Growth - Value - Vision
Brazil, Argentina, Chile, Mexico - Yamana is targeting sustainable gold production of 2.2 M oz of gold by 2012.
Message: 3Q Results/4Q Guidance/Conference Call Info
| November 4, 2008 | |||
| Yamana Gold Reports Third Quarter 2008 Results | |||
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TORONTO, ONTARIO--(Marketwire - Nov. 4, 2008) - YAMANA GOLD INC. (TSX:YRI)(NYSE:AUY)(LSE:YAU) today announced its financial and operating results for the third quarter ended September 30, 2008. All dollar amounts are expressed in United States Dollars unless otherwise specified. FINANCIAL AND OPERATING HIGHLIGHTS Highlights for the three- and nine-month periods ended September 30, 2008 include: - Total revenue of $247.5 million and $940.5 million respectively. - Mine operating earnings of $44.4 million (after a non-recurring mark-to-market adjustment and inventory adjustment) and $414.6 million respectively. - Net earnings of $150.2 million, or $0.21 per share, and $255.4 million, or $0.37 per share respectively. - Cash flow from operations of $100.2 million, or $0.14 per share, and $414.3 million, or $0.60 per share respectively, before changes in non-cash working capital. - Adjusted earnings of $31.5 million, or $0.05 per share, and $257.9 million, or $0.38 per share respectively. - Total production of 235,406 gold equivalent ounces (GEO) and 728,124 GEO respectively. - Average cash costs after by-product credits of $140 per GEO and $(40) per GEO respectively. - Copper production of 44.4 million pounds and 130.2 million pounds respectively. Highlights subsequent to the quarter include: - Further mitigated currency exposure in Brazil with additional hedging of approximately 191.2 million Reais at an average of approximately 2.4 Reais to the United States Dollar for the next two years. - Strengthened cash position through the sale of Yamana's 40 per cent joint venture interest in the Rossi Mine in Nevada for total consideration of $29.2 million. The interest was non-core and sold to Barrick Gold which was the majority owner and operator of the mine. - Realized significant value in the Company's copper hedge program by monetizing a portion of its longer-term contracts. "The global economy is currently experiencing one of the most unsettled times in recent history. With the severe correction in the capital markets, and illiquidity in the credit markets, a sociopolitical and economic shift of incredible proportions is taking place," said Peter Marrone, Chairman and CEO of Yamana Gold. "In the context of this environment, successful companies will be the ones that are able to maintain flexibility, continue to generate cash flow, preserve capital and maximize cash balances. At Yamana, our goal has consistently been to complement sustainable production growth with increases in cash flow, always with an eye toward preservation of cash. We remain committed to maintaining and increasing our already robust cash reserves by increasing cash flow, containing costs, mitigating expansionary capital where appropriate and divesting non-core assets. The recent sale of our minority interest in the Rossi mine highlights Yamana's ongoing commitment to maximizing our cash position and concentrating on our core assets. Equally, the value of our copper hedges represents, subsequent to quarter end, the significant embedded value in other assets. We are well positioned with cash, cash equivalents, and growth, both in production and cash flow, and other valuable assets." "Finally, the quarter just ended represents, in our view, the high water mark for costs in our industry and improvements in costs should begin to show as this year comes to an end," Mr. Marrone continued. "We are beginning to see significant decline in the cost of fuel, with oil at current levels, consumables and other products. The appreciation of the United States Dollar against local currencies, particularly the currencies in Brazil (approximately 26 per cent from the third quarter) and Chile (up 30 per cent from the third quarter), should further assist our cost structure." Financial and Operating Summary Revenue for the three-month period ended September 30, 2008 was $247.5 million and for the nine-month period was $940.5 million, representing a 78 per cent increase from the comparative nine-month period last year. Mine operating earnings for the three-month period ended September, 30 2008 were $44.4 million (accounting for a non-recurring mark-to-market adjustment and inventory adjustment) and for the nine-month period were $414.6 million, representing a 35 per cent increase from the comparative nine-month period last year. Net earnings for the three-month period ended September 30, 2008 were $150.2 million, or $0.21 per share, and for the nine-month period were $255.4 million, or $0.37 per share, representing a 132 per cent increase from the comparative nine-month period total last year. Cash flow from operations, before changes in non-cash working capital items, for the three-month period ended September 30, 2008 was $100.2 million, or $0.14 per share, and for the nine-month period was $414.3 million, or $0.60 per share, representing a 51 per cent increase from the comparative nine-month period total last year. Adjusted earnings for the three-month period ended September 30, 2008 were $31.5 million, or $0.05 per share, and for the nine-month period were $257.9 million, or $0.38 per share, representing a 38 per cent increase from the comparative nine-month period total last year. Adjusted earnings take into account only the gain or loss actually realized on the copper hedge program in the period. Certain non-recurring items for the quarter are not included in adjusted earnings such as unrealized exchange gains and losses and similar changes. Total production for the three-month period ended September 30, 2008 was 235,406 GEO representing a 77 