YAMANA GOLD INC. (TSX:YRI) (NYSE:AUY) (LSE:AUY) is herein reporting its financial and operational results for the third quarter of 2022. Production totalled 241,302 gold equivalent ounces(2) at total cost of sales, cash costs(1) and all-in sustaining costs(1) of $1,299, $794 and $1,148 per GEO(2) respectively. The standout production results, which were realized despite the gold-to-silver ratio being near an all-time high and significantly above that anticipated in guidance, delivered strong cash flow generation including $164.7 million in cash flows from operating activities and $157.1 million in cash flows from operating activities before net change in working capital. With solid results across its operations, the Company is well positioned to achieve its annual production guidance of 1,000,000 GEO(2) with AISC(1) expected to be within the upper end of guidance when adjusted for the impact of the higher gold-to-silver ratio.
THIRD QUARTER HIGHLIGHTS
Financial Results – Strong Earnings and Cash Flow Generation Highlight Resiliency of Operations
Production Results – Continuing to Execute as Planned
Cost Results – Maintaining Solid Margins Against Inflationary Backdrop
Capital Allocation and Free Cash Flows
Health, Safety and Sustainable Development
OPERATING RESULTS SUMMARY
|For the three months ended September 30, 2022|
|GEO(2) Production||Total cost of
sales per GEO(2) Sold
per GEO(2) Sold
per GEO(2) Sold
|Canadian Malartic (50%)||75,262||—||75,262||$||1,366||$||803||$||1,098|
|For the three months ended September 30, 2021|
|Total cost of
|Canadian Malartic (50%)||86,803||—||86,803||$||1,168||$||687||$||887|
Canadian Malartic had a strong third quarter, producing 75,262 ounces, in line with plan. With the processing of softer Barnat ore, Canadian Malartic recovery rates have continued to trend higher than comparative periods. The Barnat pit, which has a higher strip ratio in the upper benches, contributed approximately half of the ore processed during the third quarter. The Canadian Malartic pit provided approximately a quarter of the mill feed, while the remaining ore came from the surface stockpile. As planned, Canadian Malartic is on track to achieve its guidance with the mining sequence and transition from the Canadian Malartic pit optimizing cash flows.
Total cost of sales, cash costs(1) and AISC(1) on a per GEO(2) basis for the quarter were $1,366, $803, and $1,098 respectively, with cash costs(1) and AISC(1) better than plan.
Jacobina had an exceptional third quarter and delivered record quarterly gold production of 50,113 ounces. The production results were in line with plan and exceeded the comparative quarter, driven by higher ore tonnes processed. 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 third quarter of $907, $586, and $801, respectively.
Cerro Moro produced 40,201 GEO(2) comprising 24,888 ounces of gold, and 1,375,661 ounces of silver, consistent with or exceeding production guidance 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 now stabilized throughput.
The opening of more mining faces and resultant increase in mill feed coming from higher-grade underground ore continued in the third quarter with Zoe contributions becoming more prevalent. During the third 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 or exceed gold and silver guidance for the year.
Total cost of sales, cash costs(1) and AISC(1) on a per GEO(2) basis during the third quarter were $1,481, $926, and $1,263, respectively, better than plan and all well below the comparative quarter, as a result of the exceptional production in the quarter. There was a brief illegal labour action at the Cerro Moro mine in the latter part of July 2022, which was resolved.
El Peñón produced 53,228 GEO(2), comprising gold production of 43,912 ounces, which exceeded plan, and 837,104 ounces of silver. Optimized mining sequencing, bringing forward zones with a higher gold-to-silver ratio in the first three quarters 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 fourth quarter, due to the mining of higher-grade silver zones such as Fortuna, Providencia, Pampa Campamento and Martillo Flats.
Quarterly total cost of sales, cash costs(1) and AISC(1) on a per GEO(2) basis of $1,211, $775, and $1,034, respectively.
Minera Florida reported gold production of 22,497 ounces during the quarter, increasing production for the third consecutive quarter, and remains on target to achieve 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 $1,721, $1,041, and $1,382 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 fourth quarter, 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 in the fourth quarter due to higher grades, and higher silver and zinc by-product credits.
VALUE CREATION AND UPSIDE OPTIONALITY UNDERPINNING CORE PORTFOLIO OF GENERATIONAL ASSETS
The Company’s exploration success and track record of mineral reserve replacement and mineral resource growth supports a clear pathway toward realizing significant and progressive production increases and increased cash flows generation. The board-approved YAMANA 1.5 Plan supports the measured and prudent production growth of approximately 50% to 1.5 million GEO(2) within the ten-year outlook horizon, with upside optionality from longer-term development projects which potentially extend the production platform beyond that timeframe and above that production level.
