Yamana
Gold Announces Second Quarter 2011 Results - Records Achieved in Revenue, Cash
Flow and Earnings
Based on IFRS and in United
States dollars unless otherwise specified)
TORONTO, Aug. 3, 2011 /CNW/
- YAMANA GOLD INC. (TSX: YRI) (NYSE:
AUY) (LSE: YAU) ("Yamana" or "the Company") today announced
its financial and operating results for the second quarter of 2011.
HIGHLIGHTS FOR THE SECOND QUARTER 20Mercedes of approximately $16 million11
·
Production
of 278,737 gold equivalent ounces (GEO)(1) at cash costs of negative $80
per GEO(2)(3)
·
o Gold
production of 232,138 ounces
o
o Silver
production of 2.3 million ounces
o
o Generated cash margin of $1,589 per
ounce(4)
o
·
Mercedes
is expected to commence production by year-end, ahead of the original plan for
mid-year 2012
·
·
Significant
financial and operational increases over the second quarter of 2010
·
o Production
increased 10% to 278,737 GEO
o
o Record
revenue increased 63% to $573.3 million
o
o Record net earnings increased 178% to $194.7
million, $0.26 per share
o
o Record adjusted earnings(2) increased 122%
to $186.2 million, $0.25 per share
o
o Record cash flow generated from operations(2)(5) increased
70% to $331.0 million, $0.44 per share
o
·
Cash
and cash equivalents at June 30, 2011 were $520.9 million,
a $60 million increase from the end of the first quarter of 2011
·
1. Gold equivalent ounces (GEO) includes silver production at a ratio of 50:1.
2.
3. Refers to a non-GAAP measure. Reconciliations can be
found at the end of this press release.
4.
5. Cash costs are shown on a by-product basis including
Alumbrera unless otherwise noted.
6.
7. Cash margin is the difference between the average
realized gold price received less by-product cash
costs per GEO.
8.
9. Cash flow from operations before changes in non-cash
working capital.
10.
"Our second quarter results continue to
demonstrate our focus and commitment to increased reliability and continuous
improvement in our operational and financial results," commented Peter
Marrone, Chairman and CEO. "Our operational successes resulted in
records in revenue, cash flow and earnings both on an absolute basis and on a
per share basis. This allowed us to increase our dividend in the quarter by
50%."
"In addition, we are ahead of schedule on delivering
production growth, with Mercedes expecting its first gold pour before year-end
and all of our other construction projects are on track. We continue to expect
to deliver over 60% production growth over four years taking our sustainable
production level to 1.7 million ounces in 2014."
KEY
STATISTICS
|
|
|
|
Three
months ended
June 30,
|
Six
months ended
June 30,
|
|
In millions of US dollars except where noted
|
2011
|
2010
|
2011
|
2010
|
|
Revenues
|
$573.3
|
$351.4
|
$1049.4
|
$697.7
|
|
Cost of sales excluding depletion, depreciation and
amortization
|
191.8
|
135.7
|
348.9
|
280.8
|
|
Depletion, depreciation and
amortization
|
89.0
|
68.7
|
169.5
|
138.8
|
|
General and administrative
expenses
|
34.1
|
29.3
|
61.6
|
54.6
|
|
Exploration expenses
|
9.1
|
10.7
|
15.6
|
17.5
|
|
Operating Earnings
|
254.7
|
110.2
|
467.3
|
221.2
|
|
Equity earnings from
Alumbrera
|
16.6
|
7.8
|
28.3
|
19.5
|
|
Adjusted earnings
|
186.2
|
84.0
|
338.4
|
160.0
|
|
Adjusted earnings per share
|
0.25
|
0.12
|
0.46
|
0.22
|
|
Cash flow generated from operations after changes in
working capital
|
315.8
|
127.2
|
544.7
|
268.5
|
|
Per share
|
0.42
|
0.17
|
0.73
|
0.36
|
|
Cash flow generated from operations before changes
in working capital
|
331.0
|
194.3
|
615.4
|
358.8
|
|
Per share
|
0.44
|
0.26
|
0.83
|
0.49
|
|
Average realized gold price per ounce
|
$1,509
|
$1,201
|
$1,450
|
$1,157
|
|
Average realized silver price per ounce
|
$37.76
|
$18.45
|
$35.78
|
$17.74
|
|
Average realized copper price per pound
|
$4.22
|
$3.07
|
$4.25
|
$3.16
|
PRODUCTION SUMMARY
FINANCIAL AND OPERATING
SUMMARY
|
|
Three
months ended
June 30,
|
Six
months ended
June 30,
|
|
|
2011
|
|
2010
|
|
2011
|
|
2010
|
|
Total gold equivalent ounces - produced
|
|
278,737
|
|
253,264
|
|
546,105
|
|
493,100
|
|
Gold produced
|
|
232,138
|
|
208,399
|
|
453,627
|
|
399,062
|
|
Silver produced (millions of ounces)
|
|
2,329,964
|
|
2,467,629
|
|
4,623,898
|
|
5,172,069
|
|
Total gold equivalent ounces - sold (excl. Alumbrera)
|
|
261,926
|
|
233,413
|
|
516,014
|
|
470,192
|
|
Total copper produced - Chapada (millions of pounds)
|
|
40.8
|
|
37.0
|
|
79.2
|
|
66.7
|
|
Total copper sold - Chapada (millions of pounds)
|
|
41.6
|
|
31.6
|
|
71.3
|
|
60.7
|
|
|
|
|
|
|
|
|
|
|
|
Co-product cash costs per gold equivalent ounce
|
$
|
451
|
$
|
434
|
$
|
450
|
$
|
429
|
|
Cash cost per pound of copper - Chapada
|
$
|
1.32
|
$
|
1.13
|
$
|
1.26
|
$
|
1.18
|
|
By-product cash costs per gold equivalent ounce
|
$
|
(80)
|
$
|
103
|
$
|
(34)
|
$
|
95
|
Revenues were $573.3 million in the
second quarter on the sale of 220,376 ounces of gold excluding Alumbrera, 2.1
million ounces of silver, and 41.6 million pounds of copper excluding Alumbrera
compared with $351.4 million in the same quarter of 2010 on the
sale of 186,921 ounces of gold excluding Alumbrera, 2.6 million ounces of
silver and 31.6 million pounds of copper excluding Alumbrera.
Record adjusted earnings were $186.2 million,
an increase of 122%, or $0.25 per share in the second quarter of
2011 compared with adjusted earnings of $84.0 million or $0.12
per share in the same quarter of 2010.
Record net earnings for the quarter were $194.7
million, an increase of 178%, compared with net earnings of $70.1
million for the second quarter of 2010, which included earnings from
discontinued operations of $6.5 million. Earnings per share
increased 189% to $0.26 on a basic and diluted basis for the
second quarter of 2011, compared with basic and diluted earnings per share of $0.09
for the same quarter in 2010.
Cash flow generated from operations before changes in
working capital was $331.0 or $0.44 per share
compared with $194.3 million or $0.26 per share
for the second quarter of 2010, which reflects certain reclassifications made
under IFRS.
