YAMANA GOLD INC. (TSX:YRI) (NYSE:AUY) (LSE:AUY) is herein reporting its financial and operational results for the second quarter of 2022. Production totalled 260,960 gold equivalent ounces (2) at total cost of sales, cash costs(1) and all-in sustaining costs (1) of $1,168, $734 and $1,084 per GEO(2) sold respectively. The standout production results, combined with the low-cost performance, delivered strong cash flow generation, including $187.8 million in cash flows from operating activities and $195.9 million in cash flows from operating activities before net change in working capital. With solid results across its operations, the Company is well positioned to achieve its guidance for the year in both production and AISC(1).
SECOND QUARTER HIGHLIGHTS
Financial Results – Strong Earnings and Cash Flow Generation Strengthening Balance Sheet
Production Results – Exceptional Performance Across Entire Portfolio
Cost Results – Maintaining Solid Margins Against Inflationary Backdrop
Capital Allocation and Free Cash Flow
Health, Safety and Sustainable Development
OPERATING RESULTS SUMMARY
|For the three months ended June 30, 2022|
|Canadian Malartic (50%)||87,186||—||87,186||$1,205||$724||$915|
|For the three months ended June 30, 2021|
|Canadian Malartic (50%)||92,106||—||92,106||$1,147||$632||$911|
Canadian Malartic had a strong second quarter, producing 87,186 ounces, which was higher than plan. Canadian Malartic recovery rates have trended higher than comparative periods, as anticipated from the processing of softer Barnat ore. As previously guided, to optimize cash flow, the mine is expected to have lower production and throughput in 2022, relative to 2021.
Total cost of sales, cash costs(1) and AISC(1) on a per GEO(2) basis for the quarter were $1,205, $724 and $915, respectively, with AISC(1) largely flat versus the prior year comparative period and better than plan.
Jacobina had an exceptional second quarter and delivered record quarterly gold production of 49,662 ounces. The production results exceeded plan and the comparative quarter, driven by higher ore tonnes mined. Underground mine development work is in line with the mine plan at 1,500 metres per month to gain access to new mining panels, and together with the higher ore tonnes mined, provides additional flexibility through the development of stockpiles supporting the higher throughput expected from the ongoing phased expansion. As previously guided, production for 2022 is expected to increase for the ninth consecutive year, a trend that is expected to continue in the coming years, as a result of the phased expansion strategy and the exploration programs aimed at generating significant value from the remarkable geological upside of the property.
Total cost of sales, cash costs(1) and AISC(1) on a per GEO(2) basis for the second quarter of $856, $559 and $775, respectively, were significantly lower than the comparative prior year quarter. Costs benefited from higher production as a result of the aforementioned increased mill throughput, and fixed production costs being distributed over less ounces in the prior year.
Cerro Moro had a standout quarter, producing 51,906 GEO(2) comprising 30,929 ounces of gold and 1,736,872 ounces of silver, significantly exceeding plan and production from the comparative period. Production continued to benefit from access to additional mining faces, which supported the increase in mill feed coming from higher-grade underground ore, which accounts for nearly 80% of the stabilized throughput.
The opening of more mining faces and resultant increase in mill feed coming from higher-grade underground ore continued in the second quarter with Zoe contributions becoming more prevalent. During the second quarter, most of the ore delivered to the plant came from Escondida Far West, Zoe, Escondida Central and Escondida West. Over the past year, Cerro Moro has optimized the operation of the processing plant to increase daily throughput to approximately 1,100 tonnes per day (“tpd”). With improvements to mine development and flexibility, and modifications to the mining sequence for the year, the Company anticipates more balanced quarterly production profile over the second half of year, with production reflecting reserve grades. This positions Cerro Moro well to meet guidance for the year.
Total cost of sales, cash costs(1) and AISC(1) on a per GEO(2) basis during the second quarter were $1,250, $842, and $1,181, respectively, better than plan and all well below the comparative quarter, as a result of the exceptional production in the quarter.
El Peñón had a strong quarter, with GEO(2) production of 54,068, comprising gold production of 46,627 ounces, and 619,981 ounces of silver. June production of 19,077 GEO(2) benefited from access to the Chiquilla Chica zone which entered into production at the beginning of the month. Optimized mine sequencing, bringing forward zones with a higher gold-to-silver ratio in the first half of the year, has put El Peñón in an excellent position to achieve full-year GEO(2) production guidance. The Company expects higher silver production in the second half of 2022, due to the mining sequence and the mining of the Providencia Sur, Dorada SW and Flat zones, where an increase in higher-grade silver ore is anticipated. The first step to unlock the opportunity to leverage the currently existing processing capacity at the mine and increase production was to establish additional mining sectors. The development of La Paloma, Quebrada Colorada Sur and Pampa Campamento Deep was an important component of that strategy; accessing these new areas has now provided increased mining flexibility. With improved access now in place, and development rates able to support throughput, the Company expects higher production to come in the following quarters predominantly driven by higher grades.
Quarterly total cost of sales, cash costs(1) and AISC(1) on a per GEO(2) basis of $1,091, $712, and $988, respectively, were all well below the comparative period, as a result of the previously-disclosed higher development rates, that facilitated access to additional mining areas during the quarter. Mine development is currently occurring at a rate that exceeds 3,000 metres per month.
Minera Florida reported gold production of 18,138 ounces during the quarter, and remains on target for its annual production guidance range. During the past year, Minera Florida has seen improved operational efficiency and reduced haulage distances as a result of re-establishing ore passes. Internalization of mining activities, ongoing optimization of the haulage infrastructure, and increasing disposal storage of development waste into underground voids will further improve mine productivity going forward. A review of the processing plant in the first quarter identified several opportunities to increase recovery. Management is prioritizing these opportunities, focusing on the initiatives that can be implemented quickly with minimal investment.
