ENP Newswire -
Release date- 30042014 -
Production and costs for the first quarter were within budget expectations;
Production is expected to accelerate quarter-over-quarter with the biggest increases expected at Chapada,
Gualcamayo production increased 10% over fourth quarter 2013 and 28% over first quarter 2013 with the contribution from QDD Lower West and
Pilar production increased 13% over fourth quarter 2013 as ramp-up accelerated.
Total production for the first four months of approximately 380,000 gold equivalent ounces ('GEO') (1) with second quarter average monthly production expected to be 16% higher than the average monthly production in the first quarter.
Updated Cerro Moro feasibility study reduces initial capital expenditure to
'In the first quarter, we delivered production in line with our budget at costs consistent with the lower levels established last year. Subsequently, for the month of April we delivered a significant production increase which is a trend we expect to continue throughout the second quarter and balance of the year, positioning us well for our production this year. We also expect to balance production growth with cost containment and margin preservation,' said
'Expansionary capital expenditures were down significantly compared to first quarter last year and with the second quarter expected to be the last period of the current phase of expansionary capital spending, we expect our cash balance to increase in coming quarters. The combination of increasing production at lower costs, and the continued focus on balancing top and bottom line growth is expected to result in quarterly cash flow returning to the baseline level we established last year.'
FIRST QUARTER 2014 OVERVIEW
Production of 271,908 GEO and 27.6 million pounds of copper.
By-product cash costs of
All-in sustaining cash costs ('
Adjusted earnings from continuing operations of
Cash flows before changes in non-cash working capital of
(All amounts are expressed in
1. GEO assumes gold plus the gold equivalent of silver using a ratio of 50:1.
2. Refers to a non-GAAP measure. Reconciliation of non-GAAP measures are available at www.yamana.com/Q12014
3. Cash flows from operating activities.
4. Includes cash costs, sustaining capital, corporate general and administrative expense and exploration expense.
Financial Results for the three months ended
Cash flows from operating activities after changes in non-cash working capital items for the three month period ended
Cash flows from operating activities before changes in non-cash working capital for the three months ended
Cash flows from operating activities before changes in non-cash working capital were
Net loss for the quarter was
Lower metal prices accounted for 58% of the variance in revenues in comparison to the first quarter of 2013 representing approximately
Revenues for the three months ended
The average realized price of gold in the first quarter of 2014 was
Cost of sales excluding depletion, depreciation and amortization for the three months ended
Depletion, depreciation and amortization ('DDA') expense for the quarter was
The increase was attributable to higher DDA at Gualcamayo from
Other expenses including of general and administrative, exploration and evaluation, other and net finance expenses were
General and administrative expenses were
Exploration and evaluation expenses were
Other expenses were
Finance expense net of finance income was
Equity earnings from Alumbrera were
The Company recorded an income tax expense of
The income tax provision for the first quarter of 2014 reflects a current income tax expense of
As a result for local purposes, a charge of
During the quarter, the capacity under the Company's revolving line of credit was increased from
The Company's outstanding net debt position from all credit facilities was approximately
Subsequent to the quarter end, the Company plans to restructure its equity interest in the Ernesto/Pau-a-Pique mine to below 50% with preference to the repayment of its investment. The Company will continue to manage Ernesto/Pau-a-Pique until the end of year subject to any renewal at that time.
Operating Results for the three months ended
Total production for the first quarter of 2014 was 271,908 GEO, compared to 291,312 GEO produced in the first quarter of 2013. Total production included the Company's attributable production from Alumbrera of 10,115 ounces of gold and production during commissioning of 24,116 ounces of gold.
Commercial production for the first quarter was 247,792 GEO compared with 287,203 GEO produced in the first quarter of 2013. Total commercial production comprised of 204,255 of gold and 2.2 million ounces of silver, compared to 244,129 ounces of gold and 2.2 million ounces of silver produced in the same quarter of 2013.
Gualcamayo increased production by 28% relative to the first quarter of 2013 and 10% relative to the fourth quarter of 2013 with production contribution from the QDD Lower West underground mine and from
Similar to previous years, first quarter production was planned to be the lowest of the year given the rainy season and the ramp-up of new projects. Total production for the first four months of approximately 380,000 GEO, in line with budget, with second quarter average monthly production expected to be 16% higher than the average monthly production in the first quarter.