The increase in cash flows generated from operations
was primarily due to strong cost constraint, an increase in gold, silver and
copper volume and prices generating higher sales revenues and favourable final
pricing adjustments on copper in concentrate shipments.
The Company is well positioned to meet its financial
obligations. Cash and cash equivalents as at June 30, 2011 were $520.9
million, representing an increase of $190.4 million
since December 31, 2010, as a result of increased cash flows
from operating activities. A total of $25 million of debt
repayments were made during the quarter.
In the three months ended June 30, 2011,
production of GEO totaled 278,737 GEO compared with 253,264 GEO in 2010,
representing a quarter-over-quarter increase of 10%.
In the second quarter of 2011, copper production of
40.8 million pounds from the Chapada mine increased by 10% over production of
37.0 million pounds in the three months ended June 30, 2010. Tonnage of copper concentrate production at Chapada also increased
by 9.9% over the second quarter of 2010. Additionally, 9.3 million
pounds of copper produced from Alumbrera were attributable to the Company in
the second quarter of 2011, the same as the amount produced in the quarter
ended June 30, 2010.
For the quarter, by-product cash costs including
Alumbrera were negative
$80 per GEO and excluding Alumbrera were negative $2
per GEO compared with positive
$103 per GEO and positive
$201 per GEO, respectively, in the second quarter of 2010. By-product
cash costs take into account the natural hedge of by-product metal prices for
the Company's production cost structure. By-product credits inherently offset
unusually high mining inflation during periods of high metal prices. The
Company believes that by-product cash costs are a better representation of its
cost structure. Lower by-product cash costs compared to last year reflect
strong cost containment and strong copper prices which mitigated cost pressures
due to mining industry inflation and the appreciation of currencies in the
countries where the Company's mines are located. Quarter-over-quarter, the
value of the Chilean Peso increased by 15% and the Brazilian Real went up 13%
against the United States Dollar. The Company has hedged approximately 55% of
the operating expenses of its mines in Brazil
for the remainder of the year with an average contract rate of 2.08 Reais per United
States Dollar that largely offset the foreign exchange losses related to
operating expenses incurred in Reais.
Average co-product cash costs for the quarter were $451
per GEO including Alumbrera, representing a 3.9% increase from $434
per GEO for the second quarter of 2010; excluding Alumbrera, average co-product
cash costs increased by 4.1% to $461 per GEO from $443
per GEO. Reliability of operations and cost management improvement allowed the
Company to mitigate the adverse impact of a strong Brazilian Real and Chilean
Peso.
Co-product cash costs per pound of copper were $1.32
for the quarter from Chapada, compared with $1.13 in the second
quarter of 2010 and co-product cash costs including the Company's interest in
the Alumbrera mine were $1.36 per pound of copper, compared with
$1.21 for the quarter ended June 30, 2010.
Operating Mines
A summary of mine-by-mine operating results can be
found on the final page of this press release.
Chapada, Brazil
Chapada produced a total of 31,566 ounces of gold
contained in concentrate in the second quarter of 2011 compared with 30,450
ounces of gold in concentrate in the second quarter of 2010, representing a
quarter-over-quarter increase of 3.7%. Chapada copper production of 40.8
million pounds in the second quarter was 10% higher than the production of 37.0
million pounds of copper contained in concentrate during the comparable period
in 2010.
Higher production of both gold and copper in the
quarter compared with the second quarter of 2010 was mainly due to copper grade
and gold and copper recovery rates.
Copper contained in concentrate has remained within
the range of 35-40 million pounds per quarter.
By-product cash costs for the quarter were negative $3,555
per ounce compared with negative
$1,583 per ounce for the same quarter of 2010.
Higher by-product cash cost credits reflect the continuous strength of copper
prices resulting in lower by-product cash costs.
Co-product cash costs for the quarter were $342
per gold ounce and $1.32 per pound of copper compared to $350
per gold ounce and $1.13 per pound of copper for the same
quarter of 2010. The increase in co-product cash costs per pound of copper is
primarily due to an increase in transportation costs allocated to copper.
The exploration program at Chapada includes 23,000
metres of diamond drilling that will principally target the southern extension
of the Chapada pit at Corpo Sul and the southern extension at Suruca, a
satellite deposit that is located six kilometres northeast of Chapada.
Drilling at Corpo Sul has identified gold and copper
mineralization along a minimum strike length of 1.7 kilometres, to a depth of
almost 200 metres and mineralization remains open along strike and down dip.
Results were received from seven drill holes, three located immediately
adjacent to the Chapada open pit and four located approximately 1.7 kilometres
further along strike to the southwest at Corpo Sul. All of the holes returned
mineralization similar in grade and composition to that currently being mined.
With the discovery of Suruca in late 2009 and the positive results at Corpo Sul
this year, copper and gold mineralization has now been identified along a
strike length of almost 12 kilometres including the main Chapada deposit.
The Company is also evaluating Corpo Sul as a
satellite shallow low strip ratio open pit operation that would contribute to
copper and gold production at Chapada, from 2014 onward, with grades greater
than the grades the Company would otherwise be mining from the main Chapada
pit.
A feasibility study for Suruca is currently underway
with the focus primarily on an initial average gold production contribution of
approximately 40,000 to 50,000 ounces per year beginning in 2014 from oxide
ore. Development plans and permitting are in progress for a heap leach
operation to supplement production from the main Chapada pit.
Cumulatively, with the contribution to gold production
from Suruca oxide ore along with Corpo Sul's contribution to copper and gold
production, overall copper and gold production would exceed currently planned
production at Chapada beginning in 2014.
During the remainder of 2011, diamond drilling will
continue to focus on the expansion and delineation of mineralization at Corpo
Sul and the southern extension of Suruca towards the Chapada pit.
Jacobina, Brazil
Production at Jacobina was 27,806 ounces of gold in
the second quarter of 2011 compared to production of 29,785 ounces of gold in
the second quarter of 2010. Production for the quarter was on plan which
anticipated lower grades.
The Company continues to focus on upgrading the
current mineral resources to mineral reserves at Canavieiras and Morro Do Vento
and improving overall mineral reserve grade for the mine. Mining of higher
grade areas could increase average annual production at Jacobina to 150,000
gold ounces beginning in 2014.
Cash costs averaged $663 per ounce of
gold for the second quarter compared with $534 per ounce of gold
in the second quarter of 2010 mainly due to lower production and higher plant
costs as a result of down-time caused by normal course repairs and maintenance
costs that were higher during the quarter.
The objectives of the 2011 exploration program at
Jacobina are to upgrade current mineral resources to mineral reserves at
Canavieiras and Morro do Vento, to improve overall mineral reserve grade for
the mine, and to add new mineral resources along strike extensions in those
zones. The 2011 exploration budget of $5 million includes 14,000
metres of diamond drilling.
To date in 2011, 19 drill holes have been completed at
the Canavieiras deposit and results from the first 10 holes confirm grades that
are higher than the current mineral reserve grade. Mining of higher grade areas
is expected to increase annual production up to 150,000 gold ounces commencing
in 2014.