Total cost of sales, cash costs(1) and AISC(1) on a per GEO(2) basis during the quarter were $1,718, $1,041, and $1,503 respectively. AISC(1) was impacted by several factors during the quarter, including mining sequence which saw extraction from a higher number of mining zones in preparation for the second half of the year, with both linear development and exploration expenses being in line with plan, despite the lower production profile. Costs per GEO(2) are expected to improve throughout the year due to higher grades, and higher silver and zinc by-product credits.
CONSTRUCTION, DEVELOPMENT AND ADVANCED STAGE PROJECTS
Wasamac Advancing Bulk Sample Permitting and Optimized Life-of-Mine Plan
During 2021, the Company made a positive development decision on its wholly-owned Wasamac project in the Abitibi-Témiscamingue region of Quebec, Canada. Wasamac solidifies the Company’s long-term growth profile with a top-tier gold project in a region where Yamana has deep operational and technical expertise and experience.
During the second quarter, the Company continued to advance preparations for its board-approved bulk sample program. The initiative would allow construction to commence on the ramp, enabling earlier access to the deposit to increase the level of confidence in metallurgical and geotechnical variables and optimize the processing flow sheet and mining sequence. Construction of surface facilities to support the ramp development activity and associated environmental requirements would also be advanced.
With a high level of continuity and regular geometry, combined with a relatively simple structural setting and average mineralized widths of 13 metres, Wasamac is well positioned for high-production and low-cost underground mining methods given the project’s low level of geological risk and favourable geological environment. Results since mid-2021 continue to confirm or exceed expected grades and widths within the resource area, suggesting good opportunities to increase reserves within and adjacent to the known mineralized envelope. Similarly, the metallurgical and geomechanical assumptions used in the feasibility study are based on rigorous lab testing from drill hole samples. Bulk sampling and industrial-scale tests will build on these results, enabling development of production-ready models for the grade, recovery, and geotechnical aspects of the project, to support the first three years of production.
Additionally, the bulk sample program will allow the Company to capture opportunities to optimize the processing performance by testing multiple flowsheet options and confirm stope stability parameters to optimize stope dimensions, backfilling strategy and mining sequence while contributing to ensuring a safe working environment. The accelerated development of the ramp will also establish drilling platforms to perform both delineation and exploration drilling at Wasamac main zones, Wildcat and potential new zones from underground.
Preparation of the documentation for the bulk sample permits is underway and scheduled for submission in the third quarter of 2022, with the approval process expected to take less than 6 months. Permit approvals are expected in early 2023 and ramp development could begin in spring 2023. While the permit application is in progress, select site works, including construction of an access road, a temporary 25 kV power line and temporary buildings are scheduled to commence in the second half of 2022.
The bulk sample will not require additional costs above what was included in the feasibility study, rather a fraction of the costs will be advanced slightly. A modest capital expenditure of approximately $7 million is planned for the second half of 2022, in preparation for development to commence in the first half of 2023.
Opportunities Providing Upside
During the second quarter, the Company completed an update of the Wasamac strategic life-of-mine (LOM) plan, building on the 2021 feasibility study and incorporating the results of several value-adding studies that were advanced throughout the first half of 2022. The strategic plan demonstrates an improved gold production profile compared to the feasibility study, while continuing to establish Wasamac as a modern, low-cost, responsible underground mine.
Extension of the processing plant site through land acquisition and additional geotechnical drilling have allowed optimization of the underground mine design and processing plant layout. The revised layout avoids environmentally-sensitive areas, improves the plant configuration, and provides additional space for ore stockpiling, while continuing to minimize impacts to the surrounding property holders. Using the revised mine designs, the mining sequence has been optimized to increase feed grades in the first two years, resulting in a faster production ramp-up to 200,000 ounces in 2027 and up to 250,000 ounces in 2028.
Furthermore, the ongoing mine design and sequence optimizations could position the Wasamac mine with the option for a future incremental expansion from 7,000 tpd to 9,000 tpd in year 3 of operations, to extend the gold production profile of 250,000 ounces per year until at least 2030. The results of a comminution trade-off study indicate that the higher throughput of 9,000 tpd could be achieved with limited additional mechanical equipment at modest capital expenditures and without increasing the plant footprint.
The strategy to start production at 7,000 tpd, with a later incremental expansion to 9,000 tpd, balances the mining equipment fleet and workforce requirements while minimizing any impact to the ongoing permitting process. As a result, the Company continues to expect to receive the required permits to commence project construction in mid-2024 and the initial capital cost estimate from the feasibility study of $416 million also remains unchanged.
Positive infill and exploration drilling results to date indicate the potential for a strategic mine life of 10 to 15 years at 200,000 to 250,000 ounces of gold per year, compared to the LOM average of 169,000 ounces in the feasibility study. The Wasamac deposit is not only open at depth and along strike but the underexplored secondary zones such as Wildcat are showing promising drilling results. Additional exploration targets on the property, including the adjacent Francoeur, Arntfield, and Lac Fortune properties, provide further upside. For highlights of the ongoing exploration program at Wasamac please see the July 27, 2022 press release ‘Yamana Gold Announces Positive Exploration Results Underpinning Strategic Upside at Odyssey and Wasamac’.
As a result of the improved production profile in the updated strategic LOM plan, unit costs are expected to be lower than the feasibility study LOM average AISC(1) of $828 per ounce and, at the feasibility study gold price of US$1,550, the net present value would approximately double, assuming the strategic mine life is extended through 2036 at 9,000 tpd.
