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Yamana Gold Reports Strong Third Quarter 2021 Results With a Step Change Increase in Cash Flows, Standout Quarters From Canadian Malartic, Jacobina, El Peñón and an Exceptional Quarter From Cerro Moro

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Yamana Gold Reports Strong Third Quarter 2021 Results With a Step Change Increase in Cash Flows, Standout Quarters From Canadian Malartic, Jacobina, El Peñón and an Exceptional Quarter From Cerro Moro

 

 

 

 

 

YAMANA GOLD INC. (TSX:YRI) (NYSE:AUY) (LSE:AUY) is herein reporting its financial and operational results for the third quarter of 2021. With strong results from operations, the Company remains well positioned to achieve guidance for the year of 1,000,000 gold equivalent ounces(2), underpinned by momentum at Canadian Malartic, Jacobina and El Peñón, as well as a strong fourth quarter performance expected at El Peñón and Cerro Moro, as previously guided.

 

THIRD QUARTER HIGHLIGHTS

 

Financial Results – Strong Cash Flows, Increase to Mine Operating Earnings

  • Net earnings(3) were $27.0 million or $0.03 per share basic and diluted. Adjusted net earnings(1, 3) were $69.7 million or $0.07 per share basic and diluted.
  • Mine operating earnings were $154.0 million and increased quarter-over-quarter by 8%.
  • Cash flows from operating activities were $190.6 million and cash flows from operating activities before net change in working capital(1) were $202.9 million, representing sharp increases from second quarter results of 24% and 21% respectively.
  • Free cash flow before dividends and debt repayments(1) was $81.6 million and increased 59% quarter-over-quarter.
  • Cash and cash equivalents totalled $460.2 million(8) and the Company has $750.0 million in available credit.

 

 

  Three months ended September 30
(In millions of United States Dollars) 2021 2020
Net Free Cash Flow (1) $ 139.2    $ 185.5  
Free Cash Flow before Dividends and Debt Repayments (1) $ 81.6    $ 156.9  

(See end notes on at end of press release)

 

Operating Results – Standout Quarters from Canadian Malartic, Jacobina and El Peñón, Exceptional Quarter from Cerro Moro

  • As previously guided, production is weighted at 53% for the second half of the year, with the fourth quarter being the strongest quarter, expected to exceed 270,000 GEO(2) produced. Consequently, with a strong third quarter, the Company remains well positioned to achieve guidance for the year of 1,000,000 GEO(2), underpinned by the momentum at Canadian Malartic, Jacobina and El Peñón, as well as a strong fourth quarter performance expected at El Peñón and Cerro Moro.
  • GEO(2) production was 256,464, including 225,556 ounces of gold, and 2.27 million ounces of silver. This marks the second highest all-time GEO(2) production total for Yamana mines(4), on the back of exceptional gold production. The Company expects record-breaking GEO(2) production in the fourth quarter, as gold is expected to reach an all-time quarterly high.
  • Standout gold production from Canadian Malartic with 86,803 ounces, Jacobina with 47,373 ounces and El Peñón with 50,229 ounces. Further, Cerro Moro had an exceptional quarter producing 19,261 ounces of gold which increased approximately 33% from the second quarter and with stronger production expected in the fourth quarter from higher grades.
  • Silver production was 2,273,183 ounces with both El Peñón and Cerro Moro recording their highest quarterly silver production totals of the year, with stronger production expected in the fourth quarter from higher grades at both mines anticipated.
  • El Peñón third quarter GEO(2) production was 62,545, a 19% increase above its second quarter GEO(2) production. As previously guided, El Peñón is well positioned to meet its annual production guidance with approximately 31% of annual gold production for the operation expected for the fourth quarter.
  • Cerro Moro produced 37,853 GEO(2) during the quarter with 98,406 GEO(2) produced year to date, a significant increase versus the comparative prior year-to-date period of 89,472 GEO(2).
  • Minera Florida produced 21,890 ounces of gold, and is expected to meet its annual production guidance with a strong fourth quarter underpinned by a strong start in October.
  • Cash costs(1) and all-in sustaining costs (“AISC”)(1) for the quarter were $702 and $1,041 per GEO(2), respectively, which on a consolidated basis were lower than the second quarter and the comparative period. The Company recorded standout September performances at several mines with per GEO(2) costs for those mines during the month being the lowest month of the quarter by a considerable margin. Further, consolidated AISC(1) on a per GEO(2) basis for September was approximately 10% lower than the quarterly average, which positions the Company to deliver its lowest per GEO(2) cost of the year during the fourth quarter.
  • Year-to-date costs have had a modest impact from inflationary pressures, which are expected to continue during the fourth quarter. For the full year, the Company expects upwards of $20 per GEO(2) of inflationary pressure on costs not originally anticipated at the start of the year.(2) Nonetheless, costs for the fourth quarter will be well below the average costs experienced on a year-to-date basis due to the strong production anticipated.

