TORONTO, ON — (Marketwired) — 11/10/16 —
This release does not constitute management’s discussion and analysis (“MD&A”) as contemplated by applicable securities laws and should be read in conjunction with the MD&A and the Company’s condensed interim consolidated financial statements for the three and nine months ended September 30, 2016, which are available on SEDAR at www.sedar.com and on the Company’s website. Unless otherwise noted, references herein to “$” are to thousands of United States dollar. References to “C$” are to thousands of Canadian dollar. Tables are expressed in thousands of United States dollar, except where otherwise noted.
- Income of $734 or $0.01 per share for the three months ended (“three months ended” or “the third quarter of”) September 30, 2016 compared to income of $4,837 or $0.02 per share for the third quarter of 2015;
- Effective cash operating income1 of $2,288 or $74 per ounce (“oz”) of gold sold for the third quarter of 2016 compared to an income of $1,547 or $41 per oz of gold sold for the third quarter of 2015;
- Net sales revenue in the third quarter of 2016 decreased by 3% over the third quarter of 2015. Details are as follows:
|For the three months ended September 30, 2016||For the three months ended September 30, 2016||For the nine months ended September 30, 2016||For the nine months ended September 30, 2015|
|San Andres, ounces (“oz”)||18,946||21,740||55,105||65,191|
|Sao Francisco, oz||12,195||16,203||37,669||44,136|
|Total ounces sold||31,141||37,943||92,774||109,327|
|Realized average gold price per oz – gross||$||1,334||$||1,128||$||1,250||$||1,179|
|Realized average gold price per oz – net1||$||1,148||$||1,010||$||1,085||$||1,060|
|Gold sales revenues, net of local sales taxes||$||40,016||$||41,349||$||111,881||$||124,311|
|Copper concentrate sales, net||$||–||$||(130||)||$||–||$||3,745|
|Total net sales||$||40,016||$||41,219||$||111,881||$||128,056|
- The realized average gold price per oz – gross and the realized average gold price per oz – net1 for the three months ended September 30, 2016 and 2015 in the above table compare to the average market prices (London PM Fix) of $1,335 per oz and $1,124 per oz, respectively. There were no copper concentrate sales for the third quarter of 2015, only revaluations of unsettled shipments;
- Gold production for the third quarter of 2016 was 8% lower than in the third quarter of 2015. Gold production and cash costs1 for the three and nine months ended September 30, 2016 and 2015 were as follows:
|For the three months ended September 30, 2016||For the three months ended September 30, 2015|
|Oz Produced||Cash Costs1||Oz Produced||Cash Costs1|
|Total / Average||33,456||$||881||36,200||$||842|
| For the nine months ended
September 30, 2016
|For the nine months ended September 30, 2015|
|Oz Produced||Cash Costs1||Oz Produced||Cash Costs1|
|Total / Average||93,615||$||871||107,764||$||906|
- Gross margin of $11,291 for the third quarter of 2016, compared to a gross margin of $4,922 for the third quarter of 2015;
- On June 23, 2016, the Company completed the acquisition of the
EPP Project. The Company has also published a NI 43-101 technical report on the EPP Project; and
- On September 30, 2016, the Company closed a rights offering of 36,346,284 common shares at C$0.15 per common share for gross proceeds of $4,162 (C$5,451).
Jim Bannantine, the Company’s President and CEO commented, “We are happy to report a good quarter of production and costs for
Revenues and Cost of Goods Sold
Gold sales revenues for the three months ended September 30, 2016 decreased by 3% compared to the three months ended September 30, 2015. The decrease in gold sales revenues is primarily attributable to an 18% decrease in gold sales volumes. The decrease in gold sales volumes is mainly due to lower production at Sao Francisco as the mine reaches the end of its mine life.
There was no copper concentrate sold during the third quarter of 2016 and 2015, only revaluation of unsettled shipments.
For the three months ended September 30, 2016 and 2015, total cost of goods sold from San Andres was $17,338 or $915 per oz compared to $20,765 or $955 per oz, respectively. For the three months ended September 30, 2016 and 2015, cash operating costs were $800 per oz and $903 per oz, respectively, while non-cash depletion and amortization charges were $115 per oz and $52 per oz, respectively. There were no write-downs of production inventory to net realizable value for the three months ended September 30, 2016 and 2015.
At Sao Francisco, for the three months ended September 30, 2016 and 2015, total cost of goods sold was $11,387 or $934 per oz compared to $15,145 or $935 per oz, respectively. For the three months ended September 30, 2016 and 2015, cash operating costs were $933 per oz and $927 per oz, respectively, while non-cash depletion and amortization charges were $1 per oz and $8 per oz, respectively. There were no write downs included in the cash operating costs for the three months ended September 30, 2016 to bring production inventory to net realizable value. (2015: cash operating costs included write downs of $114 or $7 per oz).
