YAMANA GOLD INC. (TSX:YRI)(NYSE:AUY)(LSE:YAU) ("Yamana" or "the
Company") today announced its financial and operating results for
the third quarter 2012.
HIGHLIGHTS FOR THE THIRD QUARTER 2012
-- Record production of 310,490 gold equivalent ounces (GEO)(1), an 11%
increase over the same period a year ago
-- Gold production of 266,374 ounces
-- Silver production of 2.2 million ounces
-- Cash costs of $201 per GEO(2)(3)
-- Significant financial results
-- Record revenue of $612 million
-- Adjusted earnings(2) of $178 million, $0.24 per share
-- Cash flow generated from operations(4) of $286 million, $0.38 per
share
-- Generated cash margin(5) of $1,479 per ounce
-- Over $1.15 billion in available funds, including cash and cash
equivalents of $400 million
-- Completed the acquisition of Extorre Gold Mines and commenced the
evaluation of exploration and development plans for Cerro Moro. $5
million will be spent in 2012 to increase and upgrade mineral resources
1. Gold equivalent ounces (GEO) includes silver production at a ratio of
50:1.
2. Refers to a non-GAAP measure. Reconciliation of non-GAAP measures are
available at www.yamana.com/q32012
3. Cash costs are shown on a by-product basis including Alumbrera unless
otherwise noted.
4. Cash flow from operations before changes in non-cash working capital.
5. Cash margin is the difference between the average realized gold price
received less by-product cash costs per GEO.
"We delivered record revenue and production in the third quarter
and year to date, which also resulted in strong cash flow. Our cash
flow after changes in working capital reached record levels also.
As production increases, and more production enters a commercial
phase, that should translate into increasing cash flow. Our
development projects continue to advance and delivery of additional
future growth is in progress. We also realized on a further
objective in the third quarter with the closing of our acquisition
of Extorre Gold, which is now being evaluated for its exploration
and development contribution to Yamana," commented Peter Marrone,
Chairman and Chief Executive Officer. "We are also confident that
we will deliver production and costs within our guidance this year.
We will continue our efforts at becoming a reliable precious metals
company delivering growth and sustainability across all measures
from production to cash flow."
KEY STATISTICS
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Three months ended Nine months ended
September 30 September 30
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(In thousands of US dollars
except where noted) 2012 2011 2012 2011
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Revenues $ 611,807 $ 555,211 $ 1,707,257 $ 1,604,571
Cost of sales excluding
depletion, depreciation &
amortization 231,660 189,429 624,526 538,308
Depletion, depreciation and
amortization 100,989 93,619 283,544 263,148
General and administrative
expenses 37,241 27,470 106,859 89,038
Exploration expenses 15,336 7,741 42,909 23,318
Operating Earnings 220,609 229,776 599,268 697,116
Equity earnings from Alumbrera 20,644 9,425 32,496 37,750
Net earnings 59,965 115,767 272,902 458,696
Net earnings per share - basic 0.08 0.16 0.37 0.62
Adjusted earnings 177,588 190,267 496,965 528,654
Adjusted earnings per share 0.24 0.26 0.67 0.71
Cash flow generated from
operations after changes in
working capital 363,059 342,268 790,177 886,932
Per share 0.48 0.46 1.06 1.19
Cash flow generated from
operations before changes in
working capital 285,696 330,522 746,883 945,939
Per share 0.38 0.44 1.00 1.26
Average realized gold price per
ounce 1,680 1,697 1,661 1,532
Average realized silver price
per ounce 30.76 37.52 30.15 36.42
Average realized copper price
per pound 3.54 3.98 3.62 4.15
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PRODUCTION SUMMARY - FINANCIAL AND OPERATING SUMMARY
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Three months ended Nine months ended
September 30 September 30
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2012 2011 2012 2011
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Total gold equivalent ounces -
produced 310,490 279,274 878,021 825,379
Gold produced 266,374 230,986 743,597 684,613
Silver produced (millions of
ounces) 2.2 2.4 6.7 7.0
Total gold equivalent ounces - sold 315,972 277,528 869,376 817,321
Total copper produced - Chapada
(millions of pounds) 39.4 41.4 110.1 120.6
Total payable copper sold - Chapada
(millions of pounds) 37.1 38.7 101.8 110.0
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2012 2011 2012 2011
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Co-product cash costs per gold
equivalent ounce(2) $ 531 $ 468 $ 529 $ 456
Cash cost per pound of copper -
Chapada(2) $ 1.38 $ 1.45 $ 1.40 $ 1.33
By-product cash costs per gold
equivalent ounce(2) $ 201 $ 94 $ 242 $ 9
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Financial Results for the three months ended September 30,
2012
Revenues were $612 million in the third quarter compared with
$555 million in the same quarter of 2011. Mine operating earnings
were $279 million in the quarter, compared with $272 million in the
third quarter of 2011. Higher revenues and mine operating earnings
were mainly due to higher sales volume of gold from the production
of the new Mercedes mine, which was under construction during the
comparative period, partly offset by lower metal prices and lower
volume of copper concentrate sales.
Revenues for the quarter were generated from the sale of 297,406
GEO and 37.1 million pounds of copper, excluding Alumbrera which is
accounted for as an equity investment. This compares to production
excluding Alumbrera of 266,351 GEO and 38.7 million pounds of
copper in the third quarter of 2011.
Adjusted earnings were $178 million or $0.24 basic and diluted
earnings per share in the third quarter of 2012, compared with $190
million or $0.26 per share in the same quarter of 2011. Lower
adjusted earnings is attributed to lower metal prices, primarily
copper and silver prices, partly offset by higher volume of gold
sales and increased equity earnings from the Company's interest in
Alumbrera.
During the quarter, market fundamentals remained firm for gold
and gold prices started to trend upward largely in reaction to the
easing of monetary policy by most of the major economies. Compared
with the third quarter of 2011, current quarter average realized
gold price in 2012 was $1,680 per ounce versus $1,697 per ounce in
2011, current quarter average realized copper price was $3.54 per
pound versus $3.98 per pound and current quarter average realized
silver price was $30.76 per ounce compared to $37.52 per ounce in
the third quarter of 2011. Although average realized prices for
gold, copper and silver were lower than those in the third quarter
of 2011, average realized prices for gold and silver trended upward
from the second quarter of 2012, increased by 5% and 14%,
respectively, consistent with market prices.
Net earnings for the quarter were $60 million or $0.08 per share
on a basic and diluted basis, compared with net earnings of $116
million or basic and diluted earnings per share of $0.16 for the
third quarter of 2011. Net earnings for the third quarter of 2012
were impacted by an increase in the Chilean tax rate, enacted in
late September which affects the tax rates on both current and
deferred income taxes. The Company has applied the new tax rate on
all of its Chilean deferred income tax liabilities resulting in an
adjustment to net earnings during the reporting period although
deferred income taxes may never be paid unless the assets are sold
through a direct asset sale. The additional taxes from the change
in the Chilean tax rate may never be paid.
Depletion, depreciation and amortization ("DDA") expense for the
quarter was $101 million, an increase from $94 million in the third
quarter of 2011. The impact in DDA is mainly driven by higher
volume of gold sales and the additional DDA from the Mercedes mine,
which was under construction during the comparative period in
2011.
Other expenses as an aggregate of general and administrative,
exploration, other operating and net finance expenses were $94
million in the three months ended September 30, 2012, compared to
$83 million in the third quarter of 2011. The increase in other
expenses is detailed below.
