
|
3.9 |
|
|
Temporary suspension,
standby and other incremental COVID-19 costs |
12.7 |
|
|
19.2 |
|
|
Non-discretionary items
related to the current period |
|
|
Sustaining capital
expenditures |
(46.1 |
) |
|
(26.5 |
) |
|
Interest paid |
(21.8 |
) |
|
(22.5 |
) |
|
Payment of lease
liabilities |
(4.3 |
) |
|
(4.0 |
) |
|
Cash used in other
financing activities |
(2.2 |
) |
|
(2.0 |
) |
|
Net free cash flow |
$ |
96.3 |
|
|
$ |
60.3 |
|
|
Discretionary and other items
impacting cash flow available for dividends and debt
repayments |
|
|
Expansionary and
exploration capital expenditures |
$ |
(47.4 |
) |
|
$ |
(23.1 |
) |
|
Cash flows used in
other investing activities |
$ |
2.0 |
|
|
$ |
(0.3 |
) |
|
Effect of foreign exchange of non-USD denominated cash |
$ |
0.3 |
|
|
$ |
1.3 |
|
|
Free cash flow before dividends and debt
repayments |
$ |
51.2 |
|
|
$ |
38.2 |
|
|
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 six months ended June 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.)(See end notes on at end of press
release)
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