Yamana Gold Reports Strong Fourth Quarter and Full Year 2020 Results; Impressive Technical Study Results Delivered for the Odyssey Underground Project

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Algemeen advies 12/02/2021 13:42
TORONTO, Feb. 11, 2021 (GLOBE NEWSWIRE) -- YAMANA GOLD INC. (TSX:YRI; NYSE:AUY; LSE:AUY) (“Yamana” or “the Company”) is herein reporting its financial and operational results for the fourth quarter and full year 2020, providing three-year mine-by-mine guidance, and updating mineral reserve and mineral resource estimates as at December 31, 2020.

The Company is also announcing a positive construction decision for the Odyssey underground project at the Canadian Malartic mine following the impressive results of the technical study, which outlines robust economics, a significant increase in mineral resources, and a mine life extension to at least 2039.

Further, as a continuation of Yamana’s climate change actions, the Company today is also announcing that it has formally adopted a climate strategy, approved by the Board of Directors, to demonstrate the Company’s commitment to the transition to a low-carbon future. The strategy is underpinned by adoption of two targets: a 2° C science-based target (“SBT”) and an aspirational net-zero 2050 target.

FOURTH QUARTER AND FULL YEAR HIGHLIGHTS

Financial Results - Strong Earnings and Cash Flows Further Strengthening Cash Balances and Balance Sheet
•Fourth quarter net earnings were $103.0 million or $0.11 per share basic and diluted compared to net earnings of $14.6 million or $0.02 per share basic and diluted a year earlier.
•Adjusted net earnings(2) were $107.7 million or $0.11 per share basic and diluted.
•Fourth quarter cash flows from operating activities were $181.5 million and net free cash flow(2) was $118.9 million, exceeding the averages of the preceding three quarters by 25% and 6%, respectively.
•Fourth quarter cash flows from operating activities before net change in working capital were $207.4 million, and free cash flow before dividends and debt repayments(2) was $61.7 million.
•Net debt(2) decreased by an additional $53.4 million in the fourth quarter as a result of increased cash balances largely due the significant increase in free cash flow.
•For the full year, net debt(2) fell by $323.4 million to $565.7 million. The Company has achieved its financial management objective of a leverage ratio of net debt to EBITDA(2) of below 1.0x when assuming a bottom-of-cycle gold price of $1,350 per ounce, underscoring the Company's significant financial flexibility.
•As expected and planned, capital expenditures during the fourth quarter were higher than the third quarter as the result of timing delays caused by COVID-19, and interest was paid, as interest payments are customarily made in the second and fourth quarters. Further, a working capital outflow occurred due to the timing delays of collection of recoverable indirect tax credits, payments associated with prepaid expenditures and advances, and an inventory buildup due to production exceeding sales that will normalize in 2021.
•During the fourth quarter, the Company announced a further 50% increase to its annual dividend to $0.105 per share, driven by strong free cash flow generation.

(See end notes near end of release.)



Three months ended December 31
(In millions of United States Dollars) 2020 2019
Net Free Cash Flow (2) $ 118.9 $ 123.2
Free Cash Flow before Dividends and Debt Repayments (2) $ 61.7 $ 73.3
Decrease in Net Debt (2) $ 53.4 $ 59.8

Fourth Quarter Operational Results
•Fourth quarter Gold Equivalent Ounce ("GEO")(1) production was 255,361 GEO(1) including gold and silver production of 221,659 ounces and 2.59 million ounces, respectively. The strong gold production followed standout performances from Jacobina and Minera Florida, and silver production was underpinned by an exceptionally strong performance from El Peñón.
•Full year GEO(1) production of 901,155 GEO(1), including 779,810 ounces of gold and 10.37 million ounces of silver, exceeded original guidance for the year of 890,000 GEO, and was within the plus or minus three per cent variance range of the Company's revised guidance. GEO(1) production for the year at Jacobina, El Peñón, Canadian Malartic, and Minera Florida were all well above plan. The entire difference was attributable to further changes to COVID-19 restrictions imposed in Argentina near the end of the year which impacted production at Cerro Moro.