 

Strengthening the Company’s Financial Position, Improving Financial Resilience and Increasing Financial Flexibility

  • Yamana believes that a strong financial position and financial resilience also requires a manageable debt maturity profile, and the Company has taken advantage of current market conditions to improve terms of its outstanding notes by increasing tenor and reducing carrying costs. As such, during the quarter, Yamana completed its offering of $500 million aggregate principal amount of its 2.630% Senior Notes due August 15, 2031.
  • Yamana used the net proceeds from the offering, together with cash on hand, to fund the redemptions of its 4.76% Series C Senior Notes due 2022, its 4.91% Series D Senior Notes due 2024, its 4.78% Series B Senior Notes due 2023 and its 4.950% Senior Notes due 2024.
  • The completion of the offering of the Senior 2031 Notes and the subsequent redemption of the shorter-term maturity notes represents the culmination of significant debt reduction efforts initiated in 2019. Yamana’s outstanding gross debt was reduced by $222.1 million during the quarter to $772.8 million, which compares to $1.85 billion outstanding in the second quarter of 2019.
  • Interest on the Senior 2031 Notes is set at 2.630% as compared to a weighted average interest of 4.83% for the existing notes, which reduces the Company’s annual interest carrying charges by approximately $21.6 million per annum compared to the second quarter of 2021, or roughly $60 million per annum lower compared to the second quarter of 2019.

 

Capital Returns

  • On July 29, 2021, the Company announced a normal-course issuer bid to purchase up to 48,321,676 common shares of the Company, representing up to 5% of the Company’s current issued and outstanding common shares, in open-market transactions through the facilities of the Toronto Stock Exchange, the New York Stock Exchange and alternative Canadian trading systems. The Company believes that the market price of its common shares does not currently represent their full value and growth prospects and views purchases of common shares as an attractive investment comparable to its investments in its portfolio of exploration and development stage assets. During the quarter, the Company repurchased, and subsequently cancelled, a total of 3,321,276 common shares for approximately C$18 million since the initiation of the share repurchase program.

 

Health, Safety and Sustainable Development

  • The Company’s Total Recordable Injury Rate was 0.68(6) for the first nine months of 2021. This is an increase from the full year 2020 result and primarily reflects low-energy incidents. In response, the company initiated campaigns across all operations focused on reducing the most common injuries that have occurred so far in 2021.
  • As of October 5, 2021 approximately 95%(7) of our employees have received at least one dose of a COVID-19 vaccine, with approximately 60%(7) being fully vaccinated, with the expectation of a company-wide double-vaccination rate of over 90%(7) expected in the fourth quarter.
  • The Company completed Human Rights Risk Assessments at all sites in line with the Voluntary Principles on Security and Human Rights.
  • The Company approved a Responsibility Policy covering all HSSD elements, as well as 8 supporting Statements of Commitment covering Human Rights, Safety and Health, Environmental Protection, Social Performance, Tailings Management, Government Relations, Security and Common Elements.
  • The Company established its emissions baseline year (2019) and began evaluation of three science-based temperature targets; a 2°C scenario, a well-below 2°C scenario and a 1.5°C scenario compared to pre-industrial levels. The Company also performed climate risk, adaptation and abatement workshops with each operation to progress on establishing preliminary, operations-specific roadmaps that describe abatement projects, estimated costs and schedules. These actions will help ensure that its long-range GHG reduction efforts are supported by practical and operationally focused short, medium and long-term actions to achieve the targets.

 

 

OPERATING RESULTS SUMMARY

 

  Three months ended September 30, 2021
Gold
Production
Silver
Production
GEO(2) Production Cash Cost(1)
per GEO(2) Sold
AISC(1)
per GEO(2) Sold
Canadian Malartic (50%) 86,803 86,803 $687 $887
Jacobina 47,373 47,373 $518 $722
Cerro Moro 19,261 1,370,486 37,853 $966 $1,422
El Peñón 50,229 902,698 62,545 $631 $885
Minera Florida 21,890 21,890 $917 $1,239
Total 225,556 2,273,183 256,464 $702 $1,041

 

 

 

  For the three months ended September 30, 2020
Gold
Production
Silver
Production
GEO(2) Production Cash Cost(1)
per GEO(2) Sold
AISC(1)
per GEO(2) Sold
Canadian Malartic (50%)(5) 76,398 76,398 $736 $973
Jacobina 44,080 44,080 $565 $754
Cerro Moro 18,818 1,679,342 40,380 $849 $1,307
El Peñón 39,322 1,360,999 56,454 $665 $906
Minera Florida 23,153 23,153 $936 $1,210
Total 201,772 3,040,341 240,466 $723 $1,096