General and Administrative expenses were $37 million compared to
$28 million in 2011. The increase in administrative expenses was
due to the expanded administration of the Company's growing
operations including the addition of the Mercedes mine.
Consistent with the Company's exploration plans to pursue
organic growth while continuing to build on its successful record
of replacing and increasing mineral reserves and mineral resources,
exploration expenses increased to $15 from $8 million incurred in
the comparative quarter in 2011.
Other operating expenses were $27 million compared to $17
million in the comparative quarter of 2011 due to non-cash
impairment losses recognized during the period, in particular the
impairment losses on available-for-sale investment which accounted
for $10 million.
Net finance expense was $15 million for the third quarter
compared with net finance expense of $32 million in 2011.
Significantly lower net finance expense in the current quarter,
compared to the third quarter of 2011, was mainly due to lower
unrealized exchange losses partially offset by interest expense on
higher debt level and lower capitalization of borrowing cost as
Mercedes completed commissioning in February. In the third quarter
of 2011, higher unrealized exchange losses related to monetary
assets and liabilities were recorded as a result of the increase in
the value of the Brazilian and Chilean currencies versus the United
States Dollar.
The Company recorded an income tax expense of $146 million for
the quarter (2011: tax expense of $82 million) of which $84 million
was related to the impact of increased Chilean tax rates on
deferred income taxes. The potential impact of this Chilean tax
rate change was disclosed and discussed in the Company's second
quarter report. As the charge is non-cash and relates to deferred
tax balances recorded in prior years, it is added back to adjusted
earnings. The current quarter income tax provision reflects a
current income tax expense of $47 million (2011: tax expense $52
million) and a deferred income tax expense of $99 million (2011:
deferred tax expense $30). Although taxes are accrued at a rate of
30% for accounting purposes, the adjusted tax rate for the third
quarter of 2012 was 26%, in line with the comparative third quarter
of 2011. The adjusted tax rate for the third quarter of 2012
excludes the effect of the Chilean tax increase on deferred income
taxes.
Cash flows generated from operations before changes in non-cash
working capital items for the quarter ended September 30, 2012 were
$286 million compared to $331 million for the same period ended
September 30, 2011. The decrease was due to lower earnings in the
third quarter of 2012. Additionally, the Company did not receive
any cash dividends from Minera Alumbrera in the third quarter of
2012 compared to $0.4 million received in the third quarter of
2011. Cash flows from operations after taking into effect changes
in working capital items for the period ended September 30, 2012
were $363 million, compared to inflows of $342 million for the same
period ended September 30, 2011. The increase was mainly attributed
to the increase of trade payables and other payables due to timing
of payments.
Equity earnings from associate were $21 million for the quarter
compared with $9 million in the third quarter of 2011. Cash
distributions from the Company's equity investment in Alumbrera
during the quarter were nil compared to $0.4 million in the third
quarter of 2011.
Cash and cash equivalents as at September 30, 2012 were $400
million compared to $550 million as at December 31, 2011. The lower
cash balance was due to the cash consideration paid upon the
acquisition of Extorre in August 2012.
The Company has over $1.15 billion in available funds to
continue to invest in future growth.
Financial Results for the nine months ended September 30,
2012
Revenues were $1.7 billion in the first nine months compared
with $1.6 billion in the same period of 2011 mainly due to an
increase of realized prices for gold and increased sales of gold
partly offset by lower sales volume of concentrate, copper and
silver, and lower prices for copper and silver. Mine operating
earnings were $799 million, compared with $803 million in the first
nine months of 2011.
Adjusted earnings were $497 million or $0.67 basic and diluted
earnings per share in the first nine months of 2012, compared with
$529 million or $0.71 per share in the same period of 2011. Lower
adjusted earnings is mainly attributed to lower prices for copper
and silver, lower volumes of copper and concentrate sold, partly
offset by higher average realized gold prices and gold ounces sold
during the period. Lower equity earnings from the Company's
investment in Alumbrera also affected net earnings for the
period.
Average realized price of gold was $1,661 per ounce, consistent
with market prices, compared with $1,532 per ounce for the same
period in 2011. Average realized copper price was $3.62 per pound
versus the average of $4.15 per pound, and average realized price
for silver was $30.15 per ounce compared to $36.42 per ounce in the
first nine months of 2011.
Net earnings for the first nine months were $273 million or
$0.37 basic and $0.36 diluted earnings per share, compared with net
earnings of $459 million or basic and diluted earnings per share of
$0.62 for the same period of 2011. In addition to the items
impacting adjusted earnings discussed above, net earnings were
impacted by an increase in the Chilean tax rates, enacted in late
September, which affected the tax rates on both current and
deferred income taxes.
Cash flows generated from operations before changes in non-cash
working capital items for the nine month period ended September 30,
2012 were $747 million compared to $946 million for the same period
ended September 30, 2011. Cash flows from operations after taking
into effect changes in working capital items for the period ended
September 30, 2012 were $790 million, compared to inflows of $887
million for the same period ended September 30, 2011.
Equity earnings from associate were $33 million for the first
nine months compared with $38 million in the same period in 2011.
Cash distributions from the Company's equity investment in
Alumbrera during the period were nil compared to $27 million in the
first nine months of 2011.
Operating Results for the three months ended September 30,
2012
Total production was a record 310,490 GEO for the third quarter,
including the Company's attributable production from the Alumbrera
mine of 13,633 GEO and production during commissioning of the
tailings re-treatment project at Minera Florida of 1,861 GEO,
compared with production of 279,274 GEO for the quarter ended
September 30, 2011. Commercial production for the quarter of
308,629 GEO was also a quarterly production record, representing an
11% quarter-to-quarter increase. The production increase was mainly
due to the contribution from the Company's new mine, Mercedes in
Mexico and increased production from Fazenda Brasileiro. Production
from all mines was in line with plan except for Minera Florida,
where the ramp up of the tailings re-processing plant was delayed
in part due to the installation of a zinc recovery plant which is
expected to further improve the cost structure through additional
zinc by-product credits. Build-up of ore stockpiles at Chapada, El
Penon, Jacobina and Gualcamayo continued to provide greater
flexibility in respect to future production.
By-product cash costs were $201 per GEO, compared with $94 per
GEO in the third quarter of 2011. By-product cash costs were
impacted by lower copper sale credits as a result of lower market
prices. The average market price for copper was 14% lower than that
for the third quarter of 2011.
Co-product cash costs were $531 per GEO compared with $468 per
GEO for the third quarter of 2011. Planned lower gold grades at
certain mines and higher input costs during the period primarily
impacted by-product and co-product cash costs.
Copper production for the third quarter was 39.4 million pounds
from the Chapada mine, compared with 41.4 million pounds for the
third quarter 2011. Chapada copper production was lower primarily
as a result of expected lower copper grade and recovery rate offset
by higher throughput compared with the third quarter of 2011.
Additionally, 10.4 million pounds of copper produced from Alumbrera
were attributable to the Company, compared with 9.5 million pounds
for the quarter ended September 30, 2011. Total copper production
for the third quarter was 49.8 million pounds, compared with 50.9
million pounds in the same quarter of 2011.
Co-product cash costs per pound of copper were $1.38 for the
quarter from the Chapada mine, compared with $1.45 per pound for
the third quarter in 2011. Co-product cash costs per pound of
copper for the quarter including the Company's interest in the
Alumbrera mine were $1.49 per pound versus $1.48 per pound for the
quarter ended September 30, 2011.
The Company anticipates average by-product cash costs for the
year to be lower than $250 per GEO, in line with previous guidance.