Other opportunities that continue to be evaluated but are not yet included in the strategic plan include the processing flow sheet optimization to increase metallurgical recoveries by approximately 3% (for which metallurgical testing is ongoing), optimized configuration of the tailings filter plant and paste backfill plant, and increased levels of electrification, automation and renewable energy usage in the project.
The Odyssey Project Advancing on Schedule and Continues Exploration Success
Yamana and Agnico Eagle Mines Ltd., who each hold a 50% interest in the Canadian Malartic General Partnership, owner and operator of the Canadian Malartic mine, announced a positive construction decision for the Odyssey underground project at Canadian Malartic on February 11, 2021.
Following significant advancement of the project in 2021, the Odyssey team is focusing on two key milestones:
The project continues to be on budget, and on schedule. Notable developments on progress as follows:
With a significant production platform, material cash flow generation and a prominent position within Quebec’s Abitibi District, Canadian Malartic will remain one of the Company’s cornerstone assets and one of the more prolific and generational mines in the world, particularly as the Odyssey mine is developed and comes into production. The Company is taking a disciplined approach to the development of Odyssey with a conservative outlook for initial throughput and production. While the Odyssey mine is expected to initially process 20,000 tonnes per day and produce 500,000 to 600,000 ounces per year, based on the current mine plan, the Company recognizes that there is a large inventory of ounces that is not currently in the mine plan. Odyssey ores will be processed through a plant with an original design capacity of over 55,000 tonnes per day, processing closer to 60,000 tonnes per day, which far exceeds the initial expected throughput of Odyssey. The plant was designed for the larger open pit operations that will end later this decade, and while the Company will scale the plant to the level required for the underground operation, that plant capacity will always be there. The Company’s approach at its other mines has been to conduct extensive exploration which provides flexibility to maximize and increase throughput, and a similar approach will be taken with Odyssey, where delineation of extensions of underground mineralized zones and new zones of mineralization is already occurring. The extension of East Gouldie and discovery of Titan are examples of these underground exploration successes and opportunities. The Company’s efforts at East Amphi, Rand and Camflo also provide potential to add tonnage and production. The Camflo property, which was added to the Partnership in 2021, covers the past producing Camflo mine which had historical production of approximately 1.6 million ounces of gold. An initial evaluation of the Camflo property has identified porphyry and diorite hosted gold mineralization that could potentially be mined via an open pit. Additional studies are underway to initiate an aggressive exploration program in 2023. The Company firmly believes that in its 10-year outlook period, these efforts will lead to more mining areas that will allow the Company to take advantage of available plant capacity, resulting in ore processing that will exceed 20,000 tonnes per day, and sustainable production will then significantly exceed the initial production plan of 500,000 to 600,000 ounces per year.
Infill Drilling and Exploration
Infill drilling in 2022 continues to demonstrate remarkable grade and width continuity in the East Gouldie mineralized zone, with indicated resource drilling meeting or exceeding the grade and width of the reported inferred resource, validating the inferred resource estimate. With twelve surface diamond drill rigs active on East Gouldie, as well as four underground drill rigs on Odyssey South, ongoing drilling is expected to convert a significant portion of the 2021 year-end inferred mineral resource to indicated mineral resources for 2022 year-end reporting. As well, drilling is expected to significantly expand the inferred resource envelope. Up to four drill rigs worked during the second quarter on exploration of the eastern extension of the East Gouldie structure from the Rand property, completing 14,600 metres on East Gouldie Extension, 4,600 metres of exploration at East Amphi and 690 metres on the Midway project. During the third quarter, exploration will continue with one drill rig working on exploration testing further targets on the consolidated property.
The new indicated mineral resources will provide the basis for updated technical studies in 2023 that will allow definition of mineral reserves for the Odyssey underground project over the next few years, starting at the end of 2022. For highlights of the ongoing exploration program at Odyssey please see the July 27, 2022 press release ‘Yamana Gold Announces Positive Exploration Results Underpinning Strategic Upside at Odyssey and Wasamac’.
Jacobina Expansion Strategy
The Company’s expansion strategy at Jacobina is well advanced and the Company anticipates that the low-cost operation will have a mine life that exceeds several decades, taking reserves and high conviction mineral resources into consideration. Production is expected to materially increase with phased expansions providing a pathway to sustainable production of 350,000 ounces per annum. This will increase the already excellent cash flow generation of the mine and deliver meaningful value. With well-below average costs at Jacobina, cash flows exceed those from mines that produce significantly, and as much as fifty per cent, more ounces. The mine currently has a reserve life of over 15 years plus a pipeline of resources and exploration targets that we believe will further extend mine life. Work performed since 2019 has allowed for the systematic exploration of the Company’s large land package in the Jacobina district, which covers 155 kilometres of exploration potential, allowing for the definition of a fourteen-kilometre long belt of gold-bearing conglomerate located north of the mine complex and also extending the known mineralized reefs south of João Belo in a continuous area extending 2,200 metres. Further areas have been identified during reconnaissance exploration programs. Work will continue to define mineralized reefs exposed on surface and follow up with drill testing targeting both extensions of the mine complex and new standalone mine targets. Consequently, the Company sees significant opportunities to grow its regional presence and continue to build the world-class Jacobina Complex.
The Phase 2 expansion at Jacobina continued to successfully ramp-up during the quarter, with the mine achieving a sustained throughput rate of over 8,400 tpd in June. Yamana expects the throughput objective of 8,500 tpd to be achieved in July, establishing Jacobina’s sustainable production profile at 230,000 ounces of gold per year.