The YAMANA 1.5 Plan is underpinned by multiple low-risk, low-capital projects which are modular, meaning that the sequencing can be modified to accommodate changes in assumptions on capital allocation, permitting, etc., and adhere to the Company’s balanced approach to capital allocation, which is expected to generate significant and growing cash balances during the guidance period, positioning projects to be funded from those free cash flows generation. The multiple projects further benefit from being largely brownfield in nature, allowing for added flexibility with regards to sequencing and timing of such projects in response to prevailing market conditions, enabling each component to provide incremental growth and free cash flows generation on the path to achieving the growth plan. Such flexibility allows the Company to re-arrange, adjust or defer the projects at its discretion while still having the confidence in achieving the overall plan.
The Company’s near-term guided growth to 1.06 million GEO(2) is supported by the recently completed Phase 2 expansion at Jacobina and first production from the Odyssey Project in early 2023. Thereafter, to achieve the YAMANA 1.5 Plan, the Company’s advanced, low-capital projects, which can be pursued and re-sequenced to add GEO(2) in a responsible and self-funded manner, include:
For further details on the above projects, please refer to the MD&A for the three- and nine-month periods ended September 30, 2022, specifically the Strategic Developments, Construction Developments and Advanced Stage Projects section, Section 5: Construction, Development and Other Initiatives and Section 6: Exploration.
The Odyssey Project at Canadian Malartic represents one important step towards realizing the YAMANA 1.5 Plan as it will establish a large sustainable gold production platform of 500,000 – 600,000 ounces (100% basis) with a strategic mine life into the 2040’s. As of December 31, 2021, the Odyssey mineral resource holds 2.35 million ounces of gold in 25.2 million tonnes of ore at a grade of 2.9 grams per tonne of indicated mineral resources and 13.15 million ounces of gold in 173.7 million tonnes of ore at a grade of 2.4 grams per tonne of inferred mineral resources of which 7.3 million ounces, approximately 47% of the total mineral resource, is included in the technical study mine plan.
Further supporting the YAMANA 1.5 Plan is the district potential at Jacobina. The track record of growth in mineral reserves and mineral resources at Jacobina underpins its significant prospectivity and geological upside, which supports the planned low risk, brownfield phased expansion strategy that is expected to materially increase production and cash flows, generating strong returns on investment.
El Peñón, which achieved a fourth consecutive year of adding mineral reserves in excess of depletion with mineral reserves increasing 23% to 1.3 million GEO(2) over that period, represents another source of value creation for the Company as it continues to extend the mine life at a production rate of 220,000 to 230,000 GEO(2) per year. Daily throughput is now approximately 3,300 tpd versus the currently available plant capacity of up to 4,200 tpd, representing an opportunity to increase production as the operation endeavours to build its mineral inventory in wake of consistent exploration results.
Yamana continues to balance cash flow generation and exploration expenditures to maximize the value of its asset portfolio, and is confident the low-capex nature of its growth plans, largely centered on mine life extensions that are near the existing infrastructure, will demonstrate a focus on measured, responsible growth and the sustainability of cash flows.
Further growth beyond this level, for a production platform of 2.75 million to 3.1 million GEO(2) would come from the MARA and Suyai projects, and opportunities currently within the generative exploration portfolio such as Jacobina Norte, Las Fechas, Falcon, and Borborema, among others; these opportunities provide additional upside potential to the ten-year outlook. The MARA Project is one of the largest copper-gold projects in the world, of which Yamana owns 56.25%, and which has an average annual production of 556 million pounds of copper equivalent(8) (100% basis) during its first ten years. In addition, the Suyai Project is a large gold project in Chubut Province, Argentina, that is projected to reach production of up to 250,000 ounces annually in its first eight years. Further, Jacobina Norte is a highly-prospective property that lies contiguous to and north of the Company’s prolific Jacobina mine, with preliminary results showing excellent potential for the discovery of standalone Jacobina-type mineralization and the addition of a new mine along the greenstone basin.