 

 

OPERATIONS UPDATE

 

Canadian Malartic

 

Canadian Malartic had a strong third quarter in line with plan, after an exceptional second quarter due to higher grade, delivering quarterly production that exceeded plan. Third quarter results benefited from higher grade and recoveries compared to the third quarter of 2020 from ore deeper in the Malartic pit with overall production greatly exceeding the comparative period by 14% due to the prior year’s COVID-related temporary challenges. Throughout the course of 2021, the mine continued the transition from the Malartic pit to the Barnat pit. Canadian Malartic expects to complete the final 7,000 meters of topographic drilling at Barnat during October, while overburden removal was completed earlier this year as planned. As previously disclosed, the Company expects that the higher strip ratio seen in Barnat will normalize over the following years as the mine sequencing progresses. Additionally, the Company is undertaking the required pit pushback to obtain the optimized ounces as per the revised open pit design, which resulted in an increase of approximately 150,000 ounces of gold mineral reserves on a 50% basis.

 

Cash costs(1) of $687 per GEO(2) and AISC(1) of $887 per GEO(2) were lower year over year, a result of higher production and fixed production costs being distributed over more ounces in the current quarter.

 

Jacobina

 

Jacobina had an exceptional third quarter and exceeded its production plan with quarterly gold production of 47,373 ounces, closely approximating the record-setting production established in the second quarter of 2021. Mill throughput for the quarter was well above plan, with recovery rates and grade as expected.

 

The Jacobina processing plant continues to exceed expectations, at nearly 7,500 tonnes per day over the full third quarter of 2021, a 4% increase compared to the previous quarter. This aligns with the previously mentioned target throughput of 7,500 tpd for the second half of 2021, which represents the permitted operational processing rate. A new daily throughput record of 8,842 tonnes was achieved in September during a trial to test the processing plant capacity. Mining rates increased by 9% compared to the previous quarter, with the underground mine on track to sustain 7,500 tpd by year end. The ongoing success reflects a simplified approach to complete the Phase 2 expansion, which will be achieved through incremental debottlenecking of the processing plant and tailings management system, combined with other operational improvements and without requiring the installation of an additional ball mill. This approach is expected to significantly reduce capital expenditures, improve energy efficiency, and de-risk the project execution.

 

Third quarter cash costs(1) of $518 per GEO(2) and AISC(1) of $722 per GEO(2) were better than annual cost guidance ranges and lower than the comparative prior year period, a result of higher production from the aforementioned increased mill throughput, and fixed production costs being distributed over more ounces in the current quarter. September was a strong month for Jacobina with the lowest per GEO(2) costs of the quarter for the operation, and AISC(1) on a per GEO(2) basis approximately 12% lower than the average quarterly cost. Underground mine development work is in line with the mine plan at 1,500 metres per month, to sustain the current production rates and operational flexibility.

 

Cerro Moro

 

Cerro Moro third quarter GEO(2) production was 37,853, with gold production of 19,261 ounces and silver production of 1,370,486 ounces, a 50% increase to the second quarter’s production. Silver production of 1,370,486 ounces increased by 86% compared to the second quarter, and is expected to further increase during the fourth quarter. In the third quarter, gold and silver recoveries were impacted by high clay content causing sedimentation and clarification challenges in the countercurrent decantation (“CCD”) circuit. Actions to improve the CCD circuit performance include implementation of a feed blending control system, drilling of new wells to improve the processing water quality, and trials of new and improved reagents. As a result, gold and silver recoveries improved in the second half of September and are expected to average approximately 93% in the fourth quarter.

 

The opening of more mining faces and resultant increase in mill feed coming from higher-grade underground ore, continued in the quarter with Zoe contributions becoming more prevalent. This trend will continue during the fourth quarter, expected to be the strongest production quarter of the year, with most of the ore to plant coming from Escondida Far West, Zoe, Escondida Central and Escondida West. Over the past year, Cerro Moro has optimized the operation of the processing plant to increase daily throughput to approximately 1,100 tpd, a rate experienced in the first quarter. The mine saw linear development rates continue to improve during the quarter; these improvements will continue throughout the remainder of the year, further supporting the much higher second half of 2021 production profile.

 

Cash costs(1) and AISC(1) during the third quarter were $966 per GEO(2), and $1,422 per GEO(2), respectively. September was a strong month for Cerro Moro with the lowest per GEO(2) costs of the quarter for the operation, and AISC(1) on a per GEO(2) basis approximately 14% lower than the quarterly cost. With increased fourth quarter production, the Company expects costs to be commensurately lower than those observed on a year-to-date basis.

