Yamana Annual Report 2019
The Stage
is Set
YAMANA GOLD 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.
CONTENTS
1
8
Executive Chairman Message
President and CEO Message
12 Mineral Reserves and Mineral Resources
20
2019 Financial Review
139 Corporate Governance & Committees of the Board
140 Corporate Information
COVER : Sheila Magalhães, geologist at the Jacobina mine, evaluates rock samples.
Sheila has been at Yamana since 2006 and works on geologic modelling.
Executive Chairman Message
Evolve, Adapt,
Advance
To be successful in mining, companies must take a long-term strategic
perspective. At Yamana, our planning and development activities are
measured in years and our exploration program in decades. At the
same time, mining companies must also constantly evolve and adapt.
That is because change is the one constant in our business, be it in
commodity prices, laws and regulations, or community expectations.
We as leaders, therefore, must be nimble, proactive, and avoid
complacency at all costs or risk being left behind.
Peter Marrone
Executive Chair
In Yamana’s sixteen year history,
environmental, and community
the Company has undergone
performance continued to meet
several evolutions, always emerging
the high standards that we set for
stronger. Two thousand nineteen
ourselves and that our community
marked the culmination of our latest
partners expect and deserve.
evolution—and we are stronger than
ever. We significantly improved our
balance sheet and financial flexibility,
reducing net debt by $889.1 million.
Net free cash flow increased by 63%
to $358.4 million, underpinning an
equally dramatic improvement in our
cash position, which climbed 61% to
$158.8 million at year-end 2019. We
raised our annual dividend by 150%
from 2 cents per share to 5 cents.
Our production exceeded guidance,
our projects progressed, our mineral
reserves grew, and our health, safety,
We are, as a result, well positioned
to further advance our organic
growth projects and exploration
pipeline while continuing to increase
shareholder returns. We are equally
well positioned to benefit fully from
the resurgence in the price of gold,
which surpassed $1,500 per ounce
last year. Indeed, we are already
benefiting, as higher metal prices
coupled with our improved
fundamentals to drive our share price
up by 67% last year on the New York
Annual Report 2019
1
“ Yamana is on the
cusp of a new
growth phase
that is expected
to carry us into
the next several
decades.”
Executive Chairman Message (cont.)
Stock Exchange, among the highest
These changes helped us achieve
in our peer group. And yet, despite
many of the aforementioned
the increase, Yamana continues to
objectives making us more lean,
demonstrate considerable upside
nimble, efficient, and diverse, while
especially if we measure ourselves
streamlining and strengthening
against a peer multiple to cash flow
our portfolio. But there was a final
generation. Yamana is on the cusp of a
step that we needed to take to
new growth phase that is expected to
get to where we needed to be,
carry us into the next several decades.
and that was the sale of Chapada.
Context is important and, given what
I mentioned earlier as the long-term
nature of our industry, I would like
to briefly discuss what longer-term
decisions were made that got us here.
We sold the operation for an initial
$800 million cash payment plus
several contingency payments,
one of which we later monetized,
bringing total cash consideration
to $865.5 million.
Chapada Sale the Final Piece
We were prudently managing
of the Puzzle
Last year on these pages, I outlined
our multi-year strategy to improve our
portfolio, mine plans, management,
board, governance, efficiency, and
production. This encompassed
numerous changes including:
the rightsizing of El Peñón, which
enjoyed its strongest year since we
implemented the rightsizing in late
2016; the reset at Jacobina, which
posted record production for the
second straight year; the development
of Cerro Moro, our newest mine; the
streamlining of our portfolio with the
sale of Mercedes and Gualcamayo
along with the spin off of Brio
Gold; the refresh of our board and
enhancements to our management
structure, including centralizing
senior leadership at our head office
and appointing a new generation of
general managers at our mines.
our portfolio to properly manage
allocation of capital and mitigate risk.
We reasoned that the asset would
be in a period of lower cash flows
which coincided with required capital
spending. Further, we were aware of
the significant sensitivity Chapada
had to metal prices and we were not
prepared to take the risk on copper
prices declining instead of increasing.
We took a contrarian view on copper
prices to protect ourselves against risk,
which led to the decision to sell the
asset. We recognized fair value and
the knowledge that the buyer would
take a long-term view to improving
the asset and absorbing the impact of
potentially lower metal prices.
While we believed it was the right
time to sell Chapada, we did not
take this decision lightly. Chapada
was Yamana’s first major mine and
significant cash flow contributor,
entering production shortly after we
2
Yamana Gold
Operations
CANADA
Canadian Malartic, Canada
- 50% Yamana Owned
- Open pit gold mine
Jacobina, Brazil
- 100% Yamana Owned
- Complex of Underground Mines
El Peñón, Chile
- 100% Yamana Owned
- High grade underground
gold-silver mine
CHILE
BRAZIL
ARGENTINA
Minera Florida, Chile
- 100% Yamana Owned
- Underground gold-silver mine
Cerro Moro, Argentina
- 100% Yamana Owned
- Open pit/Underground Mine
Annual Report 2019
3
Executive Chairman Message (cont.)
took the Company public in 2003.
we could not have predicted the
Before we acquired it, Chapada
sharp increase in the price of gold
had been an advanced exploration
following the sale, the upturn
project for decades but no one had
provided an immediate opportunity
been able to develop it. We saw the
to monetize the instrument and
potential, however, and we were
increase our cash balance. After
bullish on copper. Despite long odds,
conducting an in-depth analysis, we
we developed Chapada on budget
chose to leverage that opportunity,
and ahead of schedule. Over time,
monetizing the Gold Price Instrument
we turned it into a world-quality
for $65.5 million in a competitive
asset unlocking significant value.
bidding process.
“ Agua Rica as one
of the longest life,
lowest capital
intensity copper
projects in the
world.”
In so doing, we did not only build
a successful mining operation, we
built close ties with the communities
we supported and the thousands of
people we hired, trained, and watched
flourish. It is no easy thing to part with
so many people who you care deeply
for. But there comes a time—and this
is true of all assets—when you can
obtain better value from a sale. We
found a buyer who we believed would
nurture what we built and provide fair
value. We recognized that the sale of
Chapada would have shorter-term
In the wake of the sale, we took a
critical lens to our corporate overhead
to align our cost structure to our
remaining assets. This resulted in a
$15 million reduction in annual general
and administrative (G&A) expenses
and a further streamlining of our
organizational structure. Our annual
G&A costs are now approximately
$60 million, down from $75 million at
the start of 2018, a 20% reduction.
Advancing Agua Rica
consequences, especially on our share
While the Chapada sale was an
price, but reasoned that the longer-
important driver of our success last
term benefits would outweigh those
year, it was far from the only driver.
shorter-term consequences.
We made significant progress towards
Consideration for Chapada also
included several contingency
payments, one of which effectively
gave us an option on the price of
gold. This contingency, or Gold Price
Instrument, gave Yamana the right
to receive up to $125 million in cash
based on the price of gold over the
five-year period from the close
the development of the Agua Rica
project in 2019. Agua Rica is a large
copper, gold, silver and molybdenum
project located in the Catamarca
province of Argentina. The potential
of this project has not always been
well understood, not unlike Chapada
in its pre-development stage. But that
is beginning to change.
of the transaction. It also gave us
In March 2019, we announced an
the right to monetize the Gold
integration agreement with our
Price Instrument at any time. While
partners in the Agua Rica project,
4
Yamana Gold
Glencore and Newmont, under which
Maximizing return on investment
and raise gold production to 170,000
the project would be developed
to shareholders through sustainable
ounces per year. Daniel addresses
and operated using the existing
dividends is key to our strategy. Last
the expansion project in greater
infrastructure of the Alumbrera mine.
year, we announced two dividend
detail in his letter that follows, but I
The agreement significantly de-risks
increases, bringing our annual
think it is worth noting that Jacobina
the project and reduces its complexity
dividend to 5 cents per share from
is a mine that was producing just
and environmental footprint.
2 cents. We also—in a rare step for
75,000 ounces as recently as 2014.
We also released positive pre-
feasibility results last year that further
underscored Agua Rica as one of the
longest life, lowest capital intensity
copper projects in the world. We
continue to review strategic and
value-creating alternatives to advance
the project towards a full feasibility
study. We are excited about the
potential of this project and the value
that it will create for our shareholders.
Sticking to Our Knitting
When I am asked how Yamana’s
strategy will change in this higher
gold price environment, I typically
respond as follows: “We plan to stick
to our knitting.”
In other words, our strategy will
not change. We will focus on the
compelling growth opportunities
at our existing operations, we will
advance our project pipeline, we will
continue to invest in exploration,
and we will continue to maximize
free cash flow and shareholder
returns. The higher gold price
does, however, further improve our
financial flexibility. The fact is we were
generating free cash at $1,200 gold;
we generate substantially more at
$1,500 gold, and that is all upside
for our shareholders.
our industry—established a reserve
We took the deliberate step six years
fund to maintain sustainability of
ago to scale back production to
our dividend for at least three years.
allow time for development work to
In addition, we adopted a policy
advance and for further exploration
of treating dividends on a per gold
into new mineralized areas. Many
equivalent ounce (GEO) basis with a
people strongly advised us to sell
target range of $50 to $100 per GEO.
the asset around that time, but we
We are already at $50 per GEO, and
saw the potential, and that patience,
we will regularly evaluate whether we
persistence, planning and the ability
can sustain additional increases.
to adapt that I spoke of at the start of
Jacobina a World-Quality Mine
We will continue to leverage our deep
expertise and experience in geological
this letter has paid off.
El Peñón Continues to
Replace Reserves
modelling, asset interpretation, and
Strong exploration results were a
mine planning and development to
common theme across our operations
improve our portfolio. This know-how
last year. This includes the El Peñón
is rooted in our DNA, dating back
mine, which developed a new
to our earliest days at Chapada
structural interpretation of faulting
to more recent initiatives such as
in the mine’s Deep Orito vein that
the right-sizing of El Peñón and
is helping to define new high grade
recalibration of Jacobina.
mineralization with the potential to
Jacobina has emerged as a world-
increase mine life.
quality mine in recent years. The mine
El Peñón is a resilient operation that
produced a record 159,000 ounces of
has continually replaced mineral
gold last year while increasing mineral
reserves, and last year was no
reserves by 19%. We are very pleased
different. The mine replaced gold and
with these results, but the best is still
silver mineral reserves over and above
to come. The operation is advancing
depletion by 15% and 21%, respectively,
a two-phased expansion, with Phase
marking the third straight year mineral
1 involving modest plant upgrades
reserves ended the year higher than
that will increase throughput to a
where they started. We are confident
sustainable 6,500 tonnes per day
that this mine has a lot of life in it yet.
Annual Report 2019
5
“ We are confident
that at least one
future Yamana
mine will emerge
from this program
with a gold
inventory large
enough to support
a mine with
150,000 ounces
of annual
production for at
least eight years.”
Executive Chairman Message (cont.)
East Gouldie Discovery
Significant Milestone
We have been working for several
years now with Agnico Eagle, our
joint venture partner at Canadian
Malartic, to build a critical mass of
mineral resources to facilitate an
underground mining operation at
Canadian Malartic. The discovery of
the East Gouldie zone, announced
last September, was a significant
milestone in this regard. Drilling
results indicate that the East Gouldie,
East Malartic, and Sladen zones are
converging at depth, suggesting the
prospect of a large underground bulk
tonnage opportunity that has the
potential to extend mine life at higher
grades. We look forward to updating
you on this exciting development as
exploration progresses.
Laying the Foundation for the Next
Generation of Yamana Mines
We have always taken a long-term
that we continue to explore and
evaluate. We have the flexibility
to quickly prioritize these or other
projects in the portfolio as and when
merited by drill results.
We are allocating $53 million to the
generative exploration program
over three years, a large portion of
which will be derived from the recent
monetization of our royalty portfolio.
Monetizing Inactive Assets an
Important Part of Our Strategy
Monetizing inactive assets, such as
our royalty portfolio, and applying
the proceeds towards active assets
is another important element of our
strategy. Monetizations provide an
alternative source of capital that
allows us to invest in our portfolio
while ensuring we continue to meet
our primary objective of maximizing
free cash flow and returning cash to
shareholders.
strategic perspective with a decades-
We recently sold our royalty
long time horizon. That is why we
portfolio for total consideration
created a generative exploration
program to advance the most highly
of $65 million to Guerrero Ventures.
This included $20 million in cash,
prospective exploration projects in
which, as mentioned, will help fund
our portfolio. We are confident that
the generative exploration program.
at least one future Yamana mine will
It also included shares in a newly
emerge from this program with a gold
created royalty company valued
inventory large enough to support a
at $45 million. The new company,
mine with 150,000 ounces of annual
Nomad Royalty, has a highly
production for at least eight years.
experienced management team,
While the program is currently
focused on projects in Brazil and
Canada, Yamana also holds large
land packages in Chile and Argentina
strong asset base, and a mandate
to grow. We believe Nomad has
considerable upside and, going
forward, we will have the option to
monetize this asset and generate
6
Yamana Gold
1.02M
GEO
900k oz
Gold
10.6M oz
Silver
substantial additional value for our
injury. We also continued to advance
shareholders.
This model, I would note, is similar to
the approach that we took with the
creation of our Brio Gold subsidiary
several years ago. Brio became
a successful standalone public
company that provided valuation
upside to Yamana after it was
acquired by Leagold Mining Corp.,
which itself recently merged with
Equinox Gold Corp., generating even
more value for Yamana.
High ESG Standards Integral to
Running a Profitable Business
We have always taken our
environmental, social and governance
(ESG) responsibilities and obligations
with the utmost seriousness. We
believe that high ESG standards
go hand in hand with running a
profitable business and attracting
our climate change strategy last year,
implementing action plans to mitigate
potential impacts identified by risk
assessments conducted in 2018.
Stronger Than Ever
I would like to close by thanking my
fellow Board members. Your support,
wisdom, and guidance were invaluable
in what was another exciting and
eventful year for Yamana. I would
also like to express my gratitude and
appreciation to Yamana’s employees
across the Americas for their hard
work, diligence, and dedication. You
are the lifeblood of this Company
and your commitment to excellence
every day is what truly drives our
success. Finally, I would like to
acknowledge and thank all of our
stakeholders for their continued
support and trust in Yamana.
investment. Indeed, many of the
We have, as I said at the start of this
world’s largest institutional investors
letter, completed the latest evolution
are paying much closer attention to
of Yamana and laid the foundation
ESG performance than ever before.
for a new phase of growth. We have
We welcome this attention, and
strengthened our portfolio and we are
believe our high standards and strong
advancing significant growth projects.
performance in the areas of health,
We are laser-focused on maximizing
safety, environment, and community
free cash flow and continuing to
relations are competitive advantages
increase shareholder returns. The
for Yamana.
I am pleased to report that our total
recordable injury frequency rate fell to
0.57 in 2019, a 5% decrease from 2018,
and a 24% decline over the past three
years. El Peñón has been a standout
in this regard, achieving its second
straight year without a lost-time
stage is set, we are stronger than ever,
and we will continue to deliver.
“Peter Marrone”
Peter Marrone
Executive Chairman
Annual Report 2019
7
President and CEO Message
Achieving Sustained
Excellence
Operational excellence is a core value at Yamana. It is an inherently
difficult objective to achieve because the bar is constantly being raised,
but I can tell you that in 2019 we achieved sustained excellence in many
areas of our operations.
The El Peñón mine achieved a second
increased sharply, improving financial
straight year without a lost-time
flexibility and allowing us to continue
injury. That is 8.9 million work hours,
reducing net debt following the sale
a remarkable accomplishment.
of Chapada. In the fourth quarter,
Jacobina increased production in
we lowered net debt by a further
each quarter of 2019 en route to
$59.8 million to $889.1 million, and
its second straight year of record
we expect this downward trend to
production. Minera Florida closed
accelerate in 2020 as our free cash
out 2019 in outstanding fashion,
flow profile continues to grow.
producing 8,200 ounces of gold
during December, its best month of
the year and, we believe, a sign of
things to come.
Production Exceeds Guidance
Achieving sustained excellence
translated into strong financial and
operational results. Gold, silver,
and gold equivalent ounce (GEO)
production all exceeded guidance.
Net earnings of $225.6 million, or
24 cents per share basic and diluted,
were our highest in seven years. Free
cash flow and cash balances both
Costs were in line with guidance after
factoring in the removal of production
from Chapada in the second half
of 2019 along with the higher GEO
ratio that resulted from gold’s
outperformance versus silver and
increased spending on exploration.
Strong Year in Exploration
The decision to increase exploration
spend was deliberate, aimed at
building on the robust drilling results
being obtained across our operations.
We issued positive exploration
Daniel Racine
President and Chief
Executive Officer
8
Yamana Gold
“ At Canadian
Malartic, positive
drilling results
propelled the
operation to a
111 per cent
increase in inferred
mineral resources
last year.”
updates for all five of our mines in
for the deposit earlier this year. The
the second half of 2019, announcing
zone currently consists of 12.8 million
new high-grade mineralization in
tonnes of ore at 3.34 grams per tonne
key sectors of the Jacobina mine,
for 1.37 million ounces (50% basis).
new veins at better than life-of-
East Gouldie remains open in all
mine grades in the PV Sur-Fantasma
directions and, together with the
corridor at Minera Florida, and the
East Malartic, Odyssey, Rand,
discovery of a new mineralized
Sheehan, and Sladen zones, it is a
zone at Cerro Moro, to share a few
key source of organic growth that
notable results.
Earlier this year, we provided an
update on our generative exploration
program, which focuses on our most
prospective advanced and advancing
exploration projects such as Lavra
Velha and Jacobina Norte in Brazil
and Monument Bay and Domain
here in Canada. We are budgeting
$53 million for the program over three
years with the bulk of that funding
to be derived from monetizations of
non-cash producing assets, as Peter
explained in his letter. We believe
that using this alternative method of
funding creates an optimum balance
between investing in new projects and
maximizing free cash flow.
continues to advance with the end
goal of developing a significant
underground mining operation at
Canadian Malartic.
Jacobina Phased Expansion
on Track
Jacobina increased mineral reserves
by 19 per cent last year and is our
longest life mine with an estimated
life of at least 16 years. The mine’s
robust reserve base supports the
phased expansion plan, another key
organic growth initiative for Yamana.
Phase 1, calls for an increase in daily
throughput to a sustainable 6,500
tonnes per day bringing production to
170,000 ounces per year. The target
date for completion of this initial
Canadian Malartic Inferred Mineral
phase is mid-2020.
Resources Rise Sharply
Phase 2 envisions a broader plant
At Canadian Malartic, positive drilling
expansion to raise throughput to
results propelled the operation to
7,500-to-8,500 tonnes per day
a 111 per cent increase in inferred
and increase production to up
mineral resources last year. The
to 225,000 ounces per year. A
East Malartic zone and the newly
prefeasibility study to evaluate project
discovered East Gouldie zone
economics along with optimum
accounted for a significant portion
mining and a development timeline is
of these gains. We announced the
expected to be completed in the first
East Gouldie discovery in September
quarter of 2020.
2019 and issued a maiden resource
Annual Report 2019
9
“ El Peñón is
currently
completing its
twenty-first year
of operation and
gold mineral
reserves are
higher today
than they were
when operations
commenced
in 1999.”
President and CEO Message (cont.)
El Peñón Finding New Ways to
that in 2020, Cerro Moro will have
Increase Mineral Reserves
more meaningful contributions
El Peñón continues to prove its
resilience. The mine is currently
completing its twenty-first year of
operation and gold mineral reserves
are higher today than they were
when operations commenced in
1999. The mine increased mineral
reserves for gold and silver well
beyond depletion for the third straight
year. A contributing factor to these
stellar results is the use of artificial
intelligence and machine learning to
reinforce conventional drill targeting
and identify additional zones of
interest. This has generated positive
results and is a good example of
how Yamana strategically integrates
technology in cost-effective ways to
improve efficiency and productivity.
Cerro Moro Silver Production
Exceeded Plan in 2019
At Cerro Moro, silver production
exceeded plan in 2019, but the
positive impact on GEO production
was partially offset by the higher
GEO ratio that resulted from gold’s
outperformance relative to silver
during the year. We expect silver
to continue to be a meaningful
contributor to GEO in 2020 in
relation to gold. We also expect
from underground mines, providing
enhanced mine flexibility and
efficiencies.
The operation continues to pursue
a drilling and surface exploration
program at near-mine targets and
across the property. In 2019, gold and
silver inferred mineral resources rose
29% and 10%, respectively.
Minera Florida has Turned
the Corner
Minera Florida had its strongest
operational performance of the year
in the fourth quarter underpinned by
a very strong December. Quarter on
quarter throughput increased, as did
grades and mechanical availability.
On that latter point, and in yet
another example of how we have
become more nimble and efficient,
we transferred certain equipment
from El Peñón and Jacobina to
Minera Florida in recent quarters
that those operations did not require
due to improved efficiencies. This
equipment transfer had the duo
benefit of reducing additional capital
expenditures at Minera Florida and
improving productivity at the mine.
In relation to mining sequence, we
the Zoe underground mine, which
continued to shift production to the
experienced slight sequencing delays
core mine to focus on exploration
in the fourth quarter of 2019, to be
and development in the Agua Fria
a more meaningful contributor to
concessions and prepare the PVS,
production in 2020, along with a
Pataguas, and Don Leopoldo veins for
return to mineral reserve grade mining
long-term success. We truly believe
and processing. It is also expected
that this mine has turned the corner.
10
Yamana Gold
Mineral Reserves and Resources
the value that it represents to our
who are fully committed to our
Social License to Operate Index
our employees for their dedication
Replaced Depletion
shareholders.
We replaced mineral reserve
depletion in 2019, exiting the year with
7.86 million ounces of gold mineral
We continue to work closely with
reserves. Measured and indicated
our host communities to understand
gold mineral resources increased in
their priorities and ensure that
2019 to 12.67 million ounces while
our community programs align
gold inferred mineral resources
with those priorities. One way we
surged 27 per cent to 12.08 million
measure how we are performing
ounces. Canadian Malartic was a
is through our social license to
substantial contributor, adding
operate index. The index is a
2.57 million ounces of new inferred
series of quarterly community
mineral resources last year, while
perception surveys designed to give
culture of excellence. I would like
to take this opportunity to thank
and commitment to safety and
production, which in my 30-plus years
of mining, have always gone hand in
hand. And, lastly, I would like to thank
all of our stakeholders, including our
community and government partners,
shareholders, suppliers, and the many
non-governmental organizations with
whom we work to make a positive
difference. We will continue to work
relentlessly to maintain your trust
and support.
Jacobina increased its inferred
mineral resource inventory by
398,000 ounces.
We exited 2019 with 63.82 million
ounces of silver mineral reserves
along with 90.1 million ounces in the
measured and indicated and inferred
mineral resource categories. El Peñón,
as noted above, was a standout,
adding just over 9 million ounces of
new silver mineral resources in the
measured and indicated category
and 1.4 million ounces in the inferred
mineral resource category.
us a quantitative evaluation of our
social license and provide feedback
on our social license, a driver of
ESG (environmental, social, and
governance) performance. We began
“Daniel Racine”
Daniel Racine
President and Chief Executive Officer
implementing this leading-edge tool
in 2018 and I am pleased to inform
you that the perception of our social
license has increased significantly.
The Stage is Set
We are on an evolutionary continuum
that continues to make us better,
stronger, and able to deliver more
value. Our free cash flow has grown
We made significant progress on
to a point where we can continue
the Agua Rica project last year, as
reducing debt while supporting a
Peter mentioned in his letter. Proven
substantially higher dividend and
and probable gold mineral reserves
advancing our organic growth
increased by 13 per cent from year-
initiatives. We have a strong portfolio
end 2018 to 7.4 million ounces, while
of operating assets and projects
proven and probable copper mineral
in the Americas with excellent
reserves rose 21 per cent to 11.8 billion
potential to increase mineral
pounds. Mineral resources decreased
reserves and extend mine life. And,
marginally due to the conversion of
most importantly, are business is
ounces to mineral reserves, but we
underpinned by outstanding people
are excited about this project and
at every level of the organization
Annual Report 2019
11
Mineral Reserves
and Mineral Resources
Mineral Reserves (Proven and Probable)
Gold
Yamana Gold Projects
Canadian Malartic Open Pit (50%)
Canadian Malartic Underground (50%)
Canadian Malartic Total (50%)
Cerro Moro
El Peñón Ore
El Peñón Stockpiles
El Peñón Total
Jacobina
Jeronimo (57%)
Minera Florida Ore
Minera Florida Tailings
Minera Florida Total
Total Gold Mineral Reserves
Agua Rica
Alumbrera (12.5%)
Silver
Yamana Gold Projects
Cerro Moro
El Peñón Ore
El Peñón Stockpiles
El Peñón Total
Minera Florida Ore
Minera Florida Tailings
Minera Florida Total
Total Silver Mineral Reserves
Agua Rica
Copper
Yamana Gold Projects
Agua Rica
Alumbrera (12.5%)
Zinc
Yamana Gold Projects
Minera Florida Ore
Minera Florida Tailings
Minera Florida Total
Total Zinc Mineral Reserves
Molybdenum
Yamana Gold Projects
Agua Rica
Alumbrera (12.5%)
Totals may not add due to rounding
Proven Mineral Reserves
Probable Mineral Reserves
Total – Proven and Probable
Tonnes
(000’s)
Grade
(g/t)
Contained
oz. (000’s)
Tonnes
(000’s)
Grade
(g/t)
Contained
oz. (000’s)
Tonnes
(000’s)
Grade Contained
oz. (000’s)
(g/t)
23,847
0
23,847
12
577
18
595
20,720
6,350
1,275
0
1,275
52,799
587,200
8,435
0.83
0.00
0.83
5.99
5.03
3.03
4.97
2.29
3.91
3.61
0.00
3.61
1.89
0.25
0.39
635
0
635
2
93
2
95
1,525
798
148
0
148
3,204
4,720
105
43,057
0
43,057
1.27
0.00
1.27
1,518
10.79
5,078
724
5,802
13,456
2,331
2,186
1,248
3,434
69,598
517,600
294
4.85
1.23
4.40
2.24
3.79
3.76
0.94
2.74
2.08
0.16
0.37
1,754
0
1,754
526
792
29
821
968
284
264
38
302
66,904
0
66,904
1.11
0.00
1.11
1,530
10.75
5,655
742
6,397
34,176
8,681
3,461
1,248
4,709
4.87
1.28
4.45
2.27
3.88
3.71
0.94
2.98
2.00
0.21
0.39
2,389
0
2,389
529
885
31
916
2,493
1,082
413
38
450
7,859
7,382
109
4,656
2,663
3
122,397
1,104,800
8,728
Tonnes
(000’s)
Grade
(g/t)
Contained
oz. (000’s)
Tonnes
(000’s)
Grade
(g/t)
Contained
oz. (000’s)
Tonnes
(000’s)
Grade Contained
oz. (000’s)
(g/t)
12 1158.5
577
18
595
1,275
0
1,275
1,882
169.9
121.7
168.5
24.7
0.0
24.7
77.6
456
3,153
70
3,224
1,014
0
1,014
4,694
1,518
614.8
30,005
1,530
619.2
30,461
5,078
724
5,802
2,186
1,248
3,434
163.4
14.4
144.8
21.7
14.5
19.1
26,679
335
27,014
1,528
584
2,112
5,655
742
6,397
3,461
1,248
4,709
164.1
17.0
147.0
22.8
14.5
20.6
29,832
406
30,238
2,542
584
3,125
10,754
171.0
59,131
12,636
157.1
63,824
587,200
3.0
57,014
517,600
2.6
43,766
1,104,800
2.8
100,781
Tonnes
(000’s)
Grade
(%)
Contained
lbs (mm)
Tonnes
(000’s)
Grade
(%)
Contained
lbs (mm)
Tonnes
(000’s)
Grade Contained
lbs (mm)
(%)
587,200
8,435
0.57
0.40
7,379
75
517,600
294
0.39
0.38
4,450
2
1,104,800
8,728
0.49
0.40
11,829
77
Tonnes
(000’s)
Grade
(%)
Contained
lbs (mm)
Tonnes
(000’s)
Grade
(%)
Contained
lbs (mm)
Tonnes
(000’s)
Grade Contained
lbs (mm)
(%)
1,275
0
1,275
1,275
1.29
0.00
1.29
1.29
36
0
36
36
2,186
1,248
3,434
3,434
1.18
0.58
0.96
0.96
57
16
73
73
3,461
1,248
4,709
4,709
1.22
0.58
1.05
1.05
93
16
109
109
Tonnes
(000’s)
Grade
(%)
Contained
lbs (mm)
Tonnes
(000’s)
Grade
(%)
Contained
lbs (mm)
Tonnes
(000’s)
Grade Contained
lbs (mm)
(%)
587,200
8,435
0.030
0.013
388
2.45
517,600
294
0.030
0.014
342
0.09
1,104,800
8,728
0.030
0.013
731
2.55
Annual Report 2019
13
Mineral Resources (Measured, Indicated and Inferred)
(exclusive of Mineral Reserves)
Gold
Yamana Gold Projects
Arco Sul
Canadian Malartic Open Pit (50%)
Odyssey Underground (50%)
East Malartic Underground (50%)
East Gouldie Underground (50%)
Canadian Malartic Total (50%)
Cerro Moro
El Peñón Mine
El Peñón Tailings
El Peñón Stockpiles
El Peñón Total
Jacobina
Jeronimo (57%)
La Pepa
Lavra Velha
Minera Florida
Monument Bay
Suyai
Total Gold Mineral Resources
Agua Rica
Alumbrera (12.5%)
Silver
Yamana Gold Projects
Cerro Moro
El Peñón Mine
El Peñón Tailings
El Peñón Stockpiles
El Peñón Total
Minera Florida
Suyai
Total Silver Mineral Resources
Agua Rica
Totals may not add due to rounding
Measured Mineral Resources
Indicated Mineral Resources
Total – Measured and Indicated
Inferred Mineral Resources
Tonnes
(000’s)
Grade
(g/t)
Contained
oz. (000’s)
Tonnes
(000’s)
Grade
(g/t)
Contained
oz. (000’s)
Tonnes
(000’s)
Grade
(g/t)
Contained
oz. (000’s)
Tonnes
(000’s)
Grade
(g/t)
Contained
oz. (000’s)
0
2,020
0
0
0
2,020
18
627
0
0
627
27,705
772
15,750
0
2,377
0
0
49,268
53,600
6,737
0.00
1.42
0.00
0.00
0.00
1.42
9.02
4.53
0.00
0.00
4.53
2.26
3.77
0.61
0.00
5.15
0.00
0.00
1.89
0.13
0.34
0
92
0
0
0
92
5
91
0
0
91
2,014
94
308
0
394
0
0
2,998
224
74
0
6,720
1,011
4,962
0
12,693
1,234
5,631
0
1,019
6,650
14,765
385
133,682
0
3,475
36,581
4,700
214,165
206,300
1,916
0.00
1.57
2.10
2.18
0.00
1.85
4.33
2.93
0.00
1.13
2.65
2.27
3.69
0.57
0.00
4.79
1.52
15.00
1.41
0.11
0.53
0
339
68
347
0
755
172
530
0
37
567
1,076
46
2,452
0
535
1,787
2,286
9,675
730
33
Tonnes
(000’s)
Grade
(g/t)
Contained
oz. (000’s)
Tonnes
(000’s)
Grade
(g/t)
Contained
oz. (000’s)
Tonnes
(000’s)
Grade
(g/t)
Contained
oz. (000’s)
Tonnes
(000’s)
Grade
(g/t)
Contained
oz. (000’s)
18
1,012.2
627
0
0
627
2,377
0
3,021
53,600
123.3
0.0
0.0
123.3
32.3
0.0
57.0
1.6
587
2,484
0
0
2,484
2,467
0
5,538
2,671
1,234
5,631
0
1,019
6,650
3,475
4,700
16,059
206,300
333.3
102.1
0.0
28.8
90.9
26.2
23.0
75.7
1.9
13,222
18,485
0
942
19,427
2,922
3,523
39,095
12,337
0
8,740
1,011
4,962
0
14,713
1,252
6,257
0
1,019
7,276
42,470
1,157
149,432
0
5,852
36,581
4,700
263,433
259,900
8,653
1,252
6,257
0.00
1,019
7,276
5,852
4,700
19,080
259,900
0.00
1.54
2.10
2.18
0.00
1.79
4.40
3.09
0.00
1.13
2.81
2.26
3.74
0.57
0.00
4.93
1.52
15.00
1.50
0.11
0.38
343.0
104.2
0.0
28.8
93.7
28.6
23.0
72.8
1.8
0.0
431
68
347
0
847
177
621
0
37
658
3,090
139
2,760
0
928
1,787
2,286
12,672
954
107
13,809
20,969
0
942
21,911
5,389
3,523
44,632
15,008
5,000
2,354
11,684
39,382
12,760
66,180
2,175
4,510
13,767
0
18,276
18,528
1,118
37,900
3,934
4,365
41,946
900
200,323
742,900
849
2,175
4,510
13,767
0
18,276
4,365
900
25,717
742,900
4.02
1.22
2.22
2.05
3.34
2.30
3.91
3.38
0.55
0.00
1.25
2.36
4.49
0.50
4.29
5.32
1.32
9.90
1.87
0.09
0.46
222.2
120.0
18.9
0.0
43.9
25.1
21.0
54.9
1.6
646
92
833
2,596
1,369
4,890
273
490
245
0
735
161
620
543
747
1,406
1,781
274
12,075
2,150
13
15,542
17,406
8,380
0
25,786
3,517
575
45,421
38,693
NOTE: Mineral Resources are exclusive of Mineral Reserves. Mineral Resources are not Mineral Reserves and do not have demonstrated economic viability.
14
Yamana Gold
Measured Mineral Resources
Indicated Mineral Resources
Total – Measured and Indicated
Inferred Mineral Resources
Tonnes
(000’s)
Grade
(g/t)
Contained
oz. (000’s)
Tonnes
(000’s)
Grade
(g/t)
Contained
oz. (000’s)
Tonnes
(000’s)
Grade
(g/t)
Contained
oz. (000’s)
Tonnes
(000’s)
Grade
(g/t)
Contained
oz. (000’s)
0
8,740
1,011
4,962
0
14,713
1,252
6,257
0
1,019
7,276
42,470
1,157
149,432
0
5,852
36,581
4,700
263,433
259,900
8,653
0.00
1.54
2.10
2.18
0.00
1.79
4.40
3.09
0.00
1.13
2.81
2.26
3.74
0.57
0.00
4.93
1.52
15.00
1.50
0.11
0.38
0.0
431
68
347
0
847
177
621
0
37
658
3,090
139
2,760
0
928
1,787
2,286
12,672
954
107
5,000
2,354
11,684
39,382
12,760
66,180
2,175
4,510
13,767
0
18,276
18,528
1,118
37,900
3,934
4,365
41,946
900
200,323
742,900
849
4.02
1.22
2.22
2.05
3.34
2.30
3.91
3.38
0.55
0.00
1.25
2.36
4.49
0.50
4.29
5.32
1.32
9.90
1.87
0.09
0.46
646
92
833
2,596
1,369
4,890
273
490
245
0
735
1,406
161
620
543
747
1,781
274
12,075
2,150
13
Tonnes
(000’s)
Grade
(g/t)
Contained
oz. (000’s)
Tonnes
(000’s)
Grade
(g/t)
Contained
oz. (000’s)
Tonnes
(000’s)
Grade
(g/t)
Contained
oz. (000’s)
Tonnes
(000’s)
Grade
(g/t)
Contained
oz. (000’s)
1,252
6,257
0.00
1,019
7,276
5,852
4,700
19,080
259,900
343.0
104.2
0.0
28.8
93.7
28.6
23.0
72.8
1.8
13,809
20,969
0
942
21,911
5,389
3,523
44,632
15,008
2,175
4,510
13,767
0
18,276
4,365
900
25,717
742,900
222.2
120.0
18.9
0.0
43.9
25.1
21.0
54.9
1.6
15,542
17,406
8,380
0
25,786
3,517
575
45,421
38,693
NOTE: Mineral Resources are exclusive of Mineral Reserves. Mineral Resources are not Mineral Reserves and do not have demonstrated economic viability.
Gold
Yamana Gold Projects
Arco Sul
Canadian Malartic Open Pit (50%)
Odyssey Underground (50%)
East Malartic Underground (50%)
East Gouldie Underground (50%)
Canadian Malartic Total (50%)
Cerro Moro
El Peñón Mine
El Peñón Tailings
El Peñón Stockpiles
El Peñón Total
Jacobina
Jeronimo (57%)
La Pepa
Lavra Velha
Minera Florida
Monument Bay
Suyai
Total Gold Mineral Resources
Agua Rica
Alumbrera (12.5%)
Silver
Yamana Gold Projects
Cerro Moro
El Peñón Mine
El Peñón Tailings
El Peñón Stockpiles
El Peñón Total
Minera Florida
Suyai
Total Silver Mineral Resources
Agua Rica
Totals may not add due to rounding
2,020
0
0
0
0
2,020
18
627
0
0
627
27,705
772
15,750
2,377
0
0
0
49,268
53,600
6,737
0.00
1.42
0.00
0.00
0.00
1.42
9.02
4.53
0.00
0.00
4.53
2.26
3.77
0.61
0.00
5.15
0.00
0.00
1.89
0.13
0.34
0.0
0.0
32.3
0.0
57.0
1.6
0
92
0
0
0
92
5
91
0
0
91
2,014
94
308
394
0
0
0
2,998
224
74
587
2,484
0
0
0
2,484
2,467
5,538
2,671
18
1,012.2
627
123.3
627
123.3
0
0
0
2,377
3,021
53,600
0
6,720
1,011
4,962
0
12,693
1,234
5,631
0
1,019
6,650
14,765
385
133,682
0
3,475
36,581
4,700
214,165
206,300
1,916
1,234
5,631
0
1,019
6,650
3,475
4,700
16,059
206,300
0.00
1.57
2.10
2.18
0.00
1.85
4.33
2.93
0.00
1.13
2.65
2.27
3.69
0.57
0.00
4.79
1.52
15.00
1.41
0.11
0.53
333.3
102.1
0.0
28.8
90.9
26.2
23.0
75.7
1.9
0
339
68
347
0
755
172
530
0
37
567
1,076
46
2,452
0
535
1,787
2,286
9,675
730
33
13,222
18,485
0
942
19,427
2,922
3,523
39,095
12,337
Annual Report 2019
15
Copper
Yamana Gold Projects
Agua Rica
Alumbrera (12.5%)
Total Copper Mineral Resources
Zinc
Yamana Gold Projects
Minera Florida
Total Zinc Mineral Resources
Molybdenum
Yamana Gold Projects
Agua Rica
Alumbrera (12.5%)
Total Molybdenum Mineral Resources
Totals may not add due to rounding
Measured Mineral Resources
Indicated Mineral Resources
Total – Measured and Indicated
Inferred Mineral Resources
Tonnes
(000’s)
Grade
(%)
Contained
lbs (mm)
Tonnes
(000’s)
Grade
(%)
Contained
lbs (mm)
Tonnes
(000’s)
Grade
(%)
Contained
lbs (mm)
Tonnes
(000’s)
Grade
(%)
Contained
lbs (mm)
53,600
6,737
60,337
0.22
0.33
0.23
260
49
309
206,300
1,916
208,216
0.30
0.23
0.30
1,364
10
1,374
259,900
8,653
268,553
0.28
0.31
0.28
1,624
58
1,682
742,900
849
743,749
0.23
0.21
0.23
3,767
4
3,771
Tonnes
(000’s)
Grade
(%)
Contained
lbs (mm)
Tonnes
(000’s)
Grade
(%)
Contained
lbs (mm)
Tonnes
(000’s)
Grade
(%)
Contained
lbs (mm)
Tonnes
(000’s)
Grade
(%)
Contained
lbs (mm)
2,377
2,377
1.41
1.41
74
74
3,475
3,475
1.41
1.41
108
108
5,852
5,852
1.41
1.41
182
182
4,365
4,365
1.20
1.20
116
116
Tonnes
(000’s)
Grade
(%)
Contained
lbs (mm)
Tonnes
(000’s)
Grade
(%)
Contained
lbs (mm)
Tonnes
(000’s)
Grade
(%)
Contained
lbs (mm)
Tonnes
(000’s)
Grade
(%)
Contained
lbs (mm)
53,600
6,132
59,732
0.020
0.016
0.020
24
2.11
26
206,300
462
206,762
0.030
0.013
0.030
136
0.13
136
259,900
6,593
266,493
0.030
0.015
0.028
160
2.23
162
742,900
85
742,985
0.030
0.014
0.030
491
0.03
491
NOTE: Mineral Resources are exclusive of Mineral Reserves. Mineral Resources are not Mineral Reserves and do not have demonstrated economic viability.
