YAMANA GOLD INC. (TSX:YRI) (NYSE:AUY) (“Yamana” or “the Company”) today provided an update on the cost containment and margin reclamation initiatives and provided an update to future production expectations.
The cost containment and margin reclamation initiatives reflects the Company’s focus on quality of ounces produced measured by contribution to cash flow instead of production volume alone. These initiatives have advanced since they were announced in the second quarter. For mines currently in commercial production, the Company committed to reducing all-in sustaining co-product cash costs(1)(2) initially by
“We are focused on our programs initiated earlier this year to push costs down to reclaim a portion of the margin per ounce lost to the declining metal prices,” said
Margin Reclamation/Cost Containment
The program, initiated in the second quarter of this year, will realize cost savings through reductions in operating costs, capital expenditures, exploration costs, and general and administrative costs, in addition to other areas.
In total, approximately
Reductions in operating costs are being realized in the following areas:
— Labour and contractors costs through headcount reductions, accelerations
of automation/efficiency initiatives and the modifications of existing
— Power, fuel, consumables and other already announced Government
initiatives, and the renegotiation of longer term contracts.
The Company expects these reductions to operating costs will total approximately
The Company has begun implementing reductions and deferrals in both sustaining and development capital spending originally anticipated for 2013.
— Initial deferrals have begun at Chapada,
Cerro Moro and Ernesto/Pau-a-
Pique among other projects, which will not impact longer term production
although would realize capital cost savings through improving
negotiations, such as for necessary land acquisitions, better pricing as
business activity reduces and improving foreign exchange rates for
— Procurement renegotiation, better use of technology and other
Sustaining and development capital expenditures are expected to be reduced by approximately
General and Administrative Costs
The Company has identified and initiated the reduction in general and administrative (“G&A”) expenses both corporately and at the mine site level.
Reductions are being realized through:
— Corporate and mine site headcount reduction.
— Reduction in salaries and overall compensation.
— Reduction in fees for corporate projects and consultants.
Total G&A is expected to be reduced by more than
The 2013 exploration program has been reviewed to reduce spending inline with the cost containment initiative. Targets were prioritized based on those with the highest prospectivity and where ounces are closest to infrastructure and can be quickly brought into production. As a result, reductions to the exploration budget are focused on greenfield, early stage reconnaissance activities and are not expected to impact the planned replacement and growth in mineral reserves and mineral resources. Exploration spending for 2013 is expected to be reduced by
2013/2014 and Future Production Expectations
Consistent with the Company’s goal in prior years, the Company continues to strive to deliver sustainable value. In doing so, the Company remains focused on cost control, operational performance and sustainable volume growth, always with a “simple to understand” objective of performing financially and maximizing cash flows. Emphasis remains on comparatively low costs to drive margins and cash flows, delivery of high quality ounces and projects while maintaining disciplined capital spending, along with our commitment to adhere to the best practices for health, safety and environmental protection.
As a result of current metal prices, the cost containment initiative, and the focus on profitability and cash flow, the Company has revised its production expectations. This new expectation also accounts for the timing in the start-up and ramp-up of recently developed operations, and the re-evaluation of certain operations whose all-in sustaining co-product cash cost structure exceeds the Company average.
The Company now expects production in 2013 to be between 1.32 and 1.37 million GEO.
In 2014, the Company now expects to produce between 1.4 and 1.5 million GEO.
In 2015, the Company now expects to produce over 1.55 million GEO.
Production expectations include over eight million ounces of annual silver production in 2013 through 2015.
Copper production at Chapada is expected to average 130 million pounds per year for 2013 through 2015.
For the balance of 2013, the cost structure is expected to improve over second quarter levels as the benefit of cost improvements are realized although the cost structure of the three new mines, as they now begin production, continues to be evaluated.
The average cost structure per GEO for 2014 to 2015 is expected to be below:
All-in sustaining by-product cash costs(2)
All-in sustaining co-product cash costs(2)
All-in sustaining cash costs on a by-product basis assume by-product credits based on
With the Company’s development projects now in commissioning, expansionary capital is expected to be significantly lower in 2014 than 2013.
With the exploration successes over the past four years including the expected increase in mineral reserves and resources expected at year end, the mineral resource base will allow the Company to achieve stated targets. As a result, exploration spending in 2014 is expected to significantly decline.
The Company continues to work toward the stated target of over 1.7 million GEO which it believes remains achievable with its existing producing mines. However, with an extended timetable, this further growth can more efficiently be delivered at better costs. Exploration results continue to support the higher level of sustainable production through its producing mines. Details of the exploration program year to date can be found in the Company’s exploration press release dated
Longer-term mineplans are under evaluation based on these exploration results and are targeted to be finalized sometime before year-end and are expected to provide some potential improvements. Some of the anticipated opportunities for increased production levels include:
— The high grade core at Corpo Sul offers the potential to increase
sustainable production levels at Chapada.
— The focus at Jacobina over the next several years will be on development
work related to the underground which is expected to be followed by
increasing production levels.
— Continued exploration success at Ernesto which allows the Company to
evaluate production at initial design levels.
— Concurrent mining of the underground zone at C1
Santa Luz instead of the
initially planned successive production.
— After a new mineral resource of the underground is determined at
year end, a feasibility study will be initiated and is expected to
be completed in 2014.
— The Maria Lazarus deposit is being evaluated as an additional ore source
for Pilar with potential to positively impact production levels.
The cost containment initiative and modest revision to production expectations are consistent with the Company’s established focus on profit maximization and cash flow generation, and will be followed by a returned focus on production growth. The Company believes prioritizing financial performance over production at this time is a prudent approach that will deliver value.
Yamana is a Canadian-based gold producer with significant gold production, gold development stage properties, exploration properties, and land positions throughout the
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 expected production and exploration, development and expansion plans at the Company’s projects discussed herein being met, the impact of proposed optimizations at the Company’s projects, the impact of the proposed new mining law in
(1) Includes co-product cash costs, sustaining capital, corporate general
and administrative expense and exploration expense
(2) Refers to a non-GAAP measure. Reconciliation of non-GAAP measures are
available at www.yamana.com/Q22013
(3) GEO assumes gold plus the gold equivalent of silver using a ratio of
FOR FURTHER INFORMATION PLEASE CONTACT:
Yamana Gold Inc.
Corporate Communications and Investor Relations
416-945-7362 or 1-888-809-0925
Yamana Gold Inc.