By-product cash costs are highly dependent on copper price
assumptions. A downward trend in co-product cash costs is expected
to result from the continued ramp up of production at Mercedes,
additional lower cost production from the tailings re-treatment
material at Minera Florida and the expected grade improvement
during the fourth quarter at El Penon and at Jacobina beginning in
the fourth quarter.
OPERATING MINES
A summary of mine-by-mine operating results can be found on the
final page of this press release.
Chapada, Brazil
Chapada produced a total of 33,610 GEO contained in concentrate
in the third quarter of 2012 compared with 36,075 GEO contained in
concentrate in the same quarter of 2011. Chapada copper production
was 39.4 million pounds in the quarter compared with production of
41.4 million pounds of copper in the third quarter of 2011.
Production for the quarter was consistent with the mine plan,
which indicated lower grades and recovery rates for 2012 relative
to 2011. Production levels from Chapada will be less in 2012
compared to 2011 levels consistent with the mine plan, however,
gold production is expected to increase late 2013 and in the years
to follow, mostly as a result of the start up of the oxide gold
operation at Suruca and the expected gold and copper production
from Corpo Sul beginning in 2014.
By-product cash costs for the quarter were negative $1,659 per
GEO compared with negative $2,045 per GEO for the same quarter in
2011. Lower by-product cash cost credits were due to lower copper
sale credits as a result of lower market prices and lower sales
volume of copper pounds. The favourable effects of higher tonnage
mined and tonnage processed on by-product and co-product cash costs
per GEO were partly offset by lower feed grades and lower recovery
rates during the quarter compared to that of the third quarter of
2011. To reverse the trend of lower grades and lower recovery
rates, a study to increase grind capacity has been started and a
CIL project is planned for 2013.
Co-product cash costs were $341 per GEO in the third quarter,
virtually unchanged from $329 per gold ounce in the same quarter of
2011. Co-product cash costs for copper were $1.38 per pound in the
third quarter versus $1.45 per pound in the same quarter of
2011.
Chapada revenues for the quarter net of sales taxes and
treatment and refining costs were $174 million (2011 - $149
million). Revenues included mark-to-market adjustments and final
and provisional pricing settlements in the quarter of positive $6
million (2011 - negative $42 million).
In December 2011, the Company completed the feasibility study
and basic engineering on the oxides at Suruca. The deposit will
support an additional average production of 45,000-50,000 gold
ounces per year to Chapada's operations over an initial five years
beginning in late 2013.
Drilling continued at Corpo Sul, a gold and copper deposit
discovered in 2011 at the southwest end of the orebody of Chapada
with mineral resources of higher average grade cores especially
near the current Chapada pit. The additional drilling has further
defined the geometry and grade continuity of Corpo Sul from the
southwest limits of the 2011 mineral resources for an additional
strike length of 2.9 kilometres. Mineralization and mineral
resources have been traced along a combined strike length of almost
16 kilometres centered by the main Chapada pit. These new
discoveries have led to the initiation of a pre-feasibility study,
which is currently underway and expected to be completed by year
end. Corpo Sul is expected to enhance throughput through the
blending of this higher grade ore with ore from the main Chapada
pit and, as its size and scale increases, it will be evaluated as a
stand alone orebody.
The Company's strategic plan is to ensure sustainable production
from Chapada of 150,000 gold ounces and 135 million pounds of
copper from 2013 for at least five years.
Jacobina, Brazil
Gold production at Jacobina was 30,028 ounces in the third
quarter, compared with 31,567 ounces produced in the third quarter
of 2011. The decrease in production in the third quarter compared
to that of 2011, resulted from a decrease in feed grade and lower
tonnage processed, partly offset by improved recoveries. Continued
development of access to higher grade areas is expected to improve
average ore grade beginning in the fourth quarter.
Cash costs were $768 per ounce for the third quarter compared
with $654 per ounce in the third quarter of 2011. Cash costs were
impacted by higher labour inflation and maintenance costs in
addition to continued roof support improvements made during the
quarter.
The Company continues to focus on upgrading the current mineral
resources at Canavieiras and Morro do Vento and improving overall
mineral reserve grade for the mine. Development of these high grade
areas creates the opportunity for production to increase to
approximately 140,000 ounces beginning in 2014.
Fazenda Brasileiro, Brazil
Production at Fazenda Brasileiro was 18,601 ounces of gold in
the third quarter compared to 14,335 ounces of gold in the third
quarter of 2011, representing a 30% quarter-over-quarter increase.
The increased production was mainly due to higher gold grade and
increased tonnage processed. Compared with the previous quarters of
the year, the third quarter production also represents increases of
15% over the second quarter production and 32% above the first
quarter production.
Cash costs for the third quarter were $803 per ounce, 15% lower
than $940 per ounce for the same period in 2011. Increases in
tonnage processed positively impacted cash costs and more than
offset the effect of mining inflation. Compared with the previous
quarters of the year, the third quarter per ounce cash costs also
represent decreases of 3% from the second quarter and 23% from the
first quarter cash costs.
The Fazenda Brasileiro mine was acquired in 2003 with two and a
half years of mine life remaining based on known mineral reserves.
The Company has been mining at Fazenda Brasileiro for nearly nine
years. The mine continues to further outline exploration potential
and mineral resource additions are expected in 2012.
Two new mineralization zones, CLX2 and Lagoa do Gato were
discovered in 2009. The CLX2 zone is identified as having
significant potential for high grade sources of ore for the mill.
Both infill and extension drilling confirm the continuity of
mineralization in both areas. The Company continues to develop the
high grade mineral reserves at CLX2 with a focus on increasing
mineral reserves and mineral resources. The Company is evaluating
the possible extension of mine life.
El Penon, Chile
El Penon produced 118,457 GEO during the third quarter of 2012
compared to 120,627 GEO in the same quarter of 2011. Production for
the quarter consisted of 83,092 ounces of gold and 1.8 million
ounces of silver, compared with 76,347 ounces of gold and 2.2
million ounces of silver produced in the third quarter of 2011.
Production of gold increased by 9%, compared with the same
quarter of 2011, mainly as a result of higher feed grade, while
production of silver decreased by 20% due to lower feed grade and
lower recovery rate. These variations in grade and recovery are
consistent with the mine plan for 2012 and the result of the
combination of ore from different veins and mines.
Cash costs were $422 per GEO in the third quarter, compared with
$407 per GEO in the third quarter in 2011. Higher maintenance
costs, increases in power costs, diesel and other consumables in
addition to other mining cost inflation compared to that of the
third quarter of 2011, contributed to higher per unit cash costs,
which are expected to decrease as feed grades are expected to
continue to improve for the balance of 2012, according to the mine
plan.
Exploration has been ongoing for 20 years at El Penon, which has
a long track record of replacement of ounces mined. Exploration at
Pampa Augusta Victoria ("PAV") is being accelerated as part of the
Company's continuous exploration effort on high grade areas at El
Penon. This is expected to return significant near surface gold and
silver values, improve production and provide mining flexibility
for a sustainable production level of about 440,000 GEO per year
and ultimately increase mine life. Development has commenced at
PAV.
Minera Florida, Chile
Minera Florida produced a total of 22,339 GEO in the quarter,
compared with 26,577 GEO in the third quarter of 2011. The expected
lower production was mainly a result of the combined effect of
lower gold and silver feed grades, lower gold recovery rate, and
lower tonnage mined and processed. Grade variations are due to the
combination of production areas included in the mine plan compared
to that of the third quarter of 2011. Mine and plant production
were also affected by weather, which extended its effects from the
second quarter into the third quarter.