Fazenda Brasileiro, Brazil
The Fazenda Brasileiro mine produced 14,007 ounces of
gold in the quarter ended June 30, 2011. This compares to 18,333
ounces of gold in the second quarter of 2010. Cash costs for the second quarter
were $934 per ounce compared with $559 per ounce
for the same period in 2010. Grade for the quarter was 2.02 g/t compared to 2.36
g/t for the comparative quarter last year, representing a planned decline in
grade of 14%, which impacted cash costs. Appreciation of the Brazilian Real
relative to the United States Dollar also impacted cash costs.
The Fazenda Brasileiro mine was acquired in 2003 with
two and a half years of mine life remaining based on known mineral reserves.
The Company has since been mining at Fazenda Brasileiro for seven years. The
mine continues to further outline exploration potential and resource additions
are expected in 2011.
The two new mineralization zones, CLX2 and Lagoa do
Gato, both discovered in 2009, are identified as having significant potential
for high-grade sources of ore for the mill. Both infill and extension drilling
confirm the continuity of mineralization in both areas. In 2011, the Company
continues to develop the high-grade mineral reserves at CLX2, improve mine
fleet costs using road trucks and focus on continuing to extend Fazenda
Brasileiro's mine life.
El Peñón, Chile
El Peñón produced 124,118 GEO during the
second quarter of 2011. Production for the quarter consisted of 80,861 ounces
of gold and 2.2 million ounces of silver, compared with 100,485 GEO, which
consisted of 57,351 ounces of gold and 2.4 million ounces of silver produced in
the second quarter of 2010. This represents a 24% quarter-over-quarter increase
in 2011 versus 2010 production on a GEO basis.
Higher GEO production was mainly due to improved gold
and silver grades compared with the same quarter of 2010. Higher grade areas including
Al Este and Bonanza contributed to the increase in GEO
production. As well, since conversion to owner-mining, operational dilution has
decreased and feed grade has improved. This, combined with increased capacity,
has led to increased production. The decrease in silver
production was primarily the result of lower tonnage processed and lower
recoveries.
Cash costs were $382 per GEO in the
quarter ended June 30, 2011, compared with $449
per GEO in the second quarter in 2010, which included the impact of maintenance
cost on improvement of fleet availability subsequent to the process of
transition from contract mining to owner mining. Reliability of operation and
cost management improvement allowed mine management to mitigate the adverse
impact of the appreciation of the Chilean Peso versus the United States Dollar.
The average currency exchange rate of the Chilean Peso versus the United States
Dollar went up by 15% from the second quarter of 2010.
During 2011 approximately $4.5 million
of the total $25 million in exploration spending at El
Peñón will be focused on Pampa Augusta Victoria
("PAV") with the objective of completing an initial mineral reserve
and mineral resource estimate. The majority of the drilling is being completed
on the Victoria vein, which, to date, has returned significant near surface
gold and silver values.
The Victoria vein system has been traced along a
strike length of over 400 metres and to a vertical depth of at least 100 metres
from the surface at 1,750 metres elevation to 1,625 metres elevation. The
mineralization remains open along strike and down dip. The near surface, highly
oxidized nature of this mineralization will facilitate rapid low cost
development and recoveries which should be in the range of the original near
surface mineralization at El Peñón (approximately 95 percent for
gold and 90 percent for silver).
Exploration drilling will continue throughout 2011 to
further extend mineralization at Victoria both along strike and down dip and is
expected to expand and confirm the mineral resource potential of the Victoria
Este and Elizabeth veins. It is anticipated that development can be accelerated
and ore could be mined from PAV as early as 2013.
PAV is expected to provide further sustainability at
current production levels in El Peñón's mine life by increasing
mine certainty and flexibility.
Minera Florida, Chile
Minera Florida produced a total of 25,376 GEO in the
current quarter compared with 25,274 GEO in the second quarter of 2010.
Gold grade for the quarter averaged 3.43
g/t which was lower than the 4.27 g/t for the second quarter of 2010.
The lower gold grade was part of the mine plan. Production from veins with
better gold grade such as Tribuna
and Victoria is expected to commence in the near term.
In addition, the mine produced 1,863 tonnes of zinc in
the three-month period ended June 30, 2011 compared with 1,592
tonnes of zinc produced in the second quarter of 2010. Zinc is accounted for as
a by-product credit to cash costs.
Cash costs for the second quarter were $614
per GEO compared with $370 per GEO in the same quarter in 2010
due to the appreciation of the Chilean Peso, mining inflation, higher energy
costs and lower grades mined.
The Company's expansion project at Minera Florida is
designed to increase annual production at Minera Florida by approximately
40,000 GEO per year for five years through the re-treatment of tailings. The
project continues to advance ahead of schedule with completion planned for late
2011. Total expansionary capital at Minera Florida is now estimated to be $75
million. The increase over feasibility levels is largely attributed to
a change in the scope of the project which includes a zinc flotation plant for
recovering zinc which is expected to reduce costs.
Gualcamayo, Argentina
Gualcamayo produced 43,194 ounces of gold in the
second quarter of 2011 compared with 37,467 ounces produced in the second
quarter of 2010, representing a 15% quarter-over-quarter improvement.
Production increased as a result of mining higher grade benches (20% increase
in grade) and improvements in recovery. Mining for the quarter was consistent
with the block model with modestly higher grades than expected.
Gold recovery rate at Gualcamayo was 74.4% for the
second quarter, an improvement from 66.4% for the first quarter and 70.4% for
the comparative quarter of 2010. The current recovery rate is in line with our
projection of a sustainable range of 70% to 75%. The Company continues to take
steps to improve recoveries and minimize carbon fines as it completes the construction
of a new heap leach pad later this year.
Cash costs were $399 per ounce in the
quarter ended June 30, 2011, compared with $427
per ounce in the second quarter of 2010, representing a 6.6% improvement.
Management continued to reduce cash costs from $662 per ounce
level in the fourth quarter of 2010 and $507 per ounce in the
first quarter this year down to the current level.
In 2011, the Company is focusing on a number of
operational initiatives, including efforts in sustaining the 1,500 tonne per hour
feed through the plant, underground development of QDD Lower West and expansion
of the heap leach pad at Valle Norte. Development of QDD Lower West continues.
Success at this deposit will make an additional positive contribution to
mineral reserves and mineral resources for Gualcamayo in 2011. In addition, the
Company will continue to work on reducing reliance on contractors for increased
cost predictability. Gold production for the second half of 2011 is expected to
increase based on continuing higher grades, increases in crusher availability
and throughput tonnage.
Alumbrera, Argentina
The Company's interest in the Alumbrera Mine
is accounted for as an equity investment. The Company recorded earnings from
its 12.5% interest in Alumbrera Mine of $16.6 million
and $28.3 million for the three month and six month periods
ended June 30, 2011, compared with $7.8 million
and $19.5 million reported for the respective periods of 2010.
The Company received $6.6 million in cash distributions during
the three months and $27.0 million for the six month period
ended June 30, 2011 compared with $17.9 million
and $30.7 million for the comparative periods in 2010.