Production is expected to accelerate for the remainder of the year as ordinary course mine sequencing will result in mining of higher grade areas with the largest impact at mines that contribute most significantly to the operating cash flow generation of the Company.
By-product cash costs for the first quarter of 2014 averaged
By-product and co-product cash costs were impacted by planned lower grades at certain mines and higher input costs compared to the three months ended
All-in sustaining cash costs ('
Copper production for the quarter was 27.6 million pounds from the Chapada mine, compared to 27.4 million pounds for the same quarter of 2013. A total of 7.2 million pounds of copper produced from Alumbrera were attributable to the Company, compared with 6.3 million pounds for the quarter ended
Co-product cash costs per pound of copper were
Charts providing a summary of mine-by-mine operating results are presented at the end of this press release.
In the first quarter of 2014, Chapada produced a total of 21,710 GEO, which consisted of 20,455 ounces of gold and 62,729 ounces of silver, contained in concentrate compared with 23,358 GEO, which consisted of 21,722 ounces of gold and 81,812 ounces of silver contained in concentrate in the same quarter of 2013. Chapada copper production was 27.6 million pounds in the quarter compared with production of 27.4 million pounds of copper in the first quarter of 2013.
Production for the quarter was lower than the first quarter of 2013 as a result of lower tonnage processed compared to the first quarter of 2013. Lower tonnage mined and processed was the result of heavier rainfall during the current wet season compared to 2013 and harder ore that affected mill performance.
The mine has reduced drilling patterns spacings to improve ore fragmentation in blasting in order to enhance plant throughput and will realize further improvements throughout the year on completion of the installation of an in-pit crusher and certain other optimizations.
Production at Chapada is expected to be stronger in the second half of the year with the dry season enabling greater flexibility to access higher grade areas unavailable during the wet season and the additional contribution from higher grade ore at Corpo Sul by the end of year. Corpo Sul is an adjacent near-to-surface ore body to the main pit. Pre-stripping is underway at Corpo Sul and ore feed is expected to be available later this year.
By-product cash costs for the quarter were negative
Co-product cash costs were
Chapada revenues for the quarter net of sales taxes and treatment and refining costs were
The Company continues to advance initiatives to improve production. These initiatives include modifications to the grinding circuit and the installation of an in-pit crusher to increase throughput. The in-pit crusher is planned to be commissioning by the end of the second quarter. Additionally, the development of Corpo Sul, a gold and copper deposit at the southwest end of the main ore body of Chapada is the most prospective new opportunity planned to increase production at Chapada.
Pre-stripping at Corpo Sul began in the first quarter and will continue throughout the year. Corpo Sul is expected to contribute to higher gold and copper grades expected to begin in the third quarter this year. Other opportunities under evaluation include Suruca and
In the first quarter of 2014,
Feed grades for gold are expected to increase to higher levels in the second quarter. Silver grade and recovery was consistent with budget although higher than the first quarter of 2013. Scheduled replacement of equipment is also underway to further improve productivity and reduce mining costs. This will contribute to greater flexibility in ore blending and, as a result, increase production during the balance of the year, positioning
Co-product cash costs were
Production of 25,460 GEO in the first quarter consisted of 23,579 ounces of gold and 94,042 ounces of silver, compared with 36,575 GEO, which consisted of 33,039 ounces of gold and 176,801 ounces of silver in the first quarter of 2013. Production was consistent with budget levels, mining lower grade areas as part of normal mine sequencing.
Mining of higher grade areas is planned throughout the year with gold and silver grades expected to be at 2013 levels in the third quarter. A brief labour interruption in February also impacted plant throughput for the quarter. Feed grades are expected to improve in the second half of the year.
Co-product cash costs of
Development of other areas continued during the first quarter at Mercedes including: infrastructure and sill development of the
Gualcamayo produced 38,481 ounces of gold in the first quarter compared with 30,177 ounces produced in the first quarter of 2013, representing a 28% increase as a result of the contribution from the new underground operation. Production was also 10% higher than the fourth quarter of 2013.