In addition, the mine produced 1,315 tonnes of zinc in the third
quarter, compared with 2,389 tonnes of zinc produced in the third
quarter of 2011. Zinc is accounted for as a by-product credit to
cash costs.
Cash costs for the third quarter were $826 per GEO compared with
$588 per GEO in the same quarter in 2011 primarily as a result of
higher cost for power, increased cost in temporary mine services
and labour inflation, the adverse effect of lower production on
unit costs, and lower credit from sales of zinc as a result of
lower production and lower prices for zinc.
The Company's expansion project at Minera Florida is expected to
increase annual production by approximately 40,000 GEO per year for
five years through the re-treatment of tailings. The tailings
re-treatment plant was completed in May and ramp up to design
capacity was delayed in part due to the installation of a zinc
recovery plant that was not initially contemplated. The zinc
recovery plant is expected to further improve costs through the
application of additional zinc by-product credits. Production from
tailings re-treatment for 2012 is expected to be in the range of
12,000 to 16,000 GEO and ramp up to 40,000 GEO per year in 2013.
Overall costs are expected to improve with the addition of tailings
production given the lack of mining costs associated with the
re-treatment of tailings. In subsequent periods, mine grade is
expected to be consistent with plan and overall site performance
augmented by ramping up the processing of relatively low cost
historical tailings material.
The recently strengthened leadership team at the senior
management level in Chile continues to focus on the operations in
Chile and Mexico with the expansion at Minera Florida as their
first priority.
Gualcamayo, Argentina
Gualcamayo produced 38,248 ounces of gold in the third quarter,
representing a 2% increase, compared with 37,381 ounces produced in
the third quarter of 2011. Higher production was mainly due to
higher recoveries, in spite of lower feed grade. The grade for the
third quarter was consistent with plan. Increased tonnage of ore
mined reflects Gualcamayo's continuous effort in stacking materials
in preparation of transitioning to Phase III of the mine as part of
the planned expansion. Recovery rate improved over the second
quarter and the comparative quarter in 2011 as a result of the
production from the new Valle Norte heap leach pad.
Cash costs were $669 per ounce in the quarter ended September
30, 2012 compared with $442 per ounce in the third quarter of 2011.
Inflationary pressures on labour and consumable costs, lower grade
and re-handling of waste costs along with increased maintenance to
improve availability of equipment resulted in higher cash costs.
Gualcamayo is an open pit operation along a mountain face and from
time to time waste is removed and stored and then must be moved
again once that ore has been accessed. This movement, or
re-handling, of waste will cause costs to increase from time to
time. This re-handling is also expected to have an impact on fourth
quarter cost levels. The Company is evaluating how to reduce the
re-handling of waste and has initiated a maintenance program in an
effort to better contain costs. This is in addition to increased
production through existing facilities, mainly from QDD Lower West,
should reduce costs on a per ounce basis.
Underground development of QDD Lower West continues to advance
and project completion remains on schedule. Full ramp-up of
Gualcamayo's expansions to be completed by mid-2013 are expected to
increase sustainable production to over 200,000 gold ounces per
year beginning in 2014.
A scoping study on the evaluation of milling higher grade ore at
Gualcamayo, subject to mineral resource increases in 2012 and 2013,
has commenced and is expected to be completed in the first half of
2013.
Mercedes, Mexico
Mercedes produced 33,713 GEO in the third quarter, representing
increases of 17% over the second quarter production and 41% over
the first quarter. Third quarter production consists of 31,497
ounces of gold and 0.1 million ounces of silver. Production at
Mercedes has increased in consecutive quarters since the
declaration of commercial production for Mercedes in February
2012.
Cash costs per GEO were $490 for the third quarter, 2% lower
than the cash costs in the second quarter and 8% lower than the
first quarter, representing decreases in consecutive quarters since
the beginning of commercial production. Cash costs are expected to
trend down as production continues to ramp up, averaging
approximately $475 - $500 per GEO for the year.
Development continues at the Barrancas zone with the higher
grade Lagunas Norte vein, one of the newest discoveries at the
mine, which started production from sills in the third quarter.
Development of the vein structure in the Barrancas zone was not
included in the original mine plan and represents a significant
opportunity to increase production. Infill drilling at Lupita is
confirming the width and grades of mineralization and is expected
to continue growth of the measured and indicated mineral resources
that will extend mine life, maintain higher throughput and
sustainable production levels.
Production is initially planned at an annual rate of 120,000 GEO
per year although for 2012 the Company plans to produce
approximately 105,000 GEO as the mine completes its ramp up. With
the acceleration of underground development and plant modifications
the Company expects production to increase to 125,000 - 135,000 GEO
in 2013 with a target of 140,000 GEO thereafter.
Alumbrera, Argentina
The Company's interest in the Alumbrera Mine is accounted for as
an equity investment. The Company recorded earnings from its 12.5%
interest in Alumbrera Mine of $21 million for the third quarter,
compared with $9 million reported for the same quarter of 2011.
Higher earnings were due to the resumption of export sales by
Alumbrera in the second quarter to comply with a new resolution in
respect of repatriation of net proceeds from export sales set forth
by the Argentine Government. Subsequently, the Argentine Government
amended its resolution enabling Alumbrera to resume export sales of
concentrate in July and the backlog of sales is expected to be
realized during the second half of 2012. The Company did not
receive a cash distribution during the nine months ended September
30, 2012, compared with cash distributions of $0.4 million in the
third quarter and $27 million for the nine month period ended
September 30, 2011.
Attributable production from Alumbrera was 13,633 ounces of gold
and 10.4 million pounds of copper for the quarter. This compares
with attributable production of 12,712 ounces of gold and 9.5
million pounds of copper for the third quarter of 2011.
By-product cash costs per ounce of gold were negative $2,254 in
the quarter ended September 30, 2012, compared with negative $1,216
in the third quarter of 2011. Co-product cash costs were $282 per
ounce compared with $259 per ounce in the third quarter of
2011.
CONSTRUCTION AND DEVELOPMENT PROJECTS
Ernesto/Pau-a-Pique, Brazil
Physical completion is on schedule for end of the year.
Ernesto/Pau-a-Pique commenced the commissioning phase, which will
continue for the remainder of the year as will the process for
obtaining the final operational permits. Commercial production is
expected within 4-6 months. As of September 30, 2012, physical
advancement continued and was approximately 96% complete. Mine
development and electromechanical works continued as expected.
Underground development at Pau-a-Pique continued to progress and
reached a total length of more than 4,200 metres. Annual production
is expected to be approximately 90,000-100,000 gold ounces.
C1 Santa Luz, Brazil
Construction is progressing to a planned physical completion by
the end of 2012. Start up of operations is planned for early 2013
with commercial production expected within 4-6 months after start
up. Water availability for C1 Santa Luz will come from a reservoir
for which water is collected during the rainy season, which usually
starts in November. Start up will depend on how quickly water will
be accumulated in the reservoir. As of September 30, 2012, physical
advancement of the project was over 90% complete. Civil works and
electromechanical assembly continued as planned. Power line
construction is expected to be completed in January 2013. Annual
production is expected to be approximately 100,000 gold ounces with
average annual production during the first two full years to exceed
130,000 gold ounces.