Costs Offset by Margin Generated from Barnat Pre-Commercial Production
•Cash costs(2) for the quarter and full year were $675 and $701 per GEO(1), respectively, and all-in sustaining costs ("AISC")(2) for the quarter and full year were $1,076 and $1,080 per GEO(1), respectively.
•Full year cash costs(2) and AISC(2) were modestly higher than previously forecast, mostly impacted by lower production at Cerro Moro resulting from the re-imposition of national safety measures in Argentina in December. The Company had also anticipated that more production from Barnat at Canadian Malartic would be classified as commercial production, and as costs for such production were expected to be lower than the Company's average, overall costs would have been positively impacted. With more pre-commercial production from Barnat, costs were not positively impacted, but the margin generated from Barnat’s pre-commercial production was treated as a reduction to expansionary capital. This significant cash flow benefit resulted in the reduction of expansionary capital for the year by a further $14 million compared with plan. The net results of the modestly higher costs and lower expansionary capital was neutral, and consequently had little impact to overall generation of cash flows for the year.

Increased Gold Mineral Reserves and Mineral Resources
•Replaced mineral reserve depletion on a consolidated basis at operating mines.
•Significant increase in mineral resources: ?Notable increase in East Gouldie at Canadian Malartic of 1.84 million ounces (at 50%) of inferred mineral resources.
?Further, through the acquisition of the Wasamac project the Company has been able to increase its mineral inventory at a very advantageous purchase price.
?Lastly, inventory from the MARA project, which has generally been shown outside of the Company's subtotals has been added to inventory in the current year, given its advanced stage in the development process and the completion of the integration of the Agua Rica project and Minera Alumbrera plant and infrastructure.


MARA Project Integration
•On December 17, 2020, the Company completed the integration of the Agua Rica project with the Minera Alumbrera plant and infrastructure. Going forward, the integrated project will be known as the MARA project.
•Under the agreement, Yamana, as the sole owner of Agua Rica, and the partners of Alumbrera have created a new Joint Venture pursuant to which Yamana holds a controlling ownership interest in the MARA Project at 56.25%. Glencore holds a 25.00% interest and Newmont holds an 18.75% interest. Yamana will be the operator of the Joint Venture and will continue to lead the engagement with local, provincial, and national stakeholders, and completion of the Feasibility Study and Environmental Impact Assessment for the project.
•The integration creates significant synergies by combining existing substantive infrastructure that was formerly used to process ore from the Alumbrera mine during its mine life, including processing facilities; a fully permitted tailings storage facility; pipeline; logistical installations; ancillary buildings, and other infrastructure, with the future open pit Agua Rica mine.

Acquisition of Wasamac Property and Camflo Property and Mill (Acquisition of Monarch Gold)
•During the quarter, the Company announced the acquisition of the Wasamac property and the Camflo property and mill through the acquisition of all of the outstanding shares of Monarch Gold not owned by Yamana. The Company completed the acquisition on January 21, 2021.
•The Wasamac project, which has existing proven and probable mineral reserves of 1.8 million ounces of gold at 2.56 grams per tonne and excellent potential for future exploration success, further solidifies the Company’s long-term growth profile with a top-tier gold project in Quebec’s Abitibi region, where the Company has deep operational and technical experience and expertise.

Other Financial Updates: Impairment and Reversal of Impairment
•During the fourth quarter, the Company had a positive non-cash impact related to a net impairment of $191 million on a pre-tax basis, or approximately $37.6 million after-tax. The Company believes that its overall net asset value is also further enhanced by the acquisition of the Wasamac project and by the MARA project.
•After indicators of impairment reversal were noted at the El Peñón mine in Chile, the Company observed an increase in the recoverable amount of the unit, which resulted in a reversal of impairment of $560.0 million pre-tax, or $386.3 million after tax. This reversal was partially offset by a calculated pre-tax impairment of $369.0 million, or $348.7 million after tax, in respect of Cerro Moro, at which indicators of impairment were identified. For additional details, please refer to 'Section 3: Review of Financial Results' in the Company's Management Discussion & Analysis for the year ended December 31, 2020, available at www.yamana.com and on SEDAR.

CLIMATE CHANGE ACTION

As a continuation of Yamana’s climate change actions, the Company has formally adopted a climate strategy, approved by the Board of Directors, to demonstrate the Company’s commitment to the transition to a low-carbon future. The strategy is underpinned by adoption of two targets: a 2° C SBT and an aspirational net-zero 2050 target. The targets are supported by foundational work to be performed in 2021 to establish a multi-disciplinary Climate Working Group, determine our emissions baseline, develop the Greenhouse Gas (“GHG”) abatement pathways required to achieve the 2° C SBT and establish preliminary, operations-specific roadmaps that describe abatement projects, estimated costs and schedules. These actions will help ensure that our long-range GHG reduction efforts are supported by practical and operationally focused short, medium and long-term actions to achieve the targets.