Attributable production from Alumbrera was 12,670
ounces of gold and 9.3 million pounds of copper for the quarter. This compares
with attributable production of 11,470 ounces of gold
and 9.3 million pounds of copper for the second quarter of 2010.
In the first quarter of 2011, the Company announced an
agreement with Xstrata Queensland Limited ("Xstrata") and Goldcorp
Inc. ("Goldcorp") that would facilitate the integration of Agua
Rica, which is currently 100% owned by Yamana, into Minera Alumbrera. Following
the integration, Xstrata, Goldcorp and Yamana would own
interests in the combined projects of 50%, 37.5% and 12.5% respectively,
consistent with their current interest in Alumbrera. The integration of Agua
Rica with Alumbrera provides the greatest value potential for Yamana and the
best opportunity for the development of Agua Rica in the Catamarca province of Argentina.
CONSTRUCTION AND DEVELOPMENT PROJECTS
All construction projects are on or in the case of
Mercedes, ahead of schedule. All permits have been received. Detailed
engineering has or is currently advancing and long-lead time equipment has been
ordered for the various projects. Mine development is also advancing on
schedule with accelerated development of newly discovered higher grade areas at
Mercedes.
The following summary highlights key updates from the
construction and development projects at the Company.
Mercedes, Mexico
Mercedes is a gold/silver project located in Sonora,
Mexico currently under construction. Construction is ahead of
schedule with start-up of production expected by the end of 2011 rather than
the original plan of the second quarter of 2012 and commercial production is
now expected by mid-2012. As of June 30, 2011, overall physical
advancement of the project was approximately 85%. Advancement included
completion of the tailings dam, approximately 90% advancement of over structural,
mechanical and piping installation and near completion of the powerline. In
addition, approximately 85% of budget costs were committed as at June
30, 2011. The Company is also advancing the development of Barrancas,
a newly discovered higher grade area at Mercedes. Barrancas
is a more recent discovery made after the decision was made to develop
Mercedes. Estimated total project capital expenditures for Mercedes are
expected to be $194 million of which approximately $10
million is a newly allocated amount for the advancement of Barrancas
providing the potential to increase production at Mercedes. The increase in
capital expenditure above the $168 million, not including new
development, can be attributed to the strengthening of the Mexican Peso in
comparison to the Company's assumed foreign exchange rate in the previous
bugeted amounts. Annual production at Mercedes is expected initially to be
approximately 120,000 GEO and plans are underway to increase production to up
to 150,000 GEO per year beginning in 2014.
Ernesto & Pau-a-Pique, Brazil
Construction progress is on schedule with
commissioning and start-up of production expected by the end of 2012 and
commercial production by mid-2013. As at June 30, 2011, physical
advancement was approximately 42% with earthworks ahead of schedule and the
tailings dam completed. Approximately 59% of budget costs were committed as at June
30, 2011. Annual production is expected to be approximately 100,000
gold ounces with production during the first two full years expected to be
approximately 120,000 gold ounces.
C1 Santa Luz, Brazil
Construction progress is on schedule with
commissioning and start-up of production expected by the end of 2012 and
commercial production by early-2013. As at June 30, 2011,
detailed engineering and the tailings were completed. Total physical
advancement of the project was approximately 40% and 50% of budget costs have
been committed. Annual production is expected to be approximately 100,000 gold
ounces with production during the first two full years expected to exceed
130,000 gold ounces.
Pilar, Brazil
Pilar is a development stage project located in Goias,
Brazil
approximately 80 kilometres from the Company's Chapada mine. Construction
progress is on schedule with commissioning and start-up of production expected
mid-2013 with commercial production expected by the end of 2013. Annual
production from the mine is estimated to be 120,000 ounces of gold.
The Pilar project is being built at a capacity level
that is 30% higher than that contemplated in the feasibility study. Discovery
of new mineral resources along with the decision to advance Caiamar, a deposit
located 38 kilometres from Pilar, to pre-feasibility assuming that ore would be
processed at Pilar is expected to support the higher capacity level. Studies
have been completed confirming the processing plant at Pilar is suitable for
processing the Caiamar ore and the higher grades can offset the costs of
transporting the ore. Resource development work has started at Caiamar, which
could positively impact capacity utilization and Pilar
production rates as early as 2014.
Agua Rica, Argentina
The Company is in the process of completing final
documentation for the integration of Minera Agua Rica into Minera Alumbrera
("MAA") and targeting to close the transaction by the end of August
2011. Under the direction of Xstrata, operator of MAA, MAA
has initiated a feasibility study with respect to the integration of its
operations and those of Minera Agua Rica.
Jeronimo, Chile
Following the delivery of the first mineral reserve
estimate at Jeronimo in early 2011, a feasibility study of Jeronimo is currently
underway. This reflects the Company's intention on continuing to refine the
economics of this project by evaluating various processing methods, accounting
for potential by-product credits and other optimizations that could positively
impact the project.
EXPLORATION
The Company continues to actively explore its
exploration targets around existing mines along with its efforts to look for
new opportunities such as on the ground purchases elsewhere in the Americas.
The Company is largely focused on developing its future based on its
exploration successes and organic growth.
In May 2011, the Company announced an
increase in its exploration budget for 2011 by approximately 25% to $105
million. The increase partially resulted from the significant cash flow
being generated by the Company, the success of the 2010 program, as well as the
success already achieved in 2011.
The following summary highlights key updates from the
exploration program at the Company since the end of the first quarter 2011.
BRAZIL
Pilar
During 2011, approximately 45,000 metres of diamond
drilling will be completed as part of a $9.8 million exploration
budget. The drilling is focused on the expansion of the Jordino mineral
resource both down dip, which has been shown to be open for more than two
kilometres of dip length, and along strike to the north towards Tres Buracos,
where a small near surface, inferred mineral resource exists. Year-to-date, 74
drill holes have been completed totaling 24,000 metres and drill results
confirm that growth in mineral reserves and mineral resources is expected to
continue in 2011.
Arco Sul
Arco Sul is a new discovery that was made in
late 2010. The discovery was made one kilometre from the Company's
decommissioned Fazenda Nova mine in western Goiás State, Brazil
and 380 kilometres from the Company's Chapada Mine. The
discovery is characterized by a zone of stockwork and breccias that appear to
be the strike and dip extension of previously mined oxide ores at Fazenda Nova.
Mineralization has been traced along strike for one
kilometre and across a width of 300 metres as shown by current drilling and
geologic interpretation. Diamond drilling began in September 2010
and 12 holes totaling 5,300 metres have been drilled to date. Additional
drilling will be completed in 2011 to better understand the geometry of
mineralization.
MEXICO
Mercedes
The 2011 exploration budget of $8.5 million
includes approximately 45,000 metres of diamond drilling focused on the
expansion of mineral reserves and mineral resources, particularly at the
Lagunas Norte and Diluvio zones within the Barrancas
and Lupita vein zones. The grades encountered at Lagunas Norte continue to be
significantly higher than the average mineral resource grades within the
Mercedes project area. The Lagunas Norte ore shoot is currently defined along
130 metres of strike length and is an extension to the Lagunas zone. The recent
drill campaign at the Diluvio zone continues to confirm continuity of this
zone, with gold/silver mineralization delineated in an area of approximately
600 metres by 250 metres containing multiple vein/stockwork zones of up to 140
metres in width.