16
Yamana Gold
Copper
Yamana Gold Projects
Agua Rica
Alumbrera (12.5%)
Total Copper Mineral Resources
Zinc
Yamana Gold Projects
Minera Florida
Total Zinc Mineral Resources
Molybdenum
Yamana Gold Projects
Agua Rica
Alumbrera (12.5%)
Total Molybdenum Mineral Resources
Totals may not add due to rounding
Measured Mineral Resources
Indicated Mineral Resources
Total – Measured and Indicated
Inferred Mineral Resources
Tonnes
(000’s)
Grade
(%)
Contained
lbs (mm)
Tonnes
(000’s)
Grade
(%)
Contained
lbs (mm)
Tonnes
(000’s)
Grade
(%)
Contained
lbs (mm)
Tonnes
(000’s)
Grade
(%)
Contained
lbs (mm)
53,600
6,737
60,337
0.22
0.33
0.23
260
49
309
206,300
1,916
208,216
0.30
0.23
0.30
1,364
10
1,374
259,900
8,653
268,553
0.28
0.31
0.28
1,624
58
1,682
742,900
849
743,749
0.23
0.21
0.23
3,767
4
3,771
Tonnes
(000’s)
Grade
(%)
Contained
lbs (mm)
Tonnes
(000’s)
Grade
(%)
Contained
lbs (mm)
Tonnes
(000’s)
Grade
(%)
Contained
lbs (mm)
Tonnes
(000’s)
Grade
(%)
Contained
lbs (mm)
2,377
2,377
1.41
1.41
74
74
3,475
3,475
1.41
1.41
108
108
5,852
5,852
1.41
1.41
182
182
4,365
4,365
1.20
1.20
116
116
Tonnes
(000’s)
Grade
(%)
Contained
lbs (mm)
Tonnes
(000’s)
Grade
(%)
Contained
lbs (mm)
Tonnes
(000’s)
Grade
(%)
Contained
lbs (mm)
Tonnes
(000’s)
Grade
(%)
Contained
lbs (mm)
53,600
6,132
59,732
0.020
0.016
0.020
24
2.11
26
206,300
462
206,762
0.030
0.013
0.030
136
0.13
136
259,900
6,593
266,493
0.030
0.015
0.028
160
2.23
162
742,900
85
742,985
0.030
0.014
0.030
491
0.03
491
NOTE: Mineral Resources are exclusive of Mineral Reserves. Mineral Resources are not Mineral Reserves and do not have demonstrated economic viability.
Annual Report 2019
17
Year End 2019 Mineral Reserves and Mineral Resources Reporting Notes
1. Metal Price, Cut-off Grade, Metallurgical Recovery
Mine
Mineral Reserves
Mineral Resources
Yamana Gold Projects
Arco Sul
N/A
Price assumption: $1,500 gold
2.5 g/t gold cut-off
Canadian Malartic (50%)
Price assumption: $1,200 gold
Price assumption: $1,200 gold
Open pit cut-off grades range from 0.40 to 0.43 g/t gold
Metallurgical recoveries for gold averaging 90.2%
Cerro Moro
Price assumption: $1,250 gold and $18.00 silver
Open pit cut-off at 123 NSR $/ton and Underground
cut-off at 215 NSR $/ton
Metallurgical recoveries average 95% for gold and 93%
for silver
Cut-off grades range from 0.40 to 0.43 g/t gold inside pit
to 1.0 g/t gold outside or below pit
Underground Cut-off grade at Odyssey is 1.15 to 1.35 g/t
gold (stope optimized)
Underground Cut-off grade at East Malartic is 1.30 to
1.60 g/t gold (stope optimized)
Underground Cut-off grade at East Gouldie is 1.35 to
1.55 g/t gold (stope optimized)
Cut-off grade at 3.0 g/t Aueq.
El Peñón
Price Assumption: $1,250 gold, $18.00 silver
Price Assumption: $1,250 gold, $18.00 silver
Open Pit cut-off at $43.15/t
Underground cut-off at $127.90/t
Low grade stockpiles cut-off 0.90 g/t gold equivalent
Metallurgical recoveries for open pit ores range from
86.56% to 90.29% for gold and from 83.53% to 86.95%
for silver
Underground cut-off at $95.93/t, which corresponds
to 75% of the cut-off value used to estimate the
mineral reserves
Mineral Resources contained in tailings and stockpiles
reported at cut-offs of 0.50 g/t and 0.79 g/t gold
equivalent respectively
Metallurgical recoveries for underground ores range
from 77.0% to 96.9% for gold and from 63.0% to 94.4%
for silver
Metallurgical recoveries for tailings estimated to be
60% for gold and 30% for silver
Metallurgical recoveries for underground ores range from
77.0% to 96.9% for gold and from 63.0% to 94.4% for silver
Metallurgical recoveries for stockpiles estimated to be
88.0% for gold and 80.8% for silver
Metallurgical recoveries for low grade stockpiles are 95.2%
for gold and 83.0% for silver
Jacobina
Price assumptions: $1,250 gold
Underground reserves are reported at variable cut-off
grades by zone ranging from 1.12 g/t gold to 1.30 g/t gold
Mineral reserves includes lower grade supplemental ore
which is incorporated into the life of mine plan, and which
was previously categorized as mineral resources
Metallurgical recovery is 96%
Underground cut-off grade is 1.00 g/t gold, which
corresponds to 75% of the cut-off used to estimate
the mineral reserves
Minimum mining width of 1.5 meters, considering internal
waste and dilution
18
Yamana Gold
1. Metal Price, Cut-off Grade, Metallurgical Recovery (continued)
Mine
Mineral Reserves
Mineral Resources
Yamana Gold Projects
Jeronimo (57%)
Price Assumption:$900 gold
Cut-off grade at 2.0 g/t gold
Cut-off grade at 2.0 g/t gold
Metallurgical recovery for gold is 86%.
La Pepa
Lavra Velha
Minera Florida
N/A
N/A
Price Assumption: $780 gold
Cut-off grade at 0.30 g/t gold
Price assumption: $1,300 gold and $3.50 copper
Cut-off grade at 0.2 g/t gold and 0.1% copper
Price assumption: $1,250/oz gold, $18.00/oz silver
and $1.25/lb Zn.
Price assumption: $1,250/oz gold, $18.00/oz silver
and $1.25/lb Zn.
Underground cut-offs for Las Petaguas Zone $91.48/t
and for the Core Mine Zones $92.86/t
Underground Mineral Resources are estimated at a
cut-off grade of 2.50 g/t gold equivalent
Metallurgical recoveries are 91.36% for gold, 62.93% for
silver and 75.38% for zinc
Metallurgical recoveries are 91.36% for gold, 62.93% for
silver and 75.38% for zinc
Monument Bay
N/A
Price Assumption: $1,200 gold
Suyai
Agua Rica
N/A
Cut-off grades are 0.4 g/t gold and 0.7 g/t gold for the
open pits and 4.0 g/t gold for underground
5.0 g/t gold cut-off inside mineralized wireframe
modeling
Mineral Reserves are estimated using a variable
metallurgical recovery.
Mineral Resources are estimated using a variable
metallurgical recovery.
Average metallurgical recoveries of 86% Cu, 35% Au,
43% Ag, and 44% Mo were considered.
LOM average metallurgical recoveries of 86% Cu,
35% Au, 43% Ag, and 44% Mo were considered.
Open pit Mineral Reserves are reported at a variable
cut-off value averaging $8.42/t, based on metal price
assumptions of US$3.00/lb Cu, $1,250/oz Au, $18/oz Ag,
and $11/lb Mo. A LOM average open pit costs of $1.72/t
moved, processing and G&A cost of $6.70/t of run of
mine processed. The strip ratio of the mineral reserves
is 1.7 with overall slope angles varying from 39° to 45°
depending on the geotechnical sector.
Mineral Resources are constrained by an optimized pit
shell based on metal price assumptions of $4.00/lb Cu,
$1,600/oz Au, $24/oz Ag, and $11/lb Mo. Open pit
Mineral Resources are reported at a variable cut-off
value which averages $8.42/t milled with overall slope
angles varying from 39° to 45° depending on the
geotechnical sector.
Alumbrera Projects (12.5%)
Alumbrera Deposit
Price assumption: $1,250 gold, $2.91 copper
Price assumption: $1,250 gold, $2.95 copper.
Underground cut-off at 0.5% copper equivalent
Underground cut-off at 0.43% copper equivalent
Metallurgical recoveries average 87.85% for copper and
72.31% for gold
Bajo El Durazno Deposit
N/A
Price assumption: $1,250 gold, $2.95 copper.
0.74 g/t Aueq cut-off within underground economic
envelope
Annual Report 2019
19
2019
Financial
Review
21 Management’s Discussion and Analysis
21
31
Highlights and Relevant Updates
Core Business, Strategy and Outlook
34
Review of Financial Results
40 Operating Segments Performance
47
Construction, Development and Exploration
50 Mineral Reserve and Mineral Resource Estimates
54
57
Financial Condition and Liquidity
Economic Trends, Business Risks and Uncertainties
60 Contingencies
60 Critical Accounting Policies and Estimates
61 Non-GAAP Performance Measures
69 Disclosure Controls and Procedures
73 Management’s Responsibility for Financial Reporting
74 Reports of Independent Registered Public Accounting Firm
77 Consolidated Financial Statements
82 Notes to the Consolidated Financial Statements
20
Yamana Gold
MANAGEMENT’S DISCUSSION AND ANALYSIS OF OPERATIONS AND FINANCIAL CONDITION
This Management’s Discussion and Analysis of Operations and Financial Condition ("MD&A") should be read in conjunction with
Yamana Gold Inc.'s (the "Company" or "Yamana") most recently issued annual consolidated financial statements for the year
ended December 31, 2019. (All figures are in United States Dollars ("US Dollars") unless otherwise specified and are in accordance
with International Financial Reporting Standards as issued by the International Accounting Standards Board (“IFRS”).
The Company has included certain non-GAAP financial measures, which the Company believes, that together with measures
determined in accordance with IFRS, provide investors with an improved ability to evaluate the underlying performance of the
Company. Non-GAAP financial measures do not have any standardized meaning prescribed under IFRS, and therefore they may
not be comparable to similar measures employed by other companies. The data is intended to provide additional information and
should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. The non-
GAAP financial measures included in this MD&A include:
• Cash costs per gold equivalent ounce ("GEO") sold;
All-in sustaining costs ("AISC") per GEO sold;
•
• Net debt;
• Net free cash flow;
•
•
Average realized price per ounce of gold/silver sold; and
Average realized price per pound of copper sold.
Reconciliations associated with the above performance measures can be found in Section 11: Non-GAAP Performance Measures
in this MD&A.
Cautionary statements regarding forward-looking information and mineral reserves and mineral resources can be found in Section
12: Disclosure Controls and Procedures in this MD&A.
1.
HIGHLIGHTS AND RELEVANT UPDATES
For the year ended December 31, 2019
•
•
•
•
Exceeded gold production guidance for the year with annual production of 900,339 ounces, compared to guidance of
899,000 ounces.
Exceeded silver production guidance for the year with annual production of 10,640,156 ounces compared to guidance of
10,000,000 ounces, representing a significant over-performance of 6%.
Exceeded gold equivalent ounce ("GEO") production guidance for the year with annual production of 1,024,454 GEO
compared to guidance of 1,010,000 GEO, notwithstanding a higher GEO ratio than that assumed when 2019 guidance
was set. GEO assumes gold ounces plus the gold equivalent of silver ounces using a ratio of 85.54 and 86.02 for the
three months and year ended December 31, 2019, respectively, and 81.30 and 79.60 for the three months and year
ended December 31, 2018, respectively.
Production costs for the year were in line with guidance. Guidance ranges are after the inclusion of adjustments noted
during the year, including the removal of production from Chapada in the second half of the year, decisions to spend more
on exploration and the higher GEO ratios observed as noted above.
Total Yamana(i) production performance relative to guidance is summarized as follows:
Total Yamana (i)
Gold Production (ounces) (ii)
Silver Production (ounces)
GEO Production (ounces) (ii)
(i)
Strong yearly cash flows as follows:
2019 Actual 2019 Guidance
899,000
% increase
—%
900,339
10,640,156
1,024,454
10,000,000
1,010,000
6%
1%
• Cash flows from operating activities of $521.8 million and cash flows from operating activities before net change
in working capital of $590.5 million, which significantly exceeded prior year cash flows.
◦ Net free cash flow(iv) of $358.4 million, which significantly exceeded prior year net free cash flow(iv).
Annual Report 2019
21
• Net earnings attributable to the Company's equity holders for the year ended December 31, 2019 were $225.6 million or
$0.24 per share basic and diluted, including the positive impact of the sale of the Chapada asset during the year,
compared to a net loss of $284.6 million or $0.30 per share basic and diluted for the year ended December 31, 2018. For
a list of adjustments not reflective of current and ongoing operations, which may be used to adjust or reconcile input
models in consensus estimates, refer to Section 3: Review of Financial Results.
• Debt decreased as follows:
Total debt decreased by $710.8 million during the year.
•
• Net debt(iv) decreased more significantly, by $771.1 million as a result of increased cash balances largely as a
result of the significant increase in cash flows.
• Net debt(iv) decreased to $889.1 million.
• Cash balances increased to $158.8 million, in comparison to $98.5 million in the prior year, an increase of $60.3 million.
•
Increased gold mineral reserves and mineral resources as follows:
◦ Mineral reserve depletion for 2019 was fully replaced on a consolidated basis, excluding assets disposed of in
2019.
Increased mineral resources on a consolidated basis. Measured and indicated mineral resources increased, and
there was a substantial increase in inferred mineral resources of 27%.
◦
Refer to Section 4: Operating Segments Performance and Section 6: Mineral Reserve and Mineral Resource Estimates
for additional details on how the Company's exploration programs continue to deliver on mineral resources discovery and
mineral reserve replacement and growth.
• Discovery of East Gouldie, a new mineralized zone at the Canadian Malartic mine, which contributed significantly to
inferred mineral resources of the mine at year end. On a 50% basis, the zone added 12.8 million tonnes of inferred mineral
resources at 3.34 g/t, for a total of approximately 1.4 million ounces.
•
The Company increased its dividend cumulatively by 150% to $0.05/share annually for the first quarter of 2020, in relation
to dividends paid during the third quarter of 2019 of $0.02/share.
◦
The Company adopted a policy of treating dividends, amongst other measures, on a per ounce basis, and
established a program pursuant to which it would establish a reserve fund to protect the dividend for a minimum
of three years.
◦ With increases in sustainably higher free cash flow, the Company is targeting the payment of a dividend between
the current rate of approximately $50 per GEO and $100 per GEO.
The Company will continue to maintain a balance between the sustainable payment of dividends with reinvestment
in the Company and further improvements to the balance sheet.
◦
• Completion and advancement of several strategic initiatives during the year including:
Jacobina expansion scenarios
▪
▪
At Jacobina, a pre-feasibility study ("PFS") to identify optimum mining and processing expansion
scenarios, evaluate project economics, and determine a project development schedule that includes the
timing for permit applications is expected to be completed in the first quarter of 2020.
Pending favourable pre-feasibility study results and capital allocation decisions, investment for Phase 2
would occur mostly in 2021 and 2022, with the objective of being at the higher throughput level at the
beginning of 2023.
Agua Rica integration agreement and PFS
▪ On March 7, 2019, the Company announced the signing of an integration agreement with Glencore
International AG and Newmont Corporation whereby the Agua Rica project would be developed and
operated using the existing infrastructure and facilities of Minera Alumbrera Limited.
The integration would give the Company 56% ownership in the integrated project, which carries
significantly less development risk, as certain infrastructure would not need to be constructed.
▪
▪ During the year, the Company announced positive PFS results, which underscored Agua Rica as a long
life, low-cost project with robust economics and studies were advanced to optimize Agua Rica in
preparation for a planned feasibility study in 2020.
Sale of Chapada mine
▪
The Company completed the sale of the Chapada mine and received initial upfront cash consideration of
$800.0 million on closing, in addition to other consideration. Refer to Note 6 to the Company's
Consolidated Financial Statements for the year ended December 31, 2019 for additional details.
◦
◦
◦
22
Yamana Gold
For the three months ended December 31, 2019
• Quarterly gold production from Yamana Mines(iii) of 221,595 ounces(ii) and silver production of 2,967,867 ounces was in
line with plan, at costs in line with expectations. GEO production comprised 256,288 GEO(ii).
• Net earnings attributable to the Company's equity holders for the three months ended December 31, 2019 of $14.6 million
or $0.02 per share basic and diluted, compared to a net loss of $61.4 million or $0.06 per share basic and diluted for the
three months ended December 31, 2018. For a list of adjustments not reflective of current and ongoing operations, which
may be used to adjust or reconcile input models in consensus estimates, refer to Section 3: Review of Financial Results.
•
Strong quarterly cash flows as follows:
◦ Cash flows from operating activities of $201.7 million and cash flows from operating activities before net change
in working capital of $176.6 million, which significantly exceeded those of the comparative prior year period and
prior quarter.
◦ Net free cash flow(iv) of $136.5 million, which significantly exceeded that of the comparative prior year period and
prior quarter.
• Cash flows exceeded the average of the three preceding quarters, as follows:
◦
◦
◦
cash flows from operating activities exceeded the average by 91%,
cash flows from operating activities before net change in working capital exceeded the average by 29%, and
net free cash flow(iv) exceeded the average by 87%.
• Debt decreased as follows:
Total debt decreased by $0.9 million during the quarter.
◦
◦ Net debt(iv) decreased more significantly, by $59.8 million, as a result of increased cash balances largely as a result
of the significant increase in cash flows.
◦ Net debt(iv) decreased to $889.1 million.
• Cash balances increased to $158.8 million, in comparison to $99.9 million as of the end of the prior quarter, an increase
of $58.8 million.
(i)
(ii)
(iii)
(iv)
Total Yamana includes production from all Yamana Mines(iii), and production from Chapada prior to divestment on July 5, 2019.
Included in fourth quarter and full year 2019 production figures are 3,137 gold ounces of pre-commercial production, related to the Company's 50% interest
in the Canadian Malartic mine's Barnat deposit.
Yamana Mines includes those mines in the Company's portfolio as of December 31, 2019: Canadian Malartic, Jacobina, Cerro Moro, El Peñón and Minera
Florida.
A cautionary note regarding non-GAAP performance measures is included in Section 11: Non-GAAP Performance Measures.
OPERATING
GEO production from Yamana Mines(i) was 256,288, compared to 269,528 in the fourth quarter of 2018. The difference was driven
primarily by higher fourth quarter of 2018 production from Cerro Moro, as the mine processed high gold grade and silver grade
stockpile ore during its ramp up phase and a higher GEO ratio.
Yamana Mines total cost of sales were $1,117 and $1,142 per GEO for the quarter and year ended December 31, 2019,
respectively, in line with prior year comparative costs. Yamana Mines AISC in the fourth quarter were $1,011 per GEO, and AISC
for the year ended December 31, 2019 were $999 per GEO, also in line with prior year comparative costs. Strong production and
cost performance was observed particularly at El Peñón and Jacobina in the fourth quarter.
Full year unitary costs for Total Yamana of $978 per GEO were in line with previous guidance and adjustments noted during the
year that impacted costs, such as the impact on costs in relation to the sale of Chapada on July 5, 2019 and the GEO ratio. The
sale of Chapada, which had been included in original guidance for the full year, resulted in an increase to 2019 AISC of
approximately $30 per GEO. In addition, differences in guided versus actual GEO ratios negatively impacted costs on a per GEO
basis.
AISC included the addition of funds that were deliberately spent on sustaining exploration capital to further advance robust drilling
results being obtained across the Company's operations. Despite the additional spend, the Company was able to do so without
impacting margins, which improved due to the rise in metal prices.
The decision to concentrate sustaining capital spending in the second half of the year further impacted AISC in the fourth quarter.
In particular, additional capital development at Jacobina and El Peñón in the second half supported high quarterly rates of mining
and production in 2019 and improved access and flexibility in mining operations during 2020.
Annual Report 2019
23
GEO
Production - Yamana Mines (i)(iii)
Production - Total Yamana (ii)(iii)
Sales - Yamana Mines (i)(iii)
Sales - Total Yamana (ii)(iii)(viii)
Per GEO sold data (iv)
Total cost of sales - Yamana Mines (i)(v)
Total cost of sales - Total Yamana (ii)(v)
Cash costs - Yamana Mines (i)(iv)
Cash costs - Total Yamana (ii)(iv)
AISC - Yamana Mines (i)(iv)
AISC - Total Yamana (ii)(iv)
Gold and silver production for the quarter was as follows:
Gold
Production - Yamana Mines (ounces) (i)(iii)
Production - Total Yamana (ounces) (ii)(iii)
Sales - Yamana Mines (ounces) (i)(iii)
Sales - Total Yamana (ounces) (ii)(iii)(viii)
Per ounce data
Revenue
Average Realized Price (iv)(vi)
Average market price (vii)
Silver
Production (ounces) (i)(iii)
Sales (ounces) (i)(iii)
Per ounce data
Revenue
Average Realized Price (iv)(vi)
Average market price (vii)
For the three months ended December 31,
2018
2019
For the year ended December 31,
2019
2018
256,288
256,288
257,904
257,743
1,117
1,118
656
656
1,011
1,012
$
$
$
$
$
$
269,528
332,660
263,850
321,948
972,143
1,024,454
990,005
1,039,583
920,347
1,133,635
879,084
1,089,804
1,101 $
1,027 $
653 $
657 $
939 $
921 $
1,142 $
1,109 $
679 $
667 $
999 $
978 $
1,109
1,047
692
692
998
971
$
$
$
$
$
$
For the three months ended December 31,
For the year ended December 31,
2019
2018
2019
2018
221,595
221,595
223,593
223,433
229,352
292,484
226,322
284,420
1,486 $
1,484 $
1,480 $
1,223 $
1,226 $
1,226 $
848,029
900,339
862,130
911,708
1,392 $
1,387 $
1,392 $
819,615
1,032,903
793,742
1,004,462
1,263
1,267
1,268
2,967,867
2,935,673
3,264,695
3,065,102
10,640,156
11,009,552
8,023,046
7,000,887
17.55 $
17.50 $
17.31 $
14.59 $
14.59 $
14.56 $
16.39 $
16.26 $
16.20 $
15.37
15.37
15.71
$
$
$
$
$
$
Gold and silver production from Yamana Mines(i) for the comparative quarter do not provide a meaningful comparison to the current
quarter, as production from Cerro Moro was above normal levels due to the reliance on a high grade stockpile which had been
accumulated during the ramp up phase in 2018.
Quarterly gold production from Yamana Mines(i) was the strongest in 2019 during the fourth quarter, driven by strong operational
results from El Peñón and Jacobina in particular, which performed well above plan.
Copper production is no longer relevant to the current operations of the Company, following the disposal of the Chapada mine on
July 5, 2019. Copper production was 61.1 million pounds for the year ended December 31, 2019, and 39.0 million pounds and
129.2 million pounds for the three months and year ended December 31, 2018, respectively. Current year production reflects
Yamana's attributable production up to the date of divestiture of Chapada.
(i)
(ii)
(iii)
Yamana Mines includes those mines in the Company's portfolio as of December 31, 2019: Canadian Malartic, Jacobina, Cerro Moro, El Peñón and Minera
Florida.
Total Yamana includes production and sales of Yamana Mines; and Chapada, and Gualcamayo, which were disposed of in July 2019 and December 2018,
respectively. Excludes Brio Gold sales ounces of 70,752 for the year ended December 2018, that were 100% consolidated in the Company's financial results
prior to disposal in May 2018.
Included in fourth quarter 2019 and year-ended December 31, 2019 production figures are 3,137 gold ounces of pre-commercial production, related to the
Company's 50% interest in the Canadian Malartic mine's Barnat deposit. Comparative production figures for the year-ended December 31, 2018 include
8,625 gold ounces and 333,878 silver ounces of pre-commercial production related to Cerro Moro, which achieved commercial production on June 26,
24
Yamana Gold
(iv)
(v)
(vi)
(vii)
(viii)
2018. Pre-commercial production ounces are excluded from sales figures, although the pre-commercial production ounces that were sold during their
respective period of production had their corresponding revenues and cost of sales capitalized to mineral properties.
A cautionary note regarding non-GAAP performance measures and their respective reconciliations is included in Section 11: Non-GAAP Performance
Measures of this MD&A. Comparatives have been restated to reflect the changes adopted in the current period.
Total cost of sales consists of the sum of 'cost of sales excluding Depletion, Depreciation and Amortization' ("DDA") plus DDA.
Realized prices based on gross sales compared to market prices for metals may vary due to the timing of the sales.
Source of information: Bloomberg.
Total Yamana sales quantities in the fourth quarter were impacted by final assay quantity adjustments on Chapada concentrate sales made prior to disposal,
but settled in the fourth quarter.
STRATEGIC DEVELOPMENTS
Jacobina, Brazil
During the year, the Company announced increases to mineral reserves and mineral reserve grades at Jacobina of 8.6% and
2.6%, respectively, versus year-end 2018. This movement was in addition to overall mineral reserve grade growth in 2018, which
when combined with the mid-year update, represented a 5.3% increase from year-end 2017.
With continued improvements to the sustainable cost structure and development productivity at the mine, Jacobina was able to
incorporate ore previously categorized as mineral resources in the mineral reserve category. The decision to include lower grade
supplemental ore, encountered as a halo to the core mineral reserves, had the impact of slightly decreasing total mineral reserve
grade but significantly increasing economical mineral reserve ounces. This supplemental ore halo has been effectively and
profitably mined over the past few quarters. The updated mineral reserves of the Company comprise:
29.17 million tonnes at a grade of 2.40 g/t in the core zone, for a total of 2.25 million ounces
5.01 million tonnes at a grade of 1.53 g/t in the supplemental halo zone, for a total of 246 thousand ounces
For a total mineral reserve of 34.18 million tonnes at a grade of 2.27 g/t, for a total of 2.49 million ounces
•
•
•
The Company’s mine plan prioritizes the mining of the core mineral reserves with a grade of 2.40 grams per tonne, and defers the
majority of the mining and processing of the supplemental halo mineral reserves until late in the mine life. The observed increase
in mineral reserves and mineral reserves grade during the mid-year and year-end update supports annual gold production above
170,000 ounces, which was previously guided as the target after the completion in mid-2020 of Phase 1, a modest plant
optimization with a sustainable level of 6,500 tonnes per day ("tpd").
The mineral reserve increase also further supports the potential for Phase 2, where production is expected to increase to
approximately 225,000 ounces per year, with a likely scenario for plant throughput in the range of 7,500 tpd to 8,500 tpd, while
maintaining gold recoveries of between 96%-97%.
A PFS to identify optimum mining and processing expansion scenarios, evaluate project economics, and determine a project
development schedule including the timing for permit applications is expected to be completed in the first quarter of 2020.
Consistent with the Company's approach to committing capital, and returns, the Company considers projects for which after-tax
returns are a multiple of its cost of capital, preferably double-digit, and as a rule of thumb exceeding 15%. However, acceptable
returns are influenced by the level of project risk, meaning that a project with substantially reduced risk could be developed with a
lower return.
Investment for Phase 2 is not expected to occur until 2021, subject to positive PFS results, with the objective of being at the higher
throughput level at the beginning of 2023. The decision to proceed with the investment will be driven by the expansion of the plant
throughput, thus bringing forward cash flows, but also an extension of mine life from continued exploration success and
improvements to Jacobina’s core zone average mineral reserve grade, which would support the investment decision.
Refer to the Company's September 5, 2019 Press Release "Yamana Gold Increases Reserve Grade, Significantly Increases
Reserves and Announces Further Positive Exploration Results at Jacobina Mine" for further details. This press release, and all
other press releases referenced in this MD&A, are available on the Company's website at www.yamana.com, on SEDAR at
www.sedar.com and on EDGAR at www.sec.gov.
Agua Rica, Argentina
During the year, the Company announced an integration agreement with Glencore International AG and Newmont Corp
(collectively the “Parties”), pursuant to which the Agua Rica project would be developed and operated using the existing
infrastructure and facilities of Minera Alumbrera Limited (“Alumbrera”) in the Catamarca Province of Argentina. The Company
would own 56% of the integrated project. The Parties established a Technical Committee to direct the advancement of the
Integrated Project.
Annual Report 2019
25
The integration significantly de-risks the development of Agua Rica due to the ability to rely on the current Alumbrera plant and
infrastructure. Infrastructure development was previously identified as a principal risk of development of the project. The Company
believes that the ability to integrate the project and utilize the existing facilities reduces both the risk of obtaining permitting
associated with tailings and the environmental footprint of the project.
On July 19, 2019, the Company announced positive PFS results, and underscored Agua Rica as a long life, low-cost project with
robust economics and opportunities to realize further value, including converting economic-grade inferred mineral resources and
expanding throughput scenarios to increase metal production and returns, among other opportunities. The Integrated Project
generates significant synergies by bringing together the extensive mineral reserves of Agua Rica with the existing infrastructure of
Alumbrera to create a unique, high quality and low risk brownfield project with an optimized environmental footprint that will bring
significant value to shareholders, local communities and stakeholders.
The PFS highlights include a long mine life of 28 years, annual production for the first 10 full years increased to 533 million pounds
of copper equivalent(i) production, cash costs decreased to $1.29 per pound, all-in sustaining costs (“AISC”) decreased to $1.52
per pound for the first ten years of production, net present value (“NPV”) increased to $1.935 billion and an increased internal rate
of return (“IRR”) of 19.7%(ii).
During 2019, the Parties advanced studies to optimize the Project in preparation for a planned feasibility study in 2020.
Furthermore, proven and probable copper mineral reserves increased from year end 2018 by 21% to 11.8 billion pounds and gold
mineral reserves increased by 13% to 7.4 million ounces.
(i)
(ii)
Copper equivalent metal includes copper with gold, molybdenum, and silver converted to copper-equivalent metal based on the following metal price
assumptions: $6,614 per tonne of copper, $1,250 per ounce for gold, $24,250 per tonne for molybdenum, and $18.00 per ounce for silver.
Assuming metal prices of $3.00 per pound of copper, $1,300 per ounce of gold price, $18.00 per ounce of silver, $11.00 per pound of molybdenum and
using an 8% discount rate.
Expansion opportunities at Canadian Malartic, Canada
Exploration programs are ongoing to evaluate several deposits and prospective exploration areas to the east of the Canadian
Malartic open pit, including the new mineralized zone discovery of East Gouldie, as well as Odyssey, East Malartic, Sladen,
Sheehan and Rand. These discoveries have the potential to provide new, mostly underground sources of ore for the Canadian
Malartic mill, replacing a portion of the lower grade open pit ores and thereby increasing production and extending mine life. Access
for additional underground drilling and possible mining would be by ramp extending from the Odyssey zone. The permit allowing
for the development of an underground ramp was received in December 2018.
Drilling at East Gouldie has yielded a number of positive intercepts and results indicate that the East Gouldie, East Malartic and
Sladen zones are converging at depth, increasing the level of confidence in the economic potential of overall mineral resources
below 1,000 meters.
East Gouldie contributed to the meaningful increase in inferred mineral resource figures for East Malartic at year-end 2019. This
increase comes after only one year of exploration, following the initial discovery hole in November 2018. The East Gouldie zone
remains open and exploration continues to investigate probable extensions of the known mineral envelope.
The Partnership is evaluating scenarios to optimize the project, which includes discussions with royalty holders and other
stakeholders to enhance the economics of the project. Given the Company's robust pipeline of development projects, the Company
does not currently anticipate approving the project for development unless these discussions are successful and the project
economics are improved.
Further details are available in the Company's September 9, 2019 Press Release "Yamana Gold Provides Exploration Update on
the Canadian Malartic Mine; Announces Discovery of East Gouldie Zone".
Sale of Chapada, Brazil and Related Consideration
On July 5, 2019, the Company completed the sale of the Chapada mine. The Company received the initial upfront cash
consideration of $800.0 million on closing, and additional consideration includes a cash payment contingent on the development
of a pyrite roaster at Chapada, a 2% net smelter return (“NSR”) royalty on the Suruca gold project in the Chapada complex, and
the right to receive additional cash consideration based on the price of gold over the five-year period from the date of closing (“the
Gold Price Instrument”). During the third quarter, the Company structured a sale and assigned its rights and obligations on the
Gold Price Instrument through a competitive bidding process to a financial institution, obtaining cash proceeds of $65.5 million on
the sale of the instrument.
With regards to the Suruca NSR, the Company is considering a possible monetization of the royalty, which would allow the
significant gain on realization on the sale of Chapada to have further upside potential and would add to the already monetized
$865.5 million in cash obtained on sale.
26
Yamana Gold
HEALTH, SAFETY, ENVIRONMENT AND CORPORATE RESPONSIBILITY
Health, safety, environment and community relations programs are integrated into all our operations. Yamana recognizes the
importance of striving to meet and exceed our corporate social responsibility objectives and the role these efforts have in delivering
on our overall objective of creating value for all stakeholders. Recent highlights are as follows:
•
•
•
•
The Company's Total Recordable Injury Frequency Rate was 0.57(i) for 2019. This represents a 5% decrease from 2018,
and a 24% decrease over the past 3 years.
El Peñón has completed 2019 without a Lost Time Injury ("LTI"). This is their second consecutive calendar year, marking
over 8.9 million work hours without a LTI.
In August, El Peñón received an award from CORESEMIN (Antofagasta Regional Mining Health and Safety Committee)
for “Outstanding Joint Committee on Hygiene and Safety” at a Regional Mining Ceremony.
Yamana achieved a fourth year with no material environmental or social incidents.
(i)
Calculated on 200,000 hours worked and includes employees and contractors. Does not include Canadian Malartic.
FINANCIAL
For the three months ended December 31, 2019
Net earnings attributable to the Company's equity holders for the three months ended December 31, 2019 were $14.6 million or
$0.02 per share basic and diluted, compared to a net loss of $61.4 million or $0.06 per share basic and diluted for the three months
ended December 31, 2018.
Earnings for the three months ended December 31, 2019 were negatively impacted by $12.1 million of certain non-cash and other
items that management believes are not reflective of current and ongoing operations, and which may be used to adjust or reconcile
input models in consensus estimates. For a full listing of reconciling items between net earnings and adjusted net earnings for the
current and comparative quarters, refer to Section 3: Review of Financial Results.
As expected, revenue in the three months ended December 31, 2019 was not meaningfully comparable with the same quarter in
2018 due to the sale of assets. However, lower sales volumes were partially offset by higher average realized prices for gold and
silver in the current quarter, with the overall decrease in revenue being primarily attributable to copper.
Cash flows from operating activities(iii) were $201.7 million in the fourth quarter, compared to $114.7 million in the fourth quarter of
2018. The change was driven by higher gross margins due to favorable metal price increases with stable costs across Yamana
Mines, and a positive net change in working capital. In addition, the fourth quarter of 2018 had a one-time payment to the Brazilian
tax authorities for $33.3 million that adversely affected cash flows. Fourth quarter working capital movement was positively
impacted by the timing of receipt of certain invoices throughout several of the Company's operations, for a total of approximately
$21.0 million. The late receipt of invoices caused payable balances to increase above those levels that are considered customary.
The Company anticipates that this seasonal buildup of payable balances will partly normalize in the first quarter of 2020.
Net free cash flow(iv) was $136.5 million in the fourth quarter, compared to $106.0 million in the fourth quarter of 2018. The change
is driven largely by higher gross margins due to favorable metal price increases with stable costs across Yamana Mines, lower
sustaining capital expenditures, and a positive net change in working capital.
Overall, mine operating earnings, operating earnings, net earnings, cash flows from operating activities(iii) and net free cash flow(iv)
for the fourth quarter were higher than the same period in 2018, although prior year results included contributions from the
Company's Gualcamayo and Chapada mines (divested December 2018 and July 2019, respectively).
For the year ended December 31, 2019
Net earnings attributable to the Company's equity holders for the year ended December 31, 2019 were $225.6 million or $0.24 per
share basic and diluted, compared to a net loss of $284.6 million or $0.30 per share basic and diluted for the year ended
December 31, 2018. This significant increase in net earnings was primarily due to a $273.1 million gain recorded on the sale of
the Company's Chapada mine in the third quarter, and the absence of any impairment write downs in the current year.
Annual Report 2019
27
Earnings for the year ended December 31, 2019 were positively impacted by $106.1 million of certain non-cash and other items
that management believes are not reflective of current and ongoing operations, and which may be used to adjust or reconcile input
models in consensus estimates. Significant adjusting items in the year ended 2019 include:
•
•
•
•
•
•
•
•
•
A $273.1 million gain related to the sale of the Company's Chapada mine;
A gain of $11.5 million related to the sale of the Gold Price Instrument;
A $13.0 million loss, representing the Company's share of a provision recognized by our associate against its deferred
income tax assets;
A one-time expense of $35.0 million, representing the financing costs associated with the early redemption of certain of
the Company's senior notes, in connection with the sale of Chapada;
Losses totalling $26.9 million related to one-time tax adjustments;
$17.9 million of losses related to non-cash tax on unrealized foreign exchange;
$15.0 million of share-based compensation expense and mark-to-market on deferred share units;
Losses of $31.5 million related to other provisions, write-downs and adjustments; and
$29.0 million of non-cash unrealized foreign exchange losses.
For a full listing of reconciling items between net earnings and adjusted net earnings for the current and prior years, refer to Section
3: Review of Financial Information.
Revenue in the year ended December 31, 2019 was not meaningfully comparable with 2018. This is primarily attributable to the
absence of contributions from Gualcamayo and Brio Gold and lower contributions from Chapada. Lower sales volumes from the
divested mines were partially offset by higher realized prices for gold and silver, with the overall decrease in revenue being primarily
attributable to lower copper contribution during the year.
Cash flows from operating activities(iii) were $521.8 million for the year ended December 31, 2019, compared to $404.2 million for
December 31, 2018. The change is driven largely by higher gross margins due to favorable metal price increases with stable costs
across Yamana Mines, and a positive net change in working capital. In addition, the year ended 2018 had one-time payments to
the Brazilian tax authorities for $101.3 million, that adversely affected cash flows.
Net free cash flow(iv) was $358.4 million for the year ended December 31, 2019, compared to $219.8 million for the December 31,
2018. The change is driven largely by higher gross margins due to favorable metal price increases with stable costs across Yamana
Mines, decreased sustaining capital expenditures, and a positive net change in working capital.
Mine operating earnings, operating earnings and net earnings were in line with the comparative period when normalized for gains
on sale of assets and impairment related charges. Cash flows from operating activities(iii) and net free cash flow(iv) for the full year
were higher than the same period in 2018. These results are despite prior year results including contributions from the Company's
Gualcamayo and Chapada mines (divested December 2018 and July 2019, respectively), as well as Brio Gold (divested in May
2018).