BUSINESS COMBINATION WITH GOLD FIELDS – INFORMATION CIRCULAR PUBLICLY FILED WITH UNANIMOUS BOARD RECOMMENDATION TO VOTE IN FAVOUR OF THE DEAL
Shareholders and other interested parties should be aware that the management information circular and related meeting and proxy materials in connection with the special meeting of shareholders, scheduled to be held on November 21, 2022, have been filed and made publicly available. The purpose of the Yamana Meeting is to seek approval for the previously-announced proposed business combination whereby all of the issued and outstanding common shares of Yamana will be acquired by a wholly-owned subsidiary of Gold Fields Limited (JSE, NYSE: GFI) by way of a plan of arrangement under the Canada Business Corporations Act.
Shareholders of record on October 18, 2022 will be eligible to vote at the Yamana Meeting. In addition to the public filing of the Information Circular, the materials are currently being mailed to Yamana shareholders of record on the above-mentioned record date. The Information Circular provides detailed information regarding the proposed business combination, which underpins the Yamana board of directors’ conclusions and recommendation.
The Yamana board of directors has unanimously recommended voting in favour of the business combination. Shareholders and other interested parties are strongly advised to read the Information Circular for a detailed description of the transaction and the reasons for the board’s recommendation. The Information Circular is available under Yamana’s profile on www.sedar.com and is also available on the Company’s website at www.yamana.com.
FINANCIAL SUMMARY AND KEY STATISTICS
Key financial and operating statistics for the third 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 September 30|
|Cost of sales excluding depletion, depreciation and amortization(7)||(196.4||)||(185.1||)|
|Depletion, depreciation and amortization||(120.9||)||(113.1||)|
|Total cost of sales(7)||(317.3||)||(298.2||)|
|Temporary suspension costs(7)||(1.7||)||—|
|Mine operating earnings||103.4||154.0|
|General and administrative expenses||(22.4||)||(19.5||)|
|Exploration and evaluation expenses||(13.2||)||(10.9||)|
|Net earnings attributable to Yamana equity holders||19.8||27.0|
|Net earnings(3) per share – basic and diluted(i)||0.02||0.03|
|Cash flows from operating activities||164.7||190.6|
|Cash flows from operating activities before changes in non-cash working capital(ii)||157.1||202.9|
|Revenue per ounce of gold||$||1,728||$||1,789|
|Revenue per ounce of silver||$||19.31||$||24.23|
|Average realized gold price per ounce(1)||$||1,728||$||1,789|
|Average realized silver price per ounce(1)||$||19.31||$||24.23|
(i) For the three months ended September 30, 2022, the weighted average number of shares outstanding was 961,057 thousand (basic) and 962,513 thousand (diluted).
(ii) Net change in working capital movement was a cash inflow of $7.6 million for the three months ended September 30, 2022.
Reconciliation of Net Earnings(3) to Adjusted Net Earnings(1)(3)
|(In millions of United States Dollars, except per share amounts, totals may not add due to rounding)||Three months ended September 30|
|Non-cash net foreign exchange gains||$||(5.3||)||$||(12.1||)|
|Share-based payments/mark-to-market of deferred share units||5.1||3.1|
|Mark-to-market losses on derivative contracts, investments and other assets and liabilities||0.4||1.0|
|Temporary suspension costs(7)||1.7||—|
|Standby and other incremental COVID-19 costs(7)||0.2||7.9|
|Early note redemption premium||—||53.3|
|Other provisions, write-downs and adjustments(i)||12.8||4.0|
|Non-cash tax on unrealized foreign exchange losses||10.5||7.2|
|Income tax effect of adjustments||(2.1||)||(16.0||)|
|One-time tax adjustments||1.4||(1.6||)|
|Adjusted net earnings(1)(3)||$||44.5||$||73.7|
|Net earnings (3) per share||$||0.02||$||0.03|
|Total adjustments(3) per share||$||0.03||$||0.05|
|Adjusted net earnings(3) per share(1)||$||0.05||$||0.08|
(i) This balance includes, among other things, transaction costs related to the Gold Fields transaction, in addition to revisions in estimates and write-downs & provisions, or reversals of provisions, for items such as tax credits and legal contingencies.
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-month periods ended September 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.
American Lithium Corp. (TSX-V:LI) (NASDAQ:AML) (Frankfurt:5LA1) a... READ MORE
Treasury Metals Inc. (TSX: TML) (OTCQX: TSRMF) is pleased to anno... READ MORE
Results continue to confirm the existence and continuity o... READ MORE
Adventus Mining Corporation (TSX-V: ADZN) (OTCQX: ADVZF) and Salazar Res... READ MORE
Madison Metals Inc. (CSE: GREN) (OTCQB: MMTLF) is pleased to anno... READ MORE