 

As previously disclosed, the Company is evaluating construction of a heap leach circuit, a lower-cost processing alternative, that would facilitate the processing of lower-grade mineralization, potentially extending Cerro Moro’s mine life. The evaluation is in the early stages with a preliminary study completed, and metallurgical lab testing currently underway. Yamana has submitted several 800 kg samples to a well-respected laboratory in Canada to run column tests, to evaluate the potential for heap leach recovery from near surface vein mineralization. Samples were collected from prior quarter diameter drill holes and surface trench saw-cut bedrock samples. Preliminary leach test results indicate that five zones returned results suggesting recoveries of over 70% could be achieved. Studies are ongoing and full results with reagent consumption and effects of grain size on recovery will be obtained before year end. The results indicate good potential for leaching of both oxidized near-surface vein material, zones with hypogene oxides (hematite) and some low sulphide gold-bearing veins. Following the positive preliminary metallurgical results, Yamana has planned and approved a dedicated and targeted oxides drilling program with the objective of defining a heap-leachable inventory of 5 Mt by the end of 2022. In the first half of 2021, Yamana also completed a scoping study for a plant expansion using a more energy-efficient comminution configuration. The study indicated that a doubling of plant throughput to approximately 2,200 tpd could potentially be achieved with modest capital investment and would significantly reduce processing costs per tonne. During the fourth quarter, Yamana will undertake further metallurgical testing to confirm the assumption of the scoping study before advancing to the next level of engineering.

 

El Peñón

 

El Peñón had a strong third quarter, with GEO(2) production of 62,545, including gold production of 50,229 ounces, and 902,698 ounces of silver. GEO(2) production greatly exceeded second quarter GEO(2) production of 52,607 by 19%. The higher grade La Paloma, Quebrada Colorada Sur and Pampa Campamento Deep sectors zones came into production during the third quarter, contributing to higher planned production which will continue in the fourth quarter, as previously guided. The Company continues to expect that the strong second half of 2021 will account for approximately 57% of gold and silver production at El Peñón; silver-rich zones will be mined in the fourth quarter. The first step to unlock the opportunity to leverage the existing processing capacity at the mine and increase production is to establish additional mining sectors. The development of La Paloma, Quebrada Colorada Sur and Pampa Campamento Deep is an important component of that strategy; accessing those new areas will provide increased mining flexibility.

 

Cash costs(1) of $631 per GEO(2) was in line with guidance and lower than the comparative period, while AISC(1) of $885 per GEO(2) was lower than the comparative period, as a result of the current period’s planned and previously disclosed higher development rates that have facilitated access to additional mining areas in the second half of the year. September was a strong month for El Peñón with the lowest per GEO(2) costs of the quarter for the operation, with AISC(1) on a per GEO(2) basis approximately 12% lower than the quarterly average, which positions the Company to deliver its lowest cost of the year during the fourth quarter. With the ongoing focus on increasing mine development rates, El Peñón has increased the number of available underground production zones which are expected to support the current level of mine production and feed grades going forward. Mine development is currently occurring at a rate that exceeds 3,000 metres per month. Costs per GEO(2) have improved compared to the first half of the year, and are anticipated to further improve in the fourth quarter to commensurately higher production.

 

Minera Florida

 

Minera Florida had gold production of 21,890 ounces during the third quarter, and a strong start to the fourth quarter, and due to mine sequencing is expected to meet or exceed plan. Linear development, to increase mining flexibility, continues to advance ahead of plan. Minera Florida is already seeing improved operational efficiency and reduced haulage distances as a result of re-establishing the Marisol ore pass from the 850 level to the 620 level. Widening of the final ore pass at Fantasma/Polvorin is underway and scheduled for completion by the end of October, which is expected to further reduce haulage distances and possibly allow for optimizing the hauling fleet. Internalization of mining activities, ongoing optimization of the haulage infrastructure, and increasing disposal storage of development waste into underground voids will further improve mine productivity going forward. A review of the processing plant in the first quarter identified several opportunities to increase recovery. Management is prioritizing these opportunities, focusing on the initiatives that can be implemented quickly with minimal investment.

 

Consistent with the 10-year outlook, the plant de-bottlenecking study and preparation of the environmental and social impact assessment (“ESIA”) are advancing on schedule, with the objective to increase throughput from 74,500 to 100,000 tonnes per month, which would increase annual gold production to approximately 120,000 ounces. Preliminary studies indicate that the capacity of the processing plant can be increased to approximately 90,000 tonnes per month with incremental adjustments. An upgrade of the crushing circuit would be required to achieve 100,000 tonnes per month.