28
Yamana Gold
For the three months ended December 31,
(In millions of US Dollars; unless otherwise noted)
Revenue
Cost of sales excluding DDA
Gross margin excluding DDA
Depletion, depreciation and amortization ("DDA")
Impairment of mining properties
Mine operating earnings
General and administrative
Exploration and evaluation
Share of (loss) earnings of associate
Other operating (expenses) income, net
Impairment of non-operating mining properties
Operating earnings (loss)
Finance costs
Other (costs) income, net
Net earnings (loss) before income taxes
Income tax (expense) recovery, net
Net earnings (loss)
Attributable to:
Yamana Gold Inc. equity holders
Non-controlling interests
Per share data
Earnings (loss) per share - basic and diluted (i)
Dividends declared per share
Dividends paid per share
Weighted average number of common shares
outstanding (thousands)
Basic
Diluted
Cash flows (ii)
Cash flows from operating activities (iii)
Cash flows from operating activities before net change in
working capital (iv)
Cash flows from (used in) investing activities
Cash flows (used in) from financing activities
Net free cash flow (iv)
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
2019
383.8
(169.4)
214.4
(119.0)
—
95.4
$
(19.3)
(3.3)
(0.3)
(5.6)
—
66.9
$
(21.6)
(3.5)
41.9
$
(27.3) $
14.6
$
2018
483.4 $
(266.2)
217.2 $
(130.9)
(46.0)
40.3 $
(21.0)
(3.6)
4.5
(11.0)
14.0
23.2 $
(32.0)
0.2
(8.6) $
(52.8) $
(61.4) $
2018
(91.8)
(149.0)
(438.3)
(1,010.0)
788.5 $
201.2 $
1,798.5 $
For the year ended December 31,
2019
1,612.2 $
(782.8)
829.4 $
(471.7)
—
357.7 $
(79.4)
(10.3)
(16.3)
222.4
—
474.1 $
(144.2)
(19.6)
310.3 $
(84.7) $
225.6 $
(176.7) $
(297.7) $
(121.0) $
(41.8) $
(153.0)
(137.4)
(13.0)
9.3
5.5
2.5
2017
1,803.8
(1,042.4)
761.4
(426.8)
(256.9)
77.7
(113.6)
(21.2)
—
(23.6)
(99.6)
(180.3)
(110.8)
(20.9)
(312.0)
113.9
(198.1)
14.6
$
(61.4) $
— $
— $
14.6
$
(61.4) $
0.02
0.010
0.010
$
$
$
(0.06) $
0.005 $
0.005 $
225.6 $
— $
225.6 $
0.24 $
0.030 $
0.025 $
(284.6) $
(188.5)
(13.1) $
(9.6)
(297.7) $
(198.1)
(0.30) $
0.020 $
0.020 $
(0.20)
0.020
0.020
950,433
952,315
949,337
949,337
950,266
951,924
949,030
949,030
948,187
948,187
201.7
176.6
$
$
(96.4) $
(46.9) $
114.7 $
521.8 $
404.2 $
484.0
115.8 $
(91.4) $
(49.3) $
590.5 $
432.0 $
(892.5) $
358.4 $
566.3 $
(329.6) $
(134.3) $
219.8 $
498.0
(644.2)
217.9
251.6
136.5
$
106.0 $
(i)
(ii)
(iii)
(iv)
Attributable to Yamana Gold Inc. equity holders.
For further information on the Company's liquidity and cash flow position, refer to Section 7: Financial Condition and Liquidity.
Cash flows from operating activities for the three months and year ended December 31, 2019, include the impact of $4.2 million (2018: $38.5 million) and
$79.4 million (2018: $99.5 million and 2017: $8.6 million), respectively in non-cash deferred revenue recognized in respect of metal sales agreements and
other, including $53.2 million associated with the copper advanced sales program in the year ended December 31, 2019 ($34.8 million and $78.0 million for
the three months and year-ended December 31, 2018, respectively, and $nil for the year-ended December 31, 2017).
A cautionary note regarding non-GAAP performance measures is included in Section 11: Non-GAAP Performance Measures.
Annual Report 2019
29
Balance Sheet and Liquidity
As at December 31, 2019, the Company had cash and cash equivalents of $158.8 million and available credit of $750.0 million,
for total available liquidity of $908.8 million.
As at,
(In millions of US Dollars)
Total assets
Total long-term liabilities
Total equity
Working capital (i)
Cash and cash equivalents
Debt (current and long-term) (ii)
Net debt (iii)
December 31, 2019 December 31, 2018 December 31, 2017
$
8,763.3
7,117.2 $
$
$
$
$
$
$
2,489.2 $
4,219.9 $
(6.7) $
158.8 $
1,047.9 $
889.1 $
8,012.9 $
3,492.7 $
4,024.0 $
(67.2) $
98.5 $
1,758.7 $
1,660.2 $
3,535.3
4,447.3
58.7
148.9
1,857.7
1,708.8
(i)
(ii)
(iii)
Working capital is defined as the excess of current assets over current liabilities, which includes the current portion of long-term debt and assets and liabilities
of disposal groups held for sale for applicable reporting periods.
On July 5, 2019, the Company completed the sale of its Chapada mine and received the initial upfront cash consideration of $800.0 million upon closing.
Concurrently with the closing, the Company used $385.0 million of the consideration to repay outstanding indebtedness under the revolving credit facility;
and the remaining $415.0 million was used by the Company to prepay portions of certain series of the Company's senior notes.
A cautionary note regarding non-GAAP performance measures is included in Section 11: Non-GAAP Performance Measures.
Capital Expenditures
For the three months ended December 31,
2019
2018
2019
2018
2019
2018
2019
2018
Expansionary
Exploration
Total (ii)
Sustaining and
other
13.5 $
(In millions of US Dollars)
Canadian Malartic
Jacobina
Cerro Moro
El Peñón
Minera Florida
Other (i)
$
8.2
11.9
7.6
3.7
1.7
11.4 $
5.1
9.4
7.4
4.4
14.8
9.8 $
6.9
2.6
0.3
2.9
2.8
8.9 $
9.4
1.7
1.1
10.5
4.6
$
46.6 $
52.5 $
25.3 $
36.2 $
0.1 $
2.7
3.8
2.8
2.3
2.2
13.9 $
0.4 $
1.7 $
3.0 $
4.7 $
3.9 $
4.8 $
18.5 $
23.4 $
17.8 $
18.3 $
10.7 $
8.9 $
6.7 $
20.7
16.2
14.1
13.2
18.8
24.2
85.8 $ 107.2
(i)
(ii)
Included in Other for the comparative period are capital expenditures relating to Gualcamayo and Chapada, the latter of which was disclosed separately in
the comparative period. Comparatives have been adjusted to conform to the change in presentation adopted in the current period.
Net of movement in accounts payable and advances to suppliers, as applicable.
For the year ended December 31,
2019
2018
2019
2018
2019
2018
2019
2018
(In millions of US Dollars)
Canadian Malartic
Jacobina
Cerro Moro
El Peñón
Minera Florida
Other (i)
Expansionary
Exploration
Total (ii)
Sustaining and
other
$ 45.1 $
24.5
46.4 $
21.0
23.5
30.8
13.1
15.0
31.8
14.5
36.5 $
30.7
3.7
0.8
11.7
31.4
20.6
61.3
1.1
32.2
29.7
37.1
$ 166.7 $ 187.8 $ 104.6 $ 183.7
21.2
59.1
$
$
1.0 $
6.5
16.2
18.1
9.5
9.1
60.4 $
4.0 $ 82.6
5.9 $ 61.7
11.3 $ 43.4
17.9 $ 49.7
14.0 $ 34.3
22.3 $ 60.0
75.4 $ 331.7
$
$
$
$
$
81.8
47.5
87.6
50.8
60.7
$ 118.5
$ 446.9
(i)
(ii)
Included in Other are capital expenditures relating to Gualcamayo and Brio Gold (comparative period only) and Chapada, the latter of which was disclosed
separately in the comparative period. Comparatives have been adjusted to conform to the change in presentation adopted in the current period. The
comparative period also included capitalized interest of $8.3 million.
Net of movement in accounts payable and advances to suppliers, as applicable.
30
Yamana Gold
2.
CORE BUSINESS, STRATEGY AND OUTLOOK
Yamana Gold Inc. (“Yamana” or the “Company”) 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. The Company is listed on the Toronto Stock Exchange
(trading symbol "YRI") and the New York Stock Exchange (trading symbol "AUY").
The Company’s principal mining properties comprise the Cerro Moro mine in Argentina, the Canadian Malartic mine (50% interest)
in Canada, the El Peñón and Minera Florida mines in Chile and the Jacobina mine in Brazil. The Company’s portfolio also includes
a 20.4% interest in Leagold Mining Corporation ("Leagold") with mining properties in Brazil and Mexico. Subsequent to year end,
on January 28, 2020, Equinox Gold Corporation and Leagold shareholders approved the merger of the two companies.
Subsequent to the merger, which is expected to close in February of 2020, Yamana will own approximately 9% of the newly formed
company on an undiluted basis. The Company also owns a 100% interest in Agua Rica, a large-scale copper, gold, silver and
molybdenum deposit located in the province of Catamarca, Argentina. The Chapada mine in Brazil was sold during the third
quarter.
Over the years, the Company has grown through strategic acquisitions to upgrade its portfolio and by pursuing organic growth to
increase cash flows and unlock value at existing mines and non-producing assets. Looking ahead, the Company’s primary
objectives include the following:
• Continued focus on the Company’s operational excellence program, advancing near-term and ongoing optimizations
related to production, operating costs, and key performance objectives in Health, Safety, Environment and Corporate
Responsibility. This includes the "One Team, One Goal: Zero" vision for sustainability, which reflects the Company's
commitment to zero harm to employees, the environment and communities near its operations.
Commitment to increasing value by improving cash flows and returns on invested capital, by gearing development
opportunities towards such increases and improvements within the framework of the Company's balance sheet objectives.
• Optimizing and increasing mine life at the Company’s existing operating mines through exploration targeted on the most
prospective properties, including:
◦ Canadian Malartic, Cerro Moro, Jacobina, and Minera Florida as a result of exploration success and prospective
geological settings;
◦ Minera Florida, El Peñón and Jacobina with the objectives of increasing mine life while also improving grade and
delivering potential for production increases through further delineation and infill drilling, and continuous
improvement of production at Jacobina;
Exploration at Canadian Malartic to further identify and discover underground ore bodies.
◦
•
Advancing the Company’s generative exploration program to help lay the foundation for the next generation of Yamana
Mines:
◦ Concentrate investment on the Company’s most advanced exploration projects;
◦
Pursue drilling programs at highly-prospective, early stage projects in the Company’s existing portfolio.
• Maximizing per share metrics related to the Net Asset Values ("NAV"), profitability and free cash flow of Yamana Mines,
and cash returns on invested capital, first on producing and then non-producing assets:
◦
◦ Within the producing portfolio, attention remains focused on per share metrics related to the growth and quality of
mineral reserves and mineral resources. Primary objectives include mine life extensions, scope for throughput
increases, metal grade and recovery improvements, and cost reductions that are expected to improve margins
and cash flow returns;
For non-producing assets, the focus is on improving NAV through exploration, drilling and technical/financial
reviews, the advancements of exploration and mining permits, and community engagement. Over time, the
Company will also consider strategic alternatives to enhance returns from the non-producing assets. This may
include advancing the projects to producing assets, developing the assets through a joint venture or other strategic
arrangements, or through monetization;
• Maximizing return on investments to shareholders through sustainable dividends, which will also be reported as dividends
per GEO produced, resulting from disciplined management of financial resources and capital allocation:
◦
◦
◦
The Company has employed a gradual and progressive approach to dividend increases as the Company’s cash
balances continue to grow from increasing free cash flow, and successful and continuing initiatives to monetize its
portfolio of non-producing assets and financial instruments;
Following the Company's initial capital spending and development phase from 2003 to 2006, the Company has
consistently paid dividends since 2007, aggregating to over $900.0 million in dividends paid over 12 years;
To ensure the sustainability of dividends, the Company has implemented a policy establishing a cash reserve fund
that will be available to be drawn upon, if required, were the gold price to decline and negatively impact margins
Annual Report 2019
31
over a longer period of time. While the balance in the cash reserve fund would change from time to time, the
Company intends to maintain a balance that can support the current, or any future increased dividend, for a
minimum period intended to be no less than three years, independent of prevailing gold prices.
• Consistently optimize the Company's financial position to create financial flexibility, allowing the Company to execute on
its business plan and increase shareholder value. During the third quarter, the Company successfully improved its
financial flexibility with the repayment of:
◦
◦
$415.0 million in senior notes issued in March 2012 and June 2013 on a pro rata basis and indebtedness under
the Company’s senior notes issued in June 2014 and December 2017; and
$385.0 million of indebtedness under the revolving credit facility.
This was achieved from proceeds from the sale of Chapada, which was completed on July 5, 2019 and which improved
the financial flexibility of the Company; the repayment of debt in the third quarter with the cash proceeds resulted in a
meaningful reduction in interest expense that will enhance net free cash flow generation and the significant expansionary
capital that was required for Chapada has been avoided. Additionally, the Company monetized the Gold Price Instrument
for $65.5 million, as previously mentioned. The Company will continue to consider the monetization of other assets, such
as certain investments and its royalty portfolio, with the above objective in mind.
2020 - 2022 Production Guidance
The following table presents the Company's total gold, silver and gold equivalent ounces ("GEO") production expectations in 2020,
2021 and 2022. Actual production for the year-ended December 31, 2019 includes comparative operations, which comprise those
mines in the Company's portfolio as of December 31, 2019. The Company notes that it guides on GEO production and costs based
on a particular assumption of gold and silver prices. Although underlying gold and silver production does not change with the
fluctuation in gold and silver prices, the change in the GEO ratio from such fluctuations may result in a different GEO production
than that guided.
The Company looks at production within a normal range of +/- 2%, and the guidance values noted below reflect the mid-point of
this production range for the 2020-2022 period. As guidance becomes less predictable three years out, in 2022, a greater allowance
of +/- 3% is provided. The Company expects that the completion of the Phase 1 optimization of Jacobina, development successes
at several of its mines, along with continued exploration success at Cerro Moro will be the main catalysts for its production levels
in 2022.
The production profile for 2020 to 2022 shows sequential growth in gold production every year. Several growth opportunities are
available, and in the near and medium-term the Company remains focused on optimizing the existing portfolio of five operating
mines while also advancing studies for various expansion projects and longer term development assets.
The Company expects to continue its established trend of delivering stronger production in the second half of the year, with
approximately 54% of production slated for the second half, along with quarterly sequential increases in production.
(000's ounces)
Total gold production (i)(ii)
Total silver production
Total GEO production (i)(ii)
2019 Actual 2020 Guidance 2021 Guidance 2022 Guidance
885
873
848
10,640
972
857
11,500
990
11,000
1,000
10,000
1,000
(i)
(ii)
Included in full year 2019 production figures are 3,137 gold ounces of pre-commercial production, related to the Company's 50% interest in the Canadian
Malartic mine's Barnat deposit.
GEO assumes gold ounces plus the equivalent of silver ounces using a ratio of 86.02 for 2019, and a ratio of 86.10 for 2020, 2021 and 2022.
32
Yamana Gold
The following table presents mine-by-mine production results for Yamana Mines for 2019 and expectations for 2020.
(000's ounces)
Canadian Malartic (50%) (i)
Jacobina
Cerro Moro
El Peñón
Minera Florida
Yamana Mines (iv)
Cost Outlook
Gold
2019 Actual 2020 Guidance
335
159
121
160
74
848
330
162
117
162
86
857
Silver
—
—
2019 Actual 2020 Guidance
—
—
7,500
4,000
—
11,500
10,640
4,317
6,323
—
GEO
2019 Actual 2020 Guidance
335
159
195
210
74
972
330
162
204
209
86
990
The following table presents cost of sales, cash costs and AISC results in 2019 and guidance ranges for 2020. The mid-point of
the guided ranges are consistent with costs observed in the current period, highlighting the ability of the Company to contain costs
and expand its margins. While there is a marginal increase in sustaining capital expenditures, the Company does not anticipate
that it will impact margins due to the higher gold and silver price environment currently in place. With the expected higher production
weighting in the second half of the year, the Company anticipates unitary costs to also trend lower in the second half, in relation to
the first half of the year.
Total cost of sales per GEO sold (ii)
Cash costs per GEO sold (ii)
AISC per GEO sold (ii) (iii)
(In US dollars)
Canadian Malartic (50%) (i) $
$
Jacobina
$
Cerro Moro
$
El Peñón
$
Minera Florida
$
Yamana Mines (iv)
2019 Actual
1,011
947
1,293
1,209
1,423
1,142
2020 Guidance
2019 Actual
2020 Guidance
$1,070-1,110 $
$970-1,010 $
$1,240-1,280 $
$1,150-1,190 $
$1,220-1,260 $
$1,130-1,170 $
601
593
725
726
945
679
$610-650 $
$600-640 $
$640-680 $
$660-700 $
$790-830 $
$640-680 $
2019 Actual
782
845
969
1,003
1,346
999
2020 Guidance
$820-850
$860-890
$970-1,000
$930-960
$1,130-1,160
$980-1,020
(i)
(ii)
(iii)
(iv)
Included in full year 2019 production figures are 3,137 gold ounces of pre-commercial production, related to the Company's 50% interest in the Canadian
Malartic mine's Barnat deposit. Pre-commercial production ounces are excluded from sales figures, although pre-commercial production ounces that were
sold during their respective period of production had the corresponding revenues and cost of sales capitalized to mineral properties.
A cautionary note regarding non-GAAP financial measures and additional subtotals in financial statements are included in Section 11: Non-GAAP
Performance Measures of this MD&A.
Mine site AISC includes cash costs, mine site general and administrative expense, sustaining capital, capitalized exploration and expensed exploration.
Consolidated AISC incorporates additional non-mine site costs including corporate general and administrative expense.
Yamana Mines includes those mines in the Company's portfolio as of December 31, 2019: Canadian Malartic, Jacobina, Cerro Moro, El Peñón and Minera
Florida
The following table presents sustaining capital and exploration spend results for 2019 and expectations by mine for 2020:
Expansionary capital
2019 Actual 2020 Guidance
25.0
Sustaining capital
Total exploration
2019 Actual 2020 Guidance
2019 Actual 2020 Guidance
(In millions of US Dollars)
Canadian Malartic (50%)
Jacobina
Cerro Moro
El Peñón
Minera Florida
Other capital
Generative exploration
Other exploration and overhead
Total
$
$
36.5 $
30.7
3.7
0.8
11.7
11.4
—
—
94.8 $
$
45.1 $
20.0
5.0
—
18.0
21.0
—
—
24.5
23.5
30.8
13.1
5.1
—
—
89.0
$
142.2 $
53.0 $
24.0
40.0
30.0
15.0
2.0
—
—
164.0 $
1.0 $
6.5
16.2
18.1
9.5
7.7
3.9
5.6
68.3 $
10.0
7.0
18.0
18.0
11.0
—
14.0
6.0
84.0
Annual Report 2019
33
The following table presents other expenditure results in 2019 and expectations for 2020:
(In millions of US Dollars)
Total DDA
Cash based G&A
Cash income taxes paid (i)
(i)
2020 guidance is based on $1,550 gold price and $18.00 silver price as per guidance assumption table.
Guidance Assumptions
Key assumptions, in relation to the above guidance, are presented in the table below.
GEO Ratio
Gold
Silver
USD-CAD
USD-BRL
USD-CLP
USD-ARS
$
$
$
$
$
2019 Actual
2020 Guidance
471.7 $
68.4 $
500.0
63.0
63.0 $ 100.0- 110.0
2019 Actual (i)
86.02
1,392 $
16.20 $
1.33
3.95
703.25
48.24
2020 Guidance
86.10
1,550
18.00
1.32
4.20
780.00
72.50
(i)
2019 metal prices and exchange rates shown in the table above are the average metal prices and exchange rates for the year ended December 31, 2019.
3.
REVIEW OF FINANCIAL RESULTS
FOR THE THREE MONTHS ENDED DECEMBER 31, 2019
Net earnings (loss)
Net earnings attributable to the Company's equity holders for the three months ended December 31, 2019, were $14.6 million or
$0.02 per share basic and diluted, compared to a net loss of $61.4 million or $0.06 per share basic and diluted for the three months
ended December 31, 2018.
Net earnings and earnings per share for the three months ended December 31, 2019 and 2018 were affected by the following non-
cash and other items that management believes are not reflective of current and ongoing operations, and which may be used to
adjust or reconcile input models in consensus estimates:
For the three months ended December 31,
(In millions of US Dollars; except per share amounts)
Non-cash unrealized foreign exchange losses
Share-based payments/mark-to-market of deferred share units
Mark-to-market losses (gains) on derivative contracts, investments and other assets
Gain on sale of subsidiaries and other assets
Net impairment of mining and non-operational mineral properties
Impairment of goodwill
Other provisions, write-downs and adjustments (i)
Non-cash tax on unrealized foreign exchange losses
Income tax effect of adjustments
One-time tax adjustments
Total adjustments - increase to earnings attributable to Yamana equity holders
Total adjustments - increase to earnings per share attributable to Yamana equity holders
$
$
$
2019
0.6 $
3.2
(0.9)
—
—
—
7.5
(3.9)
(0.2)
5.8
12.1 $
0.01 $
2018
3.2
(0.5)
(1.7)
(2.7)
(13.0)
45.0
18.9
(43.2)
(6.3)
87.9
87.6
0.09
(i)
This balance includes, among other things, revisions in estimates and write-downs & provisions, or reversals of provisions, for items such as tax credits and
legal contingencies.
34
Yamana Gold
Revenue
In the three months ended December 31, 2019, revenue was $383.8 million compared to $483.4 million in the same period in
2018. The difference was attributable to lower overall sales volumes, reflective of the fact that the Company's portfolio is now
comprised of five producing mines, partially offset by higher average realized gold and silver prices. The decrease in sales volumes
was primarily driven by the absence of contributions from Gualcamayo (divested December 2018) and Chapada (divested July 5,
2019). The lower gold and silver sales volumes was partially offset by higher average realized prices for these metals in the current
period, with the overall decrease in revenue being primarily attributable to copper.
For the three months ended December 31,
Gold (i)
Silver
Copper (i)
Quantity
sold
223,433 oz
2,935,673 oz
182,567
lbs
$
$
$
2019
2018
Revenue per
ounce/pound
Revenue
Revenue
(In millions of US
Dollars)
(In millions of US
Dollars)
1,486 $
332.0 $
17.55
1.88
51.5
0.3
$
383.8 $
347.9
44.7
90.8
483.4
2018
For the three months ended December 31,
2019
Gold (i)
Silver
Silver subject to metal sales agreement (ii)
Copper (i)
Copper subject to metal sales agreements (i)(ii)
Gross revenue
(Deduct) add:
Treatment and refining charges of gold and copper concentrate
–
– Metal price, MTM, and derivative settlement adjustments
Revenue
Quantity
sold
223,433 oz
2,635,673 oz
300,000 oz
2,935,673 oz
16,085
166,482
182,567
lbs
lbs
lbs
$
$
$
$
$
$
$
Average
Realized
Price
1,484 $
Revenue
(In millions of US
Dollars)
331.5 $
Revenue
(in millions of US
Dollars)
348.7
17.39
18.52
17.50
2.70
2.06
2.11
$
45.8
5.6
0.0
0.3
43.7
1.0
63.4
39.4
383.2 $
496.2
—
0.6
$
383.8 $
(10.0)
(2.8)
483.4
(i)
(ii)
Includes payable gold and copper contained in concentrate. Concentrate sales in the quarter result from final settlements of provisionally priced invoices.
Balances represent the metals sold under the metal sales agreements.
Cost of Sales
Cost of sales excluding DDA decreased by $96.8 million or 36% for the three months ended December 31, 2019 compared to the
same period in 2018, primarily due to the comparative period including $93.9 million from Gualcamayo and Chapada, which were
divested in December 2018 and July 2019, respectively.
Total DDA expense decreased $11.9 million or 9% for the three months ended December 31, 2019 when compared to the same
period in 2018, with the decrease primarily attributable to the absence of DDA from the Chapada mine in the current period.
Expenses and Other Income
General and administrative ("G&A") expenses include expenses related to the overall management of the business that are not
part of direct mine operating costs. In the three months ended December 31, 2019, G&A expenses decreased $1.7 million or 8%
compared to the same period in 2018 primarily attributable to cash reductions resulting from optimization and cost reduction
initiatives that were implemented following the sale of the Chapada mine to align the Company’s cost structure to its portfolio of
remaining assets. Partially offsetting this decrease was a $2.1 million increase in share-based compensation, in particular
performance share units, due to the appreciation in the Company's share price during the period. G&A cash expenditures were in
line with the revised guided value of $68.0 million for 2019.
Exploration and evaluation expenses decreased $0.3 million or 7% in the three months ended December 31, 2019 compared to
the same period in 2018, in line with lower planned greenfield exploration during the period.
Annual Report 2019
35
The Company's share of loss related to its associate, Leagold, totalled $0.3 million for the three months ended December 31,
2019, compared to a share of earnings of $4.5 million for the same period in 2018, reflective of the financial results of Leagold in
the respective periods.
In the three months to December 31, 2019, the Company recorded other operating expenses of $5.6 million. In the same period
in 2018, the Company recorded other operating expenses of $11.0 million. The decrease in the current period is primarily
attributable to one-time write offs of tax recoverable assets and other assets in the comparative period, with no current period
comparable.
Finance costs decreased $10.4 million or 33% in the three months ended December 31, 2019 compared to the same period in
2018, primarily due to lower interest expense in the current period, following the repayment of $415.0 million of senior notes and
$385.0 million of indebtedness under the revolving credit facility during the third quarter of 2019 in connection with the sale of the
Chapada mine in July 2019.
Other costs were $3.5 million in the three months ended December 31, 2019, compared to other income of $0.2 million in the
comparative period in 2018. Other income is comprised primarily of unrealized gains and losses on derivatives and foreign
exchange and, given the nature of these items, is expected to fluctuate from period to period. The loss in the current period was
primarily due to both foreign exchange losses and unrealized losses on derivatives, the latter of which increased $5.8 million from
the comparative period in 2018.
Income Tax Expense (Recovery)
The Company recorded an income tax expense of $27.3 million for the three months ended December 31, 2019, compared to an
income tax recovery of $52.8 million for the same period in 2018. The income tax provision reflects a current income tax expense
of $24.0 million and a deferred income tax recovery of $3.4 million, compared to a current income tax expense of $51.6 million and
a deferred income tax recovery of $1.3 million for the three months ended December 31, 2018.
An income tax recovery of $6.9 million is included in the income tax expense for the three months ended December 31, 2019,
compared to an income tax expense of $41.5 million in 2018, relating to the translation of deferred tax balances, foreign exchange
on non-monetary assets and foreign exchange in local books. A recovery of the deferred tax assets recognized in the amount of
$28.6 million compared to a recovery of $88.3 million for the three months ended December 31, 2018 was also included in tax
expense. The tax provision was also impacted by mining taxes of $18.0 million for the three months ended December 31, 2019,
compared to a mining tax recovery of $1.0 million in the three months ended December 31, 2018.
FOR THE YEAR ENDED DECEMBER 31, 2019
Net earnings (loss)
Net earnings attributable to the Company's equity holders for the year ended December 31, 2019, were $225.6 million or $0.24
per share basic and diluted, compared to a net loss of $284.6 million or $0.30 per share basic and diluted for the year ended
December 31, 2018.
36
Yamana Gold
Net earnings (loss) and earnings (loss) per share for the year ended December 31, 2019 and 2018 were affected by the following
non-cash and other items that management believes are not reflective of current and ongoing operations, and which may be used
to adjust or reconcile input models in consensus estimates:
(In millions of US Dollars; except per share amounts)
Non-cash unrealized foreign exchange losses
Share-based payments/mark-to-market of deferred share units
Mark-to-market losses on derivative contracts, investments and other assets
Gain on sale of subsidiaries and other assets
Gain on sale of Gold Price Instrument
Share of one-off provision recorded against deferred income tax assets of associate
Net impairment of mining and non-operational mineral properties
Impairment of goodwill
Financing costs paid on early note redemption
Other provisions, write-downs and adjustments (i)
Non-cash tax on unrealized foreign exchange losses
Income tax effect of adjustments
One-time tax adjustments
Total adjustments - (decrease) increase to earnings attributable to Yamana equity holders
Total adjustments - (decrease) increase to earnings per share attributable to Yamana
equity holders
For the year ended December 31,
2019
29.0 $
15.0
0.1
(273.1)
(11.5)
13.0
—
—
35.0
42.0
17.9
(0.5)
26.9
(106.1) $
(0.11) $
$
$
$
2018
9.5
5.3
0.4
(73.7)
—
—
250.0
45.0
14.7
57.9
151.9
(5.0)
(59.4)
396.5
0.42
(i)
This balance includes, among other things, revisions in estimates and write-downs & provisions, or reversals of provisions, for items such as tax credits and
legal contingencies.
Revenue
For the year ended December 31, 2019, revenue was $1,612.2 million compared to $1,798.5 million in the prior year. Sales
volumes in the second half of 2019 were lower, reflective of the fact that the Company's portfolio has comprised of five producing
mines since the sale of Chapada on July 5, 2019. In addition to lower contributions from Chapada, the decrease in sales volumes
in 2019 was also driven by the absence of contributions from Brio Gold and Gualcamayo (divested in May and December 2018,
respectively). Lower volumes of gold and silver sales were partially offset by higher average realized prices for gold and silver in
the current year, and higher contributions from Cerro Moro (which entered commercial production in late June 2018). The overall
decrease in revenue was primarily attributable to copper.
For the year ended December 31,
Gold (i)
Silver
Copper (i)
2019
2018
Quantity
sold
911,708 oz
11,009,552 oz
59,887,778
lbs
$
$
$
Revenue per
ounce/pound
1,392
16.39
2.72
Revenue
Revenue
(In millions of US
Dollars)
(In millions of US
Dollars)
$
$
1,268.7 $
1,357.5
180.6 $
162.9 $
107.6
333.4
1,612.2 $
1,798.5
Annual Report 2019
37
For the year ended December 31,
2019
Gold (i)
Silver
Silver subject to metal sales agreement (ii)
Copper (i)
Copper subject to metal sales agreements (ii)
Quantity
sold
911,708 oz
10,165,352 oz
844,200 oz
11,009,552 oz
37,157,312
22,730,466
59,887,778
lbs
lbs
lbs
$
$
$
$
$
$
$
Gross revenue
(Deduct) add:
- Treatment and refining charges of gold and copper concentrate
- Metal price, MTM, and derivative settlement adjustments
- Other adjustments
Revenue
Average
Realized
Price
1,387 $
Revenue
(In millions of US
Dollars)
2018
Revenue
(in millions of US
Dollars)
1,264.6 $
1,362.8
163.8
15.2
105.1
66.2
103.3
4.3
272.9
96.9
1,614.9 $
1,840.2
16.11
18.05
16.26
2.83
2.91
2.86
$
(13.0) $
10.3 $
— $
(34.6)
(6.8)
(0.2)
$
1,612.2 $
1,798.5
(i)
(ii)
Includes payable gold and copper contained in concentrate.
Balances represent the metals sold under the metal sales agreements and the advanced copper sales program.
Cost of Sales
Cost of sales excluding DDA decreased $227.2 million or 22% for the year ended December 31, 2019 when compared to the prior
year. Cost of sales excluding DDA was positively impacted by ongoing operational efficiencies improving per unit costs, the
depreciation of certain local currencies against the US Dollar, and the absence of costs from the Chapada mine (divested on July
5, 2019) for half the year. These reductions in costs were partially offset by local inflation and export taxes in Argentina that were
effective for the full year of 2019, but only for the fourth quarter in 2018.
Total DDA expense increased $33.4 million or 8% for the year ended December 31, 2019 when compared to the prior year. Higher
DDA expense was primarily attributable to a full year of DDA from Cerro Moro in the current year (only six months in the prior year
as Cerro Moro reached commercial production at the end of June 2018), an increase in DDA per ounce at Jacobina, which has a
higher depletable cost base subsequent to the $150.0 million impairment reversal recorded in the fourth quarter of 2018, as well
as higher DDA from El Peñón largely attributable to an increase in GEO ounces produced and sold in the current year. These
increases were partially offset by the absence of DDA from Chapada subsequent to April 2019 (date of reclassification as held for
sale). DDA in the current period also includes depreciation of the right-of-use assets recognized upon adoption of the new lease
accounting standard on January 1, 2019, and throughout 2019.
Expenses and Other Income
General and administrative ("G&A") expenses include costs related to the overall management of the business that are not part of
direct mine operating costs. In the year ended December 31, 2019, G&A expenses decreased $12.4 million or 13% compared to
the prior year, primarily attributable to cash reductions resulting from optimization and cost reduction initiatives that were
implemented following the sale of the Chapada mine in an effort to align the Company’s cost structure to its portfolio of remaining
assets. G&A cash expenditures were in line with the revised guided value of $68 million for 2019. Partially offsetting this decrease
was a $5.1 million increase in stock based compensation, in particular performance share units, due to the appreciation in the
Company's share price since January 1, 2019.
Exploration and evaluation expenses decreased $2.7 million or 21% in the year ended December 31, 2019 compared to the prior
year, in line with lower planned greenfield exploration during the period.
The Company's share of net loss related to its associate, Leagold, totalled $16.3 million for the year ended December 31, 2019,
compared to a share of earnings of $5.5 million in the prior year. The loss recorded in the current year was primarily attributable
to the Company recording its share of a $63.5 million tax provision recorded by Leagold during the year.
In the year ended December 31, 2019, the Company recorded other operating income of $222.4 million, and in 2018, other
operating income of $9.3 million. The income recorded in the current period was primarily attributable to the $273.1 million gain
recognized upon the sale of the Chapada mine, partially offset by various other operating expenses. The comparative period
income was driven primarily by net gains of $73.7 million, associated with the sale of certain Canadian exploration properties
(including Kirkland Lake and Hammond Reef), Brio Gold and Gualcamayo, partially offset by various other operating expenses.
38
Yamana Gold
Finance costs increased $6.8 million or 5% in the year ended December 31, 2019 when compared to the prior year, primarily
attributable to the $35.0 million expense incurred in the current year relating to the early redemption of certain of the Company's
senior notes in connection with the sale of the Chapada mine. In the comparative period, the Company incurred a $14.7 million
expense on the early redemption of a different series of senior notes. The increase attributable to the early redemption expense
was partially offset by lower overall interest payments resulting from the aforementioned reduction in the carrying amount of debt
in the third quarter of 2019. The reduction in the carrying amount of debt is expected to significantly reduce the annual carrying
cost of interest on debt, freeing up cash for other uses or for the Company to further improve its net debt position.
Other costs were $19.6 million for the year ended December 31, 2019, compared to other income of $2.5 million in the comparative
year. Other costs/income is comprised primarily of realized and unrealized gains and losses on derivatives and foreign exchange
and, given the nature of these items, is expected to fluctuate from year to year. The loss in the current period was primarily due to
foreign exchange losses, partially offset by the realized gain on the sale of the Gold Price Instrument.
Income Tax Expense (Recovery)
The Company recorded an income tax expense of $84.7 million for the year ended December 31, 2019, compared to an income
tax expense of $121.0 million in the prior year. The income tax provision reflects a current income tax expense of $95.0 million
and a deferred income tax recovery of $10.3 million compared to a current income tax expense of $138.8 million and a deferred
income tax recovery of $17.8 million for the year ended December 31, 2018.
The effective tax rate is subject to a number of factors including the source of income between different countries, different tax
rates in the various jurisdictions, the non-recognition of tax assets, foreign currency exchange movements, mining taxes, changes
in tax laws and the impact of specific transactions and assessments. The consolidated effective tax rate was 27.3% on the earnings
before tax for the year ended December 31, 2019, compared to an effective tax rate of negative 68.4% for the prior year.
The following items have the most significant impact on the difference between the Company's Canadian statutory tax rate of
26.5% and our effective rate for the years ended December 31, 2019 and 2018:
•
Permanent differences of $63.2 million reduced the income tax expense for the year ended December 31, 2019,
compared to an increase in income tax expense of $38.8 million in 2018, mainly relating to the sale of Chapada.
•
• Mining tax in the amount of $29.1 million for the year ended December 31, 2019 and $14.3 million for the year ended
December 31, 2018 was recorded in income tax expense. These taxes are incurred in Chile and Canada and are
calculated based on taxable income and are considered an income tax.
The tax provision was also impacted by the recognition of deferred tax assets in the amount of $20.6 million for the year
ended December 31, 2019, compared to the non-recognition of deferred tax assets of $26.4 million for the year ended
December 31, 2018.
An income tax recovery of $11.0 million is included in the income tax expense for the year ended December 31, 2019,
compared to an income tax expense of $32.3 million in 2018, relating to the translation of deferred tax balances, foreign
exchange on non-monetary assets and foreign exchange in local books
•
The deferred tax liabilities relating to the operating mines will reverse in the future, as the assets are depreciated or depleted. The
capitalized exploration expenditures on non-producing mineral properties will not reverse until the property becomes a mine subject
to depletion, is written off or sold. The deferred income taxes would only be paid on a direct disposition of the asset that may never
occur.
The Company operates in the following tax jurisdictions: Brazil, where the statutory tax rate is 34%; Argentina, where the statutory
tax rate is 30% in 2019, decreasing to 25% in 2021; Chile, where the statutory tax rate is 27%; and Canada, where the federal
statutory tax rate is 15% with varying provincial tax rates. The Company does not anticipate the statutory tax rates to change in
the foreseeable future; therefore, there should be no impact on the calculation of the current or deferred tax expense in the period.
The largest components of the net deferred tax liabilities relate to:
Canadian Malartic
Jacobina
El Peñón
Agua Rica
Exploration Potential
Chapada
2019
$318.5
$169.1
$51.8
$266.6
$245.9
—
2018
$314.0
$168.7
$46.1
$266.6
$245.9
$68.0
Annual Report 2019
39
QUARTERLY FINANCIAL SUMMARY
For the three months ended
(In millions of US Dollars, except per share amounts)
Financial results
Revenue
Attributable to Yamana equity holders:
Net earnings (loss)
Per share - basic and diluted
Dec. 31, Sep. 30,
2019
2019
Jun. 30 Mar. 31 Dec. 31 Sep. 30,
2018
2018
2019
2019
Jun. 30 Mar. 31,
2018
2018
$ 383.8 $ 357.8 $ 463.5 $ 407.1 $ 483.4 $ 424.7 $ 435.7 $ 454.7
$ 14.6 $ 201.3 $ 14.1 $
(4.1) $ (61.4) $ (81.3) $ 18.0 $ (160.1)
$ 0.02 $ 0.21 $ 0.01 $ 0.00 $ (0.06) $ (0.09) $ 0.02 $ (0.17)
4.
OPERATING SEGMENTS PERFORMANCE
CANADIAN MALARTIC (50% interest), CANADA
Canadian Malartic is an open pit gold mine, located in the Abitibi region of Quebec, Canada. The Company and its partner, Agnico
Eagle Mines Limited, each own 50% of Canadian Malartic General Partnership.
Key Performance Information
Operating
Ore mined (tonnes)
Waste mined (tonnes)
Ore processed (tonnes)
GEO
Production (ounces) (i)
Sales (ounces) (i)
Feed grade (g/t) (ii)
Recovery rate (%) (ii)
Total cost of sales per GEO sold
Cash costs per GEO sold (iii)(iv)
AISC per GEO sold (iii)(iv)
DDA per GEO sold
Financial (millions of US Dollars)
Revenue
Cost of sales excluding DDA
Gross margin excluding DDA
DDA
Impairment of goodwill
Mine operating earnings (loss)
Capital expenditures (millions of US Dollars)
Sustaining and other
Expansionary
Exploration
(i)
For the three months ended December 31,
For the year ended December 31,
2019
2018
2019
2018
3,589,493
3,274,236
2,720,660
3,467,366
3,619,041
2,541,967
14,642,808
13,780,384
10,524,531
85,042
84,673
1.09
89.1
1,039 $
627 $
828 $
412 $
125.9 $
(53.1)
72.8 $
(34.9)
—
84,732
89,626
1.18
87.9
974 $
587 $
748 $
388 $
110.2 $
(52.6)
57.6 $
(34.7)
(45.0)
334,596
330,851
1.12
88.7
1,011 $
601 $
782 $
409 $
460.5 $
(198.9)
261.6 $
(135.4)
—
37.9 $
(22.1) $
126.2 $
13.5 $
9.8 $
0.1 $
11.4 $
8.9 $
0.4 $
45.1 $
36.5 $
1.0 $
13,645,600
14,306,186
10,241,870
348,600
349,923
1.20
88.3
967
573
746
394
447.6
(200.4)
247.2
(137.8)
(45.0)
64.4
46.4
31.4
4.0
$
$
$
$
$
$
$
$
$
$
Included in fourth quarter 2019 and year-ended December 31, 2019 production figures are 3,137 gold ounces of pre-commercial production, related to the
Company's 50% interest in the Canadian Malartic mine's Barnat deposit. Pre-commercial production ounces are excluded from sales figures, although pre-
commercial production ounces that were sold during their respective period of production had their corresponding revenues and cost of sales capitalized to
mineral properties.