Higher production was the result of more tonnes mined and processed as the ramp of QDD Main Phase III is now complete and higher grades resulting from the new mineral source of ore
Production for April is a record of approximately 20,000 ounces for the month representing a 56% increase to average monthly production in the first quarter. This positions Gualcamayo to meet and potentially exceed 2014 budget production expectations.
The metallurgy of the ore from AIM and QDD Lower West impacts recoveries as it requires a longer leaching cycle than that of QDD Main, and increases the amount of ore on the heap leach pad. To improve recoveries, a plan is currently under review which contemplates the installation of a filtering station and an increase in volume of treatment capacity. These plant modifications are expected to improve recovery rates beginning later in the year.
Co-product cash costs were
Cash costs were also impacted by local inflationary pressures on labour and camp service costs, which were partly offset by the effect of the devaluation of the Argentina Peso on the portion of the operating cost structure reflected in local currency. The completion of the installation of a conveyor belt, which will reduce the cost of transport of ore from the QDD Lower West underground mine, is underway and expected to improve mining costs later this year.
The Company also continues to progress with studies of the options for processing the newly discovered sulphide resources including Rodado.
In the first quarter of 2013, Minera Florida produced 28,315 GEO, which consisted of 24,409 ounces of gold and 195,287 ounces of silver, compared to 34,024 GEO, which consisted of 26,651 ounces of gold and 368,634 ounces of silver in the first quarter of 2013. Lower production was mainly attributed to lower feed grades expected as part of the mine plan.
Despite lower production, co-product cash costs for the quarter were
The mine produced and sold 1,792 tonnes of zinc concentrate in the quarter, compared with 928 tonnes of zinc concentrate produced and sold in the first quarter of 2013, representing a 93% increase in volume of zinc produced and sold.
Gold production at Jacobina was 14,853 ounces in the first quarter, compared with 17,366 ounces produced in the same quarter of 2013. Lower production resulted from reduced throughput offset by improved feed grade. In April, production at Jacobina was approximately 6,000 ounces of gold, approximately 1,000 gold ounces higher than the average monthly production rate in the first quarter, in part due to a planned access to higher grade areas compared to the first quarter.
As part of a redeveloped mine plan in 2013, mining of higher grade areas will continue in 2014 with grade expected to increase to approximately 2 g/t by the fourth quarter of 2014. As noted, these results are in line with the revised plan set in 2013 for Jacobina to focus on producing quality ounces with sustainable margins and maximize profitability and as such in the short term and the emphasis has been on reducing costs rather than maximizing production preparing for a return to higher production levels and lower costs for the medium and longer term.
Co-product cash costs were
Lower co-product cash costs in the current quarter, in spite of reduced production volume, compared to the first quarter last year reflects the effect of mine management's continuous effort in executing the cost containment initiatives implemented since the second quarter of 2013.
The management structure for the oversight of the mine was also changed with oversight now provided by our Chilean management which has considerable underground experience. A development plan to improve production intermediate and longer term is in progress, the initial benefits of which are expected by the third quarter of this year.
Production was 12,693 ounces of gold in the quarter compared to 16,797 ounces of gold in the same quarter of 2013 as a result of lower feed grades. Several initiatives are underway to meet production target, these include the development of new open-pit mineral reserves, improvement in underground production with arrival of new equipment and evaluation of oxide ore from C1
Co-product cash costs averaged
The Company's interest in Alumbrera is accounted for as an equity investment. The Company recorded earnings from its 12.5% interest in Alumbrera of
The Company received cash distributions
For the quarter, attributable production from Alumbrera was 10,115 ounces of gold and 7.2 million pounds of copper. This compares with attributable production of 8,222 ounces of gold and 6.3 million pounds of copper in the first quarter of 2013.
By-product cash costs per ounce of gold averaged negative
Co-product cash costs per ounce for gold averaged
MINES IN COMMISSIONING
Processing improvements are the focus to improve production at the mine. Processing improvements include the introduction of a thickener and a regeneration kiln. Improvements in recovery rates from the carbon-in-leach (CIL) circuit are also currently underway. These intermediate term improvements are in progress and are expected to significantly improve recoveries in the second quarter with commercial production commencing in the third quarter.