per cent increase from the third quarter last year. Total production for the nine-month period was 728,124, representing a 98 per cent increase from the comparative period last year. In addition, copper production for the three-month period ended September 30, 2008 was 44.4 million pounds, representing a 33 per cent increase from the third quarter last year. Copper production for the nine-month period was 130.2 million pounds, representing a 41 per cent increase from the comparative period last year. By-product cash costs for the third quarter of 2008 were $140 per GEO, compared to $(339) per GEO in the third quarter last year. By-product cash costs for the nine months ended were $(40) per GEO, compared to $(292) per GEO for the comparative period last year. Co-product cash costs for the third quarter of 2008 were $454 per GEO, compared to $332 per GEO for the previous quarter and $322 per GEO in the third quarter last year. Co-product cash costs for the nine months ended were $385 per GEO, compared to $317 per GEO for the comparative period last year. Overview of Financial Results The following table presents a summary of financial information for the three and nine months ended September 30, 2008: Three months Nine months
ended ended
September 30, September 30,
(in thousands of dollars) 2008 2008
--------------------------------
Revenues $ 247,465 $ 940,463
Cost of sales (159,749) (379,635)
Depreciation, amortization and depletion (42,357) (142,708)
Accretion of asset retirement obligations (989) (3,560)
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Mine operating earnings 44,370 414,560
Expenses
General and administrative and
other expenses (18,020) (57,650)
Other losses (6,785) (17,871)
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Operating earnings 19,565 339,039
Foreign exchange gain 45,100 2,728
Realized loss on commodity derivatives (23,671) (66,437)
Unrealized gain on commodity derivatives 138,930 36,451
Other business and interest expense (40,108) (61,703)
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Earnings before income taxes
and equity earnings 139,816 250,078
Income tax provision 9,146 (26,427)
Equity earnings from Minera Alumbrera 1,237 31,756
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Net earnings $ 150,199 $ 255,407
Basic earnings per share $ 0.21 $ 0.37
Earnings Adjustments:
Stock-based compensation - 2,570
Foreign exchange (gain) loss (45,100) (2,728)
Unrealized (gain) loss on derivatives (138,930) (36,451)
Write-off of investments 22,723 22,723
Write-off of inventory 11,063 11,063
Future income tax expense on foreign
currency translation of inter corporate debt (33,387) (12,963)
Mark-to-market on unsettled concentrate sales 38,381 19,511
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Adjusted Earnings before income
tax effects 4,949 259,132
Income tax effect of adjustments
on earnings 26,553 (1,201)
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Adjusted Earnings $ 31,502 $ 257,931
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Adjusted Earnings per share $ 0.05 $ 0.38
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Cash flow from operating activities
(before changes in non-cash working
capital items) $ 100,200 $ 414,335
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Capital expenditures $ 141,298 $ 416,739
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Cash and cash equivalents (end of period) $ 125,636 $ 125,636
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Average realized gold price per ounce $ 861 $ 895
Average realized silver price per ounce $ 14.56 $ 16.59
Chapada average realized copper
price per lb $ 3.45 $ 3.64
Gold sales (ounces) 173,342 553,692
Silver sales (millions of ounces) 2.4 7.6
Chapada payable copper contained in
concentrate sales (millions of lbs) 33.4 101.8
OUTLOOK The global economy is currently experiencing one of the most unsettled times in recent history which has had an impact on many companies including those in the mining sector. In accommodating these impacts, Yamana intends to continue to maintain flexibility, generate cash flow, preserve capital and maximize cash balances. Yamana's approach to delivering value to shareholders is to focus on prudent and disciplined growth, taking the time to properly develop assets, ensuring effective management of capital expenditures, generating cash flow, preserving capital, maximizing cash balances and maintaining maximum flexibility with assets. The Company remains committed to maintaining and increasing cash reserves by increasing cash flow, containing costs, mitigating expansionary capital where appropriate and divesting non-core assets. The Company expects improvements in costs as the cost of consumables, fuel and other products continue to decline significantly. Also, the improved cost structure due to recent favourable movements in local currencies, particularly the currencies in Brazil and Chile, should further assist costs. Yamana's operating mines are primarily located in countries whose currencies have recently experienced significant volatility against the United States Dollar. The Brazilian Real has improved from levels as low as 1.56 Reais to the United States Dollar in mid-2008. Similarly, the Chilean Peso has improved from levels as low as 429 Pesos per United States Dollar in mid-2008. Prior to these recent favourable currency movements, significant local currency appreciation has had a substantial adverse impact on the Company's operating costs as reported in United States Dollars in prior quarters. In the second quarter of 2008, the Real averaged 1.66, and in the third quarter averaged 1.67. In the second quarter of 2008, the Peso averaged 470 and in the third quarter averaged 516. However, the trend appears to have reversed and since the third quarter 2008, the United States Dollar has appreciated against the Brazilian Real