Yamana Gold Inc.
Q3 2022 Earnings Call Transcript

Published: 28 Oct 2022

[Operator:]

All participants, please stand by, your conference is ready to begin. Thank you all for joining us this morning. Before I turn the call over, I need to advise that certain statements made during this call today may contain forward-looking information and actual results could differ from the conclusions or projections in that forward-looking information, which include but are not limited to statements with respect to the estimation of mineral reserves and resources, the timing and amount of estimated future production, cost of production, capital expenditures, future metal prices and the cost and timing of the development of new projects. For a complete discussion of the risks, uncertainties and factors which may lead to actual financial results and performance being different from the estimates contained in the forward-looking statements. Please refer to Yamana’s press release issued yesterday announcing third quarter 2022 results as well as the management's discussion and analysis for the same period and other regulatory filings in Canada and the United States. I would like to remind everyone that this conference call is being recorded and will be available for replay today at 12

[Daniel Racine:]

Thank you, operator. Thank you all for joining us and welcome to our Third Quarter 2022 Conference Call and Webcast. Presenting with me today is Peter Marrone, our Executive Chairman. Jason is here with the rest of our senior management and they will be available to answer a question during the Q&A portion of the call. As usual, I will start with a few words on health, safety and sustainable development. The health and safety of our employees always come first. Our total recordable injury rate was 0.85 for the first nine month of 2022. And I would like to thank all our employees for remaining focused and committed to our safety values. Despite our excellent track record, this is something we are always working on improving and getting better at. The company continues the implementation of its climate action strategy during the quarter, including work on assisting our Scope 3 emission and evaluation of the establishment of an internal carbon price. Yamana has a long history of prioritizing the health and safety of its people, protecting the environment and the communities where we operate. And we are committed to continuing to improve our responsible development strategy. Giving our focus on ESG, I'm very pleased to highlight that we have recently received updated performance rating from three major ESG research and rating organization with ratings improvement reflecting continued progress in the company's deep commitment to ESG excellence. The company's 2022 S&P Corporate Sustainability Assessment score increased from 48 to 50. Its MSCI rating improved from BBB to A and our Sustainalytics score improved to 21.2 from 24.7 where our lower score signify improved performance. Turning now to our third quarter highlights, we continued our track record of operation excellence and produce over 216,000 ounces of gold exceeding our plan for the quarter. The standout result was driven by Canadian Malartic and Jacobina. Notably Jacobina achieved record quarterly throughput in the gold production producing over 50,000 ounces for the first time. Silver production of over 2.2 million ounces was in line with plan, with production expected to sequentially increase in the fourth quarter due to mining sequencing at El Peñón, we delivered strong GEO production of over 241,000 ounces despite the gold-to-silver ratio being near an all-time high and significantly above budget. With the strong year-to-date performance, Yamana is well positioned to meet its annual production guidance at the gold-to-silver ratio being in line with our original forecast. We would be well ahead of both plan and guidance. As a reminder, we have guided for production in the second half of the year to be comparable with the first – with that in the first half. With the sequential increase in the fourth quarter over the third quarter, expected to mirror that realize in the second quarter over the first quarter. On the cost front we continued to maintain solid margin against inflationary backdrop. While underlying costs for metals sold in the third quarter were within plan, the higher gold-to-silver ratio, as compared to metals prices assumed in the guidance, increased unitary costs per GEO sold by over $27 per ounce as compared to plan. The inflationary impact on costs in the third quarter was mostly offset by the productivity gains. Moreover, commodity input inflation on consumables that impact costs appears to have peaked in the second and third quarters, with many inputs off their recent highs. Despite realized inflation being above what was assumed in the Company’s guidance for the year, all in sustaining costs are expected to be within the upper end of our guidance when adjusted for the impact of the gold-to-silver ratio as noted above. Notably, the management information circular and related meeting and proxy materials in connection with a proposed business combination with Gold Fields has been filled and made public – filed and made publicly available ahead of the scheduled shareholder vote in November. Peter will speak more about the proposed deal. Turning to our third quarter financial performance, our continued operations strength delivered strong revenue, gross margins, earnings and cash flow generation. Earnings during the quarter was $19.8 million or $0.02 per share. On an adjusted basis earnings were $0.05 per share. Cash flow from operating activities before net change in working capitals came at $157.1 million. Cash flows from operating activities were $164.7 million during the quarter. We also generated free cash flow before dividend and debt repayment of $24.4 million during the quarter. We ended the quarter with cash and cash equivalents of $539.2 million inclusive of $211.3 million available for the use of the MARA Project. Cash flow from operating activities are expected to increase in the fourth quarter with increased production contribution, driving sequential improvement. And with that, I will turn it over to Peter to discuss the proposed business combination.

[Peter Marrone:]

Daniel, thank you very much. So just to recap, to begin, we have an all share offer by Gold Fields under a plan of arrangement under Canadian law at an exchange ratio of 0.6 Gold Fields shares for each Yamana share. The consideration represents a premium of just under 42% to the unaffected pre-announcement closing price or just over 30% on the weighted average on an weighted average price basis. Yamana shareholders alone as a result of this transaction about 39% of the combined company, which is in line with the respective net asset value contributions are brought to bear by each companies – each company. The management information circular relating to the meeting and proxy materials in connection with that special meeting of shareholders have been filed and are publicly available. The Yamana Board has set the close of business on October 18 as the record date for determining the Yamana shareholders who are eligible to receive notice of and to vote at that special meeting. And in addition to public filing of the information circular, the materials are currently being mailed to Yamana shareholders of record on the – that record date of October 18. The Yamana special meeting will be held at 10

[Daniel Racine:]

Thank you very much Peter. We’ll open for question. Operator?

[Operator:]

Thank you. And there are no questions registered at this time. So I’ll turn the meeting back over to Mr. Racine.

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[Daniel Racine:]

Thanks, operator. I’m happy that we were very clear with our presentation this morning. Please all note that we are planning to release an exploration update on November 9 on our mines and our project. Thank you all for joining our third quarter conference call and webcast. Please take care and be safe. Bye for now.

[Operator:]

Thank you. The conference has now ended. Please disconnect your lines at this time. And we thank you for your participation.