Additionally, the Company plans to install a roaster as part of a long term solution in improving recovery rates. Current studies suggest recovery rates with a roaster would exceed 90%. C1
During the commissioning phase, a stockpile is being accumulated which will provide additional flexibility and increasing reliability for the operation as process improvements are implemented and take hold.
Commissioning production was 6,720 ounces of gold in the first quarter. Process improvements were initiated after the quarter end.
Commissioning continued to ramp-up with completion of commissioning expected in the third quarter of 2014.
The newly delivered low-profile equipment, whose purpose is to improve dilution and productivity was deployed late in the quarter and will be fully operational in May. This new low-profile mining equipment is one of a series of initiatives being implemented to increase mining efficiencies at the operation and reduce dilution over the life of the mine.
The Company is also evaluating further opportunities including the potential for more selectively mining the higher grade ore shoots that would have a positive impact on the operation as the in-situ grades are much higher than the current mineral reserve grade. Efforts continue to be focused on an infill drilling program to ensure these higher grade ore shoots can be mined efficiently and brought into production as soon as possible. The Company is now developing plans for Pilar to reach an annual production level of 100,000 gold ounces.
Production of ore from Caiamar, a satellite deposit, is ramping up for processing at Pilar with the higher grades offsetting the additional transportation costs to the plant. The Company also continues development of the Maria Lazarus deposit which is a nearer-to-plant satellite deposit with expected contribution to production and better costs due to ore geometry.
Commissioning production for the first quarter was 11,885 ounces of gold, representing an increase of 13% from the fourth quarter of 2013. Recovery rates continued to improve in the quarter. The Company confirms prior guidance that completion of commissioning is on target for the third quarter of 2014.
CONSTRUCTION AND DEVELOPMENT PROJECTS
Cerro Moro is a high-grade gold and silver deposit located in the
The parameters of the updated feasibility study include an initial capital investment of approximately
Detailed engineering has commenced to confirm assumptions and further refine capital costs to precision levels normally better than feasibility study levels. Although the total capital, once this process is completed, is not expected to exceed
The feasibility study contemplates small open pits for the first three years followed by the development of underground areas. The Company is also evaluating optimizations and efficiencies that include scalability of the plant. The processing plant is to be built in two phases. The first phase to recover metal from a high grade gravity concentrate and the second phase, after year three, will add floatation to increase recoveries. Development of the underground areas and second phase plant capital will be fully funded through cash flow.
The project is expected to generate significant returns, create robust value and positively contribute to cash flow per share. This operation aligns with the Company's focus to balance production of growth and capital spending to maximize value creation.
Suyai is a high-grade gold and silver deposit located in the Chubut province of
The plan being evaluated is a small scale underground operation with off-site processing or direct sale of a precious metal concentrate. The parameters of the current plan include an initial capital investment of approximately
Exploration at Yamana continues to be a key to unlocking value at existing operations. The 2014 program will continue to focus on finding higher quality ounces, those with the greatest potential to most quickly generate cash flow allowing the Company to grow prudently and profitably.
The following summary highlights key updates from the exploration program at the Company since
Surface exploration consisting of detailed mapping and sampling of prospective targets in the Escondida and La Negra blocks were the focus of the exploration program during the first quarter of 2014. Mapping and sampling from the decline ramp and cross cuts of the Escondida fault and associated veins, breccia, and stockwork systems, is underway. Sampling of the Escondida veins and structures is expected to confirm values in the mineral resource and mineral reserve models. To date, veins and structures exposed in the decline are located as modeled from the surface drilling.
The 2014 exploration program at Gualcamayo will focus on expanding the Rodado southwest mineral orebody and testing new target areas for near surface oxide potential. A drill program has been planned to collect core samples of the sulfide zones that can be properly preserved for metallurgical work and used for the sulfide feasibility study of the deep sulfide mineral deposits. During the first quarter, 4,626 metres were completed in 11 drill holes at Gualcamayo with 945 metres completed in 2 holes that correspond to the metallurgical test program mentioned above.
The 2014 exploration program at
The exploration program will build on the success of the 2013 program, continuing to test and extend the Borde Oeste mineral intercepts to the north and south. A horizontal exploration hole drilled from a southern
During the first quarter, the Company focused on the
The 2014 exploration program at Minera Florida will focus on upgrading mineral resources to replace and expand mineral reserves and developing new targets through surface mapping and sampling that could be drill tested in the second half of the year.