Summary of Certain Non-Cash and Other Items Included in Net Earnings

(In millions of United States Dollars, except per share amounts,
totals may not add due to rounding)

Three Months Ended
December 31 Year Ended
December 31,
2020 2019 2020 2019
Non-cash unrealized foreign exchange losses $ 21.9 $ 0.6 $ 21.6 $ 29.0
Share-based payments/mark-to-market of deferred share units 3.4 3.2 31.5 15.0
Mark-to-market (gains) losses on derivative contracts,
investments and other assets (5.8 ) (0.9 ) (6.9 ) 0.1
Gain on sale of subsidiaries, investments and other assets (3.0 ) — (1.4 ) (284.6 )
Gain on discontinuation of the equity method of accounting — — (21.3 ) —
Temporary suspension and standby costs 2.2 — 18.4 —
Other incremental COVID-19 costs 7.0 — 22.1 —
Share of one-off provision recorded against deferred
income tax assets of associate — — — 13.0
Net reversal of impairment of mining properties (191.0 ) — (191.0 ) —
Financing costs paid on early note redemption — — — 35.0
Other provisions, write-downs and adjustments 6.7 7.5 17.9 42.0
Non-cash tax on unrealized foreign exchange losses 1.8 (3.9 ) 52.8 17.9
Income tax effect of adjustments (2.4 ) (0.2 ) (19.7 ) (0.5 )
One-time tax adjustments 163.9 5.8 183.6 26.9
Total adjustments (i) $ 4.7 $ 12.1 $ 107.6 $ (106.2 )
Total adjustments - increase (decrease) to earnings
per share attributable to Yamana equity holders $ — $ 0.01 $ 0.11 $ (0.11 )

(i) For the three months ended December 31, 2020, net earnings attributable to Yamana equity holders would be adjusted by an increase of $4.7 million (2019 - increase of $12.1 million). For the year ended December 31, 2020, net earnings attributable to Yamana equity holders would be adjusted by an increase of $107.6 million (2019 - decrease of $106.2 million).




IMPRESSIVE TECHNICAL STUDY RESULTS FOR THE ODYSSEY UNDERGROUND PROJECT AT CANADIAN MALARTIC DRIVES APPROVAL OF CONSTRUCTION DECISION

Yamana and Agnico Eagle Mines Ltd., who each hold a 50% interest in the Canadian Malartic General Partnership, owner and operator of the Canadian Malartic mine, have approved construction of the Odyssey underground project. The decision reflects positive technical study results and confirms the Odyssey project as the next phase in the evolution of mining at Canadian Malartic, which has served as an economic beacon in Quebec’s Abitibi District for generations and will continue to do so for decades to come. An NI 43-101 technical report for the Canadian Malartic operation is expected to be filed in March 2021 and will include a summary of the Odyssey underground project.

The construction decision is a milestone in the ongoing evolution of the Canadian Malartic operation and is the culmination of several years of exploration, mineral resource development, and technical evaluation. It marks the transition point of the Odyssey underground project from the project definition phase to the construction and ramp-up phase, which will extend to 2028. From 2029 to 2039, the underground operation will be in full production, producing an expected 500,000 to 600,000 ounces per year. This represents an increase over the Company's initial estimate for an annual production platform of approximately 450,000 ounces. Further extension of the mine life beyond 2039 provides additional upside, with several opportunities under evaluation.

Odyssey Project Production Profile (100% basis)

A chart accompanying this announcement is available at https://www.globenewswire.com/NewsRoom/AttachmentNg/861adaad-1fb4-422b-888c-714ccda69ba4

About the Odyssey Project

Canadian Malartic has been a prolific mining operation for decades. Since 2011, it has been an open pit mine, but it has also been a successful underground operation in previous iterations. One of the strategic rationales behind Yamana's decision to jointly acquire Canadian Malartic from Osisko Mining in 2014 was the potential to significantly extend mine life by transitioning the operation to a future underground mine. Initial underground exploration drilling generated promising results, with the discovery of the East Gouldie zone in 2018 confirming the strong potential for a multi-hundred thousand ounce annual production operation with a decades-long mine life. As of year-end 2020, underground mineral resources have grown to approximately 14.4 million ounces of gold (100% basis) in just six years, including an increase of 4 million ounces from year-end 2019.