Additional financial highlights
For the three months ended September 30, 2016 and 2015, care-and-maintenance expenses were $4,420 and $332, respectively.
For the three months ended September 30, 2016 and 2015, general and administrative costs were $2,279 and $1,675, respectively. Salaries, wages and benefits decreased as a result of lower head count at the corporate office. Penalties on overdue taxes of $560 and $448 have been accrued in Honduras and Brazil, respectively, as a result of tax assessments. The Company is challenging the assessment in Honduras
For the three months ended September 30, 2016 and 2015, other losses were $441 and other gains were $2,132, respectively. For the third quarter of 2016, the loss is primarily related to a higher realized and unrealized losses on call options and fixed price contracts, higher revaluation loss in the fair value of the third gold loan as a result of the overall increase in the gold price and a stronger Brazilian Real against the USD resulting in higher foreign exchange losses. Other items increased significantly during the third quarter of 2016, due to an accrued interest income on tax credit of $1,184 related to Brazil.
Total finance costs for the three months ended September 30, 2016 and 2015 were $658 and $1,281, respectively. The decrease in finance costs is mainly driven by lower accretion and interest expenses.
The income tax expense for the three months ended September 30, 2016 was $2,519 consisting of $1,537 of current income tax expense and $356 of deferred tax expense related to San Andres and $626 of current income tax expense related to Sao Francisco. The income tax recovery for the three months ended September 30, 2015 was $1,303 consisting of $1,506 in current income tax recovery and $203 in deferred tax expense, related to San Andres.
Acquisition of the
On April 30, 2015, the Company announced that it entered into an Acquisition Agreement with Serra da Borda Mineração e
The acquisition was completed on June 23, 2016, following the receipt of the relevant regulatory approvals in Brazil including both antitrust and national defense regulatory requirements.
As consideration for the
The Working Capital Facility was assumed by the Company on the accounting acquisition date, which coincided with the receipt of the relevant regulatory approvals in Brazil, and is expected to be repaid either with the cash flows from EPP upon restart or payable in full within 36 months from the date of the Acquisition Agreement. Should EPP not enter into production or the Company not have sufficient funds to repay the Working Capital Facility on the due date, such amount outstanding will, at the option of Yamana, be converted into common shares of the Company. The Company also agreed to assume SBMM’s accounts payable and accrued liabilities at the acquisition date as part of the consideration for the
- The Ernesto underground deposit and the Lavrinha open pit are located approximately 60 km south of the Company’s Sao Francisco mine and 12 km south of the town of Pontes-e-Lacerda. These two deposits are within close proximity to the processing plant;
- The Pau-a-Pique underground mine has been on care-and-maintenance since 2013 and is located approximately 40 km south of the Ernesto and Lavrinha deposits and 5 km from the processing plant;
- The three additional areas (Nosde, Japones and Pombinhas) are within 20 km of the processing plant.
The processing plant is centrally located to these deposits and additional areas and has a capacity of 3,000 tonnes per day through a conventional carbon-in-leach process. The facility includes crushing, milling, gold extraction/recovery and a tailings disposal facility with power supplied from the national grid. Significant infrastructure exists around the entire
The Company’s primary technical focus areas for the
The combined Mineral Resource for the
|Measured & Indicated Resource||Tonnes (t)||Au (g/t)||Contained Oz|
|Total Measured & Indicated||2,553,000||3.89||320,000|
|Inferred Resource||Tonnes (t)||Au (g/t)||Contained Oz|
|Contained metal may not sum in the above tables due to rounding|
The Company has filed a NI 43-101 technical report on SEDAR and on the Company’s website.
Outlook and Strategy
Other key factors influencing profitability and operating cash flows are production levels (impacted by grades, ore quantities, labour, plant and equipment availabilities, and process recoveries) and production and processing costs (impacted by production levels, prices and usage of key consumables, labour, inflation, and exchange rates).
| For the nine months ended September 30, 2016 –
| For the year ended
December 31, 2016
|Oz Produced||Cash Costs1||Oz Produced||Cash Costs1|
|San Andres||56,406||$||834||75,000 – 85,000||$||825 – 875|
|Sao Francisco||37,209||928||35,000 – 40,000||800 – 850|
|Total / Average||93,615||$||871||110,000 – 125,000||$||825 – 875|
To the date of this MD&A, the indicators have been that the revised pro-rata production guidance will be achieved at each operating mine.