 

Cash costs(1) and AISC(1) during the third quarter were $917 per GEO(2), and $1,239 per GEO(2) respectively. Costs are expected to improve in the fourth quarter due to higher grades, and higher silver and zinc by-product credits. In addition to the aforementioned plant improvements, the Company completed a processing plan earlier in the year, which identified opportunities to implement cost control initiatives; these are currently under consideration and may positively impact future costs.

 

CONSTRUCTION, DEVELOPMENT AND ADVANCED STAGE PROJECTS

 

The Wasamac Project Update and Positive Exploration Results

 

On July 19, 2021, the Company announced the results of several studies on the Company’s wholly-owned Wasamac project in the Abitibi-Témiscamingue Region of Quebec, Canada, intended to corroborate diligence reviews conducted by the Company on its purchase of the project in early 2021, and update a historical feasibility study. These studies updated the baseline technical and financial aspects of the Wasamac project that now underpin the decision to advance the project to production. The results from all studies were consistent with the Company’s conclusions in its diligence reviews relating to the purchase of Wasamac and, in some cases, are better than the conclusions from those reviews.

 

Yamana expects to receive all approvals, permits and certificates of authorization required for project construction by the third quarter of 2024. Construction time to processing plant commissioning is estimated at approximately two-and-a-half years, with the underground crusher and conveyor system scheduled for commissioning six months later. First gold production is scheduled for the fourth quarter of 2026, with commercial production anticipated in the fourth quarter of 2027. The Company has already identified opportunities to accelerate the production ramp-up and decrease the processing plant construction timeline, which would improve significantly over the feasibility study’s base case production profile. To increase the level of confidence in metallurgical and geomechanical assumptions, Yamana is considering the execution of an underground bulk sample, which could commence earlier on a separate environmental permit. The bulk sample would require ramp access to the underground mineralization.

 

Exploration activities continued to ramp up at Wasamac during the third quarter, including continued exploration and geotechnical drilling, and initiation of infill drilling on the Wasamac resource on September 14 with three drill rigs currently operating and a fourth rig planned to be added later in the year. Results are pending for infill holes completed to date.

 

Exploration drilling during the third quarter totaled 3,648 metres, including 3,084 metres in 6 holes testing the newly defined West 117 Wasa shear target concept and 564 metres in one drill hole testing a magnetic anomaly (Wildcat South) south of the Wildcat target. Both targets were generated from a recently completed, property wide high-resolution (25 metre) helicopter-borne magnetic survey covering 2,992 line-kilometres. The initial drill hole completed at the South Wildcat target, located approximately 300 metres south of Wildcat, intersected a 30 metre wide chlorite-sericite altered, pyritic shear zone. Drilling completed at West 117 Wasa intersected mostly narrow, rhyolite-hosted shear zones. Assays are pending for these drill holes. In addition to infill and exploration drilling, geotechnical drilling continued in the third quarter, with completion of 1,758 metres in four drill holes. Drilling year to date on the Wasamac property totals 13,087 metres in 32 holes.

 

Exploration results received in the third quarter, included 3,112 metres in 13 drill holes completed at the Wildcat target, where visually positive intervals in most holes, with visible gold in two drill holes, has been reported. Highlights from these initial drill holes at Wildcat were previously reported in the September 13, 2021 press release ‘Yamana Gold Reports Positive Initial Exploration Drill Results at Wasamac; Provides an Update on Its Generative Exploration Program’.

 

Additional ongoing exploration work completed during the third quarter included integration of the high-resolution magnetic survey data over the Wasamac property with similar survey data covering the recently acquired Francoeur property, west of Wasamac, as part of an ongoing program of integration of exploration data to form a combined Wasamac-Francoeur exploration platform on which to advance drill targeting. Additional ongoing work included sampling of select, previously unassayed, historic drill hole intervals hosting stockwork style mineralization, to assess for their potential to contribute to the mineral resource base.

 

There is excellent potential for significant future exploration success and mineral resource conversion, with the Wasamac deposit remaining open at depth and along strike. The planned infill and exploration drilling campaign has the potential to generate additional mineral reserves that would sustain a 200,000-ounce production level for an extended period and support a strategic mine life of more than 15 years. Preliminary plans include 120,000 metres of drilling in 2021 and 2022 with a budget of $15 million over the two-year period.

 

The Wasamac project further solidifies the Company’s long-term growth profile with a top-tier gold project in Quebec’s Abitibi-Témiscamingue Region, where Yamana has deep operational and technical expertise and experience. Yamana’s average annual gold production in Quebec, including production from Wasamac and the Odyssey underground at Canadian Malartic, has the potential to increase to approximately 500,000 ounces by 2028, and continue at this level through 2041.

 

The Odyssey Project Advancing on Schedule

 

Yamana and Agnico Eagle Mines Ltd., who each hold a 50% interest in the Canadian Malartic General Partnership, owner and operator of the Canadian Malartic mine, announced a positive construction decision for the Odyssey underground project at Canadian Malartic on February 11, 2021.