Pilar, Brazil
Construction progress is on schedule with commissioning and
start up of production expected by mid-2013 with commercial
production expected within 4-6 months of start up. As at September
30, 2012, mine and plant were advanced to approximately 66%
completion. Civil works and electromechanical assembly continued as
planned. Underground development at Pilar continued to progress and
reached a total length of more than 8,000 metres and underground
development at Caiamar has progressed more than 400 metres.
Annual production from the mine was originally estimated to be
120,000 ounces of gold. The project is being built with 30%
additional capacity to that contemplated in the feasibility study
in anticipation of significant mineral resource growth. Ore feed
from Caiamar, a high-grade satellite deposit located 38 kilometres
west of Pilar, is expected to contribute to production at Pilar
thereby increasing production to a minimum of 140,000 gold ounces
per year expected to begin as early as 2014. Mineral resource
development and work on a feasibility study continued at Caiamar
during the quarter. The ore from this deposit can be processed at
Pilar with the higher grades offsetting the additional
transportation costs.
Jeronimo, Chile
The Company continues to advance and evaluate additional organic
projects, including Jeronimo and Suyai. At Jeronimo, the
optimization studies, which supplement the feasibility study to
further enhance the project economics and to create greater
certainty on costs with the advanced engineering in progress, are
expected to be delivered by the end of 2012. The pressure oxidation
plant final process design is in progress. The benefit of reduced
sulfuric acid consumption will be achieved with the insertion of a
countercurrent decantation circuit. The review of the tailings
disposal project, which relates to the thickening of tailings, has
been completed; this tailings initiative is expected to reduce
capital expenditures over the project life. The Company will
continue discussions with its joint venture partner, Codelco (43%
owner of the project), toward an objective of evaluating a
construction decision.
EXPLORATION
The Company is committed to developing its future based on its
exploration successes and organic growth with programs targeting
mineral reserve growth and mineral resource discovery in addition
to development projects and discoveries at existing operations.
The budget for the 2012 exploration program of $125 million will
continue to focus on increasing the Company's mineral reserves and
mineral resources, accelerating the development of new discoveries
such as Jordino and Maria Lazarus at Pilar, the extension of Pampa
Augusta Victoria and definition of a new discovery at El Penon, the
expansion of high grade mineral resources at Jacobina and the
development of several greenfield projects with the potential to be
brought into the Company's project pipeline, enhancing present and
future asset values. Included in the program is $5 million, which
is expected to be spent at Cerro Moro, an advanced exploration and
development stage project obtained through the recent acquisition
of Extorre.
The following summary highlights key updates from the
exploration and development program at the Company since the end of
the second quarter of 2012.
Cerro Moro, Argentina
On August 22, 2012, the Company acquired all of the issued and
outstanding common shares of Extorre Gold Mines Limited that owned
several exploration and development stage precious metals projects,
the most advanced of which is the Cerro Moro project, a high grade
gold and silver deposit with approximately 1.36 million ounces of
gold equivalent indicated mineral resources and 1.05 million ounces
of gold equivalent inferred mineral resources, located in the
province of Santa Cruz in Argentina.
Evaluation of exploration and development plans is underway. The
evaluations are expected to be completed by the end of 2012. The $5
million is to be spent in 2012 on this newly acquired property to
increase and upgrade categories of mineral resources, with a focus
on certainty in the definition of grade and size of the orebody.
The recent granting of development permits by the Argentine
government to a gold mining company for the building of a new mine
in the province of Santa Cruz further demonstrates the mining
friendly position of the provincial government.
Gualcamayo, Argentina
During the quarter, 13 diamond drill holes were completed at QDD
Lower West. Year to date, the Company has completed 60 diamond
drill holes totaling 13,496 metres. The drilling was completed to
extend the southwest extension of the main QDD Lower West deposit
and also to further delineate the Rodado breccia, which was
discovered in 2011.
Pilar, Brazil
During the quarter diamond drilling was focused on infill
drilling at the Jordino deposit. A total of 50 diamond drill holes
were completed on the down dip portion of the Jordino deposit to
upgrade the inferred mineral resource to the indicated mineral
resource category and further increase confidence in the deeper
parts of the deposit. For the remainder of the year, drilling will
focus on the delineation of the Maria Lazarus deposit located 10
kilometres west of Jordino.
Chapada, Brazil
Exploration at Corpo Sul, the newly discovered mineralized zone
located southwest of and adjacent to the main pit at Chapada, has
completed 29,000 metres of diamond drilling out of a total planned
program of 32,000 metres.
Results since the discovery of Corpo Sul, in 2011, have
established the zone as a new porphyry system south of the main
Chapada pit with grades in excess of expected grades being mined in
future years at the operation. With continued drilling at 200 metre
spacing, the Company has increased confidence in the continuity of
the higher grades and the eventual increased size of Corpo Sul.
In the third quarter, 35 additional diamond drill holes have
been completed on the southwest extension of Corpo Sul. The
additional drilling has further defined the geometry and grade
continuity of Corpo Sul from the southwest limits of the 2011
mineral resource. Results from the most recently received assays
indicate all the high grade intersections are within 700 metres of
the current Corpo Sul mineral resource and will extend the
currently modeled mineral resource to the southwest.
The current drill results at Corpo Sul confirm the expansion of
the mineralized zone and continue the recent exploration success at
Chapada which commenced with Suruca in 2010 and Corpo Sul in 2011.
Mineralization and mineral resources have now been traced along a
combined strike length of almost 16 kilometres centered by the main
Chapada pit.
These new discoveries have led to the initiation of a
pre-feasibility study that is now underway, which will define the
role of Suruca and Corpo Sul in the future production at Chapada.
This study is expected to be completed by the end of 2012, and it
is expected to include a new mineral resource at Corpo Sul using
the current drilling information. Corpo Sul is expected to enhance
throughput through the blending of these higher grade ore with ore
from the main Chapada pit and as its size and scale increases it
will be evaluated as a stand alone orebody.
In 2013, the Company expects to begin evaluating the area to the
southeast of Corpo Sul and Chapada on targets that have already
been identified, with the goal of unlocking further value at
Chapada. Exploration success to date should facilitate targeted
sustainable annual production levels of approximately 150,000
ounces of gold and 135 million pounds of copper from 2013 for at
least five years. Continued exploration success is expected to
extend this sustainable production level for a longer period within
the overall mine life.
El Penon, Chile
During the quarter, 105 diamond and reverse circulation drill
holes were completed at El Penon. The majority of the drilling was
completed at Dorada West and the Elizabeth vein at Pampa Augusta
Victoria. The new and additional drilling to be completed in the
fourth quarter will allow for initial mineral resource estimates to
be completed at both new vein zones by the end of the first quarter
of 2013.
Dorada West is located immediately to the west of Dorada,
approximately halfway between the Providencia and Dorada vein
deposits. Drilling has outlined mineralization along a strike
length of approximately 900 metres and a dip length of 150 metres.
The deposit remains open to the south and down dip.
At Elizabeth drilling has outlined a vein structure that is very
similar in appearance and grade to the Victoria vein located 400
metres to the west. However, the vein width at Elizabeth is
typically narrower than Victoria with the average width being less
than one metre.
Mercedes, Mexico
During the quarter, drilling totaled approximately 10,500 metres
in 46 diamond drill holes. The drilling was completed at the
Diluvio/Lupita area and the Rey de Oro vein zone.
At Diluvio/Lupita, drilling was completed to convert inferred
mineral resource at Lupita to indicated mineral resource and to
also explore the gap between the Diluvio and Lupita vein zones and
try to establish a link between the two deposits. Although the
drilling did establish a structural and mineralogical link between
the two deposits, the grades of mineralization were uneconomic.