By the end of the first quarter, the underground based drill program has completed approximately 7,000 metres of the 18,500 metres planned for the year. Targets tested to date include the Mina Este, Hallazgo, Triangulo Mineralizado, Halo Mineralizado Este and Maquis Clavo II, which are all within the current operating mine limits, and results to date are as expected and support continued work in these areas.
Exploration investments continue at Mercedes with a focus on testing for extensions of known ore bodies along the Mercedes-Barrancas-Marianas trend and upgrading inferred and indicated mineral resources into mineral reserve category. During the year, the Company expects to complete at least 18,500 metres of surface and underground drilling, development of underground drill stations along with important surface reconnaissance and district target development work.
The surface exploration program began in mid-January and has completed 21 holes for 7,081 metres to date. Initial results are encouraging and are being followed up down dip and along strike.
Underground mapping and sampling along with computer modeling of drill data has identified moderate to high grade indicated and inferred mineral resource shoots to be drill-tested from the surface during 2014 to expand the mineral resource and mineral reserve base at Pilar. The surface and underground based drill program to test these mineral shoots began late in the first quarter. Additionally, further testing and definition drilling at Maria Lazarus is planned for 2014 and is expected to be performed in the second half of 2014.
The focus of the 2014 exploration program at Chapada is to continue to expand known mineral bodies and discover a new satellite mineral body that can be quickly defined and added to the mineral resource inventories. The Company expects 12,000 metres to be drilled within the known mine areas as infill and extension programs and 9,700 metres to be drilled on targets developed through near-mine and regional mapping and sampling programs relying on prior knowledge of the areas along with data acquired from existing aeromagnetic and radiometric surveys.
Exploration and Infill drill programs are expected to commence in the second quarter of 2014. Priority targets for the exploration program will be testing newly recognized geophysical anomalies, follow-up on the geologic and geochemical anomalies defined in the first quarter and additional testing of the Taquaracu target, which is located approximately 15 kilometres southwest of Corpo Sul. The infill program will help to define areas within Suruca, Corpo Sul and other targets as needed.
OUTLOOK AND STRATEGY
The Company continues to pursue its stated philosophy of finding the optimal balance between containing costs, protecting and preserving margins and increasing production to generate, maximize and sustain cash flow. By focusing on these metrics that contribute best to cash flow generation and financial performance and by continuing to build on its mineral reserve and resource base, the Company will continue to deliver value to shareholders.
The Company has indicated budget production of 1.4 million gold equivalent ounces ('GEO') in 2014. The Company performs various evaluations to maximize the level of confidence and reliability in the forecast production, costs and cash flow generation capacity at every operation.
These evaluations identify ounces that the Company considers to have a lower level of certainty or reliability on any of production, costs or cash flow generation. The Company considers 70,000 GEO, or less than five per cent, of its budgeted production for 2014 to have a lower level of certainty as they relate to new operations that are progressing to full capacity.
Most of these ounces would be in pre-commercial production and as such do not impact operating cash flow expectations for the year. The Company's first quarter production for all metals was in line with budget. The Company confirms its expectation in achieving production within the above range for the year.
The acceleration in production quarter over quarter, that takes the Company from first quarter production levels to meet annual budget production will result from ordinary course mine sequencing which will lead to mining of higher grade areas for the remainder of the year at mines that contribute most significantly to operating cash flow and ramp up to commercial production of certain mines as planned.
The Company's 2015 production is also expected to further increase with a further significant increase occurring in 2016 with the potential start-up of Cerro Moro. Silver production is expected to be approximately 8.8 million ounces in 2014 which is included in GEO at a ratio of 50:1. Copper production in 2014 from Chapada mine is expected to be approximately 134 million pounds.
The Company confirms that in reaching these production levels, all-in sustaining cash costs ('
Expected expansionary capital spending for 2014 remains as previously stated at approximately
The 2014 exploration program will continue to focus on increasing mineral reserves and mineral resources with its near-mine and regional exploration programs, as well as continuing to explore identified greenfield targets and generate new targets.