 

Several key processes and activities progressed as planned during the third quarter:

 

  • Underground ramp development is ahead of schedule with 1,118 linear metres of development in 2021 now completed (for a total of 2,054 metres including lateral development).
  • Development of the exploration ramp is anticipated to take approximately two years to complete, with the first drilling platform established in early July. The platform provides diamond drilling access to the upper part of Odyssey south (between surface and 160 meters of depth) and infilled drilling of the mineralization.
  • Underground construction is progressing well, with explosives storage and dining rooms on schedule.
  • Odyssey human resources ramp-up is on target, with over 300 employees and contractors hired in a variety of functions including mine development, surface construction and resource development.
  • Construction of the left-turn lane on Provincial Highway 117 has been completed.
  • Decree amendment and the mining lease process continue to be on target for the first quarter of 2022 and fourth quarter of 2022 respectively.
  • During the second quarter, the shaft collar construction was completed. The headframe’s slipform pour started in September, with structural steel installation expected to be initiated in November, and completed during the fourth quarter. The hoist room construction and interior design are expected to be completed within one year.
  • Shaft sinking is expected to start October 2022, with the sinking hoist expected to be delivered during the second quarter of 2022, on schedule. Lastly, the auxiliary hoist is under construction and is also expected to be delivered as planned during the second quarter of 2022.

 

As Canadian Malartic transitions from open pit to underground mining, underground production will offset a significant portion of the corresponding decline in open pit production. Production from open pit mining from 2021 through 2028 is expected to be approximately 3.9 million ounces (100% basis) with annual production trending lower on a yearly basis to approximately 123,000 ounces (100% basis) by 2028. Underground production will start in 2023 and increase yearly, adding approximately 932,000 ounces (100% basis) during the 2023-2028 construction period—at cash costs(2) of $800 per ounce—including approximately 385,000 ounces (100% basis) by 2028.

 

Net proceeds from the sale of the 932,000 ounces (100% basis) of underground production would significantly reduce the external cash requirements for the construction of the Odyssey project which, assuming the gold price used in the financial analysis for the project of $1,550 per ounce, would reduce the projected capital requirements in half.

 

Jacobina Processing Capacity Optimization and Expansion

 

The Company has made significant progress on the Phase 2 expansion to increase daily throughput to 8,500 tpd and raise production to 230,000 ounces per year. The Company expects to achieve the Phase 2 rate of 8,500 tpd by implementing a simplified approach of debottlenecking and incremental operational improvements, without requiring the installation of an additional ball mill. This approach is expected to significantly reduce capital expenditures, increases energy efficiency, and de-risk the project. As such, capital costs for the plant expansion are expected to be in the range of $15 million to $20 million, significantly lower than the original planned capital estimated in the Phase 2 pre-feasibility study. Successful trials conducted at Jacobina during the prior quarters demonstrate that the processing plant can consistently and reliably achieve a daily operating throughput above 8,000 tonnes per day, significantly higher than nameplate capacity. A new daily throughput record of 8,842 tonnes was achieved in September during a trial to test the processing plant capacity. Permitting for Phase 2 is ongoing with expected completion in mid-2022. Subject to successful completion of required permit modifications, Jacobina would begin processing at the new Phase 2 rate by the second half of 2023.

 

As previously presented in the Company’s 10-year production outlook, Yamana is evaluating a further expansion at Jacobina to increase throughput to 10,000 tpd, referred to as Phase 3. Engineering for the Phase 3 expansion to 10,000 tpd will advance in parallel with the Phase 2 expansion, and the processing model will continue to be updated to integrate with operational data from Phase 2, with a feasibility study for Phase 3 scheduled for completion in 2023. The Company is pursuing the Phase 3 expansion as part of a comprehensive plan which aligns the processing plant, underground mine, tailings strategy, and permitting, while managing capital expenditure and cash flow.

 

The Company is further evaluating the strategic options and direction related to Jacobina and the significant exploration that is available along the greenstone belt in which the mine is located. Jacobina is being envisioned as a complex of multiple mines, and more emphasis is being placed on regional and generative exploration, to work towards the strategic plan of Jacobina being a 400,000 ounce-plus operation.