With the Phase 2 expansion completed ahead of schedule, the Company is now pursuing the Phase 3 expansion to 10,000 tpd through continued incremental debottlenecking. With the permit to 10,000 tpd already in hand, Phase 3 is expected to increase gold production to approximately 270,000 ounces per year by 2025 with a modest capital expenditure of $20 million to $30 million.
The Phase 4 expansion, of up to 15,000 tpd, would increase gold production in excess of 350,000 ounces per year. To achieve the target throughput rates, a third grinding line would be added, as well as an expansion of the leaching and CIP circuits. As the third ball mill was originally planned as part of the Phase 2 Feasibility Study, engineering for Phase 4 is well advanced. A comprehensive plan, aligning the processing plant, underground mine, and tailings management strategy, while managing capital expenditures and cash flow, is underway.
The Company is further evaluating the strategic options and direction related to Jacobina and the significant exploration that is available along the greenstone belt which hosts the mine. Jacobina is being envisioned as a complex of multiple mines, and more emphasis is being placed on regional and generative exploration.
Cerro Moro Scalable Plant and Heap Leaching Upside Opportunities
Cerro Moro has a significant inventory of lower-grade veins that are not fully reflected in the current mineral reserve and mineral resource statements, many of which are wider than the veins currently being mined. Drilling of these lower-grade veins was not typically followed up with infill drilling in the past as the mineralization is below the current cut-off grade. Cerro Moro was developed as a high-grade, low-tonnage operation but, from the beginning, the Company has considered alternative processing options to allow for economic extraction of lower-grade mineralization, including:
Year to date, the Company has advanced the plant expansion study. Similar to the approach that has proven successful at Jacobina, the Company is considering a low-risk, phased expansion for Cerro Moro with quick payback from the initial phase used to fund subsequent phases. As such, the Company is considering using fine screens instead of cyclones for classification to improve the efficiency of the existing ball mill. Combined with a slightly coarser grind size, this initial phase is expected to increase throughput to at least 1,500 tpd, a 40% to 50% increase in capacity, without impacting gold and silver recoveries. The incremental capacity could be used for processing of lower-grade mineralization, which is expected to increase annual gold and silver production, and in turn reduce fixed costs per unit at the mine, as those costs would be distributed over additional ounces. Preliminary analysis based on current operating data indicates that the existing crushing and flotation circuits are adequate for the higher throughput rate and reconfiguration of the leaching circuit could achieve the target throughput without requiring additional leach tanks. Upgrades to the concentrate thickener, clarifying filters, flocculant make-up system, and pumping would likely be required. The capital cost of this initial phase is estimated at a modest $15 million to $20 million. Many of the upgrades in phase 1 expansion would be sufficient for a second expansion phase to increase plant throughput to approximately 2,200 tpd, double the existing capacity, further increasing production and reducing operating unit costs. Capital estimates for the phase 2 expansion are also $15 million to $20 million, for a total capital investment over the two expansion phases estimated at $30 million to $40 million. The Company is currently evaluating two options for phase 2 expansion, the addition of a high-pressure grinding rolls (“HPGR”) unit before the existing ball mill or the addition of a regrind unit. An expansion of the flotation circuit would also be required. The Company is undertaking additional test work to confirm the optimal flow sheet option and will advance the selected phase 1 and phase 2 expansion options to a pre-feasibility study level, expected for completion in early 2023.
In parallel, a technical study on the potential heap leach project was conducted, and while the results obtained in the second quarter of 2022 were positive, the Company has elected to prioritize the plant expansion project, as it provides a more immediate high-return growth prospect, similar to the phased expansion successfully deployed at Jacobina. As previously disclosed, a four-month cyanide column leach test program was conducted on eight samples with gold grades of 0.71 to 3.22 g/t. and at three different sizes of feed materials, -25 mm, -19 mm and -9.5 mm. The results indicated good potential for leaching of both oxidized near-surface vein material, zones with hypogene oxides (hematite) and some low sulphide gold-bearing veins, with extractions from column leaching varying from 32.5% to 96.9%, averaging 68.6%. Gold recoveries at the Domos La Union and Michelle zones were particularly impressive, averaging 85.6% from the four samples. Conceptual engineering was conducted for a 5,000 tpd heap leach operation and the configuration was envisaged with three stages of crushing to a crushed size P80 of 12.5 mm, followed by agglomeration and retreat conveyor stacking in a multiple lift, single-use pad with a design capacity of approximately 14 million tonnes. The leach pad, solution storage ponds, and Merrill-Crowe plant would be conceptually planned to be located approximately 2 kilometres east of the current tailings storage facility. Average feed grade would be estimated at approximately 1.0 to 1.4 g/t of gold, adding 45,000 to 65,000 ounces of gold production per year in addition to gold and silver production from the existing processing plant.
Positive exploration results achieved throughout 2021 successfully replaced depletion of mineral reserves for the first time, as reflected in increased mineral reserves and mineral resources at year-end, turning the corner for the operation. Significantly, the expansion of higher-grade veins, both within the core mine at Zoe and Martina, and outside the core mine at Naty, extends the Cerro Moro mine life at the current gold equivalent feed grade and existing throughput rate of approximately 1,100 tonnes per day. Additional high-grade targets identified in 2021 provide a pipeline of opportunities for continued mineral reserves replacement going forward which supports the plant expansion opportunity. Lastly, at a higher level of throughput, the Company may be able to create a greater inventory of mineral resources. Current exploration budgets are designed to allow for the replacement of not only mining depletion but the annual addition of inferred mineral resources for a constant pipeline of high-quality mineral resources for an ongoing annual conversion to mineral reserves.