Grades and recovery rates relate to gold production.
A cautionary note regarding non-GAAP performance measures is included in Section 11: Non-GAAP Performance Measures.
Net of CAD currency hedge losses of nil per GEO sold for the three months ended December 31, 2019 (2018: $6.3 per GEO sold), and $0.9 per GEO sold
for the year ended December 31, 2019 (2018: $4.3 per GEO sold).
(ii)
(iii)
(iv)
Canadian Malartic exceeded its production plan in the fourth quarter of 2019, and also exceeded its full year production forecast
of 330,000 ounces. Grade and recoveries were as expected, with tonnes processed greater than plan. Production was marginally
lower than the same period in 2018, as anticipated, due to lower grades, partially offset by higher recoveries.
40
Yamana Gold
Prior year unitary costs were positively impacted by record 2018 production, which resulted in fixed costs being divided over a
larger number of ounces.
The Canadian Malartic Extension Project continues to advance as expected, with modest pre-commercial contributions from Barnat
of 3,137 ounces during the fourth quarter of 2019. The highway 117 road deviation was completed and opened to traffic, with the
remaining extension work focused on overburden stripping and topographic excavation continuing according to plan. The ramp-
up of the Barnat deposit will continue throughout 2020, with 2021 being the first full year of meaningful contributions. On a 50%
basis, expansionary capital expenditures related to the Canadian Malartic Extension Project were $9.7 million during the fourth
quarter and $27.7 million during the year ended 2019, with an additional $24.3 million expected to be spent in 2020.
As part of ongoing stakeholder engagement, the Partnership is finalizing discussions with four First Nations groups concerning a
collaboration agreement, which is expected to include a financial component. As with the Good Neighbour Guide and other
community relations efforts at Canadian Malartic, the Partnership is continuously working collaboratively with stakeholders to
establish cooperative relationships that support the long-term potential of the mine.
Exploration programs are ongoing to evaluate several deposits and prospective exploration areas. Work in the fourth quarter
focused on delineation of the new East Gouldie zone, as well as testing targets along strike and developing targets in the recently
acquired Rand property. Data compilation efforts on East Amphi, located west of the Malartic open pit, have verified drill databases
and led to the definition of known mineralization as well as significant new drill targets for 2020. Drilling on the Rand property has
located several near surface porphyry bodies with some significant mineralization and near surface delineation drilling started in
January 2020.
Drill results for 2019 had a positive impact on inferred mineral resources at the Canadian Malartic property at year-end, with
significant additions from drilling on the East Gouldie discovery. The East Gouldie zone has rapidly advanced within one year of
its discovery in November, 2018. As the East Gouldie zone remains open, it represents an excellent opportunity for a significant
underground ore body.
The Company intends to continue to advance studies related to the underground mineral resources at Canadian Malartic, and to
continue exploration to define and expand those underground resources. In 2020, Malartic will consider the development of a ramp
into Odyssey and East Malartic, with the purpose of mining their respective upper zones, provide further exploration access, and,
as it is likely that these ore bodies will require a shaft, for the advance of efforts for the advancement of such shaft. For further
information and discussion surrounding Expansion opportunities at Canadian Malartic, please refer to Section 1: Highlights and
Relevant Updates, Strategic Developments, Canadian Malartic.
Annual Report 2019
41
JACOBINA, BRAZIL
Jacobina is a complex of underground gold mines located in Bahia state, Brazil.
Key Performance Information
Operating
Ore mined (tonnes)
Ore processed (tonnes)
GEO
Production
Sales
Feed grade (g/t) (i)
Recovery rate (%) (i)
Total cost of sales per GEO sold
Cash costs per GEO sold (ii)
AISC per GEO sold (ii)
DDA per GEO sold
Financial (millions of US Dollars)
Revenue
Cost of sales excluding DDA
Gross margin excluding DDA
DDA
Impairment reversal
Mine operating earnings
Sustaining and other
Expansionary
Exploration
(i)
(ii)
Capital Expenditures (millions of US Dollars)
For the three months ended December 31,
For the year ended December 31,
2019
2018
2019
2018
505,329
517,953
2,298,631
2,254,793
2,093,413
2,035,214
600,048
567,329
41,774
44,293
2.38
96.4
799 $
529 $
827 $
270 $
65.6 $
(23.4)
42.2 $
(12.0)
—
$
$
$
$
$
$
$
$
$
$
37,071
34,934
2.31
96.2
1,132 $
681 $
906 $
451 $
42.9 $
(23.8)
19.1 $
(15.7)
150.0
159,499
160,142
2.28
96.7
947 $
593 $
845 $
354 $
224.0 $
(94.9)
129.1 $
(56.7)
—
30.2 $
153.4 $
72.4 $
8.2 $
6.9 $
2.7 $
5.1 $
9.4 $
1.7 $
24.5 $
30.7 $
6.5 $
144,695
141,780
2.30
96.3
967
675
891
292
179.4
(95.7)
83.7
(41.4)
150.0
192.3
21.0
20.6
5.9
Grades and recovery rates relate to gold production.
A cautionary note regarding non-GAAP performance measures is included in Section 11: Non-GAAP Performance Measures.
Jacobina exceeded its production plan once again, and maintained strong performance momentum, posting a fourth consecutive
quarter of record setting production at 41,774 ounces. Jacobina raised its guided 2019 production during the second quarter to
152,000 GEO, and has exceeded this target. Grade, recoveries, and tonnes processed all exceeded the same three and twelve
month periods in 2018, resulting in higher production.
Costs were in line with expectations in the fourth quarter of 2019, and lower than in the fourth quarter of 2018 due to the
internalization of underground development activities which were previously under contract. Throughput for the quarter was
approximately 6,200 tpd, and the remaining Phase 1 investment, which is on track to be finalized in mid-2020, is expected to add
consistency and stability to the plant process, increasing capacity to a sustainable 6,500 tpd. Alongside this stability, the recently
provided exploration update further enables the Company to achieve previously guided long term goals due to increases to mineral
reserves. For further information and discussion surrounding Phase 1 and Phase 2 expansions, please refer to Section 1:
Highlights and Relevant Updates, Strategic Developments, Jacobina.
During the quarter unitary costs were positively impacted by the record production due to the planned higher processing rates and
higher grade ore. Lower DDA per GEO sold resulted from a reduction in the rates of depletion, depreciation and amortization per
ounce due to higher mineral reserves and resources, following the filing of a new 43-101 technical report. This was partially offset
by a higher cost base following the reversal of an impairment charge recorded in 2018, and an increase in tonnes processed. Mine
development work and improved ore extraction continued as planned and the stability of surface stockpiles continues to provide
flexibility to the mine. Further, cash costs per GEO sold benefited from lower secondary development in connection with increased
capital primary development, conducted to add future flexibility to the mine. With planned flexibility achieved, the rate of
development is being normalized, and is expected to decrease by 4,000 metres to 14,000 metres during 2020.
On a year-to-date basis, unitary costs per GEO sold were positively impacted by the higher productivity and cost reduction
improvements relating to mining, plant processing, maintenance and supply chain, however, higher DDA per GEO sold resulted
from the aforementioned reversal of an impairment charge.
42
Yamana Gold
Approximately 14,400 metres of drilling were completed at Jacobina in the fourth quarter, including 3,800 metres dedicated to
delineation of new inferred resources, 3,700 metres toward definition of new mineral envelope, and 6,900 metres toward
delineation of new indicated resources. Total drilling completed in 2019 was in line with the annual target. Drilling in quarter focused
on the definition of new indicated mineral resources in the Morro do Vento and Canavieiras sectors, which surpassed the annual
targets.
The mineral envelope was extended at Canavieiras Sul Extension, and the mineral envelope at the João Belo south extension
continues to grow. Structural interpretations, including the recognition of the low angle faults bounding different mine sectors, is
allowing for significant lateral expansion of the known mineralized zones in Canavieiras and Morro do Vento, underneath shallow
dipping faults. Exploratory drilling in the large prospective area south of João Belo infrastructure has returned positive drill results
that indicate almost 2 km of mineralized reefs. Drilling in this area is expected to provide new inferred resources in 2020 with long
term growth potential. Surface exploration continue to define other targets at Jacobina Norte, where surface results now indicate
15 km of strike with conglomeratic reefs carrying significant gold located 9 kilometers north of Canavieiras. This area will be drilled
in 2020 to test for a new deposit located north of the town of Jacobina.
CERRO MORO, ARGENTINA
Cerro Moro is the Company’s newest high-grade underground and open pit gold-silver mine, located in the province of Santa Cruz,
Argentina.
Key Performance Information
Operating
Ore mined (tonnes)
Waste mined (tonnes)
Ore processed (tonnes)
GEO
Production (i)
Sales (i)
Total cost of sales per GEO sold
Cash costs per GEO sold (ii)
AISC per GEO sold (ii)
DDA per GEO sold
Gold
Production (ounces) (i)
Sales (ounces) (i)
Feed grade (g/t)
Recovery rate (%)
Silver
Production (ounces) (i)
Sales (ounces) (i)
Feed grade (g/t)
Recovery rate (%)
Financial (millions of US Dollars)
Revenue
Cost of sales excluding DDA
Gross margin excluding DDA
DDA
Mine operating earnings
Sustaining and other
Expansionary
Exploration
(i)
Capital Expenditures (millions of US Dollars)
For the three months ended December 31,
For the year ended December 31,
2019
2018
2019
2018
101,020
1,497,928
99,593
45,102
45,690
1,456 $
811 $
1,228 $
646 $
26,568
27,088
8.79
94.4
1,584,904
1,588,986
519.43
95.3
68.5 $
(37.0)
31.5 $
(29.5)
2.0 $
11.9 $
2.6 $
3.8 $
$
$
$
$
$
$
$
$
$
$
83,313
2,261,670
85,673
70,638
63,443
352,332
6,640,990
367,334
194,574
213,077
1,067 $
1,293 $
601 $
816 $
466 $
725 $
969 $
571 $
45,066
40,016
17.09
94.2
2,077,906
1,903,652
811.35
91.4
76.9 $
(38.1)
38.8 $
(29.5)
9.3 $
9.4 $
1.7 $
3.0 $
120,802
135,949
10.81
94.5
6,322,864
6,660,934
568.61
94.8
299.6 $
(153.8)
145.9 $
(121.7)
24.2 $
23.5 $
3.7 $
16.2 $
210,644
6,416,534
199,602
144,352
105,128
1,096
629
848
467
92,793
68,669
15.85
93.1
4,119,085
2,920,252
724.69
89.4
126.8
(66.1)
60.7
(49.1)
11.6
15.0
61.3
11.3
Cerro Moro reached commercial production on June 26, 2018. Comparative production figures for the year ended December 31, 2018 include 8,625 gold
ounces and 333,878 silver ounces of pre-commercial production. Pre-commercial production ounces are excluded from sales figures, although pre-
commercial production ounces that were sold during their respective period of production had the corresponding revenues and cost of sales capitalized to
mineral properties.
A cautionary note regarding non-GAAP performance measures is included in Section 11: Non-GAAP Performance Measures.
(ii)
Annual Report 2019
43
For the fourth quarter of 2019, Cerro Moro production, feed grade and mined ore grade all exceeded those of the prior quarter.
Production in relation to the comparative period was impacted by the fact that the mine processed high grade gold and silver
stockpile ore during its ramp up phase in 2018. Silver production exceeded plan, but the positive impact on GEO production was
partially offset by the higher GEO ratio. The out-performance of gold price, relative to silver price during the year, caused the GEO
ratio to be higher than that assumed in guidance and compared to prior year.
At Cerro Moro, production for gold and silver varies year-over-year and the Company strives to maintain consistent production on
a GEO ratio. As expected, silver production was higher in the fourth quarter in comparison to gold. It is anticipated that silver will
continue to be a more meaningful contributor to GEO in 2020 in relation to gold.
Furthermore, there were slight mine sequencing delays at Zoe during the current quarter. More meaningful contributions from the
Zoe underground mine are expected in 2020, along with a return to reserve grade mining and processing. In particular, gold mining
grade is expected to increase with the commencement of meaningful stope production from Zoe. It is expected that in 2020, Cerro
Moro will have more meaningful contributions from underground mines, providing enhanced mine flexibility and efficiencies.
Fourth quarter unitary costs during the period were higher than the same period in 2018 due to the comparative period's higher
production resulting from high grade stockpile consumption. Additionally, 2019 costs were impacted by a full year of Argentine
export duty, versus only one quarter in 2018, and consequently full year costs were $17.1 million higher than in the comparative
period. This resulted in an increase in export duty by $69 per ounce sold to roughly $92 per ounce sold. The Argentinian
government enacted an export tax in 2018 that provided for a floating rate of up to 12%, with a specific cap for certain commodities
at AR$4:U$1, in place until December 31, 2020. The cap was removed on December 14, 2019 effectively making tax on exports
12%. On December 23, 2019, the Argentinian government enacted a new law that allows for an export tax on mining and
hydrocarbon commodities up to a maximum fixed percentage of 8% until December 31, 2021. The final regulations have not yet
been published to establish the reduced rate.
Cerro Moro continues to pursue a drilling and surface exploration program at near-mine targets and across the property. During
the fourth quarter of 2019 drilling focused on testing and delineation of near-mine structures. During the quarter approximately
1,500 metres of infill drilling were completed and a further 10,500 metres was drilled in exploration. Exploration drilling targeting
vein extensions and regional structures generated new inferred resources, mainly from the new Naty discovery and Agostina.
Fourth quarter exploration focused on the Naty target, and defined a 600 meter mineralized envelope, which remains open for
further exploration. Naty is a recent discovery, made late last year, and exploration in 2020 will continue to define the newly
discovered mineralized zone. Scout drilling, mostly testing regional structures, has generated several new targets and an
expanding mineral envelope for further resource delineation in 2020.
The total number of surface rock and soil samples collected in 2019 as part of a property wide sampling and mapping program far
exceeded annual targets, with 6,700 rock and 11,000 soil samples collected across the property. Systematic soil sampling and
other fieldwork will continue during 2020. Results from an ongoing surface sampling and related exploration work, in addition to an
aeromagnetic survey over 150,000 hectares, continues to drive exploration and generate new targets in the large land position at
Cerro Moro.
44
Yamana Gold
EL PEÑÓN, CHILE
El Peñón is a high grade gold-silver underground mine located approximately 160 kilometres southeast of Antofagasta in northern
Chile.
Key Performance Information
Operating
Ore mined (tonnes)
Ore processed (tonnes)
GEO
Production
Sales
Total cost of sales per GEO sold
Cash costs per GEO sold (i)
AISC per GEO sold (i)
DDA per GEO sold
Gold
Production (ounces)
Sales (ounces)
Feed grade (g/t)
Recovery rate (%)
Silver
Production (ounces)
Sales (ounces)
Feed grade (g/t)
Recovery rate (%)
Financial (millions of US Dollars)
Revenue
Cost of sales excluding DDA
Gross margin excluding DDA
DDA
Mine operating earnings (loss)
Sustaining and other
Expansionary
Exploration
(i)
Capital Expenditures (millions of US Dollars)
For the three months ended December 31,
For the year ended December 31,
2019
2018
2019
2018
315,143
349,086
64,289
63,552
1,062 $
562 $
775 $
500 $
48,131
47,843
4.52
94.5
1,382,963
1,346,687
143.20
85.9
94.1 $
(35.7)
58.4 $
(31.8)
26.6 $
7.6 $
0.3 $
$
$
$
$
$
$
$
$
$
270,191
310,808
52,561
51,965
1,280 $
777 $
1,031 $
503 $
37,956
37,864
4.04
93.8
1,186,789
1,145,821
141.89
84.2
63.0 $
(40.4)
22.6 $
(26.2)
(3.6) $
7.4 $
1.1 $
4.7 $
1,010,081
1,290,239
209,857
211,231
1,209 $
726 $
1,003 $
483 $
159,515
160,484
4.09
94.0
4,317,292
4,348,618
120.65
86.2
297.0 $
(153.4)
143.6 $
(102.0)
41.6 $
30.8 $
0.8 $
975,379
1,103,835
201,065
200,804
1,314
851
1,117
462
151,893
151,921
4.53
94.1
3,903,961
3,878,748
131.32
83.6
253.6
(171.0)
82.6
(92.9)
(10.3)
31.8
1.1
17.9
$
A cautionary note regarding non-GAAP performance measures is included in Section 11: Non-GAAP Performance Measures.
2.8 $
18.1 $
El Peñón had its strongest quarterly operational performance from the last three years during the fourth quarter, as customary,
with production higher than the comparative prior year period and the third quarter of 2019, due to higher gold and silver feed
grades, exceeding the production plan. Mining gold grade of 4.86 g/t was in line with expectations, and El Peñón exceeded its
annual production guidance. Feed grades during the quarter were primarily from mined ore, with lower reliance on low-grade
stockpiles used in the second and third quarters. Similar to the strategy previously undertaken at Jacobina, additional mine
development has greatly improved production flexibility, and the expectation is that during 2020, processed ore will be primarily
from run of mine, with continued reduced reliance on low grade stockpiles.
Fourth quarter unitary costs were positively impacted by the higher GEO production, and the Chilean Peso devaluation, which
resulted in lower costs of sales excluding DDA. In addition, cost saving initiatives undertaken by mine management have begun
to positively impact costs with further sustainable reductions expected. With the ongoing focus to increase mine development
rates, El Peñón now has access to expanded underground mine areas that has provided increased availability of higher gold and
silver areas and is expected to support the current level of feed grades over the near term. Mine development is currently occurring
at a rate that exceeds 3,000 meters per month, and costs have been favourably impacted.
Approximately 15,000 metres of drilling were completed at El Peñón during the fourth quarter of 2019, in line with the exploration
plan. Drilling during the quarter focused on infill to establish new indicated resources, with 14,000 metres completed in four areas,
including deep Orito, Sorpresa, Nueva Abundancia and Esmerelda Central. Approximately 900 metres of exploration drilling were
completed to add new inferred resources by testing vein extensions along strike and to depth at Providencia Norte, Martillo Flat
Annual Report 2019
45
and Bonanza Este. The new structural model showing fault offsets of the Orito vein at depth has helped define new resources at
depth in the Angelina sector, where new intercepts in this wide vein structure have added to the resource base in areas immediately
adjacent to existing infrastructure. Similar interpretations are being tested in other parts of Orito as well as nearby veins (Sorpresa)
in an effort to continue to delineate resources in wide, first order veins.
Additional work carried out at Penon during the fourth quarter includes exploration of the wider El Peñón district, with five targets
(Tostado Su, Cerro Seco, Facel, Calcite Breccia and Bonanza East) being evaluated.
El Peñón has a long history of exploration and drill data, and the Company is currently exploring targets defined in part by GoldSpot
Discoveries Inc. Artificial Intelligence ("AI") algorithms to best predict areas for drilling for mineralization. Targets, including targets
generated through AI analyses, are defined by favorable lithological package (rhyolites), high white mica crystallinity and
anomalous geochemical and geophysical signatures, and will be further investigated through drilling in 2020.
MINERA FLORIDA, CHILE
Minera Florida is an underground gold mine located south of Santiago in central Chile.
Key Performance Information
Operating
Ore mined (tonnes)
Ore processed (tonnes)
GEO
Production
Sales
Feed grade (g/t) (i)
Recovery rate (%) (i)
Total cost of sales per GEO sold
Cash costs per GEO sold (ii)
AISC per GEO sold (ii)
DDA per GEO sold
Financial (millions of US Dollars)
Revenue
Cost of sales excluding DDA
Gross margin excluding DDA
DDA
Impairment
Mine operating earnings (loss)
Sustaining and other
Expansionary
Exploration
(i)
(ii)
Capital expenditures (millions of US Dollars)
For the three months ended December 31,
For the year ended December 31,
2019
2018
2019
2018
187,559
204,138
20,080
19,696
3.34
91.6
1,450
1,005
1,411
445
29.2
(19.8)
9.4
(8.8)
—
0.6
3.7
2.9
2.3
$
$
$
$
$
$
$
$
$
$
211,030
211,452
24,526
23,882
3.95
90.9
1,164 $
731 $
1,129 $
433 $
29.3 $
(17.5)
11.8 $
(10.3)
(151.0)
715,288
745,671
73,617
74,705
3.32
91.9
1,423 $
945 $
1,346 $
478 $
103.8 $
(70.6)
33.2 $
(35.7)
—
(149.5) $
(2.5) $
4.4 $
10.5 $
3.9 $
13.1 $
11.7 $
9.5 $
792,706
824,669
81,635
81,449
3.42
90.5
1,398
917
1,327
481
102.6
(74.7)
27.9
(39.2)
(151.0)
(162.3)
14.5
32.2
14.0
$
$
$
$
$
$
$
$
$
$
Grades and recovery rates relate to gold production.
A cautionary note regarding non-GAAP performance measures is included in Section 11: Non-GAAP Performance Measures.
In accordance with plan, Minera Florida had its strongest quarterly operational performance of the year during the fourth quarter,
consistent with prior years. Production in the fourth quarter of 2019 was greater than prior quarter due to increased throughput,
higher grades, and improved mechanical availability. Due to high equipment efficiency observed at El Peñón and Jacobina in
recent quarters, both mines were able to transfer certain equipment to Minera Florida, removing the requirement for additional
capital expenditures at the mine, improving mine productivity. In relation to mining sequence, the Company continued to shift
production to the core mine to focus on exploration and development in the Agua Fria concessions, and prepare the PVS, Pataguas
and Don Leopoldo veins for long-term success.
Unitary cost metrics were impacted by the lower production profile as a result of the lower grade and tonnes processed during the
fourth quarter of 2019 compared to the same period in prior year. In addition, the deterioration of zinc spot prices and increase in
market rates for treatment and refining charges negatively impacted costs of sales on an absolute basis as a result of lower by-
product credits. However, higher production and cost management initiatives significantly improved costing during the fourth
quarter of 2019, particularly in December. For the month of December 2019, cash costs per GEO sold were $892, and AISC per
46
Yamana Gold
GEO sold were $1,284. These initiatives are expected to produce better unitary metrics throughout 2020. Lower DDA per GEO
sold resulted from the lower cost base subsequent to the $151.0 million impairment recorded in 2018.
At the processing plant, the previously discussed modest investment demonstrated initial improvements to the recovery rate and
those improvements continue to be observed. Further studies suggest that with additional improvements to the leaching circuit,
expected recovery rates could increase and reach up to 94%. Additionally, processing rates continue to benefit from mill
optimization initiatives.
The focus for the year has been on exploration, and the goal to increase mineral reserves has been achieved. With the renewed
confidence in exploration, the Company is evaluating additional capital investments on underground mobile fleet equipment to
increase linear development and open new mining areas. Consequently, the Company is confident it will continue to add flexibility
to the mine plan, and maintain the sustainable production profile of December 2019 throughout future periods.
Approximately 13,000 metres of drilling were completed at Minera Florida during the fourth quarter, in line with plan. Of this,
approximately 4,000 metres of infill drilling was completed at five targets, including Fantasma, PVS, Lissette, Don Leopoldo and
Patagua, dedicated to converting inferred mineral resources to measured and indicated. Better than expected results allowed
some drilling metres to be reallocated from infill to exploration during the fourth quarter. Higher than LOM intercepts were
encountered at all targets, including several high-grade intercepts from Lissette zone, corresponding to different satellite bodies of
main Lissette vein. Three new exploitation levels were defined for this zone. Infill drilling completed in 2019 at Patagua and Don
Leopoldo demonstrated continuity of high-grade mineralization, and generated new resources.
Exploration drilling included approximately 9,000 metres dedicated to the discovery of new inferred mineral sources, with seven
targets tested including: Don Leopoldo Sur Este, Don Leopoldo Deep, Fantasma Deep, Fantasma Este-Caramelo, La Charra and
Bandolera. The Bandolera results are significant, as they are defining a significant new ore shoot located west of the Maqui fault,
a little explored area on the property.
New mineralized zones were outlined through surface exploration including trenching, mapping soil and rock sampling, leading to
the definition new resource delineation targets. The results from 2019 support the concept of new targets and veins with higher
then LOM grade demonstrating the continuing potential of the complex Minera Florida vein system.
CHAPADA, BRAZIL
Chapada is an open pit gold-copper mine located northwest of Brasília in Goías state, Brazil.
As disclosed in Section 1: Highlights and Relevant Updates of this MD&A, the Company closed the sale of the Chapada mine in
the third quarter of 2019. Consideration included an initial upfront cash payment of $800.0 million, a $100.0 million cash payment
contingent on the development of a pyrite roaster at Chapada by Lundin, a 2% net smelter return royalty on the Suruca gold project
in the Chapada complex, and the previously mentioned Gold Price Instrument.
5.
CONSTRUCTION, DEVELOPMENT AND EXPLORATION
CONSTRUCTION AND DEVELOPMENT
The following highlights key updates during the fourth quarter of 2019 in respect to certain of the Company's development projects.
Canadian Malartic (50% interest), Canada
The Canadian Malartic Extension Project is continuing according to plan with contributions from Barnat beginning in late 2019,
with a ramp-up throughout 2020 and meaningful contributions in 2021. On a 50% basis, expansionary capital expenditures related
to the Canadian Malartic Extension Project were $9.7 million during the fourth quarter and $27.7 million during the year ended
2019, with an additional $24.3 million expected to be spent in 2020. The Highway 117 road deviation has been completed and
opened to traffic, with the remaining extension work focused on overburden stripping and rock excavation, expected to be
completed by the third quarter of 2020.
The Partnership is evaluating scenarios to optimize the project, which includes discussions with royalty holders and other
stakeholders to enhance the economics of the project. Given the Company's robust pipeline of development projects, the Company
does not currently anticipate approving the project for development unless these discussions are successful and the project
economics are improved.
Annual Report 2019
47
OTHER OPTIMIZATION AND MONETIZATION INITIATIVES
A number of project evaluations are underway with a goal of surfacing value from non-strategic or non-producing assets including
Agua Rica and Suyai, all of which have well-defined delineated mineral reserves and/or mineral resources. Notable progress
relating to some of these initiatives includes, but is not limited to the following:
Agua Rica, Argentina
Agua Rica is a large-scale copper, gold, silver and molybdenum deposit located in the Catamarca Province, Argentina, 25
kilometres north of Andalgalá. The project has proven and probable mineral reserves of 11.8 billion pounds of copper and 7.4
million ounces of gold contained in 1.1 billion tonnes of ore. Mineral resources include 259,900 tonnes of measured and indicated
mineral resources, containing more than 1.6 billion pounds of copper and 954,000 ounces of gold. Additionally, inferred mineral
resources of 742,900 tonnes represent significant upside potential to further define an increase mineral reserves and life of mine.
On March 7, 2019, the Company announced the signing of an integration agreement with Glencore International AG and Newmont
Corporation (the three parties collectively, "the Parties”). Pursuant to the integration agreement, the Agua Rica project would be
developed and operated using the existing infrastructure and facilities of Minera Alumbrera Limited (“Alumbrera”) in the Catamarca
Province of Argentina. The Company would own 56% of the integrated project.
The Parties believe the integration of the Agua Rica project and the Alumbrera mine (the “Integrated Project”) has significant merit
given the proximity of the assets and the potential to realize significant synergies by taking full advantage of existing infrastructure
associated with the Alumbrera mine for the development and operation of Agua Rica. Agua Rica hosts a large scale, long life
copper mineral resource with associated gold, silver, and molybdenum while the Alumbrera infrastructure is of significant scale
and configuration that is ideally suited for the integration plan.
The Parties established a Technical Committee to direct the advancement of the Integrated Project. The Committee oversaw the
completion of a Pre-Feasibility Study ("PFS"), and the Company announced the positive PFS results on July 19, 2019, underscoring
Agua Rica as a long life, low-cost project with robust economics and opportunities to realize further value, including converting
economic-grade inferred mineral resources and expanding throughput scenarios aimed to increase metal production and returns,
among other opportunities. The Integrated Project generates significant synergies by bringing together the extensive mineral
resource of Agua Rica with the existing infrastructure of Alumbrera to create a unique, high quality and low risk brownfield project
with an optimized environmental footprint that will bring significant value to shareholders and local communities and stakeholders.
The PFS highlights are:
•
Proven and probable copper mineral reserves increased from year-end 2018 by 21% to 11.8 billion pounds and gold
mineral reserves increased by 13% to 7.4 million ounces
Initial long mine life of 28 years
Annual production for the first 10 full years increased to 533 million pounds of copper equivalent(i) production
•
•
• Cash costs decreased to $1.29 per pound and all-in sustaining costs (“AISC”) decreased to $1.52 per pound for the first
ten years of production
• Net present value (“NPV”) increased to $1.935 billion and an increased internal rate of return (“IRR”) of 19.7%(ii)
•
Full feasibility study to be completed in 2020
(i)
(ii)
Copper equivalent metal includes copper with gold, molybdenum, and silver converted to copper-equivalent metal based on the following metal price
assumptions: $6,614 per tonne of copper, $1,250 per ounce for gold, $24,250 per tonne for molybdenum, and $18.00 per ounce for silver.
Assuming metal prices of $3.00 per pound of copper, $1,300 per ounce of gold price, $18.00 per ounce of silver, $11.00 per pound of molybdenum and
using an 8% discount rate.
The PFS for the Integrated Project considers the Agua Rica deposit mined via a conventional high tonnage truck and shovel open
pit operation. Average life of mine material moved is expected to be approximately 108 million tonnes per year, with ore feed of 40
million tonnes per year and average life of mine strip ratio of 1.66.
Ore extracted from the mine will be transported from the open pit by truck to the primary crusher area and then transported via a
conventional conveyor to the existing Alumbrera processing plant. To route the overland conveyor system, approximately 5.2
kilometres of tunnel development will be required. The conveyor extends 35 kilometres to the Alumbrera process plant, where it
will feed the existing stacker conveyor via a new transfer station.
Relatively modest modifications to the circuit are needed to process the Agua Rica ore in order to produce copper and by-products
concentrate, which will then be transported to the port for commercialization. An in-situ blending strategy has been defined to
manage the concentrate quality over certain years of the mine life, which will allow the project to achieve the desired targets.
Further optimizations to this strategy will be studied in the next design phase.
48
Yamana Gold
This PFS provides the framework for the preparation and submission of a new Environmental Impact Assessment (“EIA”) to the
authorities of the Catamarca Province and for the continued engagement with local stakeholders and communities. The Companies
have begun the EIA process in 2019, given the level of significant detail in the pre-feasibility study.
Suyai, Argentina
The Company previously completed several studies that evaluated two options for ore processing, both of which provide favourable
project economics. The first considered the construction of a CIL processing facility for the on-site production of gold and silver in
the form of doré. The second considered the construction of a processing facility for on-site production of gold and silver contained
in a high-grade concentrate, which would be shipped abroad for subsequent precious metal recovery. Both approaches considered
an identical underground configuration with average annual production expected to be in excess of 200,000 ounces of gold and
300,000 ounces of silver. The Company believes both scenarios address past concerns regarding open pit mining, and the
development scenario that includes production of an on-site concentrate addresses many of the past concerns regarding the use
of cyanide, and, it would potentially meet provincial regulations currently in place in Chubut. The Company will work with local
stakeholders to obtain and sustain its social license should the project progress to a more advanced stage.
The Company continues to pursue development plans and other strategic alternatives for the project. Given the extensive amount
of work performed to date, the existing scoping study could rapidly progress to a feasibility study, allowing for the project to be
developed in a short time frame. The Suyai project is a development ready project with significant financial and social benefits to
the local community, along with the broader provincial and national communities. As and when the provincial moratorium on mining
lapses and the Company has completed favourable engagement with the local community, the Company would expedite its
development plans for the project.
Monument Bay, Canada
The Monument Bay deposit is hosted in the Stull Lake Greenstone Belt, comprised of three volcanic-sedimentary assemblages
ranging in age from 2.85 to 2.71 billion years. Gold mineralization occurs along the steeply north-dipping, regional-scale Twin
Lakes Shear Zone and the lesser-explored, adjacent AZ Shear Zone.
Exploration at the Monument Bay project in 2019 focused on development of a new geological model and definition of higher grade
zones within the overall mineral envelope, to allow better resource modelling and to provide additional understanding of the controls
on mineralization at the deposit. As well, a property wide exploration program was initiated utilizing a heli-portable overburden and
top-of-bedrock RC drill rig, completed on a roughly 1 kilometer grid. A new resource model has been developed, which provides a
better understanding of the controls on and distribution of gold mineralization at the deposit, and which will be utilized in 2020 to
provide targets for further drilling. Evaluation of the remainder of the project, which has historically seen little exploration attention,
will continue and be expanded during the 2020 field season, with additional, fill-in and step-out RC drilling. This newly applied
exploration method opens up the remainder of the Monument Bay property to exploration and represents a significant step toward
advancing this prospective land package. In 2020 this program will be augmented with evaluation of other exploration methods as
warranted.
Other
The Company continues to pursue development and strategic initiatives for the 56.7% held Agua De La Falda joint venture with
Codelco, located in northern Chile. The historical Jeronimo Feasibility Study focused on maximizing production from the sulphide
deposits. The Company completed the study of a low capital start-up project based on the remaining oxide inventory with positive
results and is evaluating exploration plans on the highly prospective claims surrounding the mine, where early-stage targets have
been identified. Re-logging of historical holes and exploratory drilling done supported the potential to extend the oxide
mineralization as well as potential for copper/gold deposits within the joint venture claims. Agua De La Falda has processing
capacity and infrastructure already installed.
EXPLORATION
Exploration on the most prospective properties is a key to unlocking and creating value for shareholders. The 2019 exploration
program focused on finding higher quality ounces, improving mine grade, infill drilling to replace production by upgrading existing
mineral resources, and exploring the Yamana property portfolio as well as several joint venture opportunities.
The Company continues its exploration programs at existing operations. The Company increased its exploration spending in the
third quarter by approximately $10.0 million, with a goal of further building mineral reserves and mineral resources at key operations
as well as building a pipeline of exploration opportunities to ensure future growth. Exploration plans are focused on extending mine
life at Cerro Moro, El Peñón and Minera Florida, while increasing grade, mineral resources and mine life at Jacobina and Canadian
Malartic to allow increases in production at low costs. Over the course of the year, exploration spending at Jacobina was allocated
to support the planned expansion, and the program added new mineral reserves at a grade of 3.0 g/t or better.
Annual Report 2019
49
For exploration updates relating to operating mines during the quarter, refer to Section 4: Operating Segments Performance. The
following is a summary of the exploration and evaluation expenditures for the current and comparative periods:
(In millions of US Dollars)
Exploration and evaluation capitalized (i)
Exploration and evaluation expensed (ii)
Total exploration and evaluation expenditures
For the three months ended December 31,
For the year ended December 31,
$
$
2019
13.9 $
3.3
17.2 $
2018
18.5 $
3.6
22.1 $
2019
60.4 $
10.3
70.7 $
2018
75.4
13.0
88.4
(i)
(ii)
Capitalized exploration and evaluation costs are reflected in property, plant and equipment in the consolidated balance sheets as additions to exploration
and evaluation assets.
Expensed exploration and evaluation costs are reported in the consolidated statements of operations for the respective period.
6.
MINERAL RESERVE AND MINERAL RESOURCE ESTIMATES
Mineral reserves and mineral resources are determined in accordance with National Instrument 43-101- Standards of Disclosure
for Mineral Projects, issued by the Canadian Securities Administrators ("NI 43-101"). NI 43-101 sets out the standards of disclosure
for mineral projects including rules relating to the determination of mineral reserves and mineral resources. This includes a
requirement that a “qualified person” (as defined under the NI 43-101) supervises the preparation of the mineral reserves and
mineral resources reports. The Company's mineral reserve and mineral resource reports are reviewed by Sébastien Bernier, P.Geo
(Senior Director, Geology and Mineral Resources), who is an employee of Yamana Gold Inc. and a "Qualified Person" as defined
by NI 43-101.
For details, refer to the mineral reserve and mineral resource tables contained in the Company's 2019 annual report.
For mineral reserve estimation purposes, the gold price assumption for Yamana Mines of $1,250 is the same assumption used for
the past three years, with the exception of Canadian Malartic which uses $1,200. The Company believes that increases in mineral
reserves as result of exploration and drilling are a more meaningful representation of an ore body rather than the reporting of
additional mineral reserves resulting from an increase in mineral reserve estimation gold prices.
The Company's mineral reserves and mineral resources as at December 31, 2019 are summarized in the following tables. The
following waterfall graphs exclude the Company's interests in Alumbrera, Agua Rica, Leagold, as well as Chapada from the
December 31, 2018 totals. Complete information relating to mineral reserves and mineral resources indicating a complete listing
of metal price assumptions, tonnage, grade and recoveries is contained in a complete mineral resource and mineral reserve table
accompanying the 2019 annual report available on the Company's website, www.yamana.com.
50
Yamana Gold
Annual Report 2019
51
Mineral Reserves & Mineral Resources Estimates (i)(ii)
Contained Gold
(in 000's ounces)
Contained Silver
(in 000's ounces)
Proven & probable mineral reserves
2019
2018
2019
Canadian Malartic (50%)
Jacobina
Cerro Moro
El Peñón
Minera Florida
Jeronimo (57%)
Total proven & probable mineral reserves
Agua Rica proven & probable mineral reserves*
Alumbrera (12.5%) proven & probable mineral reserves*
2,389
2,493
529
916
450
1,082
7,859
7,382
109
2,780
2,099
675
800
404
1,082
7,841
6,559
109
—
—
30,461
30,238
3,125
—
63,824
100,781
—
2018
—
—
37,959
24,893
2,976
—
65,828
102,246
—
Contained Copper
(in million pounds)
2018
2019
—
—
—
—
—
—
—
—
—
—
—
—
—
—
11,829
9,790
77
77
*An agreement has been signed by Agua Rica, which is owned by Yamana Gold, and the owners of Alumbrera that would see the integration of the two projects.
Measured & indicated mineral resources
Canadian Malartic (50%)
Jacobina
Cerro Moro
El Peñón
Minera Florida
Jeronimo (57%)
La Pepa
Suyai
Monument Bay
847
3,090
177
658
928
139
2,760
2,286
1,787
869
3,232
208
396
817
139
2,760
2,286
1,787
Total measured & indicated mineral resources
Agua Rica measured & indicated mineral resources
Alumbrera (12.5%) measured & indicated mineral resources
12,672
12,493
954
107
896
118
—
—
13,809
21,911
5,389
—
—
3,523
—
44,632
15,008
—
—
—
15,542
25,786
3,517
—
—
—
—
575
—
45,421
38,693
—
—
15,704
12,904
5,186
—
—
3,523
—
37,317
18,200
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1,624
1,714
58
65
—
—
14,139
32,570
6,093
—
—
—
—
575
—
53,377
48,124
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
3,767
4,853
4,890
1,406
273
735
747
161
620
543
646
274
1,781
12,075
2,150
2,319
1,008
211
933
1,038
161
620
543
646
274
1,781
9,533
2,444
Agua Rica inferred mineral resources
Alumbrera (12.5%) inferred mineral resources
(i)
(ii)
13
13
Table excludes assets sold in 2019, and the Company's interests in Leagold.
The assumptions used for mineral reserve and mineral resource estimates as at December 31, 2019 for all operating mines reported in this MD&A (except
the Canadian Malartic mine) were $1,250 per ounce gold, $18.00 per ounce silver, and $1.25 per pound of zinc. The Canadian Malartic mine mineral reserve
and mineral resource estimates use $1,200 per ounce of gold. The Monument Bay project mineral resource estimates use $1,200 per ounce of gold. The
Agua Rica project mineral reserve estimates use $1,250 per ounce of gold, $18.00 per ounce of silver, $11.00 per pound of molybdenum, and $3.00 per
pound of copper. The Agua Rica project mineral resource estimates use $1,600 per ounce of gold, $24.00 per ounce of silver, $11.00 per pound
molybdenum, and $4.00 per pound of copper. The La Pepa project mineral resource estimates use $780 per ounce of gold. The Jeronimo project mineral
reserve and mineral resource estimates use $900 per ounce of gold. The Lavra Velha project mineral resource estimates use $1,300 per ounce of gold,
and $3.50 per pound of copper. The Arco Sul project mineral resource estimates use $1,500 per ounce of gold. The Suyai project mineral resource estimates
use a 5.0 g/t of gold assumption. The Alumbrera project mineral reserve and resource estimates use $1,250 per ounce of gold and $2.91 and $2.95 per
pound of copper for mineral reserve and mineral resource estimates, respectively.