 

The Jacobina mine is part of the Jacobina district, for which geological evidence and tectonic reconstruction suggest strong affinities with similar gold districts in West and South Africa, which host exceptionally large gold deposits, including the prolific Witwatersrand Basin and the Tarkwa mine. Gold mineralization at Jacobina is hosted by the Serra do Corrego Formation, preserved within the Jacobina belt, for a strike length of over ninety kilometers. The mine complex consists of six mining areas exploiting economic mineralization within a nine-kilometer long mineralized belt extending from João Belo in the south to Canavieiras Norte in the north. As at December 31, 2020, past gold production from the mine complex was slightly over two million ounces, with mineral reserves of 2.81 million ounces of gold and total mineral resources of 5.0 million ounces of gold, indicating the world class size of the current known deposit. Since 2019, the Company has started systematic exploration of its 77,800 hectare land package that covers 155 kilometers of exploration potential along the north-south trending belt. This work has defined a fourteen-kilometer long belt of gold-bearing conglomerate located north of the mine complex and has also extended the known mineralized reefs south of João Belo in a continuous area extending 2,200 metres south of the limits of the João Belo mine. Further areas have been identified both to the north and further south during reconnaissance exploration programs. Work will continue to define mineralized reefs exposed on surface and follow up with widely spaced drill testing targeting both extensions of the mine complex and new standalone mine targets. Consequently, the Company sees significant opportunities to grow its regional presence and continue to build the world-class Jacobina Complex.

 

MARA Project Advances

 

The MARA Joint Venture held by the Company (56.25%), Glencore International AG (25%) and Newmont Corporation (18.75%) continues to advance the engagement with local communities and stakeholders, and progress the feasibility study and the permitting process. The pending feasibility study will provide updated mineral reserves, production and project capital cost estimates, is being overseen by the Technical Committee comprised of members of the three Companies. Key technical results are expected during 2021, and a considerable amount of information in the pre-feasibility study is already at feasibility study level as a result of the Integration. The full feasibility study report and submission of the ESIA is expected in late 2022.

 

The MARA Project represents a significant strategic value opportunity and a solid development and growth project. The Company intends to pursue all available avenues to continue to advance and unlock its value through its controlling interest.

 

Work on the engineering design, drilling at site, and furthering of the environmental studies and permitting continued to progress well during the third quarter. The metallurgical drilling program at the Agua Rica site was completed, and all samples were submitted for metallurgical test-work in Canada. Additionally, geotechnical drilling started and is expected to continue during the fourth quarter. Next steps include resource delineation and specific geotechnical drilling for the overland conveyor tunnel design. Metallurgical test-work is progressing according to plan, advancing early stages of mechanical preparation and assaying, while preparing final composites for batch testing and pilot plant, which is expected to run during the first quarter of 2022.

 

MARA is the combined project comprised of the Agua Rica site, Alumbrera site as well as the Alumbrera plant and ancillary buildings and facilities, and will rely on processing ore from the Agua Rica mine at the Alumbrera plant. The project design minimizes the environmental footprint of the project incorporating the input of local stakeholders. MARA is planned to be a multi-decade, low cost copper-gold operation with annual production in the first ten years of 556 million pounds of copper equivalent and a life of mine annual production of 469 million pounds of copper equivalent on a 100% basis. MARA will be among the top 25 copper producers in the world when in production, and one of the lowest capital intensity of the comparable projects globally.

 

EXPLORATION

 

During the third quarter, exploration drilling and other field activities continued to ramp up in most jurisdictions as COVID-19 restrictions are progressively lifted as vaccination rates increased. The Company is refocusing its efforts on regional exploration projects, with greater efforts being placed on Jacobina and Lavra Velha, which represent the best opportunities for advancement of the goals of the generative exploration program. Drilling activities continued in Brazil at Lavra Velha, Jacobina Norte and at the early stage Colider property. Targets were advanced at the Company’s Ivolandia project, with collection of soil and rock samples and geological mapping at several targets. An airborne geophysical survey will be flown over a 210 square kilometre area at Ivolandia in early 2022. Exploration in Chile in the quarter included surface work at early stage projects near the El Peñón mine and elsewhere, and initial reverse-circulation scout drilling programs were completed at three projects in the El Peñón region. In Argentina, permitting and contracting work was undertaken in preparation for planned drilling on the Company’s Las Flechas property, where a 1,500-2,000 metre drill program in the fourth quarter is planned to test breccia-related high-sulphidation epithermal gold targets. At Monument Bay, Manitoba, results from the recently completed deep drilling program were integrated into the project database and are currently being evaluated with planning for the next steps for the project, and exploration drilling continued at the recently acquired advanced Wasamac property, in the Abitibi, Quebec. Initial field work was started on the recently developed Orogen Royalties Inc. Nevada Alliance and Raven-Callaghan property option.

 

FINANCIAL SUMMARY AND KEY STATISTICS

 

Key financial statistics for the third quarter 2021 are outlined in the following table.