Three core rigs are currently on site and a total of
20,815 metres have been drilled in 55 holes year-to-date. The Lagunas Norte
discovery is currently not reflected in Mercedes' mineral reserves and mineral
resources. Exploration success is expected to continue the rapid, low cost
mineral resource development at Mercedes resulting in an opportunity to extend
the mine life and increase annual production levels, which has now identified
over 400 metres along strike and up to 150 metres down dip. The total length of
the Barrancas
zone is 1,100 metres, including Barrancas Centro, Lagunas and Lagunas Norte.
The continued exploration success and growing mineral
resources at Mercedes are being evaluated to potentially increase mining and
production rates as well as the extension of mine life.
OUTLOOK AND STRATEGY
Consistent with the guidance provided previously,
production is expected to be in the range of approximately 1.04 million GEO to
1.14 million GEO in 2011. Production is expected to increase to approximately
1.7 million GEO by 2014 as four development stage projects including C1 Santa
Luz, Mercedes, Ernesto/Pau-a-Pique and Pilar, where construction
decisions have already been made, and the expansion project of Minera Florida
tailings are expected to start contributing to production levels.
These development projects are advancing on schedule
and are fully funded from the Company's available cash and cash flows generated
from operations. By 2014, production is targeted to be more than 1.7 million
GEO, which represents production growth over four years of approximately 65%
compared to 2010 production levels. Annual silver production is expected to be
approximately 9 million ounces in 2011 and 2012. Copper production is expected
to be in the range of 145 million to 160 million pounds in 2011 and 140 million
to 160 million pounds in 2012. This projection does not include any additional
production from new projects, expansions and optimizations under current
evaluation.
The Company's strategy and philosophy is to undertake
projects which are easily funded from internal cash flows, with comparatively
modest capital requirements and where cost escalation risks are manageable. The
following is an update of current estimates of expansionary capital
expenditures from 2011 to 2013 as compared to previous guidance. Of the planned
increases in capital expenditures of $206 million, approximately
$30 million relates to scoping changes and advancement of
development and the balance is the result of current cost inputs and foreign
exchange rates as compared to previous guidance.
|
|
2011
Budget
|
|
2011
Revised
|
|
2012
Budget
|
|
2012
Revised
|
|
2013
Budget
|
|
2013
Revised
|
|
Expansionary Capex
|
|
446
|
|
500
|
|
413
|
|
509
|
|
14
|
|
70
|
|
Change
|
|
|
|
54
|
|
|
|
96
|
|
|
|
56
|
These estimates are based on a series of assumptions
and actual expenditures will be dependent on realized foreign exchange rates
and market conditions for inputs at the time of realization.
The above mentioned estimated capital expenditures for
2013 does not include projects for which a
construction decision has not yet been made.
The Company expects sustaining capital for the next
three years to be in the range of $200 to $240 million per year.
Further details of the 2011 second 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
SECOND QUARTER CONFERENCE CALL
Q2 Conference Call
Information for Thursday August 4th, 2011 at 11:00
a.m. ET:
|
Toll Free (North America):
|
888-231-8191
|
|
International:
|
647-427-7450
|
|
Participant Audio Webcast:
|
www.yamana.com
|
|
|
Q2 Conference Call REPLAY:
|
Toll Free Replay Call (North America):
|
800-642-1687,
Passcode 80669630#
|
|
Replay Call:
|
416-849-0833,
Passcode 80669630#
|
The conference call replay will be available from 2:45
p.m. ET on August 4, 2011 until 11:59 p.m. ET
on August 18, 2011.
Via Webcast
Live Audio & Webcast: 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.
About Yamana
Yamana is a Canadian-based gold producer with
significant gold production, gold development stage properties, exploration
properties, and land positions in Brazil,
Argentina, Chile,
Mexico and Colombia.
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 Americas.
Mine by mine operating summary:
|
|
|
|
|
|
|
|
|
|
|
|
Chile
|
|
|
|
|
|
|
|
|
|
|
|
El Peñón
|
Ore
Processed
|
Gold
Grade g/t
|
Silver
Grade g/t
|
Gold
Recovery (%)
|
Silver
Recovery (%)
|
Gold
Ounces Produced
|
Silver
Ounces Produced
|
Gold
Equivalent Ounces Produced
|
Gold
Equivalent Ounces Sold
|
Cash
Cost per GEO ?¹?
|
|
Q2 2011
|
362,778
|
7.64
|
220.2
|
93.4
|
85.1
|
80,861
|
2,162,850
|
124,118
|
117,030
|
$ 382
|
|
Q1 2011
|
358,013
|
6.91
|
227.8
|
92.0
|
79.9
|
73,568
|
2,111,482
|
115,798
|
114,803
|
$ 397
|
|
Total 2010
|
1,522,366
|
5.74
|
228.5
|
91.2
|
84.1
|
256,530
|
9,427,208
|
427,934
|
431,665
|
$ 428
|
|
Q4 2010
|
366,424
|
6.94
|
229.2
|
91.3
|
79.5
|
74,785
|
2,145,809
|
113,800
|
114,403
|
$ 421
|
|
Q3 2010
|
396,209
|
5.48
|
216.8
|
90.8
|
83.3
|
63,417
|
2,298,731
|
105,212
|
108,204
|
$ 461
|
|
Q2 2010
|
392,223
|
4.97
|
216.3
|
92.0
|
87.1
|
57,351
|
2,372,380
|
100,485
|
102,324
|
$ 449
|
|
Q1 2010
|
367,509
|
5.64
|
253.3
|
90.4
|
86.3
|
60,977
|
2,610,289
|
108,437
|
106,739
|
$ 384
|
|
|
|
|
|
|
|
|
|
|
|
|
Minera Florida
|
|
|
|
|
|
|
|
|
|
|
|
Q2 2011
|
238,287
|
3.43
|
31.8
|
83.9
|
68.0
|
22,034
|
167,114
|
25,376
|
22,831
|
$ 614
|
|
Q1 2011
|
232,284
|
3.78
|
35.2
|
84.6
|
68.7
|
23,986
|
182,453
|
27,635
|
26,798
|
$ 476
|
|
Total 2010
|
779,836
|
4.41
|
33.4
|
83.7
|
67.8
|
94,585
|
606,071
|
105,604
|
102,819
|
$ 416
|
|
Q4 2010
|
214,859
|
4.68
|
45.1
|
84.7
|
70.6
|
27,787
|
234,339
|
32,048
|
30,525
|
$ 479
|
|
Q3 2010
|
207,834
|
4.30
|
39.2
|
84.2
|
67.0
|
24,337
|
182,332
|
27,652
|
27,667
|
$ 425
|
|
Q2 2010
|
204,512
|
4.27
|
21.2
|
82.0
|
66.1
|
23,543
|
95,249
|
25,274
|
23,020
|
$ 370
|
|
Q1 2010
|
152,631
|
4.38
|
25.2
|
84.0
|
67.2
|
18,918
|
94,151
|
20,630
|
21,608
|
$ 363
|
|
|
|
|
|
|
|
|
Brazil
|
|
|
|
|
|
|
|
Chapada
|
Ore
Processed
|
Gold
Grade
g/t
|
Gold
Recovery
(%)
|
Gold
Ounces
Produced
|
Gold
Ounces
Sold
|
Cash
Cost per
oz ?¹?