Sustaining capital is estimated at
The Company continues to work toward future target of over 1.5 million GEO which it believes remains achievable with its existing portfolio of assets.
The Company continues to refine this further growth to ensure it will be delivered reflecting an appropriate balance of production, costs and margin preservation and the generation, maximization and sustainability of cash flow. Exploration results continue to support the higher level of sustainable production through its producing mines. Details of the exploration program year to date can be found in Section 7 Construction, Development and Exploration.
Subsequent to the quarter end, the Company announced a plan of arrangement with
This would immediately add approximately 300,000 GEO to the Company's annual production at average costs consistent with the Company's current cost structure. The joint operation is consistent with the Company's operating focus in the
In addition, to maintaining the Company's average cash costs, the Canadian Malartic mine will be self-funding including capital requirements. It also provides significant mineral reserve growth and a large mineral resource base for future growth. The Company will update its financial targets accordingly upon closing of the transaction. The plan of arrangement is subject to approval of the shareholders of
Further details of the 2014 first quarter results can be found in the Company's unaudited Management's Discussion and Analysis and unaudited Consolidated Financial Statements at http://www.yamana.com/Investors/FinancialCorporateReports.
FIRST QUARTER 2014 CONFERENCE CALL:
Conference call information for
Toll Free (
Toronto Local and International: 416-695-6616
Conference Call REPLAY:
Toll Free (
Toronto Local and International: 905-694-9451 Passcode 2392753
The conference call replay will be available from
Annual Meeting of Shareholders
The Annual Meeting of Shareholders will take place on
For those unable to attend the meeting in person, a live video and audio webcast including slide presentation can be accessed from Yamana's website.
For further information on the conference call or webcast, please contact the Investor Relations Department at firstname.lastname@example.org visit www.yamana.com.
Yamana is a Canadian-based gold producer with significant gold production, gold development stage properties, exploration properties, and land positions throughout the
Yamana plans to continue to build on this base through existing operating mine expansions, throughput increases, development of new mines, the advancement of its exploration properties and by targeting other gold consolidation opportunities with a primary focus in the
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This news release contains 'forward-looking statements' within the meaning of the United States Private Securities Litigation Reform Act of 1995 and applicable Canadian securities legislation. Except for statements of historical fact relating to the Company, information contained herein constitutes forward-looking statements, including any information as to the Company's strategy, plans or future financial or operating performance.
Forward-looking statements are characterized by words such as 'plan,' 'expect', 'budget', 'target', 'project', 'intend,' 'believe', 'anticipate', 'estimate' and other similar words, or statements that certain events or conditions 'may' or 'will' occur.
Forward-looking statements are based on the opinions, assumptions and estimates of management considered reasonable at the date the statements are made, and are inherently subject to a variety of risks and uncertainties and other known and unknown factors that could cause actual events or results to differ materially from those projected in the forward-looking statements.
These factors include the Company's expectations in connection with the expected production and exploration, development and expansion plans at the Company's projects discussed herein being met, the impact of proposed optimizations at the Company's projects, the impact of the proposed new mining law in
Although the Company has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results not to be anticipated, estimated or intended.
There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. The Company undertakes no obligation to update forward-looking statements if circumstances or management's estimates, assumptions or opinions should change, except as required by applicable law.
The reader is cautioned not to place undue reliance on forward-looking statements. The forward-looking information contained herein is presented for the purpose of assisting investors in understanding the Company's expected financial and operational performance and results as at and for the periods ended on the dates presented in the Company's plans and objectives and may not be appropriate for other purposes.
CAUTIONARY NOTE TO
This news release uses the terms 'mineral resource', 'measured mineral resource', 'indicated mineral resource' and 'inferred mineral resource' are defined in and required to be disclosed by NI 43-101. However, these terms are not defined terms under Industry Guide 7 and are not permitted to be used in reports and registration statements of
'Inferred mineral resources' have a great amount of uncertainty as to their existence, and great uncertainty as to their economic and legal feasibility. It cannot be assumed that all or any part of an inferred mineral resource will ever be upgraded to a higher category.