As Cerro Moro’s mineral inventory increases, the Company will evaluate its options for alternative sources of power, which include a connection to the grid and wind power. Both options are expected to improve costs and further reduce GHG emissions, thereby accelerating the achievement of the Company’s 1.5ºC science-based carbon emissions reduction target.
The transition of Cerro Moro from high-cost, diesel-generated electricity to wind power is the most attractive and compelling of several viable GHG reduction options. The conversion of approximately 50% of Cerro Moro’s electricity requirements from diesel to wind power would meet the GHG emission reductions required between now and 2030 to achieve the Company’s 1.5ºC science-based target. Further, it is expected that the transition to wind power would reduce operating costs, expand mineral reserves and mine life. A detailed evaluation, including a third-party feasibility study of this opportunity is underway. The third-party study to finalize the Company’s evaluation of wind power indicates there should be a sufficient and sustainable supply of power as the Cerro Moro area of southern Argentina is considered one of the best on-shore locations in the world for wind energy. The results of the alternative power analysis will be considered in the plant expansion pre-feasibility and heap leach studies to explore synergies between the projects.
The objective at Cerro Moro is to create a sustainable ten-year production runway of at least 160,000 GEO(2) per year, and up to 200,000 GEO(2) per year. If the Company were to develop both the plant expansion and heap leach projects, which represent significant upside opportunities, along with conversion of the exploration targets to mineral resources, Cerro Moro could produce at least 200,000 GEO(2) per year.
MARA Project Advances
The MARA Joint Venture held by the Company (56.25%), Glencore International AG (25%) and Newmont Corporation (18.75%) continues to advance engagement with local communities and stakeholders, and progress the feasibility study and the permitting process. The pending feasibility study will provide updated mineral reserves, production and project capital cost estimates, and is being overseen by the Technical Committee comprised of members of the three joint venture companies. The engineering effort for the feasibility study is expected to be substantially completed by the end of 2022 and the finalized report in the first half of 2023.
MARA is the combined project comprised of the Agua Rica site, Alumbrera site, as well as the Alumbrera plant and ancillary buildings and facilities, and will rely on processing ore from the Agua Rica mine at the Alumbrera plant. The project design minimizes the environmental footprint of the project, incorporating the input of local stakeholders. MARA is planned to be a multi-decade, low-cost copper-gold operation with annual production in the first ten years of 556 million pounds of copper equivalent(8) 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 is one of the lowest capital-intensity copper projects globally.
Work during the second quarter of 2022 focused on continuing the progress made during 2021: advancing the feasibility study engineering, mine design and planning, metallurgical test-work and geotechnical drilling campaigns, other fieldwork at site, baseline social and environmental studies, as well as permitting and working with local stakeholders. The work continues, with the drilling campaign and other fieldwork now covering the Agua Rica mine infrastructure and is expected to be completed by the end of fourth quarter of 2022.
The Company is also planning to perform deep drill holes in 2022 to check the extension of high-grade chalcopyrite mineralization that could potentially unlock a pit expansion of Agua Rica, as well as to test for deep extensions of mineralization in the hypogene area of the porphyry, given the deposit is open at depth and relatively unexplored beyond the supergene zone.
The metallurgical test program is now concluding and the results are well aligned with previous results and expectations, with indicative improvements to concentrate grades and mass pull. Pilot plant investigations have also been completed and have generated samples of final concentrate and process plant tailings for third party testing and equipment sizing by the various major equipment vendors.
The MARA project represents a significant strategic value opportunity and a solid development and growth project. The Company intends to pursue all available avenues to continue to advance and unlock its value through its controlling interest.
During the second quarter, exploration drilling and other field activities were carried out as planned, with only minor COVID-related impacts to activities, most notably analytical laboratory delays, which are expected to improve in the coming months as COVID-related backlogs are expected to decrease.
The Company is continuing to advance its regional exploration projects, with particular focus being placed on Jacobina and Lavra Velha, which currently represent the best opportunities for advancement of the goals of the generative exploration program. Drilling activities continued in the second quarter in Brazil at Lavra Velha and Jacobina Norte, as well as at Ivolândia and Borborema. Field activities also advanced at the Company’s Colider and Arenopolis projects, with collection of soil and rock samples and geological mapping at several targets.
Exploration in Chile in the second quarter included surface evaluation and target development on several early-stage Yamana projects in several mineral belts, evaluation of select third-party opportunities, and ongoing regional targeting efforts in a number of districts. Surface samples collected during the quarter across all projects in Chile totaled 744 rock and 130 soil samples. Ninety-six days of geological mapping and field activities related to property reviews were completed. Two new areas have been covered by exploration concessions based on the generative work.
In Argentina, field work in the second quarter continued at the Companies Las Flechas property, including collection of 426 soil and 39 rock samples, geological mapping and alteration studies of key areas associated with breccia-related high-sulphidation epithermal gold and porphyry copper-gold targets. Soil and rock anomalies have defined excellent targets in preparation for drilling planned for the first quarter 2023. Additional exploration work conducted in Argentina during the second quarter included surface evaluation and target development on several early-stage Yamana projects, regional targeting programs in select mineral belts and mining-friendly jurisdictions, and evaluation of third party properties.
At Monument Bay, Manitoba, results from the recently-completed deep drilling program are being evaluated with planning for the next steps for the project ongoing. Exploration drilling continued at the recently-acquired, advanced Wasamac property, in the Abitibi-Témiscamingue region, Quebec, where ongoing infill drilling continues to improve confidence and demonstrate the wide, consistent nature of mineralization at the Wasa deposit, and ongoing exploration drilling continues to intercept important zones of mineralization outside of known resources. Drilling and other field activities on the Francoeur property are planned to begin in the third quarter. The 2022 planned field program was initiated on the recently developed Orogen Royalties Inc. Nevada Alliance and Raven-Callaghan property option. Data compilation work was started on Yamana’s Quito property, Nevada.
