Yamana Gold Reports Profit, Sells Mercedes Mine To Premier Gold Mines
(Kitco News) – Yamana Gold Inc. (TSX: YRI; NYSE: AUY) reported late Thursday that the company returned to second-quarter profitability as production and prices rose.
Officials also said Yamana has agreed to sell the Mercedes mine in Mexico to Premier Gold Mines and has decided to recommission the C1 Santa Luz project in Brazil.
Net earnings in the second quarter were $32.9 million, or 3 cents per share, a turnaround from a net loss of $7 million, or a penny, for the same three months in 2015.
Adjusted earnings from continuing operations were $5.4 million, or a penny per share. By contrast, the company posted an adjusted loss of $8.3 million, or penny per share, for the same period of 2015.
Second-quarter gold production was 313,086 ounces, up 7% from 293,707 ounces in the second quarter of 2015. Year-on-year increases at mines included 36% at Jacobina, 19% at Mercedes, 7% at Gualcamayo, 6% at Canadian Malartic, 7% at Pilar and 21% at Fazenda Brasileiro, plus 13,058 ounces from recently acquired Riacho dos Machados. These were partly offset by decreases at Chapada of 43% and Minera Florida of 8%.
Yamana Gold (NYSE: AUY) – Delayed Quote
Silver output fell to 1.8 million ounces in the April-June period from 2.4 million a year ago, although this was in line with expectations. “Mine sequencing at certain locations continues to extract from areas with lower silver grades,” the company said.
Copper production in the second quarter fell to 23.2 million pounds from 33.6 million a year ago, which the company blamed on poor weather conditions and the unplanned shutdown of the primary gyratory crusher at Chapada.
All-in sustaining costs rose to $964 per ounce of gold from $860 in the year-ago period. On a co-product basis, AISC were $949 per ounce of gold for the second quarter, compared to $941 a year ago. Cash costs were impacted by the troubles at Chapada and foreign-exchange rates, particularly strengthening of the Brazilian real, Canadian dollar and Chilean peso, Yamana said. The company revised its consolidated co-product AISC for 2016 to $880 to $920 an ounce, compared to $868 for 2015.
Meanwhile, the average realized price of gold for the quarter was $1,267 per ounce, up 6% from $1,195 a year ago. The average realized silver price was $16.82 per ounce, up 3% from $16.28. The average copper price fell 23% to $2.12 a pound from $2.75.
Yamana declared a third-quarter dividend of $0.005 per share, with shareholders of record at the close of business on Sept. 30, 2016 entitled to payment on Oct. 14.
“The company continues to focus on operational execution, namely tracking or exceeding operational guidance, as it advances efforts to create further value within its portfolio including the ramp-up of RDM towards expected steady-state production in early 2017, and development of C1 Santa Luz towards production in 2018 and Cerro Moro earlier that year,” Yamana said in its earnings statement. “The company is targeting continuous production growth, and will continue to evaluate opportunities for optimizations and other operational improvements across its portfolio to further increase its production profile.”
The company said it is on track to meet gold and silver production guidance for the year and expects second-half output to be higher than in the first half.
Yamana also said it aims to reduce net debt by at least $300 million by the end of 2017. The company said it expects to do this through “organic generation of cash flow from the growing production profile in the second half of the year, underpinned by higher prevailing gold prices.” Net free cash flow increased 68% year-on-year in the second quarter, Yamana said.
Yamana Gold Announces Sale Of Mercedes Mine
Yamana said it has agreed to sell its interest in the Mercedes mine in Mexico to Premier Gold Mines (TSX: PG) for consideration, in the form of cash and equity securities, valued at $140 million at the time of negotiations.
The deal includes cash of of $122.5 million, approximately 6 million Premier shares, and approximately 3 million Premier share purchase warrants exercisable at C$4.75 per for two years from closing of the transaction.
“The company expects to use the proceeds from the transaction to to reduce the company’s net debt position,” Yamana said.
The deal also calls for Yamana to receive a 1% net smelter return, payable either after six years or once cumulative production from the mine hits 450,000 gold-equivalent ounces, officials said.
Recommissioning of the C1 Santa Luz project in Brazil will help the company replace production from Mercedes beginning in 2018, Yamana said. C1 Santa Luz has proven and probable mineral reserves of 1.2 million ounces of gold. The mine life is forecast at 10 years with average annual production of 114,000 ounces of gold over the first seven years, including over 130,000 ounces in the first full year, Yamana said.
By Allen Sykora of Kitco News; asykora@kitco.com