Under Canadian rules, estimates of inferred mineral resources may not form the basis of feasibility or pre-feasibility studies, except in rare cases. Investors are cautioned not to assume that all or any part of an inferred mineral resource exists or is economically or legally mineable. Disclosure of 'contained ounces' in a mineral resource is permitted disclosure under Canadian regulations.
In contrast, the Commission only permits U.S. companies to report mineralization that does not constitute 'mineral reserves' by Commission standards as in place tonnage and grade without reference to unit measures. Accordingly, information contained in this news release may not be comparable to similar information made public by U.S. companies subject to the reporting and disclosure requirements under
The Company has included certain non-GAAP measures including 'Co-product cash costs per gold equivalent ounce', 'Co-product cash costs per pound of copper', 'By-product cash costs per gold equivalent ounce', 'Adjusted Earnings or Loss and Adjusted Earnings or Loss per share' to supplement its financial statements, which are presented in accordance with International Financial Reporting Standards ('IFRS'). The term IFRS and generally accepted accounting principles ('GAAP') are used interchangeably throughout this MD&A, except that 2010 financial data is presented in accordance with previous Canadian GAAP.
The Company believes that these measures, together with measures determined in accordance with IFRS, provide investors with an improved ability to evaluate the underlying performance of the Company. Non-GAAP measures do not have any standardized meaning prescribed under IFRS, and therefore they may not be comparable to similar measures employed by other companies. The data is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS.
Gold equivalent ounces assumes gold plus the gold equivalent of silver using a ratio of 50:1.
The Company discloses 'cash costs' because it understands that certain investors use this information to determine the Company's ability to generate earnings and cash flows for use in investing and other activities. The Company believes that conventional measures of performance prepared in accordance with International Financial Reporting Standards ('IFRS') do not fully illustrate the ability of its operating mines to generate cash flows. The measures, as determined under IFRS, are not necessarily indicative of operating profit or cash flows from operations.
Average cash costs figures are calculated in accordance with a standard developed by
Adoption of the standard is voluntary and the cost measures presented herein may not be comparable to other similarly titled measures of other companies. Cash costs include mine site operating costs such as mining, processing, administration, royalties and production taxes, but are exclusive of amortization, reclamation, capital, development and exploration costs. Cash costs are computed both on a co-product, by-product and all-in sustaining basis.
Cash costs per gold equivalent ounce on a by-product basis is calculated by applying zinc and copper net revenue as a credit to the cost of gold production and as such the by-product gold equivalent ounce cash costs are impacted by realized zinc and copper prices. These costs are then divided by gold equivalent ounces produced. Gold equivalent ounces are determined by converting silver production to its gold equivalent using relative gold/silver metal prices at an assumed ratio and adding the converted silver production expressed in gold ounces to the ounces of gold production.
Cash costs on a co-product basis are computed by allocating operating cash costs to metals, mainly gold and copper, based on an estimated or assumed ratio. These costs are then divided by gold equivalent ounces produced and pounds of copper produced to arrive at the average cash costs of production per gold equivalent ounce and per pound of copper, respectively. Production of zinc is not considered a core business of the Company; therefore, the net revenue of zinc is always treated as a credit to the costs of gold production.
All-in sustaining cash costs seeks to represent total sustaining expenditures of producing gold equivalent ounces from current operations, including by-product cash costs, mine sustaining capital expenditures, corporate general and administrative expense excluding stock-based compensation and exploration and evaluation expense. As such, it does not include capital expenditures attributable to projects or mine expansions, exploration and evaluation costs attributable to growth projects, income tax payments, financing costs and dividend payments.
Consequently, this measure is not representative of all of the Company's cash expenditures. In addition, our calculation of all-in sustaining cash costs does not include depletion, depreciation and amortization expense as it does not reflect the impact of expenditures incurred in prior periods. This performance measure has no standard meaning and is intended to provide additional information and should not be considered in isolation or as a substitute for measures prepared in accordance with GAAP.
Cash costs per gold equivalent ounce and per pound of copper are calculated on a weighted average basis.
The measure of cash costs, along with revenue from sales, is considered to be a key indicator of a company's ability to generate operating earnings and cash flow from its mining operations. This data is furnished to provide additional information and is a non-GAAP measure. It should not be considered in isolation as a substitute for measures of performance prepared in accordance with IFRS and is not necessarily indicative of operating costs, operating profit or cash flows presented under IFRS.