|
|
Q2 2011
|
4,857,313
|
0.32
|
64.3
|
31,566
|
34,260
|
$
(3,555)
|
|
Q1 2011
|
5,088,739
|
0.32
|
64.7
|
33,392
|
33,395
|
$
(2,615)
|
|
Total 2010
|
19,195,578
|
0.35
|
62.3
|
135,613
|
127,450
|
$
(2,073)
|
|
Q4 2010
|
4,757,679
|
0.37
|
64.9
|
36,965
|
31,421
|
$
(2,863)
|
|
Q3 2010
|
5,246,202
|
0.38
|
63.4
|
40,405
|
35,591
|
$
(1,856)
|
|
Q2 2010
|
4,873,077
|
0.32
|
60.7
|
30,450
|
32,881
|
$
(1,583)
|
|
Q1 2010
|
4,318,621
|
0.34
|
60.0
|
27,794
|
27,557
|
$ (1,876)
|
|
|
|
|
|
|
|
|
Jacobina
|
|
|
|
|
|
|
|
Q2 2011
|
532,496
|
1.74
|
93.4
|
27,806
|
28,354
|
$ 663
|
|
Q1 2011
|
529,035
|
1.91
|
93.5
|
30,319
|
31,537
|
$ 611
|
|
Total 2010
|
2,158,097
|
1.89
|
93.2
|
122,160
|
121,405
|
$ 535
|
|
Q4 2010
|
542,055
|
2.06
|
94.1
|
33,718
|
33,530
|
$ 495
|
|
Q3 2010
|
570,799
|
1.95
|
93.8
|
33,637
|
32,517
|
$ 463
|
|
Q2 2010
|
556,376
|
1.79
|
93.0
|
29,785
|
29,110
|
$ 534
|
|
Q1 2010
|
488,865
|
1.73
|
91.9
|
25,021
|
26,249
|
$ 687
|
|
|
|
|
|
|
|
|
Fazenda
Brasileiro
|
|
|
|
|
|
|
|
Q2 2011
|
246,551
|
2.02
|
87.5
|
14,007
|
13,052
|
$ 934
|
|
Q1 2011
|
205,389
|
1.93
|
88.2
|
11,252
|
12,891
|
$ 968
|
|
Total 2010
|
1,110,204
|
2.22
|
88.6
|
70,084
|
72,316
|
$ 628
|
|
Q4 2010
|
275,184
|
2.53
|
89.4
|
19,852
|
18,822
|
$ 705
|
|
Q3 2010
|
279,734
|
2.14
|
89.0
|
17,161
|
19,208
|
$ 620
|
|
Q2 2010
|
273,706
|
2.36
|
88.2
|
18,333
|
15,801
|
$ 559
|
|
Q1 2010
|
281,579
|
1.84
|
87.3
|
14,738
|
18,485
|
$ 622
|
|
|
|
|
|
|
|
|
Argentina
|
|
|
|
|
|
|
|
Gualcamayo
|
Ore
Processed
|
Gold
Grade
g/t
|
Gold
Recovery
(%)
|
Gold
Ounces
Produced
|
Gold
Ounces
Sold
|
Cash
Cost
per oz ?¹?
|
|
Q2 2011
|
1,882,237
|
1.02
|
74.4
|
43,194
|
46,399
|
$ 399
|
|
Q1 2011
|
1,896,533
|
0.95
|
66.4
|
37,597
|
34,665
|
$ 507
|
|
Total 2010
|
7,528,690
|
0.82
|
67.8
|
135,140
|
141,734
|
$ 506
|
|
Q4 2010
|
1,818,571
|
0.89
|
69.5
|
36,239
|
36,649
|
$ 662
|
|
Q3 2010
|
1,982,929
|
0.87
|
57.8
|
31,972
|
38,660
|
$ 480
|
|
Q2 2010
|
1,940,939
|
0.85
|
70.4
|
37,467
|
30,283
|
$ 427
|
|
Q1 2010
|
1,786,251
|
0.68
|
76.0
|
29,462
|
36,142
|
$ 443
|
|
|
|
|
|
|
|
|
Alumbrera
|
|
|
|
|
|
|
|
Q2 2011
|
1,227,348
|
0.47
|
68.2
|
12,670
|
12,367
|
$
(1,736)
|
|
Q1 2011
|
1,131,995
|
0.45
|
69.3
|
11,374
|
11,412
|
$
(1,452)
|
|
Total 2010
|
4,509,332
|
0.46
|
73.0
|
50,656
|
48,940
|
$
(1,404)
|
|
Q4 2010
|
1,160,601
|
0.50
|
76.0
|
14,061
|
12,951
|
$
(1,556)
|
|
Q3 2010
|
1,102,574
|
0.42
|
72.8
|
11,370
|
10,095
|
$
(993)
|
|
Q2 2010
|
1,117,957
|
0.43
|
69.9
|
11,470
|
15,638
|
$
(1,938)
|
|
Q1 2010
|
1,128,200
|
0.51
|
72.2
|
13,755
|
10,256
|
$
(1,142)
|
|
|
|
|
|
|
|
|
Copper
Production
|
|
|
|
|
|
|
|
Chapada
|
Ore
Processed
|
Copper
Ore Grade
|
Copper
Recovery
(%)
|
Copper
Produced
(M lbs.)
|
Copper
Sold
(M lbs.)