The Odyssey project hosts three main underground-mineralized zones, which are East Gouldie, East Malartic, and Odyssey, the latter of which is sub-divided into the Odyssey North, Odyssey South and Odyssey Internal zones. For the purpose of the technical study, mineable stope shapes were generated using a gold price of $1,250 per ounce, consistent with the price used for estimating Canadian Malartic open pit mineral reserves. Mineral resources at East Malartic below 600 metres from surface are not currently included in the technical study. A breakdown of the mineral resources used in the technical study, after dilution and mining recovery, is presented in the table below. Further details on the mineral resources are set out in the mineral reserve and mineral resource section of this news release.

Mineral Resources Included in Odyssey Project Technical Study as of December 31, 2020

Zone

Indicated Mineral Resources Inferred Mineral Resources
Tonnes
(millions) Grade
(g/t Au) Contained oz.
(millions) Tonnes
(millions) Grade
(g/t Au) Contained oz.
(millions)
East Gouldie — — — 51.95 3.14 5.24
East Malartic 4.59 2.13 0.31 7.84 2.15 0.56
Odyssey 1.52 1.89 0.10 15.19 2.11 1.08
Total 6.18 2.00 0.41 75.90 2.82 6.88

The shallow mineralized zones located above 600 metres below surface will be mined using a ramp from surface. The deeper mineralized zones below 600 metres from surface will be mined with a production shaft.

In December 2020, ramp development was started on the Odyssey project in order to facilitate underground conversion drilling in 2021 and provide access to the Odyssey and East Malartic deposits. At year-end 2020, the ramp had progressed 102 metres, and an additional 2,850 metres of development is planned in 2021, of which 1,500 metres is in the ramp.

The conceptual mine design in the technical study includes a 1.8-kilometre deep production-services shaft equipped with a Blair hoist for production, a single drum hoist for services, and an auxiliary cage. The hoisting capacity is expected to be approximately 20,000 tpd. The project will also benefit from the existing infrastructure on site such as the tailing storage facilities, the process plant, and the maintenance facilities.

The preliminary mining concept is based on a sublevel open stoping mining method with paste backfill. Longitudinal retreat and transverse primary-secondary mining methods will also be used dependent on mineralization geometry and stope design criteria.

The Odyssey project is expected to be one of the most modernized electric underground mines. All major mobile production equipment (such as trucks, scoop trams, jumbos, bolters, and longhole drill rigs will be electric powered), greatly reducing carbon footprint. On the two main levels with loading pockets, trucks and hammers would be remotely operated 24 hours a day, 7 days a week from a surface control room, greatly increasing equipment utilization.

Production via the ramp is expected to begin at Odyssey South in late 2023, increasing to up to 3,500 tpd in 2024. Collaring of the shaft and installation of the headframe is expected to commence in the second quarter of 2021, with shaft sinking activities expected to begin in late 2022. The shaft will have an estimated depth of 1,800 metres and the first loading station should be commissioned in 2027 with modest production from East Gouldie. The East Malartic shallow area and Odyssey North zones are scheduled to enter production in 2029 and 2030, respectively.

The project is expected to mine 19,000 tpd from the underground from four different mining zones:
•East Gouldie – 12,500 tpd ?Stope production starts in 2027;
?Three-year ramp up (2027-2029);
?Full stope production in 2030 to 2038.

•Odyssey North – 3,500 tpd ?Stope production starts in 2030;
?Full stope production in 2031-2038.



•Odyssey South and East Malartic – 3,500 and 3,200 tpd, respectively

?Odyssey South stope production starts in 2023;
?Odyssey South full stope production in 2024 to 2027 (3,500 tpd);
?East Malartic stope production starts in 2028;
?East Malartic full stope production in 2030 to 2039 (3,200 tpd).


Run-of–mine ore from the open pit will start to decrease in 2023, as the ore production from the underground starts at a rate of 3,000 tpd. The underground should reach full production of about 19,000 tpd by 2031.