The Rey de Oro deposit lies on trend of the Klondike deposit
approximately 200 metres further to the east-southeast. Drilling on
60 metre centers along strike and down dip has identified a wide
zone (greater than 30 metres) of near surface, quartz veinlet
stockworking with locally well developed quartz veins. The
stockwork zone is strongly oxidized and select high grade intervals
were previously mined by artisanal miners. Since the beginning of
the year, 31 diamond drill holes have been completed at Rey de
Oro.
Picacho, Mexico
The Company commenced its first drilling campaign at Picacho in
July with drilling results expected before the end of 2012.
OUTLOOK AND STRATEGY
The Company is focused on operational reliability with a focus
on increasing cash flows through containing costs and expanding
margins, thereby maximizing shareholder value. The Company
continues on a steady path of organic growth through expanding
current, near term and in development production plans, developing
new projects and advancing its exploration properties. The Company
sometimes complements its growth strategy by adding properties and
projects with high development potential and economic upside
through strategic acquisitions.
Production in 2012 is expected to be in the range of 1.175 to
1.310 million GEO with a target level exceeding 1.2 million GEO.
This will represent an increase from 2011 production of
approximately 13%, most of which will come from Mercedes as
production ramps up having completed commissioning in February
2012.
Production in 2013 is expected, to be in the range of 1.48 to
1.66 million GEO with a target level exceeding 1.5 million GEO.
Almost all of the increase over 2012 will come from production from
C1 Santa Luz and Ernesto/Pau-a-Pique, Mercedes being at full
capacity for a full year, an increase in production at Minera
Florida, the production coming from the expansion of Gualcamayo and
Pilar, which we expect to start up by mid-year.
By 2014, production is targeted to be at a sustainable level of
over 1.7 million GEO with a target of approximately 1.75 million
GEO. Production of over 1.75 million GEO thereafter will depend
upon construction decisions for other projects and assets held by
the Company which are now being evaluated, the most advanced of
which are Jeronimo, Cerro Moro, Agua Rica and Suyai.
The Company is contemplating certain initiatives that will
result in improved recoveries, reduced costs and/or mine life
extension at various operations. The objective of these initiatives
is for cash flow sustainability and an increase in cash flow. The
most significant potential impacts are at El Penon, Chapada,
Mercedes, Gualcamayo and Jacobina.
Cash costs are expected to remain below $250 per GEO for 2012.
Cash costs are calculated after only base metal by-product
credits.
Development capital expected to be spent in 2012 remains to be
below $665 million as planned. This will decline in 2013 and the
following years as the Company's development projects are
completed. Sustaining capital expenditures are expected to be $340
million in 2012 and while it will increase in aggregate as
production increases it will decline on a per GEO basis as the
production platform increases. The Company expects to spend
approximately $125 million on exploration in 2012 with a continued
focus on increasing mineral reserves and mineral resources with its
near-mine and regional exploration programs, and exploration of
greenfield targets.
In addition to over $1.15 billion of available cash and undrawn
credit available at September 30, 2012, the Company expects robust
cash flows from operations under the current and intermediate term
pricing conditions for gold will enable the Company to fully fund
its growth, reward shareholders through dividends and accelerate
capital spending to enhance the Company's production growth
profile.
THIRD QUARTER CONFERENCE CALL
Q3, 2012 Conference Call Information for Tuesday, October 30, 2012 at 11:00
a.m. ET
Toll Free (North America): 1-800-355-4959
Toronto Local and International 416-695-6616
International: Participant Audio Webcast: www.yamana.com
Q3, 2012 Conference Call REPLAY:
Toll Free Replay Call (North America): 1-800-408-3053 Passcode 9088417
Toronto Local and International: 905-694-9451 Passcode 9088417
The conference call replay will be available from 2:00 p.m. ET on October
30, 2012 until 11:59 p.m. ET on November 13, 2012.
Via Webcast
Live Audio & Webcast: www.yamana.com
For further information on the conference call or audio webcast,
please contact the Investor Relations Department or visit our
website, www.yamana.com.
About Yamana
Yamana is a Canadian-based gold producer with significant gold
production, gold development stage properties, exploration
properties, and land positions in Brazil, Argentina, Chile, Mexico
and Colombia. Yamana plans to continue to build on this base
through existing operating mine expansions, throughput increases,
development of new mines, the advancement of its exploration
properties and by targeting other gold consolidation opportunities
with a primary focus in the Americas.
----------------------------------------------------------------------------
Chile
Gold Gold Silver Gold
Ore Grade Silver Recovery Recovery Ounces
Processed g/t Grade g/t (%) (%) Produced
----------------------------------------------------------------------------
El Penon
Q3, 2012 361,544 7.72 196.3 93.3 78.1 83,092
----------------------------------------------------------------------------
Q2 2012 355,132 6.32 194.3 94.1 82.5 68,275
Q1 2012 335,741 7.19 212.0 93.5 82.9 72,742
Total 2011 1,452,090 7.05 215.9 93.0 84.0 306,184
Q4 2011 363,796 6.91 200.1 93.1 83.9 75,407
Q3 2011 367,503 6.77 215.4 93.6 86.8 76,347
Q2 2011 362,778 7.64 220.2 93.4 85.1 80,861
Q1 2011 358,013 6.91 227.8 92.0 79.9 73,568
----------------------------------------------------------------------------
Minera Florida
Q3 2012 227,246 2.97 37.2 80.5 67.3 19,994
----------------------------------------------------------------------------
Q2 2012 224,107 3.15 43.3 80.8 69.6 19,179
Q1 2012 228,994 3.70 25.2 81.4 62.4 22,101
Total 2011 920,388 3.50 38.5 84.0 68.3 86,914
Q4 2011 207,147 3.37 50.2 83.5 68.9 18,326
Q3 2011 242,670 3.45 38.0 84.0 67.6 22,569
Q2 2011 238,287 3.43 31.8 83.9 68.0 22,034
Q1 2011 232,284 3.78 35.2 84.6 68.7 23,986
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Chile
Silver Ounces Gold Equivalent Gold Equivalent Cash Cost
Produced Ounces Produced Ounces Sold per GEO(1)
----------------------------------------------------------------------------
El Penon
Q3, 2012 1,768,273 118,457 117,390 $ 422
----------------------------------------------------------------------------
Q2 2012 1,848,501 105,245 104,873 $ 491
Q1 2012 1,896,604 110,675 108,011 $ 442
Total 2011 8,470,112 475,586 473,607 $ 400
Q4 2011 1,981,806 115,043 116,174 $ 413
Q3 2011 2,213,974 120,627 125,600 $ 407
Q2 2011 2,162,850 124,118 117,030 $ 382
Q1 2011 2,111,482 115,798 114,803 $ 397
----------------------------------------------------------------------------
Minera Florida
Q3 2012 210,297 24,200 24,371 $ 826