|
Cash costs
per pound
of copper
|
|
Q2 2011
|
4,857,313
|
0.43
|
88.4
|
40.8
|
41.6
|
$ 1.32
|
|
Q1 2011
|
5,088,739
|
0.39
|
87.1
|
38.5
|
29.7
|
$ 1.21
|
|
Total 2010
|
19,195,578
|
0.41
|
86.5
|
149.4
|
143.8
|
$ 1.17
|
|
Q4 2010
|
4,757,679
|
0.44
|
86.2
|
39.9
|
39.6
|
$ 1.20
|
|
Q3 2010
|
5,246,202
|
0.43
|
86.8
|
42.8
|
43.5
|
$ 1.14
|
|
Q2 2010
|
4,873,077
|
0.39
|
87.2
|
37.0
|
31.6
|
$ 1.13
|
|
Q1 2010
|
4,318,621
|
0.36
|
85.5
|
29.7
|
29.1
|
$ 1.24
|
|
|
|
|
|
|
|
|
Alumbrera
|
|
|
|
|
|
|
|
Q2 2011
|
1,227,348
|
0.45
|
77.2
|
9.3
|
8.8
|
$ 1.54
|
|
Q1 2011
|
1,131,995
|
0.39
|
73.1
|
7.1
|
7.1
|
$ 1.85
|
|
Total 2010
|
4,509,332
|
0.50
|
82.0
|
38.7
|
37.0
|
$ 1.29
|
|
Q4 2010
|
1,160,601
|
0.40
|
81.0
|
9.3
|
9.0
|
$ 1.37
|
|
Q3 2010
|
1,102,574
|
0.40
|
82.2
|
8.3
|
7.7
|
$ 1.53
|
|
Q2 2010
|
1,117,957
|
0.44
|
81.4
|
9.3
|
12.1
|
$ 1.52
|
|
Q1 2010
|
1,128,200
|
0.54
|
84.7
|
11.8
|
8.2
|
$ 0.89
|
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 projects and exploration programs discussed herein being
met, the impact of general business and economic conditions, global liquidity
and credit availability on the timing of cash flows and the values of assets
and liabilities based on projected future conditions, fluctuating metal prices
(such as gold, copper, silver and zinc), currency exchange rates (such as the
Brazilian Real, the Chilean Peso and the Argentine Peso versus the
United States Dollar), possible variations in ore grade or recovery
rates, changes in the Company's hedging program, changes in accounting
policies, changes in the Company's corporate mineral resources, risk related to
non-core mine dispositions, changes in project parameters as plans continue to
be refined, changes in project development, construction, production and
commissioning time frames, risk related to joint venture operations, the
possibility of project cost overruns or unanticipated costs and expenses,
higher prices for fuel, steel, power, labour and other consumables contributing
to higher costs and general risks of the mining industry, failure of plant,
equipment or processes to operate as anticipated, unexpected changes in mine
life, final pricing for concentrate sales, unanticipated results of future
studies, seasonality and unanticipated weather changes, costs and timing of the
development of new deposits, success of exploration activities, permitting time
lines, government regulation of mining operations, environmental risks,
unanticipated reclamation expenses, title disputes or claims, limitations on
insurance coverage and timing and possible outcome of pending litigation and
labour disputes, as well as those risk factors discussed or referred to in the
Company's annual Management's Discussion and Analysis and Annual Information
Form for the year ended December 31, 2010 filed with the
securities regulatory authorities in all provinces of Canada
and available at www.sedar.com, and the Company's Annual Report on Form 40-F filed
with the United States Securities and Exchange Commission. 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.
NON-GAAP MEASURES
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 press
release.
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.
Co-product and By-product Cash Costs
The Company has included cash costs per GEO and cash
costs per pound of copper information 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
IFRS do not fully illustrate the ability of its operating mines to generate
cash flows. The measures are not necessarily indicative of operating profit or
cash flows from operations as determined under IFRS. Cash costs per GEO are
determined in accordance with the Gold Institute's Production Cost
Standard and are calculated on a co-product and by-product basis. Cash costs on
a co-product basis are computed by allocating operating cash costs separately
to metals (gold and copper) based on an estimated or assumed ratio. Cash costs
on a by-product basis are computed by deducting copper by-product revenues from
the calculation of cash costs of production per GEO. Cash costs per GEO and per
pound of copper are calculated on a weighted average basis.
Per Gold Equivalent Ounce ("GEO")
The following tables provide a reconciliation of cost
of sales per the financial statements to (i) Co-product Cash Costs per GEO,
(ii) Co-product Cash Costs per lb of Copper and (iii) By-product Cash Costs per
GEO:
Reconciliation of Cost of Sales per the Financial
Statements to Co-product Cash Costs per GEO
|
|
|
GEO
|
In thousands of
United States Dollars
|
|
United States Dollars
per gold equivalent
ounce
|
|
For the three months ended June 30,
|
2011
|
2010
|
|
2011
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales (i) (iii)
|
$
191,777
|
$
135,666
|
|
$ 721
|
$ 561
|
|
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
|
|
Copper contained in concentrate related cash costs
(excluding related TCRC's) (ii)
|
(47,904)
|
(35,644)
|
|
(180)
|
(148)
|
|
Treatment and refining costs (TCRC) related to
Chapada gold
|
1,049
|
1,294
|
|
4
|
5
|
|
Inventory movements and
adjustments
|
(14,121)
|
11,543
|
|
(53)
|
48
|
|
Commercial selling costs
|
(8,220)
|
(5,626)
|
|
(31)
|
(23)
|
|
Total GEO co-product cash costs (excluding
Alumbrera)
|
$
122,581
|
$
107,233
|
|
$ 461
|
$ 443
|
|
Minera Alumbrera (12.5% interest) GEO cash costs
|
3,033
|
2,730
|
|
239
|
238
|
|
Total GEO co-product cash costs (iii)
|
$
125,614
|
$
109,964
|
|
$ 451
|
$ 434
|
|
Commercial GEO produced excluding Alumbrera
|
266,067
|
241,794
|
|
|
|
|
Commercial GEO produced including Alumbrera
|
278,737
|
253,264
|
|
|
|
|
|
|
GEO
|
In thousands of
United States Dollars
|
|
United States Dollars
per gold equivalent
ounce
|
|
For the six months ended June 30,
|
2011
|
2010
|
|
2011
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales (i) (iii)
|
$
348,879
|
$
280,809
|
|
$ 668
|
$ 600
|
|
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
|
|
Copper contained in concentrate related cash costs
(excluding related TCRC's) (ii)
|
(90,089)
|
(67,676)
|
|
(173)
|
(145)
|
|
Treatment and refining costs (TCRC) related to
Chapada gold
|
1,957
|
2,326
|
|
4
|
5
|
|
Inventory movements and
adjustments
|
(5,752)
|
786
|
|
(11)
|
2
|
|
Commercial selling costs
|
(15,235)
|
(10,808)
|
|
(29)
|
(23)
|
|
Total GEO co-product cash costs (excluding
Alumbrera)
|
$
239,760
|
$
205,437
|
|
$ 459
|
$ 439
|
|
Minera Alumbrera (12.5% interest) GEO cash costs
|
5,812
|
6,095
|
|
242
|
242
|
|
Total GEO co-product cash costs (iii)
|
$
245,572
|
$
211,532
|
|
$ 450
|
$ 429
|
|
Commercial GEO produced excluding Alumbrera
|
522,061
|
467,875
|
|
|
|
|
Commercial GEO produced including Alumbrera
|
546,105
|
493,100
|
|
|
|
|
(i)
|
Cost of sales includes non-cash items including the
impact of the movement in inventory.
|
|
(ii)
|
Costs directly attributed to a specific metal are
allocated to that metal. Costs not directly attributed to a specific metal
are allocated based on relative value. As a rule of thumb, the relative value
has been 80/75% copper and 20/25% gold. TCRC's are defined as
treatment and refining charges.
|
|
(iii)
|
Depletion, depreciation and amortization is excluded from both total cash costs and cost of sales
from continuing operations for the comparative period.
