Yamana Gold Inc. reported its financial and operational results for the second quarter of 2020 showing a strong quarterly production and free cash flow while further reducing net debt.
Strong Adjusted Net Earnings and Cash Flows, Further Reduction in Net Debt
- Adjusted net earnings of $63.3 million or $0.07 per share basic and diluted compared to adjusted net earnings of $19.8 million or $0.02 per share basic and diluted a year earlier.
- Net earnings were nil or nil per share basic and diluted compared to net earnings of $14.1 million or $0.01 per share basic and diluted a year earlier.
- Strong quarterly cash flows from operating activities of $92.2 million and cash flow from operating activities before net change in working capital of $118.1 million, reflecting the impact of strong production, strong precious metal prices, and the positive impact of foreign exchange movements on costs.
- Normalized for the $19.2 million in outflows associated with COVID-19 related temporary suspensions, standby and other incremental costs, cash flows from operating activities before net change in working capital would have been $137.3 million. While cash flows were lower than in the first quarter, the difference is mostly accounted for by the lower production from mines whose operations were temporarily suspended. On a per unit of production basis, more margin and cash flows were generated in the second quarter than in the first quarter.
- Net free cash flow of $60.3 million and free cash flow before dividends and debt repaymentsnof $38.3 million, adjusted for the costs incurred in association with COVID-19. Without normalizing for the impact of temporary suspensions, standby and other incremental COVID-19 cost outflows, net free cash flow(2) and free cash flow before dividends and debt repayments would have been $41.1 million and $19.1 million respectively.
- Net debt decreased by $101.1 million in the quarter. As of June 30, 2020, net debt was $768.0 million.
- In June, the Company repaid $100.0 million of the $200.0 million drawn during the first quarter out of its $750.0 million revolving credit facility. The draw during the first quarter was performed as a precaution due to the uncertainty around the COVID-19 pandemic. The Company currently has no plans to utilize the remaining $100.0 million drawn on its revolving credit facility, and expects to repay these funds by the end of the year.
- As of June 30, 2020, the Company had cash and cash equivalents of $324.8 million
London Stock Exchange recent listing
Subsequent to quarter end, Yamana announced it is advancing the application process for listing on the Main Market of the London Stock Exchange (“LSE”). “This would add another senior exchange for trading of the Company’s shares and should further improve institutional investments and liquidity. The Company intends for its common shares to begin trading on the LSE’s Main Market in the next few months”.
Ramp-up of Canadian Malartic & Cerro Moro
Both Cerro Moro and Canadian Malartic resumed mining activities in April 2020 following the temporary suspensions of operations in March due to government-ordered restrictions related to COVID-19. The gradual resumption towards full mining activities occurred over the second quarter and complied with the recommendations of governments and public health officials, with full attention to the health and safety of returning employees, contractors, and suppliers.
At Canadian Malartic, the ramp-up progressed faster than expected, and mill throughput in each of May and June exceeded 60,000 tonnes per day (“tpd”), partially offsetting the impacts from the downtime and lower production rates during the ramp-up in April.
At Cerro Moro, ongoing government restrictions over interprovincial travel have extended the length of the operational ramp-up. While the restrictions have extended the ramp-up period, they have also resulted in potential long-term improvements to the operation relating to efficiencies as the mine continued operating with a reduced workforce during the quarter.
The Company has a 2020 production guidance of 890,000 GEO, comprised of 786,000 ounces of gold and 10,250,000 ounces of silver. Production is currently tracking above guidance and, as the year progresses, the Company will evaluate further updates to production guidance. Yamana Gold has updated AISC guidance for the second half of the year, with AISC expected 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 stronger expected production. At Cerro Moro, the ongoing interprovincial travel restrictions and its impact on a reduced workforce may further impact consolidated costs, although improved travel logistics in the second half of the year and better than planned performance from other mines is expected to offset those possible impacts.
Covid-19 related costs
Yamana Gold Inc. incurred $19.2 million in COVID-19 related costs during the quarter. These costs can be divided into two major categories:
- Temporary suspension and standby costs including those associated with placing certain mines in care and maintenance and subsequent ramp-up of those operations, and the underutilization of labour and contractors in relation to the pre-COVID mine plans.
- Other incremental costs resulting from COVID-19 including community support, additional personal protective equipment acquisitions, higher transportation costs, and overtime costs resulting from lower headcount levels on site to accommodate social distancing.