Robust Project Economics

Initial expansionary capital of $1.14 billion is expected to be spent over a period of eight years (100% basis), with capital requirements in any given year manageable and fully funded using the Company's cash on hand and free cash flow generation. Additionally, other growth capital expenditures and modest sustainable capital during the construction period total $191.4 million. Gold production during the 2021 to 2028 construction period is expected at 932,000 ounces (on a 100% basis) at cash costs of $800 per ounce. The net proceeds from the sale of these ounces would significantly reduce the external cash requirements for the construction of the project which, assuming the gold price used in the financial analysis for the project, would reduce the projected capital requirements in half.

Average annual payable production is expected to be approximately 545,400 ounces (100% basis) from 2029 to 2039, with total cash costs per ounce of approximately $630 per ounce. Sustaining capital is expected to gradually decline from 2029 to 2039, with an expected average of approximately $55.8 million per year.

The production profile is based on a ramp-up period of six years (2023-2028) followed by 11 years of full production (2029-2039), for a total of 82.1 million tonnes of underground ore processed (100% basis) at an average gold grade of 2.76 g/t, representing approximately 50% of the contained mineral resource gold ounces. On this basis, the after-tax net present value (“NPV”) (at a 5% discount rate) and after-tax internal rate of return (“IRR”) of the Odyssey project are shown at various gold price assumptions in the table below. The cut-off grade used to estimate the mineable inventory is based on a gold price of $1,250 per ounce, while the financial model uses a base case gold price assumption of $1,550 per ounce. Costs are estimated using a Canadian to U.S. dollar foreign exchange rate assumption of 1.30.

Odyssey Project Technical Study Sensitives to Gold Price (100% Basis)

Gold Price (USD/oz) $1,085 $1,250 $1,395 $1,550 $1,705 $1,860 $2,015
NPV 5% (USD millions, after-tax) $82 $481 $801 $1,143 $1,494 $1,853 $2,212
IRR (%, after-tax) 6% 11% 14% 17.5% 20% 23% 26%

These results demonstrate the expected returns of the Odyssey project after the first decade at full production, highlighting Odyssey as a robust project with significant leverage to higher gold prices and thus supporting the approval for project construction. The results are not intended to reflect the full value of the Odyssey project and extension of mine life beyond 2039 represents significant further upside.

Given the strong underground mining experience of the partners and the experience gained from operating the Canadian Malartic mine since 2014, there is a high degree of confidence in many of the cost assumptions used for the project. While the technical study is considered at a preliminary economic assessment level, the partnership believes that estimates for such things as underground development and mining costs, processing costs, and equipment procurement are more advanced than what would typically be estimated in a preliminary economic assessment level study for a project of this scope. The capital allocation and classification of costs will continue to be refined as the project advances. A preliminary economic assessment is preliminary in nature and includes inferred mineral resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves and, therefore, there is no certainty that the preliminary economic assessment will be realized.

The East Gouldie mineralization is the largest and most profitable deposit due to higher grade and tonnage with more than 70% of the total ounces produced. Exploration drilling at East Gouldie in 2020 totalled 97,000 metres (100% basis), including 25,600 metres in the fourth quarter with multiple mother holes and wedge cuts that resulted in 25 new pierce points in the zone, plus several more in the Odyssey related zones. The intensive drilling program in 2020 has allowed the partnership to increase the inferred mineral resource of the East Gouldie zone by 134% to 6.4 million ounces of gold (100% basis), compared to the initial inferred mineral resource declared at year-end 2019, with an average grade of 3.17 g/t.

The focus of the ongoing diamond drilling campaign from surface is to further define high quality mineral resources by the beginning of 2023 with a drill hole spacing of 75 metres. Improving the geological confidence of the mineral resources is expected to further de-risk future production. With further exploration the Company believes that additional mineralization will come into the mine plan in the coming years.

Yamana Gold Declares First Quarter Dividend
02/11/2021
TORONTO, Feb. 11, 2021 (GLOBE NEWSWIRE) -- YAMANA GOLD INC. (TSX:YRI; NYSE:AUY; LSE:AUY) (“Yamana” or the “Company”) declares a first quarter dividend of $0.02625 per share (annual $0.105 per share). Shareholders of record at the close of business on March 31, 2021, will be entitled to receive payment of this dividend on April 14, 2021. The dividend is an “eligible dividend” for Canadian tax purposes.

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