BUSINESS COMBINATION WITH GOLD FIELDS
On May 31, 2022, Gold Fields and Yamana announced that they had entered into a definitive arrangement agreement (the “Arrangement, under which Gold Fields will acquire all of the outstanding common shares of Yamana pursuant to a plan of arrangement under the Canada Business Corporations Act.
Under the terms of the Transaction, among other things, all of the outstanding Yamana Shares will be exchanged at a ratio of 0.6 of an ordinary share in Gold Fields or 0.6 of a Gold Fields American depositary share (for each Yamana Share.
The Transaction implies a valuation for Yamana of US$6.7 billion and represents a premium of 33.8% to the 10-day Volume-Weighted Average Price of Yamana’s Shares of US$ 5.201 on Friday, May 27, 2022, being the last trading day on the NYSE prior to the date of the announcement, based on the 10-day VWAP of Gold Fields ADSs of US$ 11.592. Upon closing of the Transaction, it is anticipated that Gold Fields Shareholders and Yamana Shareholders will own approximately 61% and 39% of the combined company, respectively.
For further information, please refer to the May 31, 2022 press release “Gold Fields to acquire Yamana Gold – a combination for long-term value creation focused on quality growth, financial discipline and shareholder returns” and the full text of the Arrangement Agreement, both available under Yamana’s profile on SEDAR at www.sedar.com. Further details will be provided upon the filing of the Management Information Circular related to Yamana’s proposed shareholder meeting to seek approval for the Transaction, which is expected to be filed during the third quarter, with the Transaction expected to close in the fourth quarter.
FINANCIAL SUMMARY AND KEY STATISTICS
Key financial and operating statistics for the second quarter 2022 are outlined in the following tables.
|(In millions of United States Dollars, except for per share and per unit amounts)||Three months ended June 30|
|Cost of sales excluding depletion, depreciation and amortization(7)||(192.7||)||(186.5||)|
|Depletion, depreciation and amortization||(110.8||)||(108.6||)|
|Total cost of sales(7)||(303.5||)||(295.1||)|
|Mine operating earnings||182.1||142.3|
|General and administrative expenses||(23.4||)||(17.0||)|
|Exploration and evaluation expenses||(11.5||)||(7.8||)|
|Net earnings (loss) attributable to Yamana equity holders||72.1||(43.9||)|
|Net earnings (loss)(3) per share – basic and diluted(i)||0.07||(0.05||)|
|Cash flow from operating activities||187.8||153.5|
|Cash flow from operating activities before changes in non-cash working capital(ii)||195.9||167.8|
|Revenue per ounce of gold||$||1,869||$||1,817|
|Revenue per ounce of silver||$||22.25||$||25.96|
|Average realized gold price per ounce(1)||$||1,869||$||1,817|
|Average realized silver price per ounce(1)||$||22.25||$||26.05|
(i) For the three months ended June 30, 2022, the weighted average number of shares outstanding was 961,060 thousand (basic) and 962,403 thousand (diluted).
(ii) Net change in working capital movement was a cash outflow of $8.1 million for the three months ended June 30, 2022.
Reconciliation of Net Earnings (Loss)(3) to Adjusted Net Earnings(1)(3)
|(In millions of United States Dollars, except per share amounts, totals may not add due to rounding)||Three months ended June 30|
|Net earnings (loss)(3)||$||72.1||$||(43.9||)|
|Non-cash net foreign exchange (gains) losses||$||(12.0||)||$||11.4|
|Share-based payments/mark-to-market of deferred share units||3.4||1.2|
|Mark-to-market losses (gains) on derivative contracts, investments and other assets and liabilities||0.4||(0.3||)|
|Gain on discontinuation of the equity method of accounting||—||(9.2||)|
|Standby and other incremental COVID-19 costs||1.8||12.7|
|Other provisions, write-downs and adjustments||5.8||5.3|
|Non-cash tax on unrealized foreign exchange (gains) losses||16.8||(13.4||)|
|Income tax effect of adjustments||(1.2||)||(1.5||)|
|One-time tax adjustments||(1.3||)||110.7|
|Adjusted net earnings(1)(3)||$||85.8||$||73.0|
|Net earnings (loss) (3) per share||$||0.07||$||(0.05||)|
|Total adjustments(3) per share||$||0.01||$||0.12|
|Adjusted net earnings (1)(3) per share||$||0.09||$||0.08|
For a full discussion of Yamana’s operational and financial results and mineral reserve and mineral resource estimates, please refer to the Company’s Management’s Discussion & Analysis and Condensed Consolidated Interim Financial Statements for the three and six months ended June 30, 2022, and the Company’s Management’s Discussion & Analysis for the year ended December 31, 2021, which are available on the Company’s website at www.yamana.com, on SEDAR at www.sedar.com and on EDGAR at www.sec.gov.
Scientific and technical information contained in this news release has been reviewed and approved by Sébastien Bernier (P. Geo and Senior Director, Reserves and Resources). Sébastien Bernier is an employee of Yamana Gold Inc. and a “Qualified Person” as defined by Canadian Securities Administrators’ National Instrument 43-101 – Standards of Disclosure for Mineral Projects.
Yamana is a Canadian-based precious metals producer with significant gold and silver production, development stage properties, exploration properties, and land positions throughout the Americas, including Canada, Brazil, Chile and Argentina. Yamana plans to continue to build on this base through expansion and optimization initiatives at existing operating mines, development of new mines, the advancement of its exploration properties and, at times, by targeting other consolidation opportunities with a primary focus in the Americas.