For the fourth quarter of 2016, updated guidance in other material areas of expenditure is provided as follows;
- Capital expenditure of $4,600. Of this amount, $3,000 relates to San Andres and principally includes the Phase VI heap leach expansion, cemetery relocation, community and other expenditures and $1,600 relates to an acceleration of the restart of the Ernesto mine;
- Care-and-maintenance costs for Aranzazu ($700) and Serrote ($150);
- General and administration costs of $1,600;
- Taxes and royalties payable to local authorities in Brazil and Honduras and to a third party for a 1.5% NSR on Sao Francisco and San Andres of $2,000.
This news release includes certain non-GAAP performance measures, in particular, the average cash cost per oz of gold, average cash cost per pound of copper, effective cash operating income (loss), and realized average gold price per oz – net which are non-GAAP performance measures. These non-GAAP measures do not have any standardized meaning within IFRS and therefore may not be comparable to similar measures presented by other companies. The Company believes that these measures provide investors with additional information which is useful in evaluating the Company’s performance and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS.
Total cash cost of gold produced includes on-site mining, processing, administration costs, off-site refining and royalty charges, reduced by silver by-product credits, but excludes amortization, reclamation, and exploration costs, as well as capital expenditures. Total cash cost of gold produced is divided by oz produced to arrive at cash cost per oz.
Effective cash operating income (loss) is the term the Company uses to describe the cash that is generated from its gold operations, net of corporate costs, local taxes and royalties and adjusted for realized losses from derivative instruments and gold loan repayments. It excludes depletion and amortization, inventory write-downs and impairment charges. Other non-cash items are deemed to be immaterial. Aranzazu’s financial results have been excluded from the quarterly comparative numbers as the project is under care-and-maintenance. Capital expenditure, working capital movements and income taxes paid are also excluded from the calculation of effective cash operating income (loss).
Realized average gold price per oz – net is the term the Company uses to describe the realized revenue per ounce of gold after determining the per oz impact of local taxes and royalties, realized losses from derivative instruments and gold loan repayments.
1 Please see the cautionary note at the end of this news release.
This news release contains certain “forward-looking information” and “forward-looking statements”, as defined in applicable securities laws (collectively, “forward-looking statements”). All statements other than statements of historical fact are forward-looking statements. Forward-looking statements relate to future events or future performance and reflect the Company’s current estimates, predictions, expectations or beliefs regarding future events and include, without limitation, statements with respect to: the amount of mineral reserves and mineral resources; the amount of future production over any period; the amount of waste tonnes mined; the amount of mining and haulage costs; cash costs; operating costs; strip ratios and mining rates; expected grades and ounces of metals and minerals; expected processing recoveries; expected time frames; prices of metals and minerals; mine life; and gold hedge programs. Often, but not always, forward-looking statements may be identified by the use of words such as “expects”, “anticipates”, “plans”, “projects”, “estimates”, “assumes”, “intends”, “strategy”, “goals”, “objectives” or variations thereof or stating that certain actions, events or results “may”, “could”, “would”, “might” or “will” be taken, occur or be achieved, or the negative of any of these terms and similar expressions.
Forward-looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable by the Company, are inherently subject to significant business, economic and competitive uncertainties and contingencies. Forward-looking statements in this news release and related MD&A are based upon, without limitation, the following estimates and assumptions: the presence of and continuity of metals at the Company’s Mines at modeled grades; the capacities of various machinery and equipment; the availability of personnel, machinery and equipment at estimated prices; exchange rates; metals and minerals sales prices; appropriate discount rates; tax rates and royalty rates applicable to the mining operations; cash costs; anticipated mining losses and dilution; metals recovery rates, reasonable contingency requirements; and receipt of regulatory approvals on acceptable terms.
Known and unknown risks, uncertainties and other factors, many of which are beyond the Company’s ability to predict or control could cause actual results to differ materially from those contained in the forward-looking statements. Specific reference is made to the most recent Annual Information Form on file with certain Canadian provincial securities regulatory authorities for a discussion of some of the factors underlying forward-looking statements, which include, without limitation, gold and copper or certain other commodity price volatility, changes in debt and equity markets, the uncertainties involved in interpreting geological data, increases in costs, environmental compliance and changes in environmental legislation and regulation, interest rate and exchange rate fluctuations, general economic conditions and other risks involved in the mineral exploration and development industry. Readers are cautioned that the foregoing list of factors is not exhaustive of the factors that may affect the forward-looking statements.
All forward-looking statements herein are qualified by this cautionary statement. Accordingly, readers should not place undue reliance on forward-looking statements. The Company undertakes no obligation to update publicly or otherwise revise any forward-looking statements whether as a result of new information or future events or otherwise, except as may be required by law. If the Company does update one or more forward-looking statements, no inference should be drawn that it will make additional updates with respect to those or other forward-looking statements.
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