----------------------------------------------------------------------------
Q2 2012 239,931 23,978 23,229 $ 811
Q1 2012 130,191 24,705 26,354 $ 748
Total 2011 791,173 102,738 101,565 $ 591
Q4 2011 241,208 23,151 23,219 $ 706
Q3 2011 200,399 26,577 28,717 $ 588
Q2 2011 167,114 25,376 22,831 $ 614
Q1 2011 182,453 27,635 26,798 $ 476
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Brazil
Gold Gold Gold Gold By-Product Co-Product
Ore Grade Recovery Ounces Ounces Cash Cost Cash Cost
Processed g/t (%) Produced Sold per GEO(1) per GEO(1)
----------------------------------------------------------------------------
Chapada
Q3 2012 5,566,744 0.30 58.6 33,610 28,202 $ (1,659) $ 341
----------------------------------------------------------------------------
Q2 2012 5,802,649 0.30 59.8 35,697 35,847 $ (2,207) $ 302
Q1 2012 4,487,496 0.29 59.6 26,367 25,970 $ (1,473) $ 348
Total 2011 20,581,385 0.32 63.8 135,347 129,419 $ (2,454) $ 319
Q4 2011 5,559,778 0.32 60.5 34,313 33,146 $ (1,715) $ 320
Q3 2011 5,075,556 0.33 66.0 36,075 28,618 $ (2,045) $ 329
Q2 2011 4,857,313 0.32 64.3 31,566 34,260 $ (3,555) $ 342
Q1 2011 5,088,739 0.32 64.7 33,392 33,395 $ (2,615) $ 286
----------------------------------------------------------------------------
By- Co-
Product Product
Gold Gold Gold Gold Cash Cost Cash
Ore Grade Recovery Ounces Ounces per Cost per
Processed g/t (%) Produced Sold GEO(1) GEO(1)
----------------------------------------------------------------------------
Jacobina
Q3 2012 545,578 1.81 94.4 30,028 31,385 $ 768
----------------------------------------------------------------------------
Q2 2012 523,603 1.75 95.1 28,005 27,852 $ 735
Q1 2012 526,765 1.94 93.0 30,493 29,706 $ 666
Total 2011 2,148,275 1.89 93.3 121,675 123,323 $ 643
Q4 2011 527,537 2.03 93.4 31,983 32,904 $ 646
Q3 2011 559,207 1.89 92.9 31,567 30,528 $ 654
Q2 2011 532,496 1.74 93.4 27,806 28,354 $ 663
Q1 2011 529,035 1.91 93.5 30,319 31,537 $ 611
----------------------------------------------------------------------------
Fazenda
Brasileiro
Q3 2012 255,769 2.52 89.6 18,601 20,448 $ 803
----------------------------------------------------------------------------
Q2 2012 251,430 2.27 88.4 16,219 14,048 $ 827
Q1 2012 270,292 1.84 88.1 14,059 14,536 $ 1,037
Total 2011 936,459 2.07 88.4 55,163 56,907 $ 937
Q4 2011 234,767 2.33 88.1 15,568 16,430 $ 915
Q3 2011 249,752 1.99 89.9 14,335 14,534 $ 940
Q2 2011 246,551 2.02 87.5 14,007 13,052 $ 934
Q1 2011 205,389 1.93 88.2 11,252 12,891 $ 968
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Argentina
Gold Gold Gold Gold Cash Cost
Ore Grade Recovery Ounces Ounces per
Processed g/t (%) Produced Sold GEO(1)
----------------------------------------------------------------------------
Gualcamayo
Q3 2012 1,664,568 0.78 94.0 38,248 42,095 $ 669
----------------------------------------------------------------------------
Q2 2012 1,977,398 0.90 71.6 38,297 33,832 $ 547
Q1 2012 2,098,004 0.85 68.1 39,263 39,877 $ 436
Total 2011 7,578,156 0.97 68.4 158,847 160,326 $ 441
Q4 2011 1,955,094 0.99 65.4 40,676 40,908 $ 424
Q3 2011 1,844,293 0.94 67.7 37,381 38,354 $ 442
Q2 2011 1,882,237 1.02 74.4 43,194 46,399 $ 399
Q1 2011 1,896,533 0.95 66.4 37,597 34,665 $ 507
----------------------------------------------------------------------------
Alumbrera
Q3 2012 1,271,732 0.45 72.8 13,633 18,566 $ (2,254)
----------------------------------------------------------------------------
Q2 2012 1,218,825 0.44 71.2 12,359 3,242 $ 711
Q1 2012 1,166,630 0.36 67.5 9,317 8,227 $ (1,270)
Total 2011 4,775,130 0.42 69.4 44,502 44,664 $ (1,448)
Q4 2011 1,176,148 0.30 68.3 7,746 9,709 $ (1,351)
Q3 2011 1,239,638 0.44 71.8 12,712 11,177 $ (1,216)
Q2 2011 1,227,348 0.47 68.2 12,670 12,367 $ (1,736)
Q1 2011 1,131,995 0.45 69.3 11,374 11,412 $ (1,452)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Mexico
Gold Gold Silver Gold
Ore Grade Silver Recovery Recovery Ounces
Processed g/t Grade g/t (%) (%) Produced
----------------------------------------------------------------------------
Mercedes
Q3 2012 151,415 6.77 74.2 94.5 29.6 31,497
----------------------------------------------------------------------------
Q2 2012 151,425 5.53 70.6 94.9 30.8 26,646
Q1 2012 136,063 5.9 83.6 93.7 28.4 22,016
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Mexico
Silver Ounces Gold Equivalent Gold Equivalent Cash Cost
Produced Ounces Produced Ounces Sold per GEO(1)
----------------------------------------------------------------------------
Mercedes
Q3 2012 110,817 33,713 31,835 $ 490
----------------------------------------------------------------------------
Q2 2012 112,729 28,900 28,760 $ 499
Q1 2012 96,887 23,953 29,041 $ 534
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Copper
Production
Copper Copper Copper Copper Cash costs
Ore Ore Recovery Produced (M Sold (M per pound of
Processed Grade (%) lbs.) lbs.) copper(1)
----------------------------------------------------------------------------
Chapada
Q3 2012 5,566,744 0.40 80.6 39.4 37.1 $ 1.38
----------------------------------------------------------------------------
Q2 2012 5,802,649 0.38 83.3 40.4 37.4 $ 1.34
Q1 2012 4,487,496 0.36 84.0 30.3 27.3 $ 1.51
Total 2011 20,581,385 0.42 87.4 166.1 153.6 $ 1.29
Q4 2011 5,559,778 0.43 86.7 45.4 43.6 $ 1.20
Q3 2011 5,075,556 0.42 87.5 41.4 38.7 $ 1.45
Q2 2011 4,857,313 0.43 88.4 40.8 41.6 $ 1.32
Q1 2011 5,088,739 0.39 87.1 38.5 29.7 $ 1.21
----------------------------------------------------------------------------
Alumbrera
Q3 2012 1,084,296 0.44 85.1 10.4 14.8 $ 1.92
----------------------------------------------------------------------------
Q2 2012 1,218,825 0.45 85.9 10.5 2.3 $ 1.41
Q1 2012 1,166,630 0.40 79.4 8.0 7.2 $ 1.85
Total 2011 4,775,130 0.40 77.2 32.2 31.5 $ 1.82
Q4 2011 1,176,148 0.30 78.9 6.2 7.7 $ 2.59
Q3 2011 1,239,638 0.44 79.5 9.5 7.9 $ 1.58
Q2 2011 1,227,348 0.45 77.2 9.3 8.8 $ 1.54
Q1 2011 1,131,995 0.39 73.1 7.1 7.1 $ 1.85
----------------------------------------------------------------------------
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS: This news
release contains "forward-looking statements" within the meaning of
the United States Private Securities Litigation Reform Act of 1995
and applicable Canadian securities legislation. Except for
statements of historical fact relating to the Company, information
contained herein constitutes forward-looking statements, including
any information as to the Company's strategy, plans or future
financial or operating performance. Forward-looking statements are
characterized by words such as "plan," "expect", "budget",
"target", "project", "intend," "believe", "anticipate", "estimate"
and other similar words, or statements that certain events or
conditions "may" or "will" occur. Forward-looking statements are
based on the opinions, assumptions and estimates of management
considered reasonable at the date the statements are made, and are
inherently subject to a variety of risks and uncertainties and
other known and unknown factors that could cause actual events or
results to differ materially from those projected in the
forward-looking statements.