Reconciliation of Total Cost of Sales to Cash Costs and AISC
|Cash Cost & AISC Reconciliation – Total||For the three months ended
June 30, 2022
|For the three months ended
June 30, 2021
|(In millions of US Dollars except GEO sold and per GEO sold amounts)||Total||Total
|Cost of sales excluding DDA(7)||$||192.7||$||192.7||$||—||$||186.5||$||186.5||$||—|
|Total cost of sales(7)||$||303.5||$||303.5||$||—||$||295.1||$||295.1||$||—|
|Standby and other incremental COVID-19 costs(7)||(1.8||)||(1.8||)||—||(12.7||)||(12.7||)||—|
|Total cash costs||$||190.9||$||190.9||$||—||$||173.8||$||173.8||$||—|
|General and administrative expenses||23.4||23.4||—||17.0||17.0||—|
|Community costs in other operating expenses||2.2||2.2||—||1.1||1.1||—|
|Reclamation & remediation – accretion & amortization||8.6||6.2||2.4||9.0||7.1||1.8|
|Exploration capital expenditures||19.2||9.2||10.0||17.2||9.6||7.6|
|Exploration and evaluation expenses||11.5||0.9||10.6||7.8||0.7||7.2|
|Sustaining capital expenditures||42.1||42.1||—||46.1||46.1||—|
|Leases (IFRS 16 Adjustment)||7.0||7.0||—||5.7||5.7||—|
|Cost of sales excluding DDA per GEO sold(7)||$||741||$||772|
|DDA per GEO sold||$||426||$||450|
|Total cost of sales per GEO sold(7)||$||1,168||$||1,222|
|Cash costs per GEO sold||$||734||$||720|
|AISC per GEO sold||$||1,084||$||1,081|
|Cash Cost & AISC Reconciliation – Total||For the six months ended
June 30, 2022
|For the six months ended
June 30, 2021
|(In millions of US Dollars except GEO and per GEO amounts)||Total||Total
|Cost of sales excluding DDA(7)||$||371.9||$||371.9||$||—||$||358.6||$||358.6||$||—|
|Total cost of sales(7)||$||591.5||$||591.5||$||—||$||567.7||$||567.7||$||—|
|Standby and other incremental COVID-19 costs(7)||(6.5||)||(6.5||)||—||(20.9||)||(20.9||)||—|
|Total cash costs||$||365.4||$||365.4||$||0.0||$||337.7||$||337.7||$||0.0|
|General and administrative expenses||46.5||46.5||—||35.3||35.3||—|
|Community costs in other operating expenses||3.9||3.9||—||2.3||2.3||—|
|Reclamation & remediation – accretion & amortization||16.7||12.8||3.9||17.1||13.4||3.7|
|Exploration capital expenditures||35.1||16.9||18.2||33.2||17.7||15.5|
|Exploration and evaluation expenses||16.6||1.7||14.9||13.9||1.3||12.6|
|Sustaining capital expenditures||78.2||78.2||—||88.3||88.3||—|
|Leases (IFRS 16 Adjustment)||14.0||14.0||—||10.4||10.4||—|
|Cost of sales excluding DDA per GEO sold(7)||$||747||$||753|
|DDA per GEO sold||$||441||$||439|
|Total cost of sales per GEO sold(7)||$||1,189||$||1,192|
|Cash costs per GEO sold||$||734||$||709|
|AISC per GEO sold||$||1,084||$||1,064|
|Cash Cost & AISC Reconciliation – Operating Segments||For the three months ended June 30, 2022|
|(In millions of US Dollars except GEO sold and per GEO sold amounts)||Total||Canadian
|Cost of sales excluding DDA||$||192.7||$||64.9||$||27.5||$||41.8||$||40.1||$||18.4||$||—|
|Total cost of sales||$||303.5||$||106.8||$||42.1||$||61.6||$||60.2||$||30.3||$||2.5|
|Standby and other incremental COVID-19 costs(7)||(1.8||)||(0.7||)||—||(0.3||)||(0.8||)||—||—|
|Total cash costs||$||190.9||$||64.2||$||27.5||$||41.5||$||39.3||$||18.4||$||—|
|General and administrative expenses||23.4||1.0||0.2||0.2||0.3||0.3||21.4|
|Community costs in other operating expenses||2.2||0.1||—||1.9||—||—||0.2|
|Reclamation & remediation – accretion & amortization||8.6||3.2||0.6||0.5||0.5||1.2||2.6|
|Exploration capital expenditures||19.2||—||2.3||1.6||3.7||1.5||10.1|
|Exploration and evaluation expenses||11.5||0.1||—||—||—||—||11.4|
|Sustaining capital expenditures||42.1||12.3||4.7||11.1||9.4||4.4||0.2|
|Leases (IFRS 16 Adjustment)||7.0||0.2||2.8||1.3||1.3||0.8||0.6|
|Cost of sales excluding DDA per GEO sold||$||732||$||559||$||848||$||727||$||1,043|
|DDA per GEO sold||$||473||$||297||$||401||$||365||$||675|
|Total cost of sales per GEO sold||$||1,205||$||856||$||1,250||$||1,091||$||1,718|
|Cash costs per GEO sold||$||724||$||559||$||842||$||712||$||1,041|
|AISC per GEO sold||$||915||$||775||$||1,181||$||988||$||1,503|
|Cash Cost & AISC Reconciliation – Operating Segments||For the three months ended June 30, 2021|
|(In millions of US Dollars except GEO sold and per GEO sold amounts)||Total||Canadian