 

(In millions of United States Dollars, except for per share and per unit amounts) Three months ended September 30
2021 2020
Revenue $ 452.2      $ 439.4  
Cost of sales excluding depletion, depreciation and amortization (177.2 )   (166.6 )
Depletion, depreciation and amortization (113.1 )   (106.9 )
Total cost of sales (290.3 )   (273.5 )
Temporary suspension, standby and other incremental COVID-19 costs (7.9 )   (8.6 )
Mine operating earnings 154.0      157.3  
General and administrative expenses (19.5 )   (21.4 )
Exploration and evaluation expenses (10.9 )   (3.6 )
Net earnings attributable to Yamana equity holders 27.0      55.6  
Net earnings(3) per share – basic and diluted (i) 0.03      0.06  
Cash flow generated from operations after changes in non-cash working capital 190.6      215.0  
Cash flow from operations before changes in non-cash working capital(2) 202.9      199.0  
Revenue per ounce of gold $ 1,789      $ 1,910  
Revenue per ounce of silver $ 24.23      $ 24.58  
Average realized gold price per ounce (2) $ 1,789      $ 1,910  
Average realized silver price per ounce (2) $ 24.23      $ 24.58  

(i)     For the three months ended September 30, 2021, the weighted average number of shares outstanding was 964,715 thousand (basic and diluted).

 

Summary of Certain Non-Cash and Other Items Included in Net Earnings(3)

 

(In millions of United States Dollars, except per share amounts,
totals may not add due to rounding)
Three months ended September 30
2021 2020
Net foreign exchange (gains) losses(3) $ (16.1 )   $ 4.2  
Share-based payments/mark-to-market of deferred share units 3.1      5.1  
Mark-to-market losses (gains) on derivative contracts, investments and other assets 1.0      (1.5 )
Gain on sale of subsidiaries, investments and other assets —      (1.8 )
Temporary suspension, standby and other incremental COVID-19 costs 7.9      8.6  
Early note redemption premium 53.3       
Other provisions, write-downs and adjustments(3) 4.0      6.1  
Non-cash tax on unrealized foreign exchange losses 7.2      8.7  
Income tax effect of adjustments(3) (16.0 )   (4.9 )
One-time tax adjustments(3) (1.6 )   12.8  
Total adjustments(3) (i) $ 42.8      $ 37.3  
Total adjustments – increase to earnings(3) per share $ 0.04      $ 0.04  

 

(i)     For the three months ended September 30, 2021, net earnings(3) would be adjusted by an increase of $42.8 million (2020 – increase of $37.3 million).

For a full discussion of Yamana’s operational and financial results and mineral reserve and mineral resource estimates, please refer to the Company’s Management’s Discussion & Analysis and Condensed Consolidated Interim Financial Statements for the three and nine months ended September 30, 2021, and the Company’s Management’s Discussion & Analysis for the year ended December 31, 2020, which are available on the Company’s website at www.yamana.com, on SEDAR at www.sedar.com and on EDGAR at www.sec.gov.

Qualified Persons

 

Scientific and technical information contained in this news release has been reviewed and approved by Sébastien Bernier (P. Geo and Senior Director, Geology and Mineral Resources). Sébastien Bernier is an employee of Yamana Gold Inc. and a “Qualified Person” as defined by Canadian Securities Administrators’ National Instrument 43-101 – Standards of Disclosure for Mineral Projects.

 

About Yamana

 

Yamana is a Canadian-based precious metals producer with significant gold and silver production, development stage properties, exploration properties, and land positions throughout the Americas, including Canada, Brazil, Chile and Argentina. Yamana plans to continue to build on this base through expansion and optimization initiatives at existing operating mines, development of new mines, the advancement of its exploration properties and, at times, by targeting other consolidation opportunities with a primary focus in the Americas.

 

 

Reconciliation of Cash Flows from Operating Activities to non-GAAP Measures Three months ended September 30
(In millions of United States Dollars) 2021 2020
Cash flows from operating activities $ 190.6    $ 215.0  
Adjustments to operating cash flows:    
Amortization of deferred revenue 2.4    2.3  
Temporary suspension, standby and other incremental COVID-19 costs 7.9    8.6  
Legal contingencies included in other cash payments —    8.0  
Non-discretionary items related to the current period    
Sustaining capital expenditures (41.1 ) (38.1 )
Interest paid (12.0 ) (5.6 )
Payment of lease liabilities (5.7 ) (4.4 )
Cash used in other financing activities (2.9 ) (0.3 )
Net free cash flow $ 139.2    $ 185.5  
Discretionary and other items impacting cash flow available for dividends and debt repayments    
Expansionary and exploration capital expenditures (52.1 ) (23.8 )
Cash flows used in other investing activities (4.6 ) (4.7 )
Effect of foreign exchange of non-USD denominated cash (0.9 ) (0.1 )
Free cash flow before dividends and debt repayments $ 81.6    $ 156.9  

 

Posted October 29, 2021

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