ADJUSTED EARNINGS OR LOSS AND ADJUSTED EARNINGS OR LOSS PER SHARE
The Company uses the financial measures 'Adjusted Earnings or Loss' and 'Adjusted Earnings or Loss per share' to supplement information in its consolidated financial statements. The Company believes that in addition to conventional measures prepared in accordance with IFRS, the Company and certain investors and analysts use this information to evaluate the Company's performance. The presentation of adjusted measures are not meant to be a substitute for net earnings or loss or net earnings or loss per share presented in accordance with IFRS, but rather should be evaluated in conjunction with such IFRS measures.
Adjusted Earnings or Loss and Adjusted Earnings or Loss per share are calculated as net earnings excluding (a) share-based payments and other compensation, (b) unrealized foreign exchange (gains) losses related to revaluation of deferred income tax asset and liability on non-monetary items, (c) unrealized foreign exchange (gains) losses related to other items, (d) unrealized (gains) losses on commodity derivatives, (e) impairment losses and reversals, (f) deferred income tax expense (recovery) on the translation of foreign currency inter-corporate debt, (g) mark-to-market (gains) losses on share-purchase warrants, (h) write-down of investments and other assets and any other non-recurring adjustments.
Non-recurring adjustments from unusual events or circumstances are reviewed from time to time based on materiality and the nature of the event or circumstance. Earnings adjustments for the comparative period reflect both continuing and discontinued operations.
The terms 'Adjusted Earnings (Loss)' and 'Adjusted Earnings (Loss) per share' do not have a standardized meaning prescribed by IFRS, and therefore the Company's definitions are unlikely to be comparable to similar measures presented by other companies. Management believes that the presentation of Adjusted Earnings or Loss and Adjusted Earnings or Loss per share provide useful information to investors because they exclude non-cash and other charges and are a better indication of the Company's profitability from operations.
The items excluded from the computation of Adjusted Earnings or Loss and Adjusted Earnings or Loss per share, which are otherwise included in the determination of net earnings or loss and net earnings or loss per share prepared in accordance with IFRS, are items that the Company does not consider to be meaningful in evaluating the Company's past financial performance or the future prospects and may hinder a comparison of its period-to-period profitability.
Reconciliations of Adjusted Earnings to net earnings are provided in the Company's MD&A Section 5 'Overview of Annual Results' and Section 6 'Overview of Quarterly Results' for both the yearly and quarterly reconciliations, respectively, found on the Company's website at www.yamana.com.
The Company uses other financial measures the presentation of which is not meant to be a substitute for other subtotals or totals presented in accordance with IFRS, but rather should be evaluated in conjunction with such IFRS measures. The following other financial measures are used:
Gross margin - represents the amount of revenues in excess of cost of sales excluding depletion, depreciation and amortization.
Mine operating earnings - represents the amount of revenues in excess of cost of sales excluding depletion, depreciation and amortization and depletion, depreciation and amortization.
Operating earnings - represents the amount of earnings before net finance income/expense and income tax expense.
Cash flows generated from operations before changes in non-cash working capital - excludes the non-cash movement from period-to-period in working capital items including accounts receivable, advances and deposits, inventory, accounts payable and accrued liabilities. Cash flows generated from operations before changes in non-cash working capital per share is calculated by dividing the cash flows generated from operations before changes in non-cash working capital, as reported in the consolidated statement of cash flows, by the basic weighted average number of common shares outstanding of the corresponding period.
The terms described above do not have a standardized meaning prescribed by IFRS, and therefore the Company's definitions are unlikely to be comparable to similar measures presented by other companies.
The Company's management believes that their presentation provides useful information to investors because gross margin excludes the non-cash operating cost item (i.e. depreciation, depletion and amortization), Cash flows generated from operations before changes in non-cash working capital excludes the non-cash movement in working capital items, mine operating earnings excludes expenses not directly associate with commercial production and operating earnings excludes finance and tax related expenses and income/recoveries.
These, in management's view, provide useful information of the Company's cash flows from operations and are considered to be meaningful in evaluating the Company's past financial performance or the future prospects.
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