|Cost of sales excluding DDA(7)||$||186.5||$||60.5||$||32.0||$||36.6||$||38.4||$||19.0||$||—|
|Total cost of sales(7)||$||295.1||$||108.2||$||44.9||$||49.4||$||59.3||$||30.8||$||2.4|
|Standby and other incremental COVID-19 costs(7)||(12.7||)||(0.8||)||(0.5||)||(8.5||)||(1.3||)||(1.6||)||—|
|Total cash costs||$||173.8||$||59.6||$||31.5||$||28.1||$||37.1||$||17.5||$||—|
|General and administrative expenses||17.0||0.9||0.2||0.2||0.2||0.3||15.2|
|Community costs in other operating expenses||1.1||0.1||0.1||0.7||—||—||0.2|
|Reclamation & remediation – accretion & amortization||9.0||4.3||0.4||0.5||0.6||1.2||2.0|
|Exploration capital expenditures||17.2||—||2.1||1.8||4.8||1.0||7.5|
|Exploration and evaluation expenses||7.8||0.1||—||—||—||—||7.8|
|Sustaining capital expenditures||46.1||20.8||3.3||8.4||9.1||4.2||0.3|
|Leases (IFRS 16 Adjustment)||5.7||0.2||1.6||1.4||1.0||1.0||0.5|
|Cost of sales excluding DDA per GEO sold(7)||$||641||$||670||$||1,335||$||766||$||869|
|DDA per GEO sold||$||507||$||271||$||467||$||417||$||540|
|Total cost of sales per GEO sold(7)||$||1,147||$||941||$||1,802||$||1,183||$||1,409|
|Cash costs per GEO sold||$||632||$||660||$||1,025||$||740||$||798|
|AISC per GEO sold||$||911||$||824||$||1,499||$||1,053||$||1,147|
|Cash Cost & AISC Reconciliation – Operating Segments||For the six months ended June 30, 2022|
|(In millions of US Dollars except GEO and per GEO amounts)||Total||Malartic
|Cost of sales excluding DDA||$||371.9||$||126.6||$||53.5||$||82.6||$||77.5||$||31.7||$||—|
|Total cost of sales||$||591.5||$||210.4||$||82.2||$||123.0||$||116.4||$||54.6||$||4.9|
|Standby and other incremental COVID-19 costs(7)||(6.5||)||(1.2||)||(1.3||)||(1.4||)||(2.4||)||(0.2||)||—|
|Total cash costs||$||365.4||$||125.4||$||52.2||$||81.2||$||75.1||$||31.5||$||—|
|General and administrative expenses||46.5||1.9||0.4||0.2||0.3||0.3||43.4|
|Community costs in other operating expenses||3.9||0.4||0.1||3.4||—||—||—|
|Reclamation & remediation – accretion & amortization||16.7||7.1||1.3||0.8||1.1||2.2||4.2|
|Exploration capital expenditures||35.1||—||4.4||3.1||6.3||3.1||18.2|
|Exploration and evaluation expenses||16.6||0.2||—||—||—||—||16.4|
|Sustaining capital expenditures||78.2||21.5||9.2||20.0||19.6||7.4||0.5|
|Leases (IFRS 16 Adjustment)||14.0||0.3||5.4||2.7||2.7||1.7||1.2|
|Cost of sales excluding DDA per GEO sold||$||759||$||558||$||855||$||732||$||982|
|DDA per GEO sold||$||502||$||299||$||417||$||368||$||711|
|Total cost of sales per GEO sold||$||1,260||$||858||$||1,272||$||1,099||$||1,693|
|Cash costs per GEO sold||$||751||$||545||$||840||$||709||$||974|
|AISC per GEO sold||$||939||$||761||$||1,152||$||992||$||1,430|
|Cash Cost & AISC Reconciliation – Operating Segments||For the six months ended June 30, 2021|
|(In millions of US Dollars except GEO and per GEO amounts)||Total||Malartic
|Cost of sales excluding DDA(7)||$||358.6||$||113.5||$||59.9||$||68.8||$||75.9||$||40.5||$||—|
|Total cost of sales(7)||$||567.7||$||203.1||$||84.4||$||94.9||$||116.8||$||63.7||$||4.8|
|Standby and other incremental COVID-19 costs(7)||(20.9||)||(1.4||)||(0.8||)||(13.3||)||(2.7||)||(2.7||)||—|
|Total cash costs||$||337.7||$||112.1||$||59.1||$||55.5||$||73.2||$||37.8||$||—|
|General and administrative expenses||35.3||1.7||0.3||0.2||0.2||0.3||32.6|
|Community costs in other operating expenses||2.3||0.2||0.2||1.7||—||—||0.2|
|Reclamation & remediation – accretion & amortization||17.1||7.9||0.8||1.1||1.1||2.4||3.8|
|Exploration capital expenditures||33.2||—||3.4||3.6||8.6||2.1||15.5|
|Exploration and evaluation expenses||13.9||0.1||0.1||—||—||—||13.7|
|Sustaining capital expenditures||88.3||40.3||6.0||15.2||18.2||8.1||0.5|
|Leases (IFRS 16 Adjustment)||10.4||0.4||2.6||2.7||2.1||1.7||0.9|
|Cost of sales excluding DDA per GEO sold(7)||$||622||$||660||$||1,104||$||790||$||909|
|DDA per GEO sold||$||491||$||270||$||419||$||426||$||520|
|Total cost of sales per GEO sold(7)||$||1,113||$||930||$||1,523||$||1,215||$||1,429|
|Cash costs per GEO sold||$||614||$||652||$||890||$||762||$||849|
|AISC per GEO sold||$||892||$||798||$||1,283||$||1,077||$||1,175|
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