and the Chilean Peso by approximately 26 per cent and 30 per cent, respectively, to levels of 2.1 Reais to the United States Dollar and 670 Pesos per United States Dollar. The devaluation of the Real and Peso, combined with the currency hedges at levels in Brazil above current levels, along with recent and expected continuation of lower input costs (including steel, fuel, contracted services, overseas and overland freight and transport), are expected to improve Yamana's cost structure going forward. In an effort to reduce volatility in cost structures due to fluctuating currency exchange rates, Yamana has hedged approximately 70 per cent of its operating currency exposure at four of its mines in Brazil. A total of approximately 435.9 Reais is now hedged for the next 2.5 years at an average rate of approximately 2.3 Reais to the United States Dollar. In Chile, given the strong correlation between the Chilean Peso and copper prices, a weakening in the currency serves as a natural hedge to declining copper prices. Any decrease in copper margins for the Company's unhedged copper due to lower copper prices is significantly offset by the expected margin improvements related to its gold and silver production in Chile due to a weaker Peso. In 2009, approximately 35 per cent of Yamana's gold production will be from mines in Chile. Quarter over quarter, Yamana's copper hedges may be represented as either a liability or an asset based on the level of copper prices at that time versus hedged copper prices. In either case, the liability or value of the asset remains unrealized and is reflected only as a mark-to-market adjustment in financial results. Yamana's copper hedges represented a liability up until the end of the third quarter, and then became an asset with a significant value of over $100 million as copper prices declined after quarter-end. Yamana took the opportunity to monetize the longer-term portion of that asset and realized proceeds of approximately $47 million, further strengthening the Company's cash position, while maintaining the majority of its shorter-term contracts. Further, on a quarterly basis, the Company may be impacted by provisional accounting as final pricing for concentrate sales is calculated two or three months after shipment. This causes a delay in the impact of price movements for copper and gold concentrate sold in the following quarter. This impact from the provisional accounting on unsettled invoices may create variability in receivables and cash flow, quarter over quarter, however this tends to become normalized over the course of a longer period. The Company is impacted from time to time by these mark-to-market gains (or losses) from its copper hedge program, although this is a non-cash item, and does not impact, positively or negatively, the operating profit of the Company. Total cash on hand as of present date exceeds $200 million and is supplemented by marketable assets with significant additional cash value along with cash flow from operations. The Company is well positioned financially. Yamana's production plan is focused on organic growth targeting more than 1.4 million GEO in 2009, approximately 1.5 million GEO in 2010, approximately 1.6 million GEO in 2011 and more than 2.0 million GEO in 2012. Production targets are based on existing reserves and resources and proposed increases at projects now being evaluated. As the Company matures its projects, increases its reserves and resources and continues with feasibility work, the Company will upgrade its production plan into a more formalized mine plan for each project under evaluation. FOURTH QUARTER 2008 GUIDANCE The expected production increases in the fourth quarter of 2008 and in 2009 is largely driven by Gualcamayo, El Penon, Minera Florida, and Chapada. Gualcamayo is expected to commence production by year end. At El Penon, Yamana plans to be mining at an annualized level of 500,000 GEO by the end of 2008. The company plans to create a stockpile of ore at El Penon and produce in the range of 460,000 to 480,000 GEO in 2009. Minera Florida is also on track to complete its expansion by the end of 2008. At Chapada, production in the fourth quarter is expected to exceed each of the first three quarters of quarterly production. UPCOMING EVENTS --------------------------------------------------------------------------- Event Expected Date --------------------------------------------------------------------------- Ongoing drill programs at Mercedes and El Penon Throughout 2008 Production commences at Gualcamayo Late 2008 Begin operations at Sao Vicente Late 2008 Completion of Phase Two expansion at Jacobina Late 2008 Complete Minera Florida expansion Late 2008 Complete throughput increases at El Penon Late 2008 Gualcamayo feasibility level study update (QDD Lower West) Late 2008 Feasibility level study for Mercedes Late 2008 Complete feasibility level study for Chapada expansion By late 2008 Complete scoping study for El Penon mine and plant expansion By late 2008 --------------------------------------------------------------------------- A conference call and audio webcast is scheduled for November 5, 2008 at 11:00 a.m. EST to discuss 2008 third quarter results. Conference Call Information: ---------------------------- Local and Toll Free (North America): 866-898-9626 International: +1-416-340-2216 Participant Audio Webcast: www.yamana.com Conference Call REPLAY: ----------------------- Toll Free Replay Call: 800-408-3053 Passcode 3272539# Replay Call: +1 416-695-5800 Passcode 3272539# Presentation Slides Presentation slides will be available 30 minutes prior to the call and can be found on Yamana's website at www.yamana.com. For further information on the conference call or audio webcast, please contact the Investor Relations Department or visit our website, www.yamana.com. |
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