—
4
4
Inferred mineral resources
Canadian Malartic (50%)
Jacobina
Cerro Moro
El Peñón
Minera Florida
Jeronimo (57%)
La Pepa
Lavra Velha
Arco Sul
Suyai
Monument Bay
Total inferred mineral resources
52
Yamana Gold
Further information by mine is detailed below.
Canadian Malartic including Odyssey, Canada (50%)
Gold mineral reserves reflect depletion associated with 2019 production at Canadian Malartic. The objective of the 2019 exploration
program at Canadian Malartic was to define and increase underground mineral resources, with a focus on Odyssey, East Malartic,
and the newly discovered East Gouldie zone. The drilling performed, particularly at East Malartic and East Gouldie, resulted in a
111% increase in inferred mineral resources. At East Malartic, mineral resources below 1,000 metres in depth were reported for
the first time. At East Gouldie, inferred mineral resources are relatively high grade at 3.34 g/t diluted. On a 100% basis, the overall
underground project has increased by more than 5,000,000 ounces of inferred mineral resources, significantly improving the
economic potential of the project. Additional exploration in these areas is planned for 2020.
Jacobina, Brazil
Jacobina increased gold mineral reserves by 19% over and above 2019 production depletion, based on updated models from
Morro do Vento, João Belo, Canavieiras South, Canavieiras Central and Serra do Córrego mines. The conversion of measured
and indicated mineral resources to mineral reserves is partially responsible for a modest decrease in gold measured and indicated
mineral resources. Inferred mineral resources increased by 398,000 ounces of gold, a 39% increase from year end 2018.
During the year, the Company announced increases to mineral reserves and mineral reserve grades at Jacobina of 8.6% and
2.6%, respectively, versus year-end 2018. This movement was in addition to overall mineral reserve grade growth in 2018, which
when combined with the mid-year update, represented a 5.3% increase from year-end 2017.
With continued improvements to the sustainable cost structure and development productivity at the mine, Jacobina was able to
incorporate ore previously categorized as mineral resources in the mineral reserve category. The conclusion to include lower grade
supplemental ore, encountered as a halo to the core mineral reserves, had the impact of slightly decreasing total mineral reserve
grade but significantly increasing economical mineral reserve ounces. This supplemental ore halo has been effectively and
profitably mined over the past few quarters. The updated mineral reserves of the Company comprise:
29.17 million tonnes at a grade of 2.40 g/t in the core zone, for a total of 2.25 million ounces
5.01 million tonnes at a grade of 1.53 g/t in the supplemental halo zone, for a total of 246 thousand ounces
For a total mineral reserve of 34.18 million tonnes at a grade of 2.27 g/t, for a total of 2.49 million ounces
•
•
•
The Company’s mine plan prioritizes the mining of the core mineral reserves with a grade of 2.40 grams per tonne, and defers the
majority of the mining and processing of the supplemental halo mineral reserves until late in the mine life. The observed increase
in mineral reserves and mineral reserves grade during the mid-year and year-end update supports annual gold production above
170,000 ounces, which was previously guided as the target after the completion in mid-2020 of Phase 1, a modest plant
optimization with a sustainable level of 6,500 tonnes per day ("tpd").
Cerro Moro, Argentina
At Cerro Moro, mineral reserves changed due to 2019 depletion, and, given the Company’s expanded experience with mining
Cerro Moro ore bodies over the past year and a half, the Company was able to further refine its geological understanding and
incorporate that understanding into the geological model, improving model predictability. Inferred mineral resources increased by
29% and 10% for gold and silver, respectively, compared to the prior year, from the addition of promising new structures. The main
increases came from the new Naty discovery, and Agostina. Naty is a recent discovery, made late last year, and exploration is
expected to continue to expand this mineralized zone. The structures of Naty, Michelle Extension, Martina, Tres Lomas, Deborah
Link and other zones are expected to undergo further drilling in 2020, as part of the aggressive exploration budget allocation to
the mine.
El Peñón, Chile
El Peñón's mineral reserves both replaced 2019 depletion and further increased such mineral reserves by 15% and 21% for gold
and silver, respectively, as the result of positive infill drilling and mine design optimization. Gold measured and indicated mineral
resources increased by 66%, while silver increased by 70% compared to the prior year, due to the positive exploration results from
numerous secondary vein structures in the east mine and adjustments to the mineral resource classification criteria. Lower gold
and silver inferred mineral resources reflect the conversion to indicated mineral resources.
Minera Florida, Chile
At Minera Florida, the increase in mineral reserves reflects an increase due to positive drilling results at Pataguas, Don Leopoldo,
Fantasma and PVO Sur, amongst others, and block model revisions. These increases were partially offset by mine depletion.
Mineral resources remained relatively unchanged as infill drilling resulted in conversion from inferred mineral resources to
Annual Report 2019
53
measured and indicated mineral resources. Other changes to calculation parameters also had the impact of modestly decreasing
inferred mineral resources, which was partially offset by new discoveries.
Agua Rica, Argentina
At Agua Rica, proven and probable gold mineral reserves increased by 13% to 7.4 million ounces, while proven and probable
copper mineral reserves increased from year end 2018 by 21% to 11.8 billion pounds. Mineral resources decreased marginally on
the conversion of ounces to mineral reserves.
7.
FINANCIAL CONDITION AND LIQUIDITY
BALANCE SHEET REVIEW
As at, (In millions of US Dollars)
Cash and cash equivalents
Current assets (including cash and cash equivalents)
Non-current assets
Total assets
Current liabilities (excluding current portion of debt)
Non-current liabilities (excluding long-term debt)
Debt (current and long-term)
Total liabilities
Equity attributable to Yamana Gold Inc. equity holders
Non-controlling interests
Total equity
Working capital (i)
Net debt (ii)
December 31,
2019
158.8 $
401.6
6,715.6
7,117.2 $
352.2
1,497.5
1,047.9
2,897.5 $
4,185.2
34.7
4,219.9 $
(6.7) $
889.1 $
$
$
$
$
$
$
December 31,
2018
98.5
429.2
7,583.7
8,012.9
494.5
1,735.7
1,758.7
3,988.9
3,989.3
34.7
4,024.0
(67.2)
1,660.2
(i)
(ii)
Working capital is defined as the excess of current assets over current liabilities, which includes the current portion of debt.
A cautionary note regarding non-GAAP financial measures and their respective reconciliations, as well as additional subtotals in financial statements is
included in Section 11: Non-GAAP Performance Measures.
Total assets were $7.1 billion as at December 31, 2019, compared to total assets of $8.0 billion as at December 31, 2018. The
decrease in the assets during the year was primarily attributable to the sale of the Chapada mine on July 5, 2019, which included
$0.9 billion of assets. The Company’s asset base is primarily comprised of non-current assets such as property, plant and
equipment and goodwill, reflecting the capital-intensive nature of the mining business and previous growth through acquisitions.
Other significant assets include: inventories, the Company's investment in associate (Leagold), indirect taxes recoverable
(consisting of value added taxes in the jurisdictions in which the Company operates), advances and deposits, ore stockpiles, and
cash and cash equivalents.
Total liabilities as at December 31, 2019, were $2.9 billion, a decrease of $1.1 billion or 27% from December 31, 2018. The
decrease during this period was attributable to the disposal of $0.3 billion of liabilities in the Chapada sale, and the repayment of
$0.8 billion of debt with cash proceeds received from the sale, as previously announced.
Cash and cash equivalents were $158.8 million as at December 31, 2019, an increase of $60.3 million when compared to
December 31, 2018. The Company had a working capital deficit of $6.7 million as at December 31, 2019, compared to a working
capital deficit of $67.2 million at December 31, 2018.
Net change in working capital movement was a cash outflow of $68.7 million for the year ended December 31, 2019. Working
capital was impacted predominantly by the timing and normalization of regular trade payments for the Company's operating mines,
the buildup and settlement of year-end accruals, timing of inventory build-up and consumption in both metals and materials and
supplies and lastly, the movements associated with indirect tax credit buildup or collection at certain of the Company's operations.
Fourth quarter working capital movement was positively impacted by the timing of receipt of certain invoices throughout several of
the Company's operations, for a total of approximately $21.0 million. The late receipt of invoices caused payable balances to
increase above those levels that are considered customary. The Company anticipates that this seasonal buildup of payable
balances will partly normalize in the first quarter of 2020.
54
Yamana Gold
Total debt was $1.0 billion as at December 31, 2019, compared to $1.8 billion as at December 31, 2018, and net debt as at
December 31, 2019, was $0.9 billion compared to $1.7 billion as at December 31, 2018 - the decrease attributable to the repayment
of $0.8 billion debt with cash proceeds received from the sale of the Chapada mine as discussed above.
Net debt decreased by $771.1 million during the year to $889.1 million. On August 7, 2019 the Company concluded the announced
debt repurchases, and successfully completed the retirement of $800.0 million of debt. This debt retirement was completed ahead
of schedule, thereby providing a catalyst for further debt reduction from interest savings and free cash flow generation. The
Company also repaid outstanding balances on its revolving credit facility and therefore, now has considerable financial flexibility
to pursue its corporate objectives, which include improving returns to shareholders. Further, the Company is well positioned to
achieve its target net debt leverage ratio of below 1.0x, now expecting this sooner than 2021 as originally planned.
The potential monetization of various non-producing projects and financial instruments will provide further opportunities to reduce
debt levels and leverage. The Company recognizes that there is significant value in such assets which would be more than the
total amount of outstanding debt, and along with cash flows, the Company has more than sufficient resources to further reduce
outstanding debt, thereby further improving financial flexibility and providing more opportunity for enhanced value and returns for
shareholders. The scheduled debt repayments of $56.2 million in the first quarter of 2020 are expected to be repaid from cash on
hand and available liquidity.
LIQUIDITY
Planned growth, development activities, expenditures and commitments are expected to be sufficiently funded by recent and
potential monetization and financing transactions, future operating cash flows and available credit facilities.
As at December 31, 2019, the financial resources available to the Company for meeting its financial obligations include
$750.0 million from its revolving credit facility.
For the year ended December 31, 2019, cash flows from operating activities were $521.9 million net of the impact of the $79.4
million deferred revenue recognized in respect of metal sales agreements. Cash flows from operating activities are expected to
remain positive. Refer to Section 8: Economic Trends, Business Risks and Uncertainties for a detailed discussion of market price
risk.
The Company’s near-term financial obligations include repayment obligations within one year of long-term debt of $56.2 million,
capital and other financial commitments of $57.8 million, and sustaining capital expenditures of approximately $164.0 million for
2020. The Company's budgets for expansionary and exploration capital expenditures are discretionary in nature, allowing
management a reasonable degree of flexibility in managing its financial resources. Further information with regards to planned
capital expenditures can be found in the Section 2: Core Business, Strategy and Outlook, and commitments by year can be found
below.
The Company's financial position remains strong and is expected to improve further over the next year with the continuation of
robust operating results.
SOURCES AND USES OF CASH
The following table summarizes cash inflows and outflows for the following periods:
For the three months ended December 31,
For the year ended December 31,
(In millions of US Dollars)
Cash flows from operating activities
Cash flows from operating activities before net change in
working capital (i)
Cash flows (used in) from investing activities
Cash flows used in financing activities
2019
2018
201.7 $
114.7
$
176.6 $
(96.4) $
115.8
$
(91.4) $
$
$
$
$
A cautionary note regarding non-GAAP performance measures is included in Section 11: Non-GAAP Performance Measures.
(46.9) $
(49.3) $
(i)
2019
521.8 $
590.5 $
432.0 $
(892.5) $
2018
404.2
566.3
(329.6)
(134.3)
Annual Report 2019
55
Operating Activities
Net cash flows from operating activities for the three months ended December 31, 2019 were higher than the comparable period
in 2018 primarily as a result of higher gross margins recognized as a result of increased metal prices.
The increase in net cash flows from operating activities for the year ended December 31, 2019 compared to the prior year is
attributable to higher gross margins recognized as a result of increased metal prices in the latter part of 2019 as noted above, and
the absence of cash payments to Brazilian tax authorities, which totaled $101.3 million in the prior year. These items were partially
offset by the absence in the current period of advanced payments received on metal purchase agreements of $127.8 million.
Investing Activities
Overall, net cash flows used in investing activities for the three months ended December 31, 2019 were comparable to the same
period in 2018. However, the current period reflected lower gross capital expenditures, with higher gross capital expenditures in
the comparative quarter being partially offset by the net cash inflow of $28.5 million on the sale of the Gualcamayo mine in
December 2018.
The $761.6 million increase in net cash flows from investing activities for the year ended December 31, 2019 compared to 2018
was primarily attributable to the cash proceeds received on the sale of the Chapada mine and monetization of the Gold Price
instrument, as well as a decrease in capital expenditures of approximately $115.0 million, due to the fact that the prior period
included expenditures related to the completion of Cerro Moro, Gualcamayo, and a full year of expenditures related to Chapada.
Also included in investing activities in 2018 was a $189.9 million net cash inflow from the sale of certain subsidiaries and other
assets during the year.
The gain on sale of Chapada in the current year was impacted by the final settlement associated with the working capital delivery
of $33.0 million on the sale, as anticipated, which decreased cash flows from investing activities.
Details on capital expenditures by mine for each period can be found in Section 1: Highlights and Relevant Updates.
Financing Activities
In the three months ended December 31, 2019, net cash flows used in financing activities decreased $2.4 million when compared
to the comparative quarter, primarily attributable to lower interest and debt repayments during the quarter (following the debt
repayments during the third quarter - see below), partially offset by an increase in dividend payments resulting from the 100%
increase in the dividend declared for the third quarter, and the inclusion of the repayment of lease liabilities in 2019, resulting from
the adoption of IFRS 16 Leases on January 1, 2019. Refer Note 5: Recent Accounting Pronouncements to the Company's
consolidated financial statements for further information.
In the year ended December 31, 2019, net cash flows used in financing activities were primarily impacted by the repayment of
debt in the third quarter following the sale of the Chapada mine, including the total outstanding balance on the revolving credit
facility and approximately $415.0 million of certain of the Company's outstanding senior notes. Net debt repayments in the
comparable year were only $26.5 million. Net cash flows used in financing activities also included payments of interest and
dividends in both years, and the repayment of lease liabilities in 2019 (see above).
CAPITAL RESOURCES
The capital of the Company consists of items included in shareholders’ equity and debt obligations, net of cash and cash
equivalents, as follows:
As at, (In millions of US Dollars)
Shareholders’ equity
Debt
Less: Cash and cash equivalents
December 31,
2019
4,219.9 $
1,047.9
5,267.8
(158.8)
5,109.0 $
$
$
December 31,
2018
4,024.0
1,758.7
5,782.7
(98.5)
5,684.2
In order to maintain or adjust its capital structure, the Company may, upon approval from its Board of Directors, issue shares, pay
dividends, or undertake other activities as deemed appropriate under the specific circumstances.
56
Yamana Gold
CONTRACTUAL OBLIGATIONS AND COMMITMENTS
In the normal course of business, the Company enters into contracts that give rise to commitments for future minimum payments.
The following table summarizes the remaining contractual maturities of the Company’s financial liabilities and operating and capital
commitments at December 31, 2019, including the impact of IFRS 16 in capital and other financial commitments, shown on an
undiscounted basis:
(In millions of US Dollars)
Debt
Repayment of principal
Interest
Capital and other financial commitments
Environmental rehabilitation obligations
Within
1 year
Years
2 and 3
Years
4 and 5
After
5 years
Total
$
56.2 $
190.7 $
528.3 $
282.9 $
1,058.0
48.4
57.8
5.9
88.7
33.3
18.4
51.1
5.5
18.7
38.7
1.6
333.9
227.0
98.2
376.9
$
168.3 $
331.1 $
603.6 $
657.1 $
1,760.1
(i)
Additionally, as at December 31, 2019, the Company had outstanding letters of credit totalling $70.1 million (C$91.1 million) representing guarantees for
environmental rehabilitation obligations and road construction relating to the Company’s share of mining interest in Canadian Malartic, and $13.6 million
representing guarantees for reclamation obligations relating to the Company's US properties.
OUTSTANDING SHARE DATA
The Company is authorized to issue an unlimited number of common shares at no par value and a maximum of eight million first
preference shares. There are no first preference shares issued or outstanding. Under the Company's normal course issuer bid,
the Company is able to purchase up to 47,513,266 common shares no later than May 5, 2020. The table below summarizes the
Company's common shares and securities convertible into common shares as at the following dates:
As at, (thousands of units)
Common shares issued and outstanding
Share options outstanding
Restricted share units
February 7,
2020
950,607
1,164
2,985
December 31,
2019
950,435
1,286
2,448
8.
ECONOMIC TRENDS, BUSINESS RISKS AND UNCERTAINTIES
Exploration, development and mining of precious metals involve numerous risks as a result of the inherent nature of the business,
global economic trends and the influences of local social, political, environmental and economic conditions in the various
geographical areas of operation. As such, the Company is subject to several financial and operational risks that could have a
significant impact on its profitability, financial instruments and levels of operating cash flows. The Company manages its exposure
to these risks in accordance with its Risk Management Policy.
Below is a summary of the principal financial risks and related uncertainties facing the Company. Readers are also encouraged to
read and consider the risk factors more particularly described in the latest available Company’s Annual Information Form. Such
risk factors could materially affect the future operating results of the Company and could cause actual events to differ materially
from those described in forward-looking statements relating to the Company.
Annual Report 2019
57
METAL PRICE RISK
Gold Price Two-Year Trend (LBMA p.m. price: USD per oz of gold)
Gold Price - Market Update
For the quarter ended December 31, 2019, spot gold prices averaged $1,480 per ounce, representing an increase of 21%
compared to $1,226 per ounce in the fourth quarter of 2018. Prices ranged between $1,452 and $1,517 per ounce during the fourth
quarter of 2019. As at December 31, 2019, the closing price was $1,515 per ounce.
Gold prices moved higher in the fourth quarter of 2019. Lower rates across the globe, along with continued trade concerns between
the US and China and growing levels of negative yielding debt globally continue to support prices. Easing monetary policies
combined with many governments facing challenging fiscal situations and elevated levels of debt, should be supportive of gold
over the longer term. In the short-term, gold prices are likely be driven by the changing sentiment as to the monetary policy path
of the US Fed and US Treasury yields, equity market volatility, developments on global trade and geopolitical concerns.
Central banks continue to be net buyers, with 2019 being the second largest year of purchases this decade. Russia, Turkey,
Poland, and China are notable buyers. It is expected that central banks will continue to be net buyers for the foreseeable future as
diversification remains key in order to mitigate risk from ongoing geopolitical and economic uncertainty.
CURRENCY RISK
Currency fluctuations may affect the Company’s capital costs and the costs that the Company incurs at its operations. Gold is sold
throughout the world based principally on a US Dollar price, but a portion of the Company’s operating and capital expenses are
incurred in Brazilian Reais, Argentine Pesos, Chilean Pesos and Canadian Dollars. The appreciation of these foreign currencies
against the US Dollar would increase the costs of production at such mining operations, which could materially and adversely
affect the Company’s earnings and financial condition. The Company may enter into forward contracts or other risk management
strategies, from time to time, to hedge against the risk of an increase in the value of foreign currencies in the jurisdictions in which
the Company operates.
58
Yamana Gold
US Dollar - Market Update
The following summarizes the movement in key currencies vis-à-vis the US Dollar (source: Bloomberg):
The Brazilian Real, Argentine Peso and the Chilean Peso all weakened against the US Dollar during the three months ended
December 31, 2019, while the Canadian Dollar strengthened modestly.
Average Exchange Rate
Period-end Exchange Rate
For the three months ended
December 31,
2018
% (i)
For the year ended December 31,
2018
2019
% (i)
1.3216
3.8112
37.112
-0.1 % 1.3269
8.0 % 3.9451
1.2961
3.6550
2.4%
7.9%
60.0 % 48.2446
30.7165
57.1%
2019
1.3200
4.1173
59.387
As at
December 31,
2019
1.2988
4.0307
59.890
748.74
As at
December 31,
2018
1.3637
3.8745
37.668
693.60
% (i)
-4.8 %
4.0 %
59.0 %
7.9 %
680.55
654.63
Positive variance represents the US Dollar increase in value relative to the foreign currency.
11.1 % 703.25
755.98
7.4%
USD-CAD
USD-BRL
USD-ARG
USD-CLP
(i)
As at December 31, 2019, the Company had zero-cost collar contracts, which allow the Company to participate in exchange rate
movements between two strikes, as follows:
Brazilian Real to USD
January 2020 to December 2020
January 2021 to June 2021
R$ = Brazilian Reais.
Evenly split by month.
(i)
(ii)
Average call price (i) Average put strike price (i)
Total (ii)
R$ 3.87
R$ 3.85
R$ 4.36
R$ 4.31
R$ 192.9 million
R$ 93.0 million
Annual Report 2019
59
In addition, as at December 31, 2019, the Company had forward contracts as follows:
Brazilian Real to USD
January 2020 to December 2020
January 2021 to June 2021
Chilean Peso to USD
January 2020 to December 2020
(i)
(ii)
R$ = Brazilian Reais, CLP = Chilean Pesos.
Evenly split by month.
OTHER FINANCIAL STATEMENT RISKS
Credit and Counterparty Risk
Average forward price (i)
Total (ii)
R$ 4.06
R$ 4.07
R$ 133.2 million
R$ 93.0 million
CLP 740.19
CLP 69.6 billion
Credit risk is the risk that a third party might fail to discharge its obligations under the terms of a financial instrument. The Company
is exposed to various counterparty risks including, but not limited to: (i) financial institutions that hold the Company’s cash and
short-term investments; (ii) companies that have payables to the Company, including concentrate and bullion customers; (iii)
providers of risk management services (including hedging arrangements); (iv) shipping service providers that move the Company’s
material; (v) the Company’s insurance providers; (vi) refineries contracted that hold and process the Company's precious metals;
and (vii) the Company’s lenders. The Company seeks to limit counterparty risk by entering into business arrangements with high
credit-quality counterparties, limiting the amount of exposure to each counterparty and monitoring the financial condition of
counterparties. In addition, credit risk is further mitigated in specific cases by maintaining the ability to novate contracts from lower
quality credit counterparties to those with higher credit ratings. For cash and cash equivalents and trade and other receivables,
credit risk is represented by the carrying amount on the consolidated balance sheets.
Liquidity and Interest Rate Risk
Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities that are
settled by delivering cash or another financial asset. Under the terms of the Company's trading agreements, counterparties cannot
require the Company to immediately settle outstanding derivatives except upon the occurrence of customary events of default.
The Company mitigates liquidity risk through the implementation of its Capital Management Policy by managing its capital
expenditures, forecast and operational cash flows, and by maintaining adequate lines of credit. The Company manages its capital
structure and adjusts it in light of general economic conditions, the risk characteristics of the underlying assets and the Company’s
working capital requirements. In order to maintain or adjust its capital structure, the Company, upon approval from its Board of
Directors, may issue shares, pay dividends, or undertake other activities as deemed appropriate under the specific circumstances.
As part of the capital allocation strategy, the Company examines opportunities to divest assets that do not meet the Company’s
investment criteria. The Company is exposed to interest rate risk on its variable rate debt and may enter into interest rate swap
agreements to hedge this risk. The Company did not have any interest rate swaps as at December 31, 2019.
9.
CONTINGENCIES
The Company is currently subject to litigation proceedings as disclosed in Note 35 to the Company's consolidated financial
statements, and may be involved in disputes with other parties in the future that may result in litigation. If the Company is unable
to resolve these disputes favorably, it may have a material adverse impact on the Company's financial condition, cash flow and
results of operations.
10.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The Company's consolidated financial statements are prepared in accordance with International Financial Reporting Standards as
issued by the International Accounting Standards Board ("IFRS"). The significant accounting policies applied and recent accounting
pronouncements are described in Note 3 and Note 5, respectively, to the Company's consolidated financial statements for the year
ended December 31, 2019.
In preparing the consolidated financial statements in accordance with IFRS, management is required to make estimates and
assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Critical accounting estimates represent
estimates that are uncertain and for which changes in those estimates could materially impact the Company's consolidated financial
60
Yamana Gold
statements. Actual future outcomes may differ from present estimates. Management reviews its estimates and assumptions on an
ongoing basis using the most current information available.
The critical judgements and key sources of estimation uncertainties in the application of accounting policies during the year ended
December 31, 2019 are disclosed in Note 4 to the Company's consolidated financial statements for the year ended December 31,
2019.
11.
NON-GAAP PERFORMANCE MEASURES
The Company has included certain non-GAAP performance measures to supplement its consolidated financial statements that are
presented in accordance with IFRS, including the following:
All-in sustaining costs per GEO sold;
• Cash costs per GEO sold;
•
• Net debt;
• Net free cash flow;
•
•
Average realized price per ounce of gold/silver sold; and
Average realized price per pound of copper sold.
The Company believes that these measures, together with measures determined in accordance with IFRS, provide investors with
an improved ability to evaluate the underlying performance of the Company. Non-GAAP financial measures do not have any
standardized meaning prescribed under IFRS, and therefore they may not be comparable to similar measures employed by other
companies. The data is intended to provide additional information and should not be considered in isolation or as a substitute for
measures of performance prepared in accordance with IFRS. Management's determination of the components of non-GAAP and
additional measures are evaluated on a periodic basis influenced by new items and transactions, a review of investor uses and
new regulations as applicable. Any changes to the measures are duly noted and retrospectively applied as applicable. Subtotals
and per unit measures may not calculate based on amounts presented in the following tables due to rounding.
GEO PRODUCTION AND SALES
Production and sales of silver are treated as a gold equivalent in determining a combined precious metal production or sales unit,
commonly referred to as gold equivalent ounces ("GEO"). Specifically, guidance GEO produced are calculated by converting silver
production to its gold equivalent using relative gold/silver metal prices at an assumed ratio and adding the converted silver
production expressed in gold ounces to the ounces of gold production. Actual GEO production and sales calculations are based
on an average realized gold to silver price ratio for the relevant period.
CASH COSTS AND ALL-IN SUSTAINING COSTS
The Company discloses “cash costs” because it understands that certain investors use this information to determine the
Company’s ability to generate earnings and cash flows for use in investing and other activities. The Company believes that
conventional measures of performance prepared in accordance with IFRS do not fully illustrate the ability of its operating mines to
generate cash flows. The measures, as determined under IFRS, are not necessarily indicative of operating profit or cash flows
from operating activities.
The measure of cash costs and all-in sustaining costs ("AISC"), along with revenue from sales, is considered to be a key indicator
of a company’s ability to generate operating earnings and cash flows from its mining operations. This data is furnished to provide
additional information and is a non-GAAP financial measure. The terms "cash costs per GEO sold" and "AISC per GEO sold" do
not have any standardized meaning prescribed under IFRS, and therefore they may not be comparable to similar measures
employed by other companies. Non-GAAP financial measures should not be considered in isolation as a substitute for measures
of performance prepared in accordance with IFRS and are not necessarily indicative of operating costs, operating profit or cash
flows presented under IFRS.
Annual Report 2019
61
Cash costs include mine site operating costs such as mining, processing, administration, production taxes and royalties which are
not based on sales or taxable income calculations, but are exclusive of amortization, reclamation, capital, development and
exploration costs. The Company believes that such measure provides useful information about its underlying Cash costs of
operations. Cash costs are computed on a weighted average basis as follows:
• Cash costs per GEO sold - The total costs used as the numerator of the unitary calculation represent cost of sales
excluding DDA, net of treatment and refining charges. The attributable cost is calculated net of by-products by applying
copper and zinc net revenues, which are incidental to the production of precious metals, as a credit to GEO sold, thereby
allowing the Company’s management and stakeholders to assess net costs of precious metal sales. These costs are then
divided by GEO sold.
AISC figures are calculated in accordance with a standard developed by the World Gold Council (“WGC”) (a non-regulatory, market
development organization for the gold industry). Adoption of the standard is voluntary, and the standard is an attempt to create
uniformity and a standard amongst the industry and those that adopt it. Nonetheless, the cost measures presented herein may not
be comparable to other similarly titled measures of other companies.
AISC seeks to represent total sustaining expenditures of producing and selling GEO from current operations. The total costs used
as the numerator of the unitary calculation represent cash costs (as defined above), and includes cost components of mine
sustaining capital expenditures including stripping and underground mine development, corporate and mine-site general and
administrative expense, sustaining mine-site exploration and evaluation expensed and capitalized and accretion and amortization
of reclamation and remediation. AISC do not include capital expenditures attributable to projects or mine expansions, exploration
and evaluation costs attributable to growth projects, income tax payments, borrowing costs and dividend payments. Consequently,
this measure is not representative of all of the Company's cash expenditures. In addition, the calculation of AISC does not include
depletion, depreciation and amortization expense as it does not reflect the impact of expenditures incurred in prior periods. AISC
are computed on a weighted average basis as follows:
• AISC per GEO sold - reflect allocations of the aforementioned cost components on the basis that is consistent with the
nature of each of the cost component to the GEO production and sales activities but net of by-product revenue credits
from sales of copper and zinc.
62
Yamana Gold
Reconciliation of Cost of Sales to Cash Costs and AISC
Cash Costs & AISC (i) - Yamana Mines (iii) Reconciliation
(In millions of US Dollars except GEO and per GEO amounts)
Cost of sales excluding DDA (ii)
DDA (ii)
Total cost of sales
DDA
Total cash costs
AISC adjustments:
Corporate or regional G&A costs, including share-based remuneration
Reclamation & remediation - accretion & amortization
Capital exploration
Exploration and study costs
Capitalized stripping & underground mine development
Other sustaining capital expenditures
Leases (IFRS 16 Adjustment)
Total AISC
Commercial GEO (i)
Cost of sales excl. DDA per GEO sold
DDA per GEO sold
Total cost of sales per GEO sold
Cash cost per GEO sold
AISC per GEO sold
For the three months ended
December 31, 2019
For the three months ended
December 31, 2018
GEO -
Yamana
Mines
Other
Mines and
Copper
Total
$
169.4 $
169.1
$
119.0
119.0
$
288.4 $
288.0
$
0.3 $
—
0.3 $
Total
266.2 $
130.9
397.1 $
GEO -
Yamana
Mines
Other Mines
and Copper
172.3
$
118.1
93.9
12.7
290.5
$
106.6
(119.0)
$
169.1
20.2
5.3
11.7
1.9
22.7
23.9
6.1
$
$
$
$
$
$
260.8
257,904
656
461
1,117
656
1,011
(118.1)
$
172.3
17.4
3.8
13.7
1.7
18.2
20.7
—
$
$
$
$
$
$
247.8
263,850
653
448
1,101
653
939
Cash Costs & AISC (i) - Total Yamana (iv) Reconciliation
For the year ended
December 31, 2019
For the three months ended
December 31, 2018
(In millions of US Dollars except GEO and per GEO amounts)
Cost of sales excluding DDA (ii)
DDA (ii)
Total cost of sales
DDA
Treatment and refining charges
Total cash costs
AISC adjustments:
Corporate or regional G&A costs, including share-based remuneration
Reclamation & remediation - accretion & amortization
Capital exploration
Exploration and study costs
Capitalized stripping & underground mine development
Other sustaining capital expenditures
Leases (IFRS 16 Adjustment)
Total AISC
Commercial GEO (i)
Cost of sales excl. DDA per GEO sold
DDA per GEO sold
Total cost of sales per GEO sold
Cash cost per GEO sold
AISC per GEO sold
Total
GEO - Total
Yamana
$
$
169.4 $
169.2
$
119.0
119.0
288.4 $
288.1
$
Other
Mines and
Copper
0.2 $
—
0.2 $
(119.0)
—
$
169.2
20.2
5.3
11.7
1.9
22.7
23.9
6.1
$
$
$
$
$
$
260.9
257,743
656
462
1,118
656
1,012
Other Mines
and Copper
56.2
10.3
66.5
Total GEO - Total
210.0
Yamana
266.2 $
$
130.9
397.1 $
120.6
330.6
$
(120.6)
1.5
$
211.5
18.0
4.6
16.0
2.0
21.4
23.2
—
$
$
$
$
$
$
296.6
321,948
652
375
1,027
657
921
Annual Report 2019
63
Cash Costs & AISC (i) - Yamana Mines (iii) Reconciliation
For the year ended
December 31, 2019
For the year ended
December 31, 2018
GEO -
Yamana
Mines
Total
Other Mines
and Copper
Total
111.1 $ 1,010.0 $
12.9
124.0 $ 1,448.3 $
438.3
GEO -
Yamana
Mines
Other Mines
and Copper
607.9
$
402.1
366.8
71.5
974.7
$
473.6
Cash Costs & AISC (i) - Total Yamana (iv) Reconciliation
For the year ended
December 31, 2019
For the year ended
December 31, 2018
Total
GEO - Total
Yamana
Other Mines
and Copper
Total GEO - Total
Yamana
Other Mines
and Copper
91.2 $ 1,010.0 $
438.3
10.5
101.7 $ 1,448.3 $ 1,141.4 $
749.5 $
391.9
260.5
46.4
306.9
$
782.8 $
671.7 $
471.7
458.8
$ 1,254.4 $ 1,130.5 $
(458.8)
0.7
$
672.4
77.2
22.6
50.8
5.1
86.3
55.2
19.9
$
$
$
$
$
$
989.3
990,005
678
463
1,142
679
999
$
782.8 $
691.6 $
471.7
461.2
$ 1,254.4 $ 1,152.8 $
(461.2)
2.4
$
693.9
77.3
23.2
51.1
5.2
90.5
55.9
20.1
$ 1,017.1
1,039,583
$
$
$
$
$
665
444
1,109
667
978
(366.8)
—
$
607.9
67.4
14.8
48.2
7.4
77.6
53.8
—
$
$
$
$
$
$
877.1
879,084
692
417
1,109
692
998
(391.9)
4.9
$
754.4
69.6
19.0
57.7
8.0
89.3
59.7
—
$ 1,057.7
1,089,804
$
$
$
$
$
688
360
1,047
692
971
(In millions of US Dollars except GEO and per GEO amounts)
Cost of sales excluding DDA (ii)
DDA (ii)
Total cost of sales
DDA
Treatment and refining charges
Total cash costs
AISC adjustments:
Corporate or regional G&A costs, including share-based remuneration
Reclamation & remediation - accretion & amortization
Capital exploration
Exploration and study costs
Capitalized stripping & underground mine development
Other sustaining capital expenditures
Leases (IFRS 16 Adjustment)
Total AISC
Commercial GEO (i)
Cost of sales excl. DDA per GEO sold
DDA per GEO sold
Total cost of sales per GEO sold
Cash costs per GEO sold
AISC per GEO sold
(In millions of US Dollars except GEO and per GEO amounts)
Cost of sales excluding DDA (ii)
DDA (ii)
Total cost of sales
DDA
Treatment and refining charges
Total cash costs
AISC adjustments:
Corporate or regional G&A costs, including share-based remuneration
Reclamation & remediation - accretion & amortization
Capital exploration
Exploration and study costs
Capitalized stripping & underground mine development
Other sustaining capital expenditures
Leases (IFRS 16 Adjustment)
Total AISC
Commercial GEO (i)
Cost of sales excl. DDA per GEO sold
DDA per GEO sold
Total cost of sales per GEO sold
Cash cost per GEO sold
AISC per GEO sold
64
Yamana Gold
Cash Costs & AISC (i) - Operating Segments Reconciliation
For the three months ended December 31, 2019
(In millions of US Dollars except GEO and per GEO amounts)
Cost of sales excluding DDA (ii)
DDA (ii)
Total cost of sales
DDA
Total cash costs
AISC adjustments:
Corporate or regional G&A costs, including share-based
remuneration
Reclamation & remediation - accretion & amortization
Capital exploration
Exploration and study costs
Capitalized stripping & underground mine development
Other sustaining capital expenditures
Leases (IFRS 16 Adjustment)
Total AISC
Commercial GEO (i)
Cost of sales excl. DDA per GEO sold
DDA per GEO sold
Total cost of sales per GEO sold
Cash cost per GEO sold
AISC per GEO sold
Total
Malartic
GEO
Jacobina
GEO
$ 169.4 $
53.1 $
119.0
34.9
$ 288.4 $
88.0 $
23.4
12.0
35.4
(34.9)
(12.0)
$
53.1 $
23.4
Cerro Moro
GEO
37.0 $
29.5
66.5 $
(29.5)
37.0 $
$
$
$
El Peñón
GEO
35.7 $
31.8
67.5 $
(31.8)
35.7 $
1.0
2.3
0.1
—
3.1
10.4
0.1
0.3
0.7
2.7
0.1
4.0
4.1
1.2
$
$
$
$
$
$
70.1 $
36.6
84,673
44,293
627 $
412 $
1,039 $
627 $
828 $
529
270
799
529
827
$
$
$
$
$
$
1.2
0.9
3.8
—
6.5
5.4
1.3
56.1 $
0.4
0.3
2.8
—
6.1
1.6
2.4
49.3 $
45,690
63,552
811 $
562 $
646 $
500 $
1,456 $ 1,062 $
811 $
562 $
1,228 $
775 $
Minera
Florida
GEO
Corp. Office,
Other Mines
& Copper
0.5
2.0
2.5
19.8 $
8.8
28.6 $
(8.8)
19.8
0.3
1.2
2.3
—
3.0
0.6
0.5
27.7
19,696
1,005
445
1,450
1,005
1,411
Cash Costs & AISC (i) - Operating Segments Reconciliation
For the three months ended December 31, 2018
(In millions of US Dollars except GEO and per GEO amounts)
Cost of sales excluding DDA (ii)
DDA (ii)
Total cost of sales
DDA
Total cash costs
AISC adjustments:
Corporate or regional G&A costs, including share-based
remuneration
Reclamation & remediation - accretion & amortization
Capital exploration
Exploration and study costs
Capitalized stripping & underground mine development
Other sustaining capital expenditures
Total AISC
Commercial GEO (i)
Cost of sales excl. DDA per GEO sold
DDA per GEO sold
Total cost of sales per GEO sold
Cash costs per GEO sold
AISC per GEO sold
Total
Malartic
GEO
Jacobina
GEO
$
$
266.2 $
52.6 $
130.9
34.7
$
23.8
15.7
397.1 $
87.3 $
39.5
$
(34.7)
(15.7)
$
52.6 $
23.8
$
Cerro Moro
GEO
38.1 $
29.5
67.6 $
(29.5)
38.1 $
El Peñón
GEO
40.4 $
26.2
66.6 $
(26.2)
40.4 $
1.3
1.2
0.4
0.2
4.2
7.2
0.4
0.7
1.7
—
3.5
1.6
$
$
$
$
$
$
67.1 $
31.7
89,626
34,934
587 $
388 $
681
451
974 $
1,132
587 $
748 $
681
906
$
$
$
$
$
$
1.0
0.1
3.0
—
2.0
7.5
51.7 $
63,443
0.4
0.7
4.7
—
5.6
1.8
53.6 $
51,965
601 $
466 $
1,067 $
601 $
816 $
777 $
503 $
1,280 $
777 $
1,031 $
Minera
Florida
GEO
Corp. Office,
Other Mines
& Copper
17.5 $
10.3
93.8
14.5
27.8 $
108.3
(10.3)
17.5
0.3
1.0
3.9
—
2.9
1.4
27.0
23,882
731
433
1,164
731
1,129
Annual Report 2019
65
Cash Costs & AISC (i) - Operating Segments Reconciliation
For the year ended December 31, 2019
(In millions of US Dollars except GEO and per GEO amounts)
Cost of sales excluding DDA (ii)
DDA (ii)
Total cost of sales
DDA
Treatment and refining charges
Total cash costs
AISC adjustments:
Corporate or regional G&A costs, including share-based
remuneration
Reclamation & remediation - accretion & amortization
Capital exploration
Exploration and study costs
Capitalized stripping & underground mine development
Other sustaining capital expenditures
Leases (IFRS 16 Adjustment)
Total AISC
Commercial GEO (i)
Cost of sales excl. DDA per GEO sold
DDA per GEO sold
Total cost of sales per GEO sold
Cash cost per GEO sold
AISC per GEO sold
Total
Malartic
GEO
Jacobina
GEO
$ 782.8 $
198.9
$
471.7
135.4
94.9
56.7
$1,254.5 $
334.4
$
151.6
(135.4)
—
(56.7)
—
$
199.0
$
94.9
Cerro Moro
GEO
153.8 $
121.7
275.5 $
(121.7)
0.7
154.5 $
$
$
$
3.9
9.0
0.8
0.2
16.1
29.1
0.5
1.3
3.4
6.3
0.2
16.6
7.9
4.7
$
$
$
$
$
$
258.6
330,851
601
409
1,011
601
782
$
$
$
$
$
$
135.3
160,142
593
354
947
593
845
4.7
3.5
16.2
—
15.8
7.7
4.2
206.6 $
213,077
722 $
571 $
1,293 $
725 $
969 $
$
$
$
$
$
$
Corp. Office,
Other Mines
& Copper
111.2
20.2
131.4
35.7
70.6 $
Minera
Florida
GEO
El Peñón
GEO
153.4 $
102.0
255.4 $ 106.3 $
(102.0)
—
153.4 $
(35.7)
70.6
—
0.7
2.1
18.1
—
26.2
4.6
6.8
0.5
4.6
9.5
—
11.6
1.6
2.3
211.9 $ 100.7
74,705
211,231
945
726 $
483 $
478
1,209 $ 1,423
726 $
945
1,003 $ 1,346
Cash Costs & AISC (i) - Operating Segments Reconciliation
For the year ended December 31, 2018
(In millions of US Dollars except GEO and per GEO amounts)
Cost of sales excluding DDA (ii)
DDA (ii)
Total cost of sales
DDA
Total cash costs
AISC adjustments:
Corporate or regional G&A costs, including share-based
remuneration
Reclamation & remediation - accretion & amortization
Capital exploration
Exploration and study costs
Capitalized stripping & underground mine development
Other sustaining capital expenditures
Total AISC
Commercial GEO (i)
Cost of sales excl. DDA per GEO sold
DDA per GEO sold
Total cost of sales per GEO sold
Cash costs per GEO sold
AISC per GEO sold
Total
Malartic
GEO
Jacobina
GEO
$ 1,010.0 $
200.4 $
95.7 $
438.3
137.8
41.4
$ 1,448.3 $
338.2 $
137.1 $
(137.8)
(41.4)
$
200.4 $
95.7 $
Cerro Moro
GEO
66.1 $
49.1
115.2 $
(49.1)
66.1 $
El Peñón
GEO
171.0 $
92.9
263.9 $
(92.9)
171.0 $
1.4
0.2
6.4
—
3.3
11.7
89.1 $
105,128
0.6
3.0
17.9
—
25.4
6.5
224.4 $
200,804
4.8
4.9
4.0
0.3
23.7
22.7
0.9
2.7
5.9
0.2
14.9
6.1
260.8 $
126.4 $
349,923
141,780
$
$
$
$
$
$
573 $
675 $
394 $
292 $
967 $
967 $
573 $
675 $
746 $
891 $
629 $
467 $
1,096 $
629 $
848 $
851 $
462 $
1,314 $
851 $
1,117 $
Minera
Florida
GEO
Corp. Office,
Other Mines
& Copper
74.7 $
402.1
39.2
77.9
113.9 $
480.0
(39.2)
74.7
1.0
4.0
14.0
—
10.4
4.1
108.2
81,449
917
481
1,398
917
1,327
(i)
(ii)
(iii)
(iv)
GEO assumes gold ounces plus the gold equivalent of silver ounces using a ratio of 85.54 and 86.02 for the three months and year ended December 31,
2019, respectively, and 81.30 and 79.60 for the three months and year ended December 31, 2018, respectively.