|
Reconciliation of Cost of Sales per the Financial
Statements to Co-product Cash Costs per Pound of Copper
|
|
|
|
|
Copper
|
In thousands of
United States Dollars
|
|
United States Dollars
per pound of copper
|
|
For the three months ended June 30,
|
2011
|
2010
|
|
2011
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales (i) (iii)
|
$
191,777
|
$
135,666
|
|
$ 4.70
|
$ 3.67
|
|
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
|
|
GEO related cash costs
(excluding related TCRC's) (ii)
|
(121,532)
|
(105,938)
|
|
(2.98)
|
(2.87)
|
|
Treatment and refining costs (TCRC)
related to Chapada copper
|
5,716
|
6,158
|
|
0.14
|
0.17
|
|
Inventory movements and
adjustments
|
(14,121)
|
11,543
|
|
(0.35)
|
0.31
|
|
Commercial selling costs
|
(8,220)
|
(5,626)
|
|
(0.19)
|
(0.15)
|
|
Total copper co-product cash costs
(excluding Alumbrera)
|
$
53,620
|
$
41,803
|
|
$ 1.32
|
$ 1.13
|
|
Minera Alumbrera (12.5% interest)
copper cash costs
|
14,340
|
14,174
|
|
1.54
|
1.52
|
|
Total copper co-product cash costs (iii)
|
$
67,960
|
$
55,978
|
|
$ 1.36
|
$ 1.21
|
|
Copper produced excluding Alumbrera
(millions of lbs)
|
40.8
|
37.0
|
|
|
|
|
Copper produced including Alumbrera
(millions of lbs)
|
50.1
|
46.3
|
|
|
|
|
|
|
|
|
Copper
|
In thousands of
United States Dollars
|
|
United States Dollars
per pound of copper
|
|
For the six months ended June 30,
|
2011
|
2010
|
|
2011
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales (i) (iii)
|
$
348,879
|
$
280,809
|
|
$ 4.40
|
$ 4.21
|
|
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
|
|
GEO related cash costs
(excluding related TCRC's) (ii)
|
(237,803)
|
(203,110)
|
|
(3.00)
|
(3.04)
|
|
Treatment and refining costs (TCRC)
related to Chapada copper
|
9,993
|
10,989
|
|
0.13
|
0.16
|
|
Inventory movements and
adjustments
|
(5,752)
|
786
|
|
(0.07)
|
0.01
|
|
Commercial selling costs
|
(15,235)
|
(10,808)
|
|
(0.20)
|
(0.16)
|
|
Total copper co-product cash costs
(excluding Alumbrera)
|
$
100,082
|
$
78,666
|
|
$ 1.26
|
$ 1.18
|
|
Minera Alumbrera (12.5% interest)
copper cash costs
|
27,525
|
24,641
|
|
1.67
|
1.17
|
|
Total copper co-product cash costs (iii)
|
$
127,607
|
$
103,307
|
|
$ 1.33
|
$ 1.18
|
|
Copper produced excluding Alumbrera
(millions of lbs)
|
79.2
|
66.7
|
|
|
|
|
Copper produced including Alumbrera
(millions of lbs)
|
95.7
|
87.8
|
|
|
|
|
(i)
|
Cost of sales includes non-cash items including the
impact of the movement in inventory.
|
|
(ii)
|
Costs directly attributed to a specific metal are
allocated to that metal. Costs not directly attributed to a specific metal
are allocated based on relative value. As a rule of thumb, the relative value
has been 80/75% copper and 20/25% gold. TCRC's are defined as
treatment and refining charges.
|
|
(iii)
|
Depletion, depreciation and amortization is excluded
from both total cash costs and cost of sales from continuing operations for
the comparative period.
|
Reconciliation of cost of sales per the financial
statements to by-product cash costs per GEO
|
|
|
|
|
GEO
|
In thousands of
United States Dollars
|
|
United States Dollars
per gold equivalent
ounce
|
|
For the three months ended June 30,
|
2011
|
2010
|
|
2011
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales (i)
|
$
191,777
|
$
135,666
|
|
$ 721
|
$ 561
|
|
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
|
|
Chapada treatment and refining costs
related to gold and copper
|
6,765
|
7,452
|
|
25
|
31
|
|
Inventory movements and
adjustments
|
(14,121)
|
11,543
|
|
(53)
|
48
|
|
Commercial selling costs
|
(8,220)
|
(5,626)
|
|
(31)
|
(23)
|
|
Chapada copper revenue
including copper pricing adjustment
|
(176,617)
|
(100,646)
|
|
(664)
|
(416)
|
|
Total GEO by-product cash costs
(excluding Alumbrera)
|
$
(416)
|
$
48,389
|
|
$ (2)
|
$ 201
|
|
Minera Alumbrera (12.5% interest)
by-product cash costs
|
(21,995)
|
(22,223)
|
|
(1,736)
|
(1,938)
|
|
Total GEO by-product cash costs (i)
|
$
(22,411)
|
$
26,167
|
|
$ (80)
|
$ 103
|
|
Commercial GEO produced excluding
Alumbrera
|
266,067
|
241,794
|
|
|
|
|
Commercial GEO produced including
Alumbrera
|
278,737
|
253,264
|
|
|
|
|
|
|
|
|
GEO
|
In thousands of
United States Dollars
|
|
United States Dollars
per gold equivalent
ounce
|
|
For the six months ended June 30,
|
2011
|
2010
|
|
2011
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales (i)
|
$
348,879
|
$
280,809
|
|
$ 668
|
$ 600
|
|
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
|
|
Chapada treatment and refining costs
related to gold and copper
|
11,950
|
13,315
|
|
23
|
28
|
|
Inventory movements and
adjustments
|
(5,752)
|
786
|
|
(11)
|
2
|
|
Commercial selling costs
|
(15,235)
|
(10,808)
|
|
(29)
|
(23)
|
|
Chapada copper revenue
including copper pricing adjustment
|
(319,941)
|
(199,296)
|
|
(613)
|
(426)
|
|
Total GEO by-product cash costs
(excluding Alumbrera)
|
$
19,901
|
$
84,806
|
|
$ 38
|
$ 181
|
|
Minera Alumbrera (12.5% interest)
by-product cash costs
|
(38,510)
|
(37,931)
|
|
(1,602)
|
(1,504)
|
|
Total GEO by-product cash costs (i)
|
$
(18,609)
|
$
46,875
|
|
$ (34)
|
$ 95
|
|
Commercial GEO produced excluding
Alumbrera
|
522,061
|
467,875
|
|
|
|
|
Commercial GEO produced including
Alumbrera
|
546,105
|
493,100
|
|
|
|
|
(i)
|
Depletion, depreciation and amortization is excluded
from both total cash costs and cost of sales from continuing operations for
the comparative period.
|
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)
stock-based 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, (f) future income tax expense (recovery) on the translation
of foreign currency inter-corporate debt, (g) write-down of investments and
other assets and any other non-recurring adjustments, (h) mark-to-market
(gains) losses on share-purchase warrants. Non-recurring adjustments from
unusual events or circumstances, such as the unprecedented volatility of copper
prices in the fourth quarter of 2008, 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. A reconciliation of Adjusted
Earnings to net earnings as well as a discussion of the adjusting items is
provided in Section 4 "Overview of Financial Results" for both the
yearly and quarterly reconciliations.