These factors include the Company's expectations in connection
with the projects and exploration programs discussed herein being
met, the impact of general business and economic conditions, global
liquidity and credit availability on the timing of cash flows and
the values of assets and liabilities based on projected future
conditions, fluctuating metal prices (such as gold, copper, silver
and zinc), currency exchange rates (such as the Brazilian Real, the
Chilean Peso, the Argentine Peso, and the Mexican Peso versus the
United States Dollar), possible variations in ore grade or recovery
rates, changes in the Company's hedging program, changes in
accounting policies, changes in the Company's corporate mineral
resources, risk related to non-core mine dispositions, risks
related to acquisitions, changes in project parameters as plans
continue to be refined, changes in project development,
construction, production and commissioning time frames, risk
related to joint venture operations, the possibility of project
cost overruns or 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 time
lines, government regulation and the risk of government
expropriation or nationalization of mining operations,
environmental risks, unanticipated reclamation expenses, title
disputes or claims, limitations on insurance coverage and timing
and possible outcome of pending litigation and labour disputes, as
well as those risk factors discussed or referred to in the
Company's annual Management's Discussion and Analysis and Annual
Information Form for the year ended December 31, 2011 filed with
the securities regulatory authorities in all provinces of Canada
and available at www.sedar.com, and the Company's Annual Report on
Form 40-F filed with the United States Securities and Exchange
Commission. Although the Company has attempted to identify
important factors that could cause actual actions, events or
results to differ materially from those described in
forward-looking statements, there may be other factors that cause
actions, events or results not to be anticipated, estimated or
intended.
There can be no assurance that forward-looking statements will
prove to be accurate, as actual results and future events could
differ materially from those anticipated in such statements. The
Company undertakes no obligation to update forward-looking
statements if circumstances or management's estimates, assumptions
or opinions should change, except as required by applicable law.
The reader is cautioned not to place undue reliance on
forward-looking statements. The forward-looking information
contained herein is presented for the purpose of assisting
investors in understanding the Company's expected financial and
operational performance and results as at and for the periods ended
on the dates presented in the Company's plans and objectives and
may not be appropriate for other purposes.
NON-GAAP MEASURES
The Company has included certain non-GAAP measures including
"Co-product cash costs per gold equivalent ounce", "Co-product cash
costs per pound of copper", "By-product cash costs per gold
equivalent ounce", "Adjusted Earnings or Loss and Adjusted Earnings
or Loss per share" to supplement its financial statements, which
are presented in accordance with International Financial Reporting
Standards ("IFRS"). The term IFRS and generally accepted accounting
principles ("GAAP") are used interchangeably throughout this
MD&A, except that 2010 financial data is presented in
accordance with previous Canadian GAAP.
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 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.
AVERAGE CASH COSTS
The Company discloses "average 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 International Financial Reporting Standards ("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
operations. Average cash costs figures are calculated in accordance
with a standard developed by The Gold Institute, which was a
worldwide association of suppliers of gold and gold products and
included leading North American gold producers. The Gold Institute
ceased operations in 2002, but the standard remains the generally
accepted standard of reporting cash costs of production in North
America. Adoption of the standard is voluntary and the cost
measures presented herein may not be comparable to other similarly
titled measures of other companies. Cash costs include mine site
operating costs such as mining, processing, administration,
royalties and production taxes, but are exclusive of amortization,
reclamation, capital, development and exploration costs. Average
cash costs are computed both on a co-product and by-product
basis.
Cash costs per gold equivalent ounce on a by-product basis is
calculated by applying zinc and copper net revenue as a credit to
the cost of gold production and as such the by-product gold
equivalent ounce cash costs are impacted by realized zinc and
copper prices. These costs are then divided by gold equivalent
ounces produced. Gold equivalent ounces are determined 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.
Cash costs on a co-product basis are computed by allocating
operating cash costs to metals, mainly gold and copper, based on an
estimated or assumed ratio. These costs are then divided by gold
equivalent ounces produced and pounds of copper produced to arrive
at the average cash costs of production per gold equivalent ounce
and per pound of copper, respectively. Production of zinc is not
considered a core business of the Company; therefore, the net
revenue of zinc is always treated as a credit to the costs of gold
production.
Cash costs per gold equivalent ounce and per pound of copper are
calculated on a weighted average basis.
The measure of average cash costs, along with revenue from
sales, is considered to be a key indicator of a company's ability
to generate operating earnings and cash flow from its mining
operations. This data is furnished to provide additional
information and is a non-GAAP measure. It should not be considered
in isolation as a substitute for measures of performance prepared
in accordance with IFRS and is not necessarily indicative of
operating costs, operating profit or cash flows presented under
IFRS.
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 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 (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
commodity derivatives, (e) impairment losses and reversals, (f)
deferred income tax expense (recovery) on the translation of
foreign currency inter-corporate debt, (g) mark-to-market (gains)
losses on share-purchase warrants, (h) write-down of investments
and other assets and any other non-recurring adjustments.
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 (Loss)" and "Adjusted Earnings
(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 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-cash and other
charges and are a better indication of the Company's profitability
from operations. The items excluded from the computation of
Adjusted Earnings or Loss and Adjusted Earnings or Loss per share,
which are otherwise included in the determination of net earnings
or loss and net earnings or loss per share prepared in accordance
with IFRS, are items that the Company does not consider to be
meaningful in evaluating the Company's past financial performance
or the future prospects and may hinder a comparison of its
period-to-period profitability. Reconciliations of Adjusted
Earnings to net earnings are provided in the Company's MD&A
Section 5 "Overview of Annual Results" and Section 6 "Overview of
Quarterly Results" for both the yearly and quarterly
reconciliations, respectively, found on the Company's website at
www.yamana.com.
ADDITIONAL MEASURES
The Company uses other financial measures the presentation of
which is not meant to be a substitute for other subtotals or totals
presented in accordance with IFRS, but rather should be evaluated
in conjunction with such IFRS measures. The following other
financial measures are used:
-- Gross margin - represents the amount of revenues in excess of cost of
sales excluding depletion, depreciation and amortization.
-- Mine operating earnings - represents the amount of revenues in excess of
cost of sales excluding depletion, depreciation and amortization and
depletion, depreciation and amortization.
-- Operating earnings - represents the amount of earnings before net
finance income/expense and income tax expense.
-- Cash flows generated from operations before changes in non-cash working
capital - excludes the non-cash movement from period-to-period in
working capital items including accounts receivable, advances and
deposits, inventory, accounts payable and accrued liabilities.
The terms described above 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. The Company's management believes that their
presentation provides useful information to investors because gross
margin excludes the non-cash operating cost item (i.e.
depreciation, depletion and amortization), Cash flows generated
from operations before changes in non-cash working capital excludes
the non-cash movement in working capital items, mine operating
earnings excludes expenses not directly associate 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
operations and are considered to be meaningful in evaluating the
Company's past financial performance or the future prospects.
Contacts: Yamana Gold Inc. Lisa Doddridge, Vice President,
Corporate Communications and Investor Relations 416-945-7362 or
1-888-809-0925lisa.doddridge@yamana.com www.yamana.com
Yamana Gold (TSX:YRI)
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