Temporary suspensions at Canadian Malartic and Cerro Moro due to government restrictions related to COVID-19 were the main factors behind reduced production and increased costs
YAMANA GOLD INC. (TSX: YRI; NYSE: AUY) (“Yamana” or “the Company”) announces preliminary second quarter 2020 results, with gold production of 164,141 ounces (30% less than in Q2 2019 and silver production of 2.01 million ounces (8% less than in Q2 2019). Total gold equivalent ounce (“GEO”) production during the quarter was 183,582 GEO (29% less than in Q2 2019).
Second Quarter 2020 Production Results
|Second Quarter 2020 Preliminary Production|
|GEO Production (oz.)||183,582|
|Gold Production (oz.)||164,141|
|Silver Production (oz.)||2,007,809|
The above totals are based on a GEO ratio of 105.14:1 for the quarter, which was higher than what the Company assumed in its revised outlook. GEO includes gold plus silver with silver converted to a gold equivalent ratio that is calculated based on quarterly average market prices.
Second Quarter 2020 Production By Mine
|Mine-by-Mine||Second Quarter 2020 Preliminary Production|
|Canadian Malartic (50%)||56,785(1)|
- Includes pre-commercial ounces from Barnat of approximately 2,600 ounces.
The quarter was highlighted by exceptional operational performances from Jacobina, El Peñón, Canadian Malartic, and Minera Florida, all of which exceeded planned production targets.
Furthermore, in line with prior guidance, the Company expects to generate increasing production, improving costs and significant cash flows in the second half of the year, sequentially increasing over the third and fourth quarters. As previously guided, production is expected to weight into the second half of the year, with 54% of production expected in the second half compared to 46% in the first half.
The Company reiterates its 2020 production guidance, which was revised on April 30, 2020, to reflect the temporary suspensions at Canadian Malartic and Cerro Moro due to government restrictions related to COVID-19.
Production is currently tracking above guidance and, as the year progresses, the Company will evaluate further updates to production guidance, likely in the third quarter.
The Company further strengthened its balance sheet by continuing to lower net debt by approximately $100 million, and repaid $100 million borrowed in March 2020 on the Company’s revolving credit facility in connection with COVID-19 matters. Net debt at the end of the quarter was below $769 million.
All-in sustaining costs (“AISC”) for the quarter were $1,125 per GEO sold on higher production and, as previously indicated, were impacted in the second quarter by the demobilization and ramp-ups of Cerro Moro and Canadian Malartic along with the implementation of precautionary safety measures related to COVID-19 across all operations. This impact was partially offset by the ongoing benefits from weaker foreign exchange rates. AISC steadily improved during the quarter to $1,061 per GEO in June as the ramp up of operations after the temporary suspensions and implementation of COVID-19 protocols and new safety and health protocols, continued.
The Company also indicated that it would update its costs guidance as the impacts of COVID-19 were better understood. With a better understanding of those impacts, the Company now updates AISC guidance for the second half of the year to be in the range of $1,020 to $1,060 per GEO. Further, the fourth quarter is expected to have the best cost profile, in line with the strongest expected production. At Cerro Moro, the ongoing interprovincial travel restrictions and its impact on a reduced workforce may further impact consolidated costs. However, improvements to these logistical matters in the second half of the year and better than planned performance from other mines due to cost improvements is expected to offset those impacts.
Net Debt Continues to Decline
Net debt decreased during the quarter by approximately $100 million with net debt now below $769 million. This compares to first quarter net debt of $869.1 million and represents a further improvement of over $15 million as compared to the pro forma net debt that was disclosed to account for the sale of the Company’s shares of Equinox Gold, which closed on April 15, 2020. Net debt would have been further reduced if certain costs associated with COVID-19 had not been incurred, and as some of those costs will no longer be incurred, net debt is expected to decline further in the upcoming quarters which also coincides with higher production in those quarters.
Yamana Gold Inc. is a Canadian-based precious metals producer with significant gold and silver production, development stage properties, exploration properties, and land positions throughout the Americas, including Canada, Brazil, Chile and Argentina. Yamana plans to continue to build on this base through expansion and optimization initiatives at existing operating mines, development of new mines, the advancement of its exploration properties and, at times, by targeting other consolidation opportunities with a primary focus in the Americas.