Cost of sales excluding DDA includes the impact of the movement in inventory (non-cash item). Information related to GAAP values of cost of sales excluding
DDA, DDA and total cost of sales are derived from the consolidated statements of operations and Note 7: Segment Information to the Company's
consolidated financial statements. Other Mines includes Brio and Gualcamayo for the comparative period.
Yamana Mines includes those mines in the Company's portfolio as of December 31, 2019: Canadian Malartic, Jacobina, Cerro Moro, El Peñón and Minera
Florida.
Total Yamana includes Yamana Mines; and Chapada, and Gualcamayo, which were divested in July 2019 and December 2018, respectively.
66
Yamana Gold
NET DEBT
The Company uses the financial measure "net debt", which is a non-GAAP financial measure, to supplement information in its
consolidated financial statements. The Company believes that in addition to conventional measures prepared in accordance with
IFRS, the Company and certain investors and analysts use this information to evaluate the Company’s performance. The non-
GAAP financial measure of net debt does not have any standardized meaning prescribed under IFRS, and therefore it may not be
comparable to similar measures employed by other companies. The data is intended to provide additional information and should
not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS.
Net debt is calculated as the sum of the current and non-current portions of long-term debt net of the cash and cash equivalent
balance as at the balance sheet date. A reconciliation of net debt is provided below:
As at, (In millions of US Dollars)
Debt
Non-current portion
Current portion
Total debt
Less: Cash and cash equivalents
Net debt
NET FREE CASH FLOW
December 31, 2019
December 31, 2018
$
$
$
991.7 $
56.2
1,047.9 $
(158.8)
889.1 $
1,756.8
1.9
1,758.7
(98.5)
1,660.2
The Company uses the financial measure "net free cash flow", which is a non-GAAP financial measure, to supplement information
in its consolidated financial statements. Net free cash flow does not have any standardized meaning prescribed under IFRS, and
therefore it may not be comparable to similar measures employed by other companies. The Company believes that in addition to
conventional measures prepared in accordance with IFRS, the Company and certain investors and analysts use this information
to evaluate the Company’s performance with respect to its operating cash flow capacity to meet non-discretionary outflows of cash.
The presentation of net free cash flow is not meant to be a substitute for the cash flow information presented in accordance with
IFRS, but rather should be evaluated in conjunction with such IFRS measures. Net free cash flow is calculated as cash flows from
operating activities adjusted for advance payments received pursuant to metal purchase agreements, non-discretionary
expenditures from sustaining capital expenditures and interest paid related to the current period.
(In millions of US Dollars)
Cash flows from operating activities
Adjustments to operating cash flows:
Deferred revenue recognized on copper prepay,
streaming arrangements and other net of advance
payments received (i)
Other payments (ii)
Non-discretionary items related to the current period
Sustaining capital expenditures
Interest paid
Net free cash flow
For the three months ended December 31,
For the year ended December 31,
$
2019
201.7 $
2018
114.8 $
2019
521.8 $
2018
404.2
4.2
—
(46.6)
(22.8)
37.5
33.2
(52.5)
(27.0)
$
136.5 $
106.0 $
79.4
8.3
(166.7)
(84.4)
358.4 $
(28.3)
108.0
(187.8)
(76.3)
219.8
(i)
(ii)
Adjustment represents non-cash deferred revenue recognized in respect of metal sales agreements, the cash payments for which, were received in previous
periods and which were similarly reduced for comparability. Of the total deferred revenue recognized, $53.2 million was attributable to the copper advanced
sales program during the first two quarters of 2019, and $1.3 million and $9.4 million was attributable to pre-existing copper and silver streaming
arrangements, for the three months and year ended December 31, 2019, respectively.
Included in other payments for the three months and year ended December 31, 2018 are one-time payments made to the Brazilian tax authorities of $33.3
million and $101.3 million, respectively.
AVERAGE REALIZED METAL PRICES
The Company uses the financial measures "average realized gold price", "average realized silver price" and "average realized
copper price", which are non-GAAP financial measures, to supplement its consolidated financial statements. Average realized
price does not have any standardized meaning prescribed under IFRS, and therefore may not be comparable to similar measures
employed by other companies. The Company believes that in addition to conventional measures prepared in accordance with
IFRS, the Company and certain investors and analysts use this information to evaluate the Company’s performance vis-à-vis
average market prices of metals for the period. The presentation of average realized metal prices is not meant to be a substitute
Annual Report 2019
67
for the revenue information presented in accordance with IFRS, but rather should be evaluated in conjunction with such IFRS
measure.
Average realized metal price represents the sale price of the underlying metal before deducting treatment and refining charges,
and other quotational and pricing adjustments. Average realized prices are calculated as the revenue related to each of the metals
sold, i.e. gold, silver and copper, divided by the quantity of the respective units of metals sold, i.e. gold ounce, silver ounce and
copper pound. Reconciliations of average realized metal prices to revenue are provided below:
For the three months ended December 31,
2019
2018
(In millions of US Dollars; unless otherwise noted)
Revenue
Treatment and refining charges
of concentrate
Metal price adjustments related to
concentrate revenue
Other adjustments
Gross revenue
Commercial gold/silver ounces, million
pounds of copper sold
Revenue per gold/silver ounce, pound of
copper sold
Average Realized Price per gold/silver
ounce, pound of copper sold
Total
$ 383.8 $
Gold
Silver
Copper
Total
332.0
$
51.5 $
0.3 $ 483.4 $
Gold
347.9 $
Silver
Copper
44.7 $
90.8
—
—
(0.6)
—
(0.5)
—
—
(0.1)
—
—
—
—
10.1
2.8
(0.1)
$ 383.3 $
331.5
$
51.4 $
0.4 $ 496.2 $
1.5
(0.6)
(0.1)
348.7 $
—
—
—
8.6
3.4
—
44.7 $
102.8
223,433
2,935,673
$
$
1,486
1,484
$
$
17.55 $
17.50 $
0.2
1.88
2.11
284,420 3,065,102
$
$
1,223 $ 14.59 $
1,226 $ 14.59 $
35.5
2.56
2.90
For the year ended December 31,
2019
2018
(In millions of US Dollars; unless otherwise noted)
Revenue
Treatment and refining charges
of concentrate
Metal price adjustments related to
concentrate revenue
Other adjustments
Gross revenue
Commercial gold/silver ounces, million
pounds of copper sold
Revenue per gold/silver ounce, pound of
copper sold
Average Realized Price per gold/silver
ounce, pound of copper sold
Total
Gold
Silver
$ 1,612.2 $ 1268.7 $
180.6 $
Copper
Copper
162.9 $ 1,798.5 $ 1,357.5 $ 107.6 $ 333.4
Silver
Total
Gold
13.0
1.7
0.6
10.7
34.6
4.9
—
29.7
(10.3)
—
(6.0)
—
(2.1)
—
$ 1,614.9 $ 1264.4 $
179.1 $
6.8
(2.2)
0.1
0.3
—
171.3 $ 1,840.2 $ 1,362.8 $ 107.6 $ 369.7
0.3
6.6
—
—
—
911,708 11,009,552
59.9
1,075,214 7,000,887
123.6
$
$
1,392 $
16.39 $
2.72
$ 1,263 $ 15.37 $
1,387 $
16.26 $
2.86
$ 1,267 $ 15.37 $
2.70
2.99
ADDITIONAL LINE ITEMS OR SUBTOTALS IN FINANCIAL STATEMENTS
The Company uses the following additional line items and subtotals in the consolidated financial statements as contemplated in
IAS 1: Presentation of Financial Statements:
• Gross margin excluding depletion, depreciation and amortization - represents the amount of revenue in excess of
cost of sales excluding depletion, depreciation and amortization. This additional measure represents the cash contribution
from the sales of metals before all other operating expenses and DDA, in the reporting period.
• Mine operating earnings/loss - represents the amount of revenue in excess of cost of sales excluding depletion,
depreciation and amortization and depletion, depreciation and amortization.
• Operating earnings/loss - represents the amount of earnings/loss before net finance costs, other income/costs and
income tax expense/recovery. This measure represents the amount of financial contribution, net of all expenses directly
attributable to mining operations and overheads. Finance costs and other income/costs are not classified as expenses
directly attributable to mining operations.
• Cash flows from operating activities before income taxes paid and net change in working capital - excludes the
payments made during the period related to income taxes and tax related payments and the movement from period-to-
period in working capital items including trade and other receivables, other assets, inventories, trade and other payables.
Working capital and income taxes can be volatile due to numerous factors, such as the timing of payment and receipt. As
68
Yamana Gold
the Company uses the indirect method prescribed by IFRS in preparing its statement of cash flows, this additional
measure represents the cash flows generated by the mining business to complement the GAAP measure of cash flows
from operating activities, which is adjusted for income taxes paid and tax related payments and the working capital change
during the reporting period.
• Cash flows from operating activities before net change in working capital - excludes the movement from period-to-
period in working capital items including trade and other receivables, other assets, inventories, trade and other payables.
Working capital can be volatile due to numerous factors, such as the timing of payment and receipt. As the Company
uses the indirect method prescribed by IFRS in preparing its statement of cash flows, this additional measure represents
the cash flows generated by the mining business to complement the GAAP measure of cash flows from operating
activities, which is adjusted for the working capital change during the reporting period.
The Company’s management believes that this presentation provides useful information to investors because gross margin
excluding depletion, depreciation and amortization excludes the non-cash operating cost item (i.e. depreciation, depletion and
amortization), cash flows from operating activities before net change in working capital excludes the movement in working capital
items, mine operating earnings excludes expenses not directly associated with commercial production and operating earnings
excludes finance and tax related expenses and income/recoveries. These, in management’s view, provide useful information of
the Company’s cash flows from operating activities and are considered to be meaningful in evaluating the Company’s past financial
performance or the future prospects.
12.
DISCLOSURE CONTROLS AND PROCEDURES
Disclosure controls and procedures are designed to provide reasonable assurance that all relevant information is gathered and
reported to senior management, including the Company’s President and Chief Executive Officer, and Senior Vice President,
Finance and Chief Financial Officer, on a timely basis so that appropriate decisions can be made regarding public disclosure. The
Company’s system of disclosure controls and procedures includes, but is not limited to, our Timely Disclosure and Confidentiality
Policy, our Code of Conduct, our Insider Trading Policy, our Corporate Controls Policy, the effective functioning of our Audit
Committee and procedures in place to systematically identify matters warranting consideration of disclosure by the Audit
Committee.
As at the end of the period covered by this Management’s Discussion and Analysis, management of the Company, with the
participation of the President and Chief Executive Officer and the Senior Vice President, Finance and Chief Financial Officer,
evaluated the effectiveness of the Company’s disclosure controls and procedures as required by applicable rules of the Canadian
Securities Administrators (or Canadian securities regulatory authorities) and the U.S. Securities and Exchange Commission (or
the SEC). The evaluation included documentation review, inquiries and other procedures considered by management to be
appropriate in the circumstances. Based on that evaluation, the President and Chief Executive Officer and the Senior Vice
President, Finance and Chief Financial Officer have concluded that, as of the end of the period covered by this Management’s
Discussion and Analysis, the disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act
of 1934) were effective to provide reasonable assurance that information required to be disclosed in the Company’s annual filings
and interim filings and other reports filed or submitted under applicable securities laws, is recorded, processed, summarized and
reported within time periods specified by those laws and that material information is accumulated and communicated to
management of the Company, including the President and Chief Executive Officer and the Senior Vice President, Finance and
Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Management of the Company is responsible for establishing and maintaining effective "internal control over financial reporting" as
such term is defined in the rules of the Canadian Securities Administrators and the SEC. The Company’s internal control over
financial reporting is designed to provide reasonable assurance regarding the reliability of the Company’s financial reporting for
external purposes in accordance with IFRS. The Company’s internal control over financial reporting includes:
• Maintaining records that, in reasonable detail, accurately and fairly reflect our transactions and dispositions of the assets
of the Company;
Providing reasonable assurance that transactions are recorded as necessary for preparation of our consolidated financial
statements in accordance with generally accepted accounting principles;
Providing reasonable assurance that receipts and expenditures are made in accordance with authorizations of
management and the directors of the Company; and
Providing reasonable assurance that unauthorized acquisition, use or disposition of Company assets that could have a
material effect on the Company’s consolidated financial statements would be prevented or detected on a timely basis.
•
•
•
The Company’s internal control over financial reporting may not prevent or detect all misstatements because of inherent limitations.
Additionally, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate due to changes in conditions or deterioration in the degree of compliance with the Company’s policies and procedures.
Annual Report 2019
69
The Company's management, with the participation of its President and Chief Executive Officer, and Senior Vice President,
Finance and Chief Financial Officer, assessed the effectiveness of the Company's internal control over financial reporting. In
making this assessment, management used the criteria set forth in Internal Control - Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management and the President
and Chief Executive Officer and Senior Vice President, Finance and Chief Financial Officer, have concluded that, as of December
31, 2019, the Company’s internal control over financial reporting was effective.
The effectiveness of the Company’s internal control over financial reporting as of December 31, 2019 has been audited by Deloitte
LLP, the Company’s independent registered public accounting firm, as stated in their report immediately preceding the Company’s
audited consolidated financial statements for the year ended December 31, 2019.
CHANGES IN INTERNAL CONTROLS
During the year ended December 31, 2019, there has been no change in the Company’s internal control over financial reporting
that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
LIMITATIONS OF CONTROLS AND PROCEDURES
The Company’s management, including the President and Chief Executive Officer and the Senior Vice President, Finance and
Chief Financial Officer, believe that any disclosure controls and procedures or internal controls over financial reporting, no matter
how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system
are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls
must be considered relative to their costs. Because of the inherent limitations in all control systems, they cannot provide absolute
assurance that all control issues and instances of fraud, if any, within the Company have been prevented or detected. These
inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because
of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two
or more people, or by unauthorized override of the control. The design of any systems of controls also is based in part upon certain
assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its
stated goals under all potential future conditions. Accordingly, because of the inherent limitations in a cost effective control system,
misstatements due to error or fraud may occur and not be detected.
This report provides a discussion and analysis of the financial condition and results of operations (“Management’s Discussion and
Analysis”) to enable a reader to assess material changes in financial condition between December 31, 2019, and December 31,
2018, and results of operations for the periods ended December 31, 2019, and December 31, 2018.
This Management’s Discussion and Analysis has been prepared as of February 13, 2020. The consolidated financial statements
prepared in accordance with IFRS as issued by the IASB follow this Management’s Discussion and Analysis. This Management’s
Discussion and Analysis is intended to supplement and complement the annual audited consolidated financial statements and
notes thereto as at and for the year ended December 31, 2019 (collectively the “Financial Statements”). You are encouraged to
review the Financial Statements in conjunction with your review of this Management’s Discussion and Analysis. This
Management’s Discussion and Analysis should be read in conjunction with both the Financial Statements and the most recent
Annual Information Form for the year ended December 31, 2018 on file with the Securities Commissions of all of the provinces in
Canada and which are included in the 2018 Annual Report on Form 40-F filed with the United States Securities and Exchange
Commission. Certain notes to the Financial Statements are specifically referred to in this Management’s Discussion and Analysis.
All Dollar amounts in the Management’s Discussion and Analysis are in US Dollars, unless otherwise specified.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
This Management’s Discussion and Analysis contains or incorporates by reference “forward-looking statements” and “forward-
looking information” under applicable Canadian securities legislation and within the meaning of the United States Private Securities
Litigation Reform Act of 1995. Forward-looking information includes, but is not limited to information with respect to the Company’s
strategy, plans or future financial or operating performance, results of feasibility studies, repayment of debt or updates regarding
mineral reserves and mineral resources. 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 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, changes in national and local government legislation, taxation, controls or regulations
and/or change in the administration of laws, policies and practices, and the impact of general business and economic conditions,
global liquidity and credit availability on the timing of cash flows and the values of assets and liabilities based on projected future
conditions, fluctuating metal prices (such as gold, silver, copper and zinc), currency exchange rates (such as the Brazilian Real,
the Chilean Peso and the Argentine Peso versus the United States Dollar), the impact of inflation, possible variations in ore grade
or recovery rates, changes in the Company’s hedging program, changes in accounting policies, changes in mineral resources and
mineral reserves, risks related to asset dispositions, risks related to metal purchase agreements, risks related to acquisitions,
70
Yamana Gold
changes in project parameters as plans continue to be refined, changes in project development, construction, production and
commissioning time frames, unanticipated costs and expenses, higher prices for fuel, steel, power, labour and other consumables
contributing to higher costs and general risks of the mining industry, failure of plant, equipment or processes to operate as
anticipated, unexpected changes in mine life, final pricing for concentrate sales, unanticipated results of future studies, seasonality
and unanticipated weather changes, costs and timing of the development of new deposits, success of exploration activities,
permitting timelines, government regulation and the risk of government expropriation or nationalization of mining operations, risks
related to relying on local advisors and consultants in foreign jurisdictions, environmental risks, unanticipated reclamation
expenses, risks relating to joint venture operations, title disputes or claims, limitations on insurance coverage, timing and possible
outcome of pending and outstanding litigation and labour disputes, risks related to enforcing legal rights in foreign jurisdictions, as
well as those risk factors discussed or referred to herein and in the Company's Annual Information Form filed with the securities
regulatory authorities in all provinces of Canada and available at www.sedar.com, and the Company’s Annual Report on Form 40-
F filed with the United States Securities and Exchange Commission. Although the Company has attempted to identify important
factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements,
there may be other factors that cause actions, events or results not to be anticipated, estimated or intended. There can be no
assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from
those anticipated in such statements. The Company undertakes no obligation to update forward-looking statements if
circumstances or management’s estimates, assumptions or opinions should change, except as required by applicable law. The
reader is cautioned not to place undue reliance on forward-looking statements. The forward-looking information contained herein
is presented for the purpose of assisting investors in understanding the Company’s expected financial and operational performance
and results as at and for the periods ended on the dates presented in the Company’s plans and objectives and may not be
appropriate for other purposes.
CAUTIONARY STATEMENT REGARDING MINERAL RESERVES AND MINERAL RESOURCES
Scientific and technical information contained in this Management’s Discussion and Analysis has been reviewed and approved by
Sébastien Bernier, P.Geo (Senior Director, Geology and Mineral Resources). Sébastien Bernier is an employee of Yamana Gold
Inc. and a "Qualified Person" as defined by Canadian Securities Administrators' National Instrument 43-101 - Standards of
Disclosure for Mineral Projects.
Readers should refer to the Annual Information Form of the Company for the year ended December 31, 2018 and other continuous
disclosure documents filed by the Company since January 1, 2019 available at www.sedar.com, for further information on mineral
reserves and mineral resources, which is subject to the qualifications and notes set forth therein.
CAUTIONARY STATEMENT TO UNITED STATES INVESTORS CONCERNING ESTIMATES OF MINERAL RESERVES AND
MINERAL RESOURCES
This Management’s Discussion and Analysis has been prepared in accordance with the requirements of the securities laws in
effect in Canada, which differ in certain material respects from the disclosure requirements promulgated by the Securities and
Exchange Commission (the “SEC”). For example, the terms “mineral reserve”, “proven mineral reserve”, “probable mineral
reserve”, “mineral resource”, “measured mineral resource”, “indicated mineral resource” and “inferred mineral resource” are
Canadian mining terms as defined in accordance with Canadian National Instrument 43-101 Standards of Disclosure for Mineral
Projects (“NI 43-101”) and the Canadian Institute of Mining, Metallurgy and Petroleum (the “CIM”) - CIM Definition Standards on
Mineral Resources and Mineral Reserves, adopted by the CIM Council, as amended. These definitions differ from the definitions
in the disclosure requirements promulgated by the SEC. Accordingly, information contained in this Management’s Discussion and
Analysis may not be comparable to similar information made public by U.S. companies reporting pursuant to SEC disclosure
requirements.
*************
Annual Report 2019
71
TABLE OF CONTENTS
Page
Management's Responsibility for Financial Reporting
Reports of Independent Registered Public Accounting Firm
Consolidated Statements of Operations
Consolidated Statements of Comprehensive Earnings (Loss)
Consolidated Statements of Cash Flows
Consolidated Balance Sheets
Consolidated Statements of Changes in Equity
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
Note 1:
Note 2:
Note 3:
Note 4:
Note 5:
Note 6:
Note 7:
Note 8:
Note 9:
Note 10:
Note 11:
Note 12:
Note 13:
Note 14:
Note 15:
Note 16:
Note 17:
Note 18:
Note 19:
Note 20:
Note 21:
Note 22:
Note 23:
Note 24:
Note 25:
Note 26:
Note 27:
Note 28:
Note 29:
Note 30:
Note 31:
Note 32:
Note 33:
Note 34:
Note 35:
Note 36:
Note 37:
Note 38:
Description of Business and Nature of Operations
Basis of Preparation and Presentation
Significant Accounting Policies
Critical Judgements and Estimation Uncertainties
Recent Accounting Pronouncements
Divestitures
Segment Information
Revenue
Employee Compensation and Benefits Expenses
Other Operating Income, Net
Other Costs (Income), Net
Finance Costs
Impairment and Reversal of Impairment
Income Taxes
Earnings (Loss) Per Share
Supplementary Cash Flow Information
Financial Instruments
Financial Risk Management
Inventories
Other Financial Assets
Other Assets
Property, Plant and Equipment
Goodwill and Other Intangible Assets
Investment in Associate
Trade and Other Payables
Other Financial Liabilities
Other Provisions and Liabilities
Long-Term Debt and Credit Facility
Environmental Rehabilitation Provision
Share Capital
Share-Based Payments
Non-Controlling Interests
Capital Management
Leases
Contingencies
Related Party Transactions
Subsequent Events
Guarantor Subsidiaries Annual Financial Statements
72
Yamana Gold
73
74
77
78
79
80
81
82
82
82
94
99
100
102
105
105
106
106
106
106
109
111
111
113
117
119
119
120
120
121
122
123
123
123
124
125
126
126
127
127
127
128
129
130
130
MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING
The accompanying consolidated financial statements of Yamana Gold Inc. and subsidiaries ("Yamana Gold Inc." or the
"Company") and all the information in this annual report are the responsibility of management and have been approved by the
Board of Directors.
The consolidated financial statements have been prepared by management on a going concern basis in accordance with
International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). When
alternative accounting methods exist, management has chosen those it deems most appropriate in the circumstances. Financial
statements are not exact since they include certain amounts based on estimates and judgements. Management has determined
such amounts on a reasonable basis in order to ensure that the financial statements are presented fairly, in all material respects.
Management has prepared the financial information presented elsewhere in the annual report and has ensured that it is consistent
with that in the consolidated financial statements.
Yamana Gold Inc. maintains systems of internal accounting and administrative controls in order to provide, on a reasonable basis,
assurance that the financial information is relevant, reliable and accurate and that the Company's assets are appropriately
accounted for and adequately safeguarded. The Company's internal control over financial reporting as of December 31, 2019, is
based on the criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission.
The Board of Directors is responsible for ensuring that management fulfills its responsibilities for financial reporting and is ultimately
responsible for reviewing and approving the financial statements. The Board carries out this responsibility principally through its
Audit Committee ("Committee").
The Audit Committee is appointed by the Board, and all of its members are independent directors. The Committee meets at least
four times a year with management, as well as the external auditors, to discuss internal controls over the financial reporting process,
auditing matters and financial reporting issues, to satisfy itself that each party is properly discharging its responsibilities, and to
review the quarterly and the annual reports, the consolidated financial statements and the external auditors' reports. The
Committee reports its findings to the Board for consideration when approving the consolidated financial statements for issuance
to the shareholders. The Committee also considers, for review by the Board and approval by the shareholders, the engagement
or reappointment of the external auditors. The consolidated financial statements have been audited by Deloitte LLP, Chartered
Professional Accountants, Licensed Public Accountants, in accordance with the standards of the Public Company Accounting
Oversight Board (United States) on behalf of the shareholders. Deloitte LLP has full and free access to the Audit Committee.
“Daniel Racine”
“Jason LeBlanc”
President and
Chief Executive Officer
February 13, 2020
Senior Vice President, Finance and
Chief Financial Officer
Annual Report 2019
73
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of Yamana Gold Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Yamana Gold Inc. and subsidiaries (the "Company") as of
December 31, 2019 and 2018, the related consolidated statements of operations, comprehensive earnings (loss), cash flows and
changes in equity, for each of the two years in the period ended December 31, 2019, and the related notes (collectively referred
to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position
of the Company as of December 31, 2019 and 2018, and its financial performance and its cash flows for each of the two years in
the period ended December 31, 2019, in conformity with International Financial Reporting Standards as issued by the International
Accounting Standards Board.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the Company's internal control over financial reporting as of December 31, 2019, based on criteria established in Internal
Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and
our report dated February 13, 2020, expressed an unqualified opinion on the Company's internal control over financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on
the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to
error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements,
whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a
test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the
accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the
financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that
were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are
material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The
communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and
we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the
accounts or disclosures to which they relate.
Mining Properties – Assessment of Whether Indicators of Impairment or Impairment Reversal Exist – Refer to Notes 4, 13
and 22 of the Financial Statements
Critical Audit Matter Description
The Company’s determination of whether an indicator of impairment or impairment reversal exists requires significant management
judgment.
While there are several inputs that are required to determine whether or not an indicator of impairment or impairment reversal
exists, the judgments with the highest degree of subjectivity are future commodity prices (gold), inputs to the consolidated
Company’s market capitalization deficiency assessment (specifically, control premiums, industry specific factors and company
performance), foreign exchange rates and the discount rate. Auditing these estimates and inputs required a high degree of
subjectivity in applying audit procedures and in evaluating the results of those procedures. This resulted in an increased extent of
audit effort, including the involvement of a fair value specialist.
74
Yamana Gold
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to future commodity prices (gold), inputs to the market capitalization deficiency assessment
(specifically, control premiums, industry specific factors and company performance), foreign exchange rates and the discount rate
in the assessment of indicators of impairment or impairment reversal included the following, among others:
•
•
Evaluated the effectiveness of controls over management’s assessment of indicators of impairment or impairment
reversal,
Evaluated the reasonableness of the foreign exchange rates by comparing our independent research of the forecasted
rates to management’s assumed rates,
• With the assistance of a fair value specialist;
◦
◦
◦
Evaluated the future commodity prices (gold) by comparing forecasts to third party forecasts,
Performed an assessment of the market capitalization to the carrying value of the cash-generating units
(“CGUs”) which included; assessing control premiums, industry specific factors and company performance, and
Evaluated the reasonableness of the change in discount rate by testing the source information underlying the
determination of the discount rate.
Goodwill – Canadian Malartic Cash-Generating Unit (CGU) Refer to Notes 4, 13 and 23 of the Financial Statements
Critical Audit Matter Description
The Company has goodwill associated with its investment in the Canadian Malartic CGU. The Company performs an annual
assessment of impairment for goodwill, or more frequently if any event or change in circumstances indicates that the fair value of
a CGU may be below its recoverable amount using fair value less cost of disposal.
While there are several assumptions that are required to determine the recoverable amount, the judgments with the highest degree
of subjectivity are future gold selling prices, the discount rate, and foreign exchange rates. Given the determination of the fair value
less cost of disposal requires management to make significant estimates and assumptions related to forecasts of future revenues
(specifically gold prices and potential ounces and land hectares), discount rate, and foreign exchange rates, performing audit
procedures to evaluate the reasonableness of such estimates and assumptions required a high degree of auditor judgment as the
estimations made by management contain significant measurement uncertainty and modifications to these assumptions have a
significant impact on the recoverable amount. This resulted in an increased extent of audit effort, including the involvement of a
fair value specialist.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the future gold selling prices, discount rate, and foreign exchange rates used in the CGU fair value
less cost of disposal calculation included the following, among others:
•
Evaluated the effectiveness of controls over management’s determination of the future gold selling prices, discount rate,
and foreign exchange rates,
• With the assistance of a fair value specialist;
◦ Evaluated the reasonableness of the future gold selling prices by comparing forecasts to third party forecasts,
◦ Tested the source information underlying the determination of the discount rate,
◦ Evaluated the reasonableness of the foreign exchange rates by comparing forecasts to third party forecasts,
◦ Developed a range of independent estimates for the discount rate and compared to the discount rate selected
by management, and
◦ Obtained third party information surrounding in-situ and $/hectare to assess the reasonableness of potential
ounces and land hectare forecasts.
"/s/ Deloitte LLP”
Chartered Professional Accountants
Licensed Public Accountants
Toronto, Canada
February 13, 2020
We have served as the Company's auditor since 1995.
Annual Report 2019
75
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of Yamana Gold Inc.
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of Yamana Gold Inc. and subsidiaries (the “Company”) as of December
31, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective
internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control - Integrated
Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the consolidated financial statements as of and for the year ended December 31, 2019 of the Company and our report
dated February 13, 2020, expressed an unqualified opinion on those financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment
of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal
Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial
reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with
respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the
Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a
material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed
risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides
a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted
accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain
to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets
of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that
could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because
of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
"/s/ Deloitte LLP"
Chartered Professional Accountants
Licensed Public Accountants
Toronto, Canada
February 13, 2020
76
Yamana Gold
YAMANA GOLD INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31,
(In millions of US Dollars except for shares and per share amounts)
Revenue (Note 8)
Cost of sales excluding depletion, depreciation and amortization
Gross margin excluding depletion, depreciation and amortization
Depletion, depreciation and amortization
Impairment of mining properties and goodwill, net (Note 13)
Mine operating earnings
Expenses
General and administrative
Exploration and evaluation
Share of (loss) earnings of associate (Note 24)
Other operating income, net (Note 10)
Impairment of non-operating mining properties (Note 13)
Operating earnings (loss)
Finance costs (Note 12)
Other (costs) income, net (Note 11)
Earnings (loss) before taxes
Current income tax expense (Note 14)
Deferred income tax recovery (Note 14)
Income tax expense, net
Net earnings (loss)
Attributable to:
Yamana Gold Inc. equity holders
Non-controlling interests
Net earnings (loss)
Earnings (loss) per share attributable to Yamana Gold Inc. equity holders (Note 15)
Basic and diluted
Weighted average number of shares outstanding (in thousands) (Note 15)
Basic
Diluted
The accompanying notes are an integral part of the consolidated financial statements.
$
$
$
$
$
$
$
$
$
$
2019
1,612.2 $
(782.8)
829.4 $
(471.7)
—
357.7 $
(79.4)
(10.3)
(16.3)
222.4
—
474.1 $
(144.2)
(19.6)
310.3 $
(95.0)
10.3
(84.7) $
225.6 $
225.6 $
—
225.6 $
2018
1,798.5
(1,010.0)
788.5
(438.3)
(149.0)
201.2
(91.8)
(13.0)
5.5
9.3
(153.0)
(41.8)
(137.4)
2.5
(176.7)
(138.8)
17.8
(121.0)
(297.7)
(284.6)
(13.1)
(297.7)
0.24 $
(0.30)
950,266
951,924
949,030
949,030
Annual Report 2019
77
YAMANA GOLD INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS (LOSS)
FOR THE YEARS ENDED DECEMBER 31,
(In millions of US Dollars)
Net earnings (loss)
Other comprehensive loss, net of taxes
Items that may be reclassified subsequently to net earnings (loss):
Cash-flow hedges
- Effective portion of changes in fair value of cash flow hedges (Note 17)
- Reclassification of gains recorded in earnings (Note 17)
- Tax Impact on fair value of hedging instruments (Note 14)
- Time value of options contracts excluded from hedge relationship (Note 17)
Share of other comprehensive loss from investment in associate (Note 24)
Items that will not be reclassified to net earnings (loss):
Changes in the fair value of equity investments at FVOCI
Re-measurement of employee benefit plan
Total other comprehensive loss
Total comprehensive earnings (loss)
Attributable to:
Yamana Gold Inc. equity holders
Non-controlling interests
Total comprehensive earnings (loss)
The accompanying notes are an integral part of the consolidated financial statements.
2019
225.6 $
2018
(297.7)
(4.3)
9.3
0.5
(1.3)
(9.4)
(5.2) $
(1.1)
1.3
(5.0) $
220.6 $
220.6 $
—
220.6 $
(15.9)
3.4
(1.4)
5.4
—
(8.5)
(1.0)
(1.0)
(10.5)
(308.2)
(294.4)
(13.8)
(308.2)
$
$
$
$
$
$
78
Yamana Gold
YAMANA GOLD INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31,
(In millions of US Dollars)
Operating activities
Earnings (loss) before taxes
Adjustments to reconcile loss before taxes to net operating cash flows:
Depletion, depreciation and amortization
Share-based payments (Note 31)
Other costs (income), net (Note 11)
Finance costs (Note 12)
Mark-to-market on financial assets and metal concentrates
Share of loss (earnings) of associate (Note 24)
Impairment of mining properties, net (Note 13)
Amortization of deferred revenue on metal purchase agreements (Note 27)
Gain on sale of subsidiaries (Note 10)
Other non-cash expenses (Note 16)
Advanced payments received on metal purchase agreements
Environmental rehabilitation obligations paid (Note 29)
Other payments
Cash flows from operating activities before income taxes paid and net change in
working capital
Income taxes paid
Cash flows from operating activities before net change in working capital
Net change in working capital (Note 16)
Cash flows from operating activities
Investing activities
Acquisition of property, plant and equipment
Net proceeds on disposal of subsidiaries and other assets
Cash used in other investing activities
Cash flows from (used in) investing activities
Financing activities
Dividends paid (Note 30)
Interest paid
Financing costs paid on early note redemption (Note 12)
Repayment of revolving credit facility and notes payable (Note 28)
Proceeds from drawdown of revolving credit facility (Note 28)
Payment of lease liabilities
Proceeds (used in) from other financing activities
Cash flows used in financing activities
Effect of foreign exchange of non-US Dollar denominated cash and cash equivalents
Increase (decrease) in cash and cash equivalents
Cash and cash equivalents, beginning of year
Cash and cash equivalents classified as held for sale, beginning of year
Cash and cash equivalents, end of year
Supplementary cash flow information (Note 16).
The accompanying notes are an integral part of the consolidated financial statements.
2019
2018
$
310.3 $
(176.7)
471.7
15.0
19.6
144.2
(4.7)
16.3
—
(79.4)
(273.1)
46.2
—
(4.3)
(8.3)
653.5
(63.0)
590.5 $
(68.7)
521.8 $
(331.7) $
825.0
(61.3)
432.0 $
(23.7) $
(84.4)
(35.0)
(952.5)
240.0
(16.8)
(20.1)
(892.5) $
(1.0)
60.3 $
98.5 $
— $
158.8 $
438.3
5.3
(2.5)
137.4
17.6
(5.5)
302.0
(99.5)
(74.2)
50.4
127.8
(5.3)
(6.7)
708.4
(142.1)
566.3
(162.1)
404.2
(446.9)
189.9
(72.6)
(329.6)
(19.0)
(76.3)
(14.7)
(486.5)
460.0
—
2.2
(134.3)
3.0
(56.7)
148.9
6.3
98.5
$
$
$
$
$
$
$
$
$
$
Annual Report 2019
79
2019
2018
$
$
$
$
$
$
$
$
$
$
158.8 $
3.4
133.4
8.5
97.5
401.6 $
5,952.9
392.2
120.3
80.8
15.2
154.2
7,117.2 $
219.5 $
18.3
131.1
39.5
408.4 $
991.7
214.7
1,041.4
98.0
143.1
2,897.3 $
7,639.9 $
21.0
(21.9)
(3,453.8)
4,185.2 $
34.7
4,219.9 $
7,117.2 $
98.5
24.3
181.0
7.4
118.0
429.2
6,696.4
399.8
146.0
88.5
18.9
234.1
8,012.9
294.8
32.5
62.3
106.8
496.4
1,756.8
241.2
1,129.3
76.0
289.2
3,988.9
7,636.4
20.4
(16.9)
(3,650.6)
3,989.3
34.7
4,024.0
8,012.9
YAMANA GOLD INC.
CONSOLIDATED BALANCE SHEETS
AS AT DECEMBER 31,
(In millions of US Dollars)
Assets
Current assets:
Cash and cash equivalents (Note 16)
Trade and other receivables
Inventories (Note 19)
Other financial assets (Note 20)
Other assets (Note 21)
Non-current assets:
Property, plant and equipment (Note 22)
Goodwill and other intangible assets (Note 23)
Investment in associate (Note 24)
Deferred tax assets (Note 14)
Other financial assets (Note 20)
Other assets (Note 21)
Total assets
Liabilities
Current liabilities:
Trade and other payables (Note 25)
Income taxes payable
Other financial liabilities (Note 26)
Other provisions and liabilities (Note 27)
Non-current liabilities:
Long-term debt (Note 28)
Environmental rehabilitation provision (Note 29)
Deferred tax liabilities (Note 14)
Other financial liabilities (Note 26)
Other provisions and liabilities (Note 27)
Total liabilities
Equity
Share capital (Note 30)
Contributed surplus
Accumulated other comprehensive (loss) income
Deficit
Attributable to Yamana Gold Inc. equity holders
Non-controlling interests (Note 32)
Total equity
Total liabilities and equity
Commitments and contingencies (Notes 22, 34 and 35).
The accompanying notes are an integral part of the consolidated financial statements
Approved by the Board
“Peter Marrone”
PETER MARRONE
Director
“Richard Graff”
RICHARD GRAFF
Director
80
Yamana Gold
YAMANA GOLD INC.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
FOR THE YEARS ENDED DECEMBER 31,
(In millions of US Dollars)
At December 31, 2017
Impact of adopting IFRS 15
Impact of adopting IFRS 9
At January 1, 2018 (restated)
Total comprehensive loss
Net loss
Other comprehensive loss
Transactions with owners
Disposal of Brio Gold (Note 6)
Disposal of part interest in
subsidiary (Note 32)
Issued on vesting of restricted
share units (Note 30)
Vesting restricted share units
Dividend reinvestment plan
(Note 30)
Dividends (Note 30)
At December 31, 2018
Impact of adopting IFRS 16
At January 1, 2019 (restated)
Total comprehensive earnings
Net earnings
Other comprehensive loss
Transactions with owners
$
$
$
$
$
$
Accumulated
other
comprehensive
(loss) income
Deficit
Contributed
surplus
18.0 $
2.2 $
(3,340.5) $
—
—
—
(8.8)
(16.4)
8.8
18.0 $
(6.6) $
(3,348.1) $
Share
capital
7,633.7 $
—
—
7,633.7 $
Attributable
to Yamana
equity
holders
4,313.4 $
(16.4)
—
4,297.0 $
Non-
controlling
interests
Total
equity
133.9 $
4,447.3
—
— $
(16.4)
—
133.9 $
4,430.9
—
—
— $
—
—
—
(9.8)
(284.6)
—
— $
(9.8) $
(284.6) $
(284.6)
(9.8)
(294.4) $
(13.1)
(0.7)
(13.8) $
(297.7)
(10.5)
(308.2)
—
—
2.3
—
0.4
—
7,636.4 $
—
7,636.4
— $
— $
—
—
—
(2.3)
4.7
—
—
—
—
—
—
—
—
— $
— $
— $
— $
— $
(19.2) $
20.4 $
(16.9) $
(3,650.6) $
—
20.4
—
(0.3)
(16.9)
(3,650.9)
—
—
—
4.7
0.4
(19.2)
3,989.3 $
(0.3)
3,989.0
(101.7)
(101.7)
16.0
16.0
—
0.3
—
—
—
5.0
0.4
(19.2)
34.7 $
4,024.0
—
34.7
(0.3)
4,023.7
— $
— $
—
— $
225.6 $
(5.0) $
(5.0)
— $
225.6
225.6 $
(5.0) $
220.6
— $
— $
—
225.6
(5.0)
220.6
(3.4)
3.4
—
Issued on vesting of restricted
share units (Note 30)
Vesting restricted share units
Share cancellations (Note 30)
Dividend reinvestment plan
(Note 30)
Dividends (Note 30)
At December 31, 2019
$
The accompanying notes are an integral part of the consolidated financial statements.
0.2
—
7,639.9 $
21.0 $
(0.1)
4.0
—
—
—
—
—
—
—
—
—
—
—
—
(28.8)
—
4.0
(0.1)
0.2
(28.8)
—
—
—
—
—
—
4.0
(0.1)
0.2
(28.8)
(21.9) $
(3,453.8) $
4,185.2 $
34.7 $
4,219.9
Annual Report 2019
81
YAMANA GOLD INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 2019 and December 31, 2018
(Tabular amounts in millions of US Dollars, unless otherwise noted)
1.
DESCRIPTION OF BUSINESS AND NATURE OF OPERATIONS
Yamana Gold Inc. is the ultimate parent company of its consolidated group ("Yamana" or "the Company”). The Company,
incorporated and domiciled in Canada, is a precious metals producer with significant gold and silver production, development stage
properties, and 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.
The Company’s registered office is Royal Bank Plaza, North Tower, Suite 2200 - 200 Bay Street, Toronto, Ontario, M5J 2J3. The
Company is listed on the Toronto Stock Exchange (Symbol: YRI) and the New York Stock Exchange (Symbol: AUY).
The Company's principal producing mining properties are comprised of the Canadian Malartic mine in Canada (50% interest); the
Jacobina mine in Brazil; the El Peñón and Minera Florida mines in Chile; and the Cerro Moro mine in Argentina. At December 31,
2019, the Company's significant projects include the Agua Rica project in Argentina.
On April 15, 2019, the Company entered into a definitive agreement to sell its 100% owned Chapada copper-gold mine located in
Brazil to Lundin Mining Corporation ("Lundin"), and completed the sale on July 5, 2019. Refer to Note 6 for further details.
2.
BASIS OF PREPARATION AND PRESENTATION
These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as
issued by the International Accounting Standards Board (“IFRS”), effective as of December 31, 2019.
The consolidated financial statements have been prepared on a historical cost basis, except for certain financial assets and
liabilities (including derivative instruments) measured at fair value as explained in Note 3. Accounting policies are consistently
applied to all years presented, unless otherwise stated.
The functional and presentation currencies of the Company and all its subsidiaries is the United States Dollar ("US Dollar"), and
all values herein are rounded to the nearest million except where otherwise indicated. References to ARS, BRL, C$, and CLP are
to Argentine Pesos, Brazilian Reais, Canadian Dollars and Chilean Pesos, respectively.
The consolidated financial statements were authorized for issuance by the Board of Directors on February 13, 2020.
3.
SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies used in the preparation of these consolidated financial statements are as follows:
(a)
Basis of Consolidation
These consolidated financial statements include the accounts of the Company and its subsidiaries. Subsidiaries are entities
controlled by the Company. Control exists when the Company has power over an investee, when the Company is exposed, or has
rights, to variable returns from the investee and when the Company has the ability to affect those returns through its power over
the investee. Subsidiaries are included in the consolidated financial statements from the date control is obtained until the date
control ceases. Where the Company’s interest in a subsidiary is less than 100%, the Company recognizes non-controlling interests.
Intercompany assets and liabilities, equity, income, expenses, and cash flows between the Company and its subsidiaries are
eliminated on consolidation.
82
Yamana Gold
The principal subsidiaries of the Company as at December 31, 2019 were as follows:
Legal Entity
Minera Meridian Ltda.
Jacobina Mineração e Comércio Ltda.
Estelar Resources Ltd.
Minera Florida Ltda.
Minera Agua Rica Sucursal Ltda.
Suyai del Sur S.A.
Agua De La Falda S.A.
(i)
Refer to discussion at Note 32.
Location
Chile
Brazil
Argentina
Chile
Argentina
Argentina
Chile
Ownership
interest
100.0 %
100.0 %
100.0% (i)
100.0 %
100.0 %
100.0 %
57.6 %
Mining properties and
projects owned
El Peñón mine
Jacobina mine
Cerro Moro mine
Minera Florida mine
Agua Rica project
Suyai project
Jeronimo project
(b)
Investments in Associates and Joint Arrangements
These consolidated financial statements also include the following joint arrangement and investment in associate:
Associates and joint
arrangements
Canadian Malartic
Leagold Mining
Corporation (Note 37)
Location
Canada
Ownership
interest
50.0 %
Classification and
accounting method
Joint operation, consolidate
Yamana's share
Brazil, Mexico
20.4 %
Associate, equity method
Mining properties and
projects owned
Canadian Malartic mine
Los Filos, RDM, Fazenda,
Pilar and Santa Luz mines
A joint arrangement is an arrangement in which two or more parties have joint control. Joint control is the contractually agreed
sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of
the parties sharing the control. A joint operation is classified as either a joint operation or a joint venture, subject to the terms that
govern each investor's rights and obligations in the arrangement. A joint operation is a joint arrangement whereby the parties have
joint control of the arrangement and have rights to the assets and obligations for the liabilities relating to the arrangement. For a
joint operation, the Company recognizes its share of the assets, liabilities, revenues and expenses of the joint arrangement. The
Company's 50% interest in each of Canadian Malartic Corporation and Canadian Malartic GP, the general partnership that holds
the Canadian Malartic mine located in Quebec (collectively "Canadian Malartic"), has been accounted for as a joint operation.
An associate is an entity over which the Company has significant influence. Significant influence is the power to participate in the
financial and operating policy decisions of the investee but is not control or joint control over those decisions. The Company is
presumed to have significant influence if it holds, directly or indirectly, 20% or more of the voting power of the investee, unless it
can be clearly demonstrated that the Company does not have significant influence. The Company concluded that it has significant
influence over its investment in Leagold through the level of ownership of voting rights and representation on Leagold's board of
directors.
The Company accounts for its investment in associate using the equity method. Under the equity method, the Company’s
investment in associate is initially recognized at cost and subsequently increased or decreased to recognize the Company's share
of net earnings/loss and other comprehensive earnings/loss of the associate, after any adjustments necessary to give effect to
uniform accounting policies, any other movement in the associate's reserves, and for impairment losses after the initial recognition
date. The total carrying amount of the Company's investment in associate also includes any long-term debt interests which, in
substance, form part of the Company's net investment. The Company’s share of the associate's losses that are in excess of its
investment are recognized only to the extent that the Company has incurred legal or constructive obligations or made payments
on behalf of the associate. The Company's share of earnings or losses of its associate are recognized in net earnings during the
period. Dividends and repayment of capital received from the associate are accounted for as a reduction in the carrying amount of
the Company’s investment. Unrealized gains and losses between the Company and its associate are recognized only to the extent
of unrelated investors’ interests in the associate. Intercompany balances and interest expense and income arising on loans and
borrowings between the Company and its associate are not eliminated.
At the end of each reporting period, the Company assesses whether there is any objective evidence that an investment in an
associate is impaired. Objective evidence includes observable data indicating there is a measurable decrease in the estimated
future cash flows of the investee’s operations. When there is objective evidence that an investment is impaired, the carrying amount
of such investment is compared to its recoverable amount, being the higher of its fair value less costs of disposal ("FVLCD") and
value-in-use ("VIU"). If the recoverable amount of an investment is less than its carrying amount, the carrying amount is reduced
to its recoverable amount and an impairment loss, being the excess of carrying amount over the recoverable amount, is recognized
in the period in which the relevant circumstances are identified. When an impairment loss reverses in a subsequent period, the
carrying amount of the investment is increased to the revised estimate of recoverable amount to the extent that the increased
carrying amount does not exceed the carrying amount that would have been determined had an impairment loss not been
Annual Report 2019
83
previously recognized. A reversal of an impairment loss is recognized in net earnings/loss in the period in which the reversal
occurs.
(c)
Foreign Currency Translation
The functional and presentation currency of the Company and each of its subsidiaries, associate and joint operation is the US
Dollar. In preparing the financial statements of the individual companies, transactions in currencies other than the Company’s
functional currency ("foreign currencies") are recognized at the rates of exchange prevailing on the dates of the transactions.
At each reporting date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates
prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are translated at the
rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost
in a foreign currency are not retranslated. Income statement items denominated in foreign currencies are translated at the average
exchange rates prevailing during the year, with the exception of depletion, depreciation and amortization which is translated at
historical exchange rates. Foreign exchange gains and losses are included in net earnings (loss). Foreign exchange gains and
losses related to income taxes, if any, are reported within the income tax expense line in the Company's consolidated statement
of operations.
(d)
Business Combinations
Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a business
combination is measured at fair value, which is calculated as the sum of the acquisition-date fair values of assets transferred by
the Company, liabilities incurred by the Company to the former owners of the acquiree and the equity interest issued by the
Company in exchange for control of the acquiree. Acquisition-related costs are recognized in profit or loss as incurred.
At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognized at their fair value at the
acquisition date.
Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the
acquiree, and the fair value of the acquirer's previously held equity interest in the acquiree (if any) over the net of the acquisition-
date amounts of the identifiable assets acquired and the liabilities assumed. If, after reassessment, the net of the acquisition-date
amounts of the identifiable assets acquired and liabilities assumed exceeds the sum of the consideration transferred, the amount
of any non-controlling interests in the acquiree and the fair value of the acquirer’s previously held interest in the acquiree (if any),
the excess is recognized immediately in profit or loss as a bargain purchase gain.
When the consideration transferred by the Company in a business combination includes contingent consideration arrangement,
the contingent consideration is measured at its acquisition-date fair value and included as part of the consideration transferred in
a business combination. Changes in fair value of the contingent consideration that qualify as measurement period adjustments are
adjusted retrospectively, with corresponding adjustments against goodwill. Measurement period adjustments are adjustments that
arise from additional information obtained during the ‘measurement period’ (which cannot exceed one year from the acquisition
date) about facts and circumstances that existed at the acquisition date.
The subsequent accounting for changes in the fair value of the contingent consideration that do not qualify as measurement period
adjustments depends on how the contingent consideration is classified. Contingent consideration that is classified as equity is not
remeasured at subsequent reporting dates and its subsequent settlement is accounted for within equity. Other contingent
consideration is remeasured to fair value at subsequent reporting dates with changes in fair value recognized in earnings.
If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs,
the Company reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are
adjusted during the measurement period (see above), or additional assets or liabilities are recognized, to reflect new information
obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the amounts
recognized as of that date.
(e)
Goodwill
Goodwill is initially recognized and measured as set out above.
Goodwill is not amortized but is reviewed for impairment at least annually. For the purpose of impairment testing, goodwill is
allocated to each of the Company’s cash-generating units ("CGUs") expected to benefit from the synergies of the combination.
CGUs to which goodwill has been allocated are tested for impairment annually, or more frequently when there is an indication that
the unit may be impaired. If the recoverable amount of the CGU is less than the carrying amount of the unit, the impairment loss
is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata
on the basis of the carrying amount of each asset in the unit. An impairment loss recognized for goodwill is not reversed in
a subsequent period. On disposal of a CGU, the attributable amount of goodwill is included in the determination of the profit or loss
on disposal.
84
Yamana Gold
(f)
Impairment and Reversal of Impairment of Non-Current Assets
At each reporting date, the Company reviews the carrying amounts of its mining properties and plant and equipment at the CGU
level to determine whether there is any indication that these assets may be impaired. If any such indication exists, the recoverable
amount of the relevant CGU is estimated in order to determine the extent of the impairment loss (if any). A CGU is the smallest
identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups
of assets. The Company's CGUs are its significant mine sites and significant development projects. In certain circumstances,
where the recoverable amount of an individual asset can be determined, impairment is performed at the individual asset level.
The recoverable amount of a mine site is the greater of its fair value less costs of disposal ("FVLCD") and value in use ("VIU"). In
the absence of market related comparative information, FVLCD is estimated as the discounted future after-tax cash flows expected
to be derived from a mine site, less an amount for costs to sell estimated based on similar past transactions. When discounting
estimated future after-tax cash flows, the Company uses its after-tax weighted average cost of capital. Estimated cash flows are
based on expected future production, metal selling prices, operating costs and capital expenditures. If the recoverable amount of
a mine site is estimated to be less than its carrying amount, the carrying amount is reduced to its recoverable amount. The carrying
amount of each mine site includes the carrying amounts of mining properties, plant and equipment, goodwill (if applicable) and
related deferred income tax balances, net of the mine site environmental rehabilitation provision. In addition, the carrying amounts
of the Company’s corporate assets are allocated to the relevant mine sites for impairment purposes. Impairment losses are
recognized in the statement of operations in the period in which they are incurred. The allocation of an impairment loss, if any, for
a particular mine site to its mining properties and plant and equipment is based on the relative carrying amounts of those assets
at the date of impairment.
At each reporting date an assessment is made to determine whether there is an indication that previously recognized impairment
losses may no longer exist or may have decreased. A previously recognized impairment loss is reversed only if there has been a
change in the assumptions used to determine the CGU’s recoverable amount since the last impairment loss was recognized. This
reversal is recognized in the consolidated statements of operations and is limited to the carrying value that would have been
determined, net of any depreciation, depletion and amortization where applicable, had no impairment charge been recognized in
prior years. When an impairment reversal is undertaken, the recoverable amount is assessed by reference to the higher of VIU
and FVLCD.
(g)
Assets and Liabilities Held for Sale and Discontinued Operations
Non-current assets and disposal groups are classified as held for sale if their carrying value will be recovered principally through
a sale transaction rather than through continuing use. The criteria for held for sale classification is regarded as met only when the
sale is highly probable and the asset or disposal group is available for immediate sale in its present condition. Actions required to
complete the sale should indicate that it is unlikely that significant changes to the sale will be made or that the decision to sell will
be withdrawn. Management must be committed to the plan to sell the asset or disposal group and the sale expected to be
completed within one year from the date of the classification.
Non-current assets and disposal groups classified as held for sale are measured at the lower of their carrying amount and fair
value less costs to sell ("FVLCS"). If the FVLCS is lower than the carrying amount, an impairment loss is recognized in the
consolidated statement of operations. Costs to sell are the incremental costs directly attributable to the disposal of an asset or
disposal group, excluding finance costs and income tax expense. Non-current assets are not depreciated or amortized once
classified as held for sale. Assets and liabilities classified as held for sale are presented separately as current items in the
Company's consolidated balance sheet.
A disposal group qualifies as a discontinued operation if it is a component of the Company that either has been disposed of, or is
classified as held for sale, and: (i) represents a separate major line of business or geographical area of operations; (ii) is part of a
single coordinated plan to dispose of a separate major line of business or geographical area of operations; or (iii) is a subsidiary
acquired exclusively with a view to resale. A component of the Company comprises an operation and cash flows that can be clearly
distinguished, operationally and for financial reporting purposes, from the rest of the Company.
Discontinued operations are excluded from the results of continuing operations and are presented as a single amount as profit or
loss after tax from discontinued operations in the consolidated statement of operations.
(h)
Revenue Recognition
Gold and Silver
The Company sells gold and silver in bullion and doré form to customers, which are all major financial institutions.
Revenue is recognized when control of the gold or silver has transferred to the customer. For bullion sales, this is typically at the
point in time when the bullion has been pledged to the customer in writing, which is often at the time it is credited to the metal
account of the customer. For doré sales, this is typically at the point in time when the customer has received all required
Annual Report 2019
85
confirmations from the Company, which is at the time the doré is shipped from the mine. Following gold or silver being pledged to
a customer or the shipment of doré, the customer has the ability to direct the use of, and obtain substantially all of the remaining
benefits from, the metal.
Revenue is measured at the transaction price agreed under the contract and excludes any amounts collected on behalf of third
parties. Payment of the transaction price is due immediately when the metal is transferred to the customer. A receivable is
recognized when the metal is transferred to the customer, as this is the point in time that the consideration is unconditional because
only the passage of time is required before the payment is due.
Metal Concentrate
Concentrate is sold to independent smelting companies for extraction of the metal contents, which are predominantly copper, with
small quantities of gold and silver.
Revenue from concentrate sales is recognized when control of the concentrate has transferred to the customer, which is typically
upon loading of the concentrate onto the shipping vessel for shipment to the customer. At this point in time, the customer has the
significant risks and rewards of ownership of the concentrate, and is committed to accept and pay for the concentrate. Although
legal title does not pass until receipt of the first provisional payment, the fact that under the contract the customer has the right to
process the concentrate as soon as it is received, indicates that the customer has obtained control of the concentrate prior to the
transfer of title - i.e. the customer has the ability to direct the use of, and obtain substantially all of the remaining benefits from, the
concentrate.
Concentrate sales include provisional pricing features whereby the price is provisional at the time of sale, with the final sales price
based on the market price at a future specified date and the final physical attributes (i.e. quantity of contained metals) of the
concentrate determined after further processing and assessment. The price adjustments associated with changes in market price
and the physical attributes of the concentrate give rise to variability in the consideration the Company will receive from the
customer. The variability associated with the change in market prices is accounted for separately as a derivative.
At the point in time that control of the concentrate transfers to the customer, the Company recognizes revenue and a receivable
(the latter, because the Company has determined it has an unconditional right to the consideration). Revenue is measured at the
amount the Company expects to be entitled to - being the estimate of the price expected to be received upon final invoice (at the
end of the quotational period) using the most recently determined estimate of metal quantity and the estimated forward price. The
receivable is measured at fair value through profit or loss, and is marked to market through earnings each period prior to final
settlement. The period between provisional and final invoicing is typically three to four months. The Company presents changes
in the fair value of the receivable arising from provisionally priced contracts in the revenue line in the consolidated statement of
operations.
Streaming Arrangements and Advanced Metal Sales
From time to time, the Company enters into arrangements with customers pursuant to which, the Company receives consideration
in advance of the delivery of metals.
Under advanced metal sales, the Company receives advanced consideration against the delivery of a fixed quantity of a specified
metal over a specified period.
Under streaming arrangements, the Company receives advanced consideration against the delivery of a portion of future metal
production referenced to the mine(s) of the Company specified in the contract. In addition to the advanced consideration, the
Company may also receive a cash payment as metals are delivered to the customer.
The Company recognizes the advanced consideration as deferred revenue and recognizes the amounts in revenue as it satisfies
its performance obligations to deliver metal to the customer over the life of the contract. In contracts for the delivery of gold or silver
bullion, this is typically at the point in time when the metal is credited to the metal account of the customer. For copper sales, this
is at the point in time when the copper, in the form of copper warrants, is delivered to the customer. Following the crediting of gold
or silver to a customer’s metal account or the delivery of copper warrants, the customer has legal title to, physical possession of,
and the risks and rewards of ownership of the metal, and therefore, the ability to direct the use of, and obtain substantially all of
the remaining benefits from, the metal.
The Company determines the amortization of deferred revenue to the consolidated statement of operations on a per unit basis. In
advanced metal sales arrangements, this is over the fixed number of ounces specified in the contract. In streaming arrangements,
the estimated total quantity of metal expected to be delivered to the customer over the term of the contract is used. Subsequent
changes to expected deliveries result in an adjustment to revenue in the year of change to retroactively adjust for the new number
of ounces or pounds expected to be delivered under the contract.
86
Yamana Gold
Where consideration is received in advance of the Company’s performance of its obligation, there is an inherent financing
component in the transaction. When the period between receipt of consideration and revenue recognition is greater than one year,
the Company determines whether the financing component is significant to the contract.
Where a contract is determined to have a significant financing component, the transaction price is adjusted to reflect the financing.
The discount rate used in adjusting the promised amount of consideration is the rate that would be reflected in a separate financing
transaction between the Company and the customer at contract inception. This rate is not subsequently adjusted for any other
changes over the contract term.
The accretion of the interest expense is recognized in the finance expense line in the consolidated statement of operations, unless
capitalized to assets under construction in accordance with the Company’s policy on capitalized borrowing costs.
The Company estimates the current portion of deferred revenue based on quantities anticipated to be delivered over the next
twelve months.
Other Income
Other income arising from the use by others of the Company's assets yielding interest, royalties and dividends are recognized
when it is probable that the economic benefits associated with the transaction will flow to the Company and the amount of the
income can be measured reliably, on the following bases:
Interest is recognized using the effective interest method.
◦
◦ Royalties are recognized on an accrual basis in accordance with the substance of the agreement.
◦ Dividends are recognized when the shareholder's right to receive payment is established.
(i)
Leases
On January 1, 2019, the Company adopted IFRS 16 Leases ("IFRS 16"). The Company adopted IFRS 16 using the modified
retrospective approach and therefore, the comparative information has not been restated and continues to be reported under IAS
17 Leases and IFRIC 4 Determining whether an arrangement contains a lease. The details of accounting policies under IAS 17
and IFRIC 4 are disclosed separately if they are different from those under IFRS 16, and the impact of changes arising from the
adoption of IFRS 16 is disclosed in Note 5.
Identifying a Lease
Policy applicable from January 1, 2019
At inception of a contract, the Company assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if
the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess
whether a contract conveys the right to control the use of an identified asset, the Company assesses whether:
•
•
•
the contract involves the use of an identified asset - this may be specified explicitly or implicitly, and should be physically
distinct or represent substantially all of the capacity of a physically distinct asset. If the supplier has a substantive
substitution right, then the asset is not identified;
the Company has the right to obtain substantially all of the economic benefits from use of the asset throughout the period
of use; and
the Company has the right to direct the use of the asset. The Company has this right when it has the decision-making
rights that are most relevant to changing how and for what purpose the asset is used. In rare cases where all the decisions
about how and for what purpose the asset is used are predetermined, the Company has the right to direct the use of the
asset if either:
◦
◦
the Company has the right to operate the asset; or
the Company has designed the asset in a way that predetermines how and for what purpose it will be used.
At inception or on reassessment of a contract that contains a lease component, the Company allocates the consideration in the
contract to each lease component on the basis of their relative stand-alone prices. However, for the leases of real estate, in which
it is a lessee, the Company has elected not to separate non-lease components and account for the lease and non-lease
components as a single lease component.
Annual Report 2019
87
Policy applicable before January 1, 2019
For contracts entered into before January 1, 2019, the Company determined whether the arrangement was or contained a lease
based on the assessment of whether:
Fulfillment of the arrangement was dependent on the use of a specific asset or assets; and
The arrangement had conveyed a right to use the asset. An arrangement conveyed the right to use the asset if one of
the following was met:
•
•
◦
◦
◦
The purchaser had the ability or right to operate the asset while obtaining or controlling more than an insignificant
amount of the output;
The purchaser had the ability or right to control physical access to the asset while obtaining or controlling more
than an insignificant amount of the output; or
Facts and circumstances indicated that it was remote that the other parties would take more than an insignificant
amount of the output, and the price per unit was neither fixed per unit or output not equal to the current market
price per unit of output.
The Company as a lessee
Policy applicable from January 1, 2019
The Company recognizes a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is
initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or
before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the
underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received.
The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of
the end of the useful life of the right-of-use asset or the end of the lease term. The estimated useful lives of right-of-use assets are
determined on the same basis as those of property and equipment. In addition, the right-of-use asset is periodically reduced by
impairment losses, if any, and adjusted for certain remeasurements of the lease liability.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date,
discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Company's incremental
borrowing rate. Generally, the Company uses its incremental borrowing rate as the discount rate.
Lease payments included in the measurement of the lease liability comprise:
•
•
•
•
fixed payments, including in-substance fixed payments;
variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the
commencement date;
amounts expected to be payable under a residual value guarantee; and
the exercise price under a purchase option that the Company is reasonably certain to exercise, lease payments in an
optional renewal period if the Company is reasonably certain to exercise an extension option, and penalties for early
termination of a lease unless the Company is reasonably certain not to terminate early.
The lease liability is measured at amortized cost using the effective interest method. It is remeasured when there is a change in
future lease payments arising from a change in an index or rate, if there is a change in the Company's estimate of the amount
expected to be payable under a residual value guarantee or if the Company changes its assessment of whether it will exercise a
purchase, extension or termination option.
When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use
asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.
The Company presents right-of-use assets in 'property, plant and equipment' and lease liabilities in 'other financial liabilities' in the
consolidated balance sheet.
The Company has elected not to recognize right-of-use assets and lease liabilities for short-term leases that have a lease term of
12 months or less and leases of low-value assets, such as certain IT equipment. The Company recognizes the lease payments
associated with these leases as an expense on a straight-line basis over the lease term.
Policy applicable before January 1, 2019
In the comparative period, the Company classified any leases that transferred substantially all of the risks and rewards of ownership
as finance leases. Assets held under other leases were classified as operating leases and were not recognized in the Company’s
consolidated balance sheet. Payments made under operating leases were recognized in profit or loss on a straight-line basis over
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the term of the lease. Lease incentives received were recognized as an integral part of the total lease expense, over the term of
the lease.
(j)
Financial Instruments
Classification and Measurement of Financial Assets and Financial Liabilities
i)
Financial Assets
On initial recognition, a financial asset is classified as measured at: amortized cost, FVOCI, or FVTPL. The classification of financial
assets is generally based on the business model in which a financial asset is managed and its contractual cash flow characteristics.
Derivatives embedded in contracts where the host is a financial asset in the scope of the standard are never separated. Instead,
the hybrid financial instrument as a whole is assessed for classification.
A financial asset is measured at amortized cost if it meets both of the following conditions and is not designated as at FVTPL:
•
•
it is held within a business model whose objective is to hold assets to collect contractual cash flows; and
its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the
principal amount outstanding.
A debt investment is measured at FVOCI if it meets both of the following conditions and is not designated as at FVTPL:
•
•
it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling
financial assets; and
its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the
principal amount outstanding.
On initial recognition of an equity investment that is not held for trading, the Company may irrevocably elect to present subsequent
changes in the investment’s fair value in OCI. This election is made on an investment-by-investment basis.
All financial assets not classified as measured at amortized cost or FVOCI as described above are measured at FVTPL. This
includes all derivative financial assets. On initial recognition, the Company may irrevocably designate a financial asset that
otherwise meets the requirements to be measured at amortized cost or at FVOCI as at FVTPL if doing so eliminates or significantly
reduces an accounting mismatch that would otherwise arise.
A financial asset (unless it is a trade receivable without a significant financing component that is initially measured at the transaction
price) is initially measured at fair value plus, for an item not at FVTPL, transaction costs that are directly attributable to its
acquisition.
The following accounting policies apply to the subsequent measurement of financial assets:
Financial assets at amortized
cost
These assets are subsequently measured at amortized cost using the effective interest
method. The amortized cost is reduced by impairment losses (see b) below). Interest
income, foreign exchange gains and losses and impairment are recognized in profit or loss.
Any gain or loss on derecognition is recognized in profit or loss.
Financial assets at FVTPL
These assets are subsequently measured at fair value. Net gains and losses, including any
interest or dividend income, are recognized in profit or loss. Refer to c) below for derivatives
designated as hedging instruments.
Equity investments at FVOCI
These assets are subsequently measured at fair value. Dividends are recognized as income
in profit or loss unless the dividend clearly represents a recovery of part of the cost of the
investment. Other net gains and losses are recognized in OCI and are never reclassified to
profit or loss.
These assets are subsequently measured at fair value. Interest income calculated using the
effective interest method, foreign exchange gains and losses and impairment are recognized
in profit or loss. Other net gains and losses are recognized in OCI. On derecognition, gains
and losses accumulated in OCI are reclassified to profit or loss.
Debt investments at FVOCI
ii)
Financial Liabilities
Financial liabilities are classified as measured at amortized cost or FVTPL. A financial liability is classified as at FVTPL if it is
classified as held-for-trading, it is a derivative or it is designated as such on initial recognition. Financial liabilities at FVTPL are
measured at fair value and net gains and losses, including any interest expense, are recognized in profit or loss. Other financial
liabilities are subsequently measured at amortized cost using the effective interest method. Interest expense and foreign exchange
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89
gains and losses are recognized in profit or loss. Any gain or loss on derecognition is also recognized in profit or loss. See below
for financial liabilities designated as hedging instruments.
Impairment
Non-Derivative Financial Assets
The Company recognizes a loss allowance for expected credit losses on financial assets that are measured at amortized cost. At
each reporting date, the Company measures the loss allowance for the financial asset at an amount equal to the lifetime expected
credit losses if the credit risk on the financial asset has increased significantly since initial recognition. If at the reporting date, the
credit risk on the financial asset has not increased significantly since initial recognition, the Company measures the loss allowance
for the financial asset at an amount equal to twelve month expected credit losses. Impairment losses on financial assets carried at
amortized cost are reversed in subsequent periods if the financial asset is no longer credit-impaired and the improvement can be
related objectively to an event occurring after the impairment was recognized (such as an improvement in the counterparty's credit
rating).
For trade receivables that are classified as financial assets at amortized cost, the Company applies the simplified approach
permitted by IFRS 9, which requires expected lifetime losses to be recognized from initial recognition of the receivables.
Derivative Instruments and Hedge Accounting
The Company uses derivative financial instruments to hedge its exposure to exchange rate fluctuations on foreign currency
operating expenses and capital expenditures.
The Company formally documents all relationships between hedging instruments and hedged items, as well as its risk management
objectives and strategies for undertaking hedge transactions. This process includes linking all derivative hedging instruments to
forecasted transactions. Hedge effectiveness is assessed based on the degree to which the cash flows from the derivative
contracts are expected to offset the cash flows of the underlying transaction being hedged.
When a derivative is designated as a cash flow hedging instrument, the effective portion of changes in fair value is recognized in
other comprehensive income, net of tax. For hedged items other than the purchase of non-financial assets, the amounts
accumulated in other comprehensive income are reclassified to the consolidated statements of operations when the underlying
hedged transaction, identified at contract inception, affects profit or loss. When hedging a forecasted transaction that results in the
recognition of a non-financial asset or a non-financial liability, the gains and losses previously deferred in equity are transferred
from equity and included in the measurement of the initial carrying amount of the asset or liability.
Any ineffective portion of a hedge relationship is recognized immediately in the consolidated statements of operations. The
Company has elected to exclude the time value component of options and the forward element of forward contracts from the
hedging relationships, with changes in these amounts recorded in other comprehensive income and treated as a cost of hedging.
For hedged items other than the purchase of non-financial assets, the cost of hedging amounts is reclassified to the consolidated
statements of operations when the underlying hedged transaction affects profit or loss. When hedging a forecasted transaction
that results in the recognition of a non-financial asset, the cost of hedging is added to the carrying amount of the non-financial
asset.
When derivative contracts designated as cash flow hedges are terminated, expired, sold or no longer qualify for hedge accounting,
hedge accounting is discontinued prospectively. Any amounts recorded in other comprehensive income up until the time the
contracts do not qualify for hedge accounting remain in other comprehensive income. Amounts recognized in other comprehensive
income are recognized in the consolidated statements of operations in the period in which the underlying hedged transaction is
completed. Gains or losses arising subsequent to the derivative contracts not qualifying for hedge accounting are recognized in
the period incurred in the consolidated statements of operations.
If the forecasted transaction is no longer expected to occur, then the amounts accumulated in other comprehensive income are
reclassified to the consolidated statement of operations immediately.
(k)
Share-Based Payments
The fair value of the estimated number of share options and restricted share units ("RSUs") awarded to employees, officers and
directors that will eventually vest, determined as of the date of grant, is recognized as share-based compensation expense within
General and Administrative expenses in the consolidated statements of operations over the vesting period of the share options
and RSUs, with a corresponding increase to equity. The fair value of share options is determined using the Black-Scholes option
pricing model with market related inputs as of the date of grant. The fair value of RSUs is the market value of the underlying shares
as of the date of grant. Share options and RSUs with graded vesting schedules are accounted for as separate grants with different
vesting periods and fair values. Changes to the estimated number of awards that will eventually vest are accounted for
prospectively. The Company's share option plan includes a share appreciation feature. If and when the share options are ultimately
exercised, the applicable amount in the equity reserve is transferred to share capital.
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Performance share units ("PSUs") and Deferred share units ("DSUs") are settled in cash. The fair value of the estimated number
of PSUs or DSUs awarded that will eventually vest, determined as of the date of grant, is recognized as share-based compensation
expense within general and administrative expenses in the consolidated statements of operations over the vesting period, with a
corresponding amount recorded as a liability. Until the liability is settled, the fair value of the PSUs and DSUs is re-measured at
the end of each reporting period and at the date of settlement, with changes in fair value recognized as share-based compensation
expense or recovery over the vesting period.
(l)
Income Taxes
Income tax expense or recovery comprises of current and deferred tax. Income tax expense or recovery is recognized in the
consolidated statements of operations except to the extent it relates to items recognized directly in equity or in OCI, in which case
the related taxes are recognized in equity or OCI.
Current income tax is the expected tax payable or receivable on the taxable income or loss for the year, which may differ from
earnings reported in the consolidated statements of operations due to items of income or expenses that are not currently taxable
or deductible for tax purposes, using tax rates substantively enacted at the reporting date, and any adjustment to tax payable in
respect of previous years.
Deferred income tax is recognized based on the balance sheet method in respect of temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not
recognized for the following temporary differences:
• Goodwill or the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects
neither accounting nor taxable profit or loss, and
Investments in subsidiaries and jointly controlled entities to the extent they can be controlled and that it is probable that
they will not reverse in the foreseeable future.
•
Deferred income tax is recognized on the movement in foreign exchange rates on non-monetary assets denominated in foreign
currencies. Foreign exchange gains or losses relating to deferred income taxes are included in the deferred income tax expense
in the consolidated statements of operations.
Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on
the laws that have been enacted or substantively enacted at the reporting date. Deferred tax assets and liabilities are offset if there
is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax
authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net
basis or their tax assets and liabilities will be realized simultaneously.
A deferred tax asset is recognized for unused tax losses, tax credits and deductible temporary differences, to the extent that it is
probable that future taxable profits will be available against which they can be utilized. Deferred tax assets are reviewed at each
reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.
(m)
Inventories
Metal inventories - ore in stockpiles (ore extracted from the mine and available for further processing), work in process (metal in
the processing circuit that has not completed the production process), and product inventories (metal in saleable form) are
measured at the lower of the cost of production and net realizable value. Cost is determined on a weighted average basis and
includes all costs incurred, based on a normal production capacity, in bringing each product to its present location and condition.
Cost of inventories comprises direct labor, materials and contractor expenses, including non-capitalized stripping costs;
depreciation, depletion and amortization including capitalized stripping costs; and an allocation of general and administrative costs.
Costs are added to ore in stockpiles at the current mining cost per tonne. As ore is removed for processing, costs are removed
based on the accumulated average cost per tonne. Net realizable value is calculated as the estimated selling price at the time of
sale based on prevailing and long-term metal prices, less estimated future costs to convert the inventories into saleable form and
estimated costs to sell.
Ore in stockpiles not expected to be processed in the next twelve months is classified as long-term.
Materials and supplies include consumables and other raw materials yet to be used in the production process, as well as spare
parts and other maintenance supplies that are not classified as capital items, and are valued at the lower of cost and net realizable
value. Provisions are recorded to reduce materials and supplies to net realizable value, which is generally calculated by reference
to its salvage or scrap value, when it is determined that the materials or supplies are obsolete. Provisions are reversed to reflect
subsequent recoveries in net realizable value where the inventory is still on hand.
Write downs of inventory and reversals of write downs are reported as a component of current period costs.
Annual Report 2019
91
(n)
Property, Plant and Equipment
Land, Building, Plant and Equipment
Land, building, plant and equipment are recorded at cost, less accumulated depreciation and accumulated impairment losses. The
cost is comprised of the asset's purchase price, any costs directly attributable to bringing the asset to the location and condition
necessary for it to be capable of operating in the manner intended by management and the estimated environmental rehabilitation
costs associated with the asset.
The depreciable amount of building, plant and equipment is amortized according to either the units of production method or on a
straight-line basis, to the residual value of the asset over the lesser of mine life or estimated useful life of the asset. Each part of
an item of building, plant and equipment with a cost that is significant in relation to the total cost of the item is depreciated separately
if its useful life differs. Useful lives of building, plant and equipment items range from two to thirty years, but do not exceed the
related estimated mine life based on proven and probable mineral reserves and the portion of mineral resources that management
expects to become mineral reserves in the future and be economically extracted.
Building
Machinery and equipment
Vehicles
Furniture and office equipment
Computer equipment and software
Land
Depreciation Method
Straight Line
Straight Line
Straight Line
Straight Line
Straight Line
Not depreciated
Useful Life
4 to 30 years
2 to 7 years
3 to 5 years
2 to 10 years
3 to 5 years
N/A
The Company reviews the useful life, depreciation method, residual value and carrying value of its building, plant and equipment
at least annually. Where the carrying value is estimated to exceed the estimated recoverable amount, which is the higher of the
asset's fair value less costs of disposal or value in use, a provision for impairment is measured and recorded.
Expenditures that extend the useful lives of existing facilities or equipment are capitalized and depreciated over the remaining
useful lives of the assets or useful life of the component (e.g. major overhaul) of an asset. Repairs and maintenance expenditures
are expensed as incurred.
Exploration and Evaluation Assets, and Depletable Producing Properties
The Company's tangible exploration and evaluation assets are comprised of mineral resources and exploration potential. The
value associated with mineral resources and exploration potential is the value beyond proven and probable mineral reserves.
Exploration and evaluation assets acquired as part of an asset acquisition or a business combination are recorded as tangible
exploration and evaluation assets and are capitalized at cost, which represents the fair value of the assets at the time of acquisition
determined by estimating the fair value of the property's mineral reserves, mineral resources and exploration potential at such
time.
The value of such assets when acquired is primarily a function of the nature and amount of mineralized materials contained in
such properties. Exploration and evaluation stage mineral interests represent interests in properties that potentially contain
mineralized material consisting of measured, indicated and inferred mineral resources; other mine exploration potential such as
inferred mineral resources not immediately adjacent to existing mineral reserves but located around and near mine or project
areas; other mine-related exploration potential that is not part of measured, indicated and inferred mineral resources; and any
acquired right to explore and develop a potential mineral deposit.
Expenditures incurred before the Company has obtained legal rights to explore a specific area of interest are expensed. Costs
incurred for general exploration that are either not-project-specific or do not result in the acquisition of mineral properties are
considered greenfield expenditures and charged to expense. Brownfield expenditures, which typically occur in areas surrounding
known deposits and/or re-exploring older mines using new technologies to determine if greater mineral reserves and mineral
resources exist, are capitalized. Brownfield activities are focused on the discovery of mineral reserves and mineral resources close
to existing operations, including around mine or near-mine, mineral reserve and mineral resource extension and infill drilling.
Exploration expenditures include the costs incurred in either the initial exploration for mineral deposits with economic potential or
in the process of obtaining more information about existing mineral deposits.
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Evaluation expenditures include the costs incurred to establish the technical feasibility and commercial viability of developing
mineral deposits identified through exploration activities or by acquisition. Evaluation expenditures include the cost of:
•
•
Acquiring the rights to explore;
Establishing the volume and grade of deposits through drilling of core samples, trenching and sampling activities in an
ore body that is classified as either a mineral resource or a proven and probable mineral reserve;
• Determining the optimal methods of extraction and metallurgical and treatment processes;
•
•
•
Studies related to surveying, transportation and infrastructure requirements;
Permitting activities; and
Economic evaluations to determine whether development of the mineralized material is commercially justified, including
scoping, pre-feasibility and final feasibility studies.
The values assigned to the tangible exploration and evaluation assets are carried at acquired costs until such time as the technical
feasibility and commercial viability of extracting mineral resource from the assets is demonstrated, which occurs when the activities
are designated as a development project and advancement of the project is considered economically feasible. At that time, the
property and the related costs are reclassified as part of the development costs of a producing property not yet subject to depletion,
and remain capitalized. Assessment for impairment is conducted before reclassification.
Depletion commences once a property has reached commercial production. Depletion of mining properties and development costs
are calculated and recorded on a units of production basis over the estimated tonnage or recoverable ounces of proven and
probable mineral reserves of the mine, and the portion of mineral resources expected to be classified as mineral reserves and
economically extracted, which may include mineral resources in each of the measured, indicated and/or inferred mineral resources
categories.
The Company assesses and tests its exploration and evaluation assets and mining properties for impairment, and subsequent
reversal of impairment, at least annually or when events or changes in circumstances indicate that the related carrying amounts
may not be recoverable or that an impairment may be reversed. Costs related to areas of interest abandoned are written off when
the decision of abandonment is made. Refer to (f) Impairment and Reversal of Impairment of Non-Current Assets for details of the
policy. An impairment assessment of the exploration and evaluation assets is conducted before the reclassification or transfer of
exploration and evaluation assets to depletable producing properties.
Stripping Costs
In open pit mining operations, it is necessary to remove overburden and other waste materials in order to access ore from which
minerals can be extracted economically. The process of mining overburden and waste materials is referred to as stripping.
Stripping costs incurred in order to provide initial access to the ore body (referred to as pre-production stripping) are capitalized as
open pit mine development costs.
During the production phase of a mine, stripping is generally considered to create two distinct benefits: (i) the production of
inventory and (ii) improved access to ore that is expected to be mined in the future. Where the benefits are realized in the form of
inventory produced in the period, the stripping costs are accounted for as part of the cost of producing those inventories. Where
the benefits are realized in the form of improved access to ore to be mined in the future, the costs are recognized as a non-current
asset, referred to as a “stripping activity asset,” if the following criteria are met: (a) future economic benefits (that is, improved
access to the ore body for future extraction) are probable; (b) the component of the ore body for which access will be improved
can be accurately identified; and (c) the costs associated with the improved access can be reliably measured. If any of these
criteria are not met, the production stripping costs are charged to profit or loss as operating costs as they are incurred.
The stripping activity asset is initially measured at cost, which is the accumulation of costs directly incurred to perform the stripping
activity that improves access to the identified component of ore, plus an allocation of directly attributable overhead costs. If
incidental operations occur at the same time as the production stripping activity, but are not necessary for the production stripping
activity to continue as planned, these costs are not included in the cost of the stripping activity asset. If the costs of the inventory
produced and the stripping activity asset are not separately identifiable, a production measure is used to allocate the production
stripping costs between the inventory produced and the stripping activity asset. This production measure is calculated for the
identified component of the ore body, which is based on the specific development phases determined when designing the
development plan for the pit. This measure is then used as a benchmark to identify the extent to which the stripping activities have
created a future benefit. The Company uses the expected volume of waste extracted for a volume of ore production compared
with the actual volume extracted for such volume of ore production to calculate each component. The stripping activity asset is
then accounted for as an addition to, or an enhancement of, the applicable mine asset, and is presented as part of “Mining
properties” in the Company’s consolidated balance sheets.
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93
Assets Under Construction
Assets under construction are capitalized as 'Construction in Progress' until the asset is capable of operating at levels intended by
management. Costs incurred prior to this point, including depreciation of related plant and equipment, are capitalized and proceeds
from sales during this period are offset against costs capitalized. Borrowing costs, including interest, associated with projects that
are actively being prepared for production are capitalized to Construction in Progress. These costs are elements of the historical
cost of acquiring an asset when a period of time is required to bring it to the condition and location necessary for its intended use.
The borrowing costs eligible for capitalization are determined by applying a capitalization rate, which is the weighted average of
the borrowing costs applicable to the borrowings of the Company that are outstanding during the period, to the expenditures on
the asset. Capitalized interest costs are amortized on the same basis as the related qualifying asset.
(o)
Environmental Rehabilitation and Other Provisions
A provision is recognized if, as a result of a past event, the Company has a present legal or constructive obligation that can be
estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Where the effect
of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax
discount rate that reflects current market assessments of the time value of money and the risks specific to the liability that have
not been reflected in the estimate of the expenditure. The unwinding of the discount is recognized as a finance expense.
Environmental rehabilitation obligations are a type of provision associated with the retirement of a long-lived asset that the
Company has acquired, constructed, developed and/or used in operations. These include the dismantling and demolition of
infrastructure and the removal of residual materials and remediation of disturbed areas. These estimated obligations are provided
for in the accounting period when the related disturbance occurs, whether during the mine development or production phases at
the present value of estimated future costs to settle the obligations, or when a constructive obligation arises. The costs are
estimated based on the Company’s mine closure plan. The cost estimates are updated annually during the life of the operation to
reflect known developments, (e.g. revisions to cost estimates and to the estimated lives of operations, or changes in legal or
regulatory requirements), and are subject to review at regular intervals.
Environmental rehabilitation provisions are initially recorded with a corresponding increase to the carrying amounts of property,
plant and equipment, with any subsequent changes to the liability accounted for as changes in the carrying amounts of the related
property, plant and equipment. The capitalized costs are amortized over the life of the mine on a unit-of-production basis.
(p)
Intangible Assets
Intangible assets acquired by way of an asset acquisition or business combination are recognized if the asset is separable or
arises from contractual or legal rights and the fair value can be measured reliably on initial recognition. Intangible assets must be
identifiable, controlled by the Company and with future economic benefits expected to flow from the assets. Intangible assets that
are acquired by the Company and have finite useful lives are measured at cost less accumulated amortization and accumulated
impairment losses. Intangible assets with finite useful lives are amortized on a straight-line basis over the lesser of mine life or
estimated useful life of the intangible asset. The Company reviews the useful life, amortization method and carrying value on a
regular basis.
4.
CRITICAL JUDGEMENTS AND ESTIMATION UNCERTAINTIES
The preparation of the Company’s consolidated financial statements in accordance with IFRS requires management to make
judgements, estimates and assumptions that affect the reported amounts of assets, liabilities, income and expenses, and the
accompanying disclosures. These assumptions, judgements and estimates are based on management’s best knowledge of the
relevant facts and circumstances, having regard to previous experience, but actual results may differ materially from the amounts
included in the consolidated financial statements. Management reviews its estimates and underlying assumptions on an ongoing
basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only
that period, or in the period of revision and future periods if the revision affects both current and future periods.
The most significant judgements and key sources of estimation uncertainty that management believes could have a significant risk
of resulting in a material adjustment to the carrying amounts of assets and liabilities within the next financial year are:
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Yamana Gold
Mineral Reserve and Mineral Resource Estimates
Key Sources of Estimation Uncertainty
The figures for mineral reserves and mineral resources are determined in accordance with National Instrument 43-101 Standards
of Disclosure for Mineral Projects, issued by the Canadian Securities Administrators. This National Instrument lays out the
standards of disclosure for mineral projects including rules relating to the determination of mineral reserves and mineral resources.
There are numerous uncertainties inherent in estimating mineral reserves and mineral resources, including many factors beyond
the Company's control. Such estimation is a subjective process, and the accuracy of any mineral reserve or mineral resource
estimate is a function of the quantity and quality of available data and of the assumptions made and judgements used in engineering
and geological interpretation. Short-term operating factors relating to the mineral reserves, such as the need for orderly
development of the ore bodies or the processing of new or different ore grades, may cause the mining operation to be unprofitable
in any particular accounting period. Lower market prices, increased production costs, reduced recovery rates and other factors
may result in a revision of its mineral reserve estimates from time to time or may render the Company’s mineral reserves
uneconomic to exploit, which may materially and adversely affect the results of operations or financial condition. Mineral reserve
data are not indicative of future results of operations. Evaluation of mineral resources is conducted from time to time and mineral
resources may change depending on further geological interpretation, drilling results and metal prices. The Company regularly
evaluates its mineral resources and it often determines the merits of increasing the reliability of its overall mineral resources.
Differences between management's assumptions, and actual events including economic assumptions such as metal prices and
market conditions, could have a material effect in the future on the Company's financial position and results of operations.
Estimates of the quantities of proven and probable mineral reserves and mineral resources form the basis for the Company’s LOM
("LOM") plans, which are used for a number of important business and accounting purposes, including: determination of the useful
life of property, plant and equipment and measurement of the depreciation expense, capitalization and amortization of stripping
costs, exploration and evaluation of mineral resources and determination of technical feasibility and commercial viability, and
forecasting the timing of the payments related to the environmental rehabilitation provision. In addition, the underlying LOM plans
are used in the impairment tests for goodwill and non-current assets.
Estimated Recoverable Ounces
Key Sources of Estimation Uncertainty
The carrying amounts of the Company’s mining properties are depleted based on recoverable ounces contained in proven and
probable mineral reserves plus a portion of mineral resources. The Company includes a portion of mineral resources where it is
considered probable that those mineral resources will be economically extracted. Changes to estimates of recoverable ounces
and depletable costs including changes resulting from revisions to the Company’s mine plans and changes in metal price forecasts
can result in a change to future depletion rates.
Economic Recoverability and Probability of Future Economic Benefits of Exploration, Evaluation and Development Costs
Critical Judgements in Applying Accounting Policies
Management has determined that exploration and evaluation costs incurred during the year and costs associated with projects
under construction have future economic benefits and are economically recoverable. In making this judgement, management has
assessed various sources of information including but not limited to the geologic and metallurgic information, history of conversion
of mineral deposits to proven and probable mineral reserves, scoping and feasibility studies, proximity of operating facilities,
operating management expertise, existing permits and life of mine plans.
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Indicators of Impairment and Reversal of Impairment
Critical Judgements in Applying Accounting Policies
The Company considers both external and internal sources of information in assessing whether there are any indications that
CGUs are impaired or reversal of impairment is needed. External sources of information the Company considers include changes
in the market, economic and legal environment in which the Company operates that are not within its control and are expected to
affect the recoverable amount of CGUs. Internal sources of information include the manner in which mining properties and plant
and equipment are being used or are expected to be used and indicators of the economic performance of the assets, historical
exploration and operating results. The primary external factors considered are changes in spot and forecast metal prices, changes
in laws and regulations and the Company’s market capitalization relative to its net asset carrying amount. Primary internal factors
considered are the Company’s current mine performance against expectations, changes in mineral reserves and resources, life of
mine plans and exploration results.
Impairment and Reversal of Impairment
Key Sources of Estimation Uncertainty
In determining the recoverable amounts of the Company’s mining interests and goodwill, management makes estimates of the
discounted future after-tax cash flows expected to be derived from the Company’s mining properties, costs to sell the mining
properties and the appropriate discount rate. The projected cash flows are significantly affected by changes in assumptions related
to metal selling prices, changes in the amount of recoverable reserves, resources, and exploration potential, production cost
estimates, future capital expenditures, discount rates and exchange rates. Significant changes in metal price forecasts, estimated
future costs of production, capital expenditures, the amount of recoverable reserves, resources, and exploration potential, and/or
the impact of changes in current economic conditions may result in a write-down or reversal of impairment of the carrying amounts
of the Company’s mining interests and/or goodwill.
No impairment losses or reversals of previous impairments were recognized during the year ended December 31, 2019. During
the year ended December 31, 2018, the Company recognized a net impairment loss of $302.0 million in respect of the carrying
amounts of certain mineral properties and goodwill. Refer to Note 13.
Deferral of Stripping Costs
Key Sources of Estimation Uncertainty
In determining whether stripping costs incurred during the production phase of a mining property relate to mineral reserves and
mineral resources that will be mined in a future period and therefore should be capitalized, the Company determines whether it is
probable that future economic benefits associated with the stripping activity over the life of the mineral property will flow to the
Company. Changes in estimated strip ratios can result in a change to the future capitalization of stripping costs incurred. At
December 31, 2019, the carrying amount of stripping costs capitalized and included in mining properties was $54.2 million
(December 31, 2018: $257.5 million).
Environmental Rehabilitation Provision
Key Sources of Estimation Uncertainty
Given the nature of its operations, the Company incurs obligations to close, restore and rehabilitate its sites. Closure and
rehabilitation activities are governed by a combination of legislative requirements and Company policies. The Company’s
environmental rehabilitation provision represents management’s best estimate of the present value of the future cash outflows
required to settle the liabilities, which reflects estimates of future costs, inflation, movements in foreign exchange rates and
assumptions of risks associated with the future cash outflows, and the applicable risk-free interest rates for discounting the future
cash outflows. Changes in the above factors can result in a change to the provision recognized by the Company. The actual future
expenditures may differ from the amounts currently provided if the estimates made are significantly different than actual results or
if there are significant changes in environmental and/or regulatory requirements in the future.
96
Yamana Gold
Revenue Recognition: Application of Variable Consideration Constraint
Key Sources of Estimation Uncertainty
The Company determines the amortization of deferred revenue to the consolidated statement of operations on a per unit basis
using the expected quantity of metal (ounces for gold and silver and pounds for copper) that will be delivered over the term of
the contract, which is based on geological reports and the Company’s LOM plan at contract inception. As subsequent changes
to the expected quantity of metal to be delivered triggers a retrospective adjustment to revenue, management is required to
estimate the ounces or pounds to be included in the denominator that will be sufficient such that subsequent changes are not
expected to result in a significant revenue reversal. Accordingly, management includes reserves and portion of resources,
which management is reasonably confident are transferable to reserves, in the calculation. With this approach, the Company
considers that it is highly probable that changes in subsequent reserve and resource estimates will not result in a significant
revenue reversal of previously recognized revenue.
Deferred Revenue
Critical Judgements in Applying Accounting Policies
Significant judgements are required in determining the appropriate accounting treatment for metal transactions entered into by the
Company. With respect to the Company's current streaming arrangements, management has determined that based on the
agreements, the counterparties assume significant business risk and rewards associated with the timing and amount of metals
being delivered. As such, the deposits received from the counterparties have been recorded as deferred revenue in the
consolidated balance sheet. Additionally, the Company has determined that the transactions are not financial liabilities as; based
on the specific rights and obligations set out in the agreements, under no circumstances will the delivery obligations be satisfied
with cash. Refer to Note 27 for additional information.
Joint arrangements
Critical Judgements in Applying Accounting Policies
Judgement is required to determine when the Company has joint control of a contractual arrangement, which requires a continuous
assessment of the relevant activities and when the decisions in relation to those activities require unanimous consent. Judgement
is also required to classify a joint arrangement as either a joint operation or a joint venture when the arrangement has been
structured through a separate vehicle. Classifying the arrangement requires the Company to assess its rights and obligations
arising from the arrangement. Specifically, the Company considers the legal form of the separate vehicle, the terms of the
contractual arrangement and other relevant facts and circumstances. This assessment often requires significant judgement, and
a different conclusion on joint control, or whether the arrangement is a joint operation or a joint venture, may have a material impact
on the accounting treatment.
Management evaluated its joint arrangement with Agnico Eagle Mines Limited, whereby both parties acquired 50.0% of the shares
of Osisko (now Canadian Malartic) in accordance with the requirements in IFRS 11 Joint Arrangements. The Company concluded
that the arrangement qualified as a joint operation upon consideration of the following significant factors: (i) The requirement that
the joint operators purchase all output from the investee and investee restrictions on selling the output to any third party; (ii) The
parties to the arrangement are substantially the only source of cash flow contributing to the continuity of the arrangement; and (iii)
If the selling price drops below cost, the joint operators are required to cover any obligations Canadian Malartic cannot satisfy.
Determination of Assets Held for Sale and Discontinued Operations
Critical Judgements in Applying Accounting Policies
Judgement is required in determining whether an asset or disposal group should be classified as held for sale. An asset or disposal
group should be classified as held for sale when it is available for immediate sale in its present condition and its sale is highly
probable. Conditions that support a highly probable sale include the following: an appropriate level of management is committed
to a plan to sell the asset or disposal group, an active program to locate a buyer and complete the plan has been initiated, the
asset or disposal group has been actively marketed for sale at a price that is reasonable in relation to its current fair value, and the
sale of the asset or disposal group is expected to qualify for recognition as a completed sale within one year from the date of
classification as held for sale.
Management also applies judgement to determine whether a component of the Company that either has been disposed of, or is
classified as held for sale, meets the criteria of a discontinued operation. The key area that involves management judgement in
this determination is whether the component represents a separate major line of business or geographical area of operation. This
determination was applied to the sale of the Chapada mine in 2019. Given that the Company will continue to operate in Brazil after
the disposal of Chapada and following the analysis of other factors, the Company concluded that Chapada was not a separate
major line of business or geographical area of operation, thus it was not considered to be a discontinued operation.
Annual Report 2019
97
Income Taxes
Critical Judgements in Applying Accounting Policies
Interest and penalties related to income taxes: The determination of whether interest and penalties relating to income taxes
are classified with income taxes and accounted for under IAS 12 Income Taxes or classified and accounted for under IAS 37
Provisions, Contingent Liabilities and Contingent Assets requires management to make certain judgements as to the substance of
the amounts incurred. If an amount was based on taxable profit and therefore meets the definition of an income tax, it should be
classified with income taxes or if it was based on another measure, such as compensation for the time value of money, it should
be classified outside of income taxes. Based on an assessment of the specific facts and circumstances in which interest and
penalties relating to the Company’s Brazilian tax liabilities were incurred, management determined that such interest and penalties
are within the scope of IAS 12 because they are in substance, part of a larger tax assessment rather than resulting from delayed
payment. The amounts are therefore, included in the tax expense line item in the Company’s consolidated statement of operations.
For the year ended December 31, 2019, such interest and penalties included in tax expense were $0.2 million (2018: $35.8 million).
Key Sources of Estimation Uncertainty
Income taxes and recoverability of deferred tax assets: In assessing the probability of realizing income tax assets recognized,
management makes estimates related to expectations of future taxable income, applicable tax planning opportunities, expected
timing of reversals of existing temporary differences and the likelihood that tax positions taken will be sustained upon examination
by applicable tax authorities. In making its assessments, management gives additional weight to positive and negative evidence
that can be objectively verified. Estimates of future taxable income are based on forecasted cash flows from operating activities
and the application of existing tax laws in each jurisdiction. The Company considers relevant tax planning opportunities that are
within the Company's control, are feasible, and within management's ability to implement. Examination by applicable tax authorities
is supported based on individual facts and circumstances of the relevant tax position examined in light of all available evidence.
Where applicable tax laws and regulations are either unclear or subject to ongoing varying interpretations, it is reasonably possible
that changes in these estimates can occur that materially affect the amounts of income tax assets recognized. Also, future changes
in tax laws could limit the Company from realizing the tax benefits from the deferred tax assets. The Company reassesses
unrecognized income tax assets at each reporting period.
Contingencies
Key Sources of Estimation Uncertainty
Due to the size, nature and complexity of the Company’s operations, various legal and tax matters are outstanding from time to
time. In the event that the Company’s estimates of the future resolution of these matters changes, the effects of the changes will
be recognized in the Consolidated Financial Statements. Refer to Note 35 for further discussion on contingencies.
Inventory Valuation
Key Sources of Estimation Uncertainty
The measurement of inventory including the determination of its net realizable value, especially as it relates to ore in stockpiles,
involves the use of estimates. Estimation is required in determining the tonnage, recoverable gold contained therein, and in
determining the remaining costs of completion to bring inventory to its saleable form. Changes in these estimates can result in a
change in mine operating costs of future periods and carrying amounts of inventories
Further, in determining the net realizable value of ore in stockpiles, the Company estimates future metal selling prices, production
forecasts, realized grades and recoveries, timing of processing, and future costs to convert the inventories into saleable form.
Reductions in metal price forecasts, increases in estimated future costs to convert, reductions in the amount of recoverable ounces,
and a delay in timing of processing can result in a write down of the carrying amounts of the Company’s work in process and ore
in stockpiles inventory. During the year ended December 31, 2019, the Company recorded a write down of $0.7 million, as a result
of the carrying amount of certain inventory exceeding net realizable value (2018: write down of $13.8 million). Refer to Note 19.
Commencement of Commercial Production
Critical Judgements in Applying Accounting Policies
Prior to a mine being capable of operating at levels intended by management, costs incurred are capitalized as part of the costs
of the related mining properties and proceeds from mineral sales are offset against costs capitalized. Recognition of revenue and
the depletion of capitalized costs for mining properties begins when the mine is capable of operating at levels intended by
management. Management considers several factors in determining when a mining property is capable of operating at levels
intended by management. Amongst other quantitative and qualitative factors, throughput, mill grades and recoveries were
98
Yamana Gold
assessed over a reasonable period to make this determination. A factor of 70% of planned output and/or design capacity measures
was utilized in determining the appropriate timing. The Company determined that the Cerro Moro mine in Argentina was capable
of operating at levels intended by management effective June 26, 2018.
5.
RECENT ACCOUNTING PRONOUNCEMENTS
Adoption of IFRS 16 Leases
On January 1, 2019, the Company adopted IFRS 16. IFRS 16 introduces a comprehensive model for the identification of lease
arrangements and accounting treatments. IFRS 16 distinguishes leases and service contracts on the basis of whether an identified
asset is controlled by a customer. Distinctions of operating leases (off balance sheet) and finance leases (on balance sheet) are
removed for lessee accounting, and are replaced by a model where a right-of-use asset and a corresponding liability are required
to be recognized for leases identified, with limited exceptions for short-term leases and leases of low value assets. (Details of
these new lease requirements are described in the Company's new accounting policy set out in Note 3). The impact of the adoption
of IFRS 16 on the Company's consolidated financial statements is described below.
The Company has adopted IFRS 16 using the modified retrospective approach and therefore, the comparative information has not
been restated as permitted under the specific transitional provisions in IFRS 16. The reclassifications and adjustments arising from
the new leasing rules are recognized in the opening consolidated balance sheet on January 1, 2019.
i)
Impact on the Company's consolidated financial statements
On transition to IFRS 16, the Company recognized an additional $41.5 million of right-of-use assets and $41.8 million of lease
liabilities, recognizing the difference in retained deficit.
When measuring lease liabilities, the Company discounted lease payments using its incremental borrowing rate at January 1,
2019. The weighted-average rate applied is 9.65%.
Operating lease commitments disclosed as at December 31, 2018 (Note 34)
Discounted using the incremental borrowing rate at January 1, 2019
Less: Short-term leases recognized on a straight-line basis as an expense
Add: Embedded leases identified in existing service contracts
Less: Other related to variable payments not based on an index or a rate
Lease liabilities recognized at January 1, 2019 (i)
Current
Non-current
(i)
Lease liabilities are included in Other Financial Liabilities on the consolidated balance sheet.
$
$
$
$
$
January 1, 2019
14.8
12.5
(1.0)
36.5
(6.2)
41.8
18.7
23.1
41.8
The associated right-of-use assets were measured at the amount equal to the lease liability, adjusted by the amount of any prepaid
or accrued lease payments relating to that lease recognized in the consolidated balance sheet on December 31, 2018. There were
no onerous lease contracts that would have required an adjustment to the right-of-use assets at the date of initial application.
Right-of-use assets are included in property, plant and equipment on the consolidated balance sheet. The right-of-use assets
recognized upon adoption of IFRS 16 relate to the following types of assets:
As at,
Properties
Vehicles
Equipment
January 1, 2019
5.3
17.0
19.2
41.5
$
$
Annual Report 2019
99
Segment assets and segment liabilities at December 31, 2019 increased as a result of the change in accounting policy. The
following segments were affected by the change in policy:
Canadian Malartic
Jacobina
Cerro Moro
El Peñón
Minera Florida
Corporate and other
Segment assets
Segment liabilities
$
$
1.8 $
7.4
14.5
10.4
1.9
7.3
43.3 $
1.9
7.3
15.2
9.4
1.8
7.9
43.5
ii)
Practical expedients applied
In applying IFRS 16 for the first time, the Company has used the following practical expedients permitted by the standard:
•
•
•
•
the use of a single discount rate to a portfolio of leases with reasonably similar characteristics;
the accounting for operating leases with a remaining lease term of less than 12 months as at January 1, 2019 as short-
term leases;
the exclusion of initial direct costs for the measurement of the right-of-use asset at the date of initial application; and
the use of hindsight in determining the lease term where the contract contains options to extend or terminate the lease.
Refer to Note 3 for a description of the new accounting policy applied by the Company as a result of adoption of IFRS 16.
New and Revised IFRSs, Narrow Scope Amendments to IFRSs and IFRS Interpretations not yet Effective
Certain pronouncements have been issued by the IASB that are mandatory for accounting periods after December 31, 2019. There
are currently no such pronouncements that are expected to have a significant impact on the Company's consolidated financial
statements upon adoption.
6.
DIVESTITURES
Chapada
On July 5, 2019, the Company completed the sale of the Chapada mine to Lundin Mining Corporation and received total
consideration of $856.2 million, net of transaction costs of $5.8 million. The consideration was comprised of $800.0 million in cash
received upon closing of the transaction, $54.0 million being the fair value ascribed to the Gold Price Instrument (refer below), and
$8.0 million, being the fair value ascribed to a 2% net smelter return royalty on gold production from the Suruca deposit. The
Company also received the right to receive a further $100.0 million of consideration, contingent upon the construction of a pyrite
roaster at Chapada. The gain on sale of Chapada was impacted by the final settlement associated with the working capital delivery
of $33.0 million, as anticipated. The Company recorded a $273.1 million gain on sale, as calculated below.
The Gold Price Instrument entitled the Company to additional cash payments of up to $125.0 million based on the price of gold
over the five-year period from the date of closing, as follows:
•
•
•
$10.0 million per year for each year over the next 5 years where the gold price averages over $1,350/oz, up to a maximum
cash payment of $50.0 million;
An additional $10.0 million per year for each year over the next 5 years where the gold price averages over $1,400/oz,
up to a maximum cash payment of $50.0 million; and
An additional $5.0 million per year for each year over the next 5 years where the gold price averages over $1,450/oz, up
to a maximum cash payment of $25.0 million.
On September 16, 2019, the Company monetized the Gold Price Instrument, selling to a third party for consideration of $65.5
million, recognizing an $11.5 million gain on sale.
Included in "Net proceeds on disposal of subsidiaries and other assets" in the Company's consolidated statement of cash flows
are the proceeds received on the sale of Chapada and the $65.5 million received on the sale of the Gold Price Instrument, net of
the impact of the aforementioned working capital delivery.
100
Yamana Gold
At April 15, 2019, the sale was considered highly probable; therefore, the assets and liabilities of Chapada were classified as
assets and liabilities held for sale and presented separately under current assets and current liabilities, respectively, in the
Company's balance sheet at June 30, 2019. As the consideration expected to be received in the transaction exceeded the carrying
amount, no impairment was required upon reclassification.
Gualcamayo and Related Argentinian Exploration Properties
As part of ongoing strategic and technical reviews of its asset portfolio, in December 2017 the Company committed to a formal
plan to dispose of the Gualcamayo mine and related exploration properties in Argentina (“Gualcamayo”) and initiated an active
program to sell Gualcamayo. As the sale was considered highly probable at December 31, 2017, the assets and liabilities of
Gualcamayo were classified as assets and liabilities (a disposal group) held for sale and presented separately under current assets
and current liabilities, respectively. Immediately prior to the classification to assets and liabilities held for sale, the carrying amount
of Gualcamayo was re-measured to its recoverable amount, being its FVLCD, the estimate of which, was supported by various
sources including a formal bid received by the Company, external valuation reports and comparable trading company multiples.
As a result, the Company recorded an impairment loss of $356.5 million in relation to Gualcamayo for the year ended December
31, 2017.
On October 25, 2018, the Company entered into a definitive purchase agreement to sell its 100% interest in the Gualcamayo to
Mineros S.A. ("Mineros") for consideration comprising: (i) $30.0 million in cash, payable at closing; (ii) An additional $30.0 million
in cash upon declaration of commercial production of the Deep Carbonates project, which is an undeveloped mineral resource
below the existing oxide gold mineralization at Gualcamayo; (iii) A 2% net smelter return royalty (“NSR”) at Gualcamayo on metal
produced after the initial 396,000 ounces, capped at $50.0 million (excluding products produced from the Deep Carbonates
Project); and (iv) A 1.5% uncapped NSR on products produced from the Deep Carbonates project.
Separately, the Company also agreed to grant Mineros an option to acquire up to a 51% interest in the La Pepa project, located
in Chile, over an earn-in period of four years (subject to extension for certain unexpected contingencies) and then the remaining
49% interest pursuant to a call option.
As the estimated consideration was lower than the carrying value of Gualcamayo, the Company recorded an impairment loss of
$75.0 million in the quarter ended September 30, 2018.
The sale of the Gualcamayo mine was completed on December 14, 2018 and the Company received total consideration of $82.5
million, net of transaction costs of $1.5 million. The Company recognized a $2.6 million gain on sale, as calculated below.
Brio Gold
On May 24, 2018, the Company completed the sale of its 53.6% controlling interest in Brio Gold to Leagold Mining Corporation
("Leagold") and received total consideration of $146.1 million, net of transaction costs of $1.5 million. The consideration was
comprised of $140.5 million of Leagold common shares ("Leagold Shares"), representing approximately 20.5% of Leagold's issued
and outstanding common shares at the closing date and $7.1 million of Leagold share purchase warrants, which entitle the
Company to purchase one Leagold Share at a price of C$3.70 for a period of two years from May 24, 2018. The Leagold Shares
were measured based on the 3-day volume weighted average trading price of Leagold Shares on the Toronto Stock Exchange
("TSX") as at May 23, 2018, and must be held for a minimum period of 12 months, subject to certain exceptions. The Leagold
share purchase warrants were valued using the Black-Scholes option-pricing model.
During the first quarter of 2018, the Company concluded that the assets and liabilities of Brio Gold met the criteria for classification
as a disposal group held for sale, and accordingly, the assets and liabilities of Brio Gold were presented separately in the
Company's consolidated balance sheet as at March 31, 2018 as current assets and current liabilities, respectively. The Company
recorded an impairment loss upon initial classification as held for sale, and a further impairment loss at March 31, 2018 to write
the carrying amount of the disposal group down to its fair value less costs to sell ("FVLCS") for a combined impairment write down
of $181.0 million ($175.0 million net of tax) in the three months ended March 31, 2018. The FVLCS was estimated based on the
consideration expected to be received in the sale transaction using the Leagold share price per the TSX on the dates of the
respective write downs, a level 1 input per the fair value hierarchy.
Upon disposal of Brio Gold on May 24, 2018, the Company recognized a $32.0 million gain, as calculated below.
Annual Report 2019
101
Canadian Exploration Properties
On March 29, 2018, the Company completed the sale of certain jointly owned exploration properties of the Canadian Malartic
Corporation (“CMC”) including the Kirkland Lake and Hammond Reef properties (the “Canadian Exploration Properties”) to Agnico
Eagle Mines Limited (“Agnico”) for total cash consideration of $162.5 million. The Transaction was structured as a sale of assets
by CMC (in which the Company holds a 50% indirect interest) pursuant to which Agnico acquired all of the Company's indirect
50% interest in the Canadian exploration assets of CMC.
At December 31, 2017, the sale was considered highly probable and accordingly, the assets and liabilities of the Canadian
Exploration Properties were classified as assets and liabilities held for sale and presented separately under current assets and
current liabilities, respectively. No impairment loss was recognized on reclassification to held for sale, as the FVLCD was higher
than the carrying amount of the assets based on the sale price in the agreement. Upon sale, the Company recognized a gain of
$39.0 million, which is included in other operating income (expenses), net in the consolidated statement of operations for the year
ended December 31, 2018.
The gains on disposal of Chapada (2019), Brio Gold (2018) and Gualcamayo (2018) were calculated as below:
Brio Gold
Chapada
Gualcamayo
Total consideration including working capital adjustments (net of transaction
costs)
Net assets sold and derecognized:
Cash and cash equivalents
Trade and other receivables
Inventories
Other financial assets
Other assets
Property, plant and equipment
Deferred tax assets
Goodwill and intangibles
Trade and other payables
Income taxes payable
Other financial liabilities
Other provisions and liabilities
Debt
Environmental rehabilitation provisions
Deferred tax liabilities
Net assets
Other comprehensive income
Non-controlling interests
Net assets attributable to Yamana
Gain on disposal (Note 10)
$
$
$
$
$
856.2 $
146.1 $
43.1 $
0.5
31.4
—
157.4
670.0
—
—
(31.9)
(18.2)
—
(150.5)
—
(58.7)
(60.0)
583.1 $
—
—
583.1 $
273.1 $
5.4 $
1.4
42.0
1.5
16.1
337.7
5.3
—
(54.1)
(3.3)
(19.4)
(14.5)
(73.0)
(34.2)
—
210.9 $
4.9
(101.7)
114.1 $
32.0 $
82.5
1.5
7.5
60.8
0.8
11.8
67.9
—
1.4
(31.1)
—
(1.3)
(9.7)
—
(29.7)
—
79.9
—
—
79.9
2.6
The gains on disposal are included in other operating income, net in the consolidated statement of operations for the respective
year ends.
The results of Chapada, Gualcamayo and Brio Gold up to their disposal dates are included in the "Other Mines" operating segment
in Note 7, and the Canadian Exploration Properties were included in the Canadian Malartic segment.
7.
SEGMENT INFORMATION
The Company bases its operating segments on the way information is reported and used by the Company's chief operating
decision maker ("CODM"), being the Company's Senior Executive Group. The results of operating segments are reviewed by the
CODM in order to make decisions about resources to be allocated to the segments and to assess their performance.
The Company considers each of its individual operating mine sites as reportable segments for financial reporting purposes. Further,
the results of operating mines that the Company does not intend to manage in the long-term, and for which a disposal plan has
been initiated, are reviewed as one segment. Accordingly, in the current period, the Chapada mine, which was disposed of on July
5, 2019, has been included in the "Other Mines" segment. Comparatives have been updated to reflect the change in presentation
adopted in the current period. In addition to these reportable segments, the Company aggregates and discloses the financial
102
Yamana Gold
results of other operating segments with similar economic characteristics as reviewed by the CODM, including exploration
properties and corporate entities, under "Corporate and Other".
Significant information relating to the Company's reportable segments is summarized in the tables below:
Canadian
Malartic Jacobina
Cerro
Moro
El Peñón
Minera
Florida
Other
Mines (i)
Corporate
and other
(ii)
Total
Property, plant and equipment at
December 31, 2019
Total assets at December 31, 2019
Total liabilities at December 31, 2019
$ 1,082.9 $
$ 1,646.2 $
415.7 $
$
917.6
952.7
269.0
$
$
$
866.1
955.5
112.3
$
$
$
571.2 $
612.5 $
210.5 $
292.6 $
317.1 $
94.0 $
— $ 2,222.5 $ 5,952.9
— $ 2,633.2 $ 7,117.2
— $ 1,795.8 $ 2,897.3
Capital expenditures for the year ended
December 31, 2019
$
82.7 $
61.7
$
43.4
$
49.7 $
34.3 $
35.8 $
24.1 $
331.7
Canadian
Malartic Jacobina
Cerro
Moro
El Peñón
Minera
Florida
Property, plant and equipment at
December 31, 2018
Total assets at December 31, 2018
Total liabilities at December 31, 2018
$ 1,160.4 $
$ 1,686.8 $
436.3 $
$
907.3
$
917.6
951.7
$ 1,033.6
232.0
$
89.1
$
$
$
585.7 $
282.9 $
646.3 $
305.7 $
158.9 $
92.0 $
Other
Mines (i)
Corporate
and other
(ii)
Total
658.3 $ 2,184.2 $ 6,696.4
819.6 $ 2,569.2 $ 8,012.9
263.9 $ 2,716.7 $ 3,988.9
Capital expenditures for the year ended
December 31, 2018
$
81.8 $
47.5
$
87.6
$
50.8 $
60.7 $
88.3 $
30.2 $
446.9
(i)
(ii)
Other mines includes Chapada (divested July 2019) for 2019 periods and reporting dates, and Chapada, Gualcamayo (divested December 2018) and Brio
Gold (divested May 2018) for 2018 periods and reporting dates.
"Corporate and other" includes advanced stage development projects, exploration properties, corporate entities, the Company's investment in associate
and Agua Rica with total assets of $1,156.5 million (December 31, 2018: $1,146.9 million). On March 7, 2019, Yamana entered into an integration agreement
with Glencore International AG ("Glencore") and Goldcorp Inc., now Newmont Corporation ("Newmont") (the three parties collectively, "the Parties") pursuant
to which, the Agua Rica project would be developed and operated using the existing infrastructure and facilities of the Alumbrera mine, given their close
proximity. The integration agreement provides the Parties with a path to a full integration of the Agua Rica project and the Alumbrera mine both technically
and legally. The Parties are currently advancing the technical work to facilitate the permitting and dialogue with communities and stakeholders, performing
confirmatory due diligence, finalizing binding agreements with government stakeholders and finalizing the legal integration structure. In respect of the
contribution of the Parties, Yamana will contribute its current 100% interest in the Agua Rica project and its 12.5% interest in Alumbrera, while Glencore
and Newmont will contribute their respective 50% and 37.5% interests in Alumbrera. The integration transaction structure will be determined based on the
final construction financing plan, which may include completing a business transaction or other monetization event involving one or more third parties with
respect to the integration project, and which may include a going public transaction.
For the year ended December 31, 2019
Revenue
Cost of sales excluding DDA (i)
Gross margin excluding DDA
DDA
Segment income (loss)
Canadian
Malartic
460.5 $
(198.9)
261.6 $
(135.4)
126.2 $
$
$
$
Jacobina
Cerro
Moro
El Peñón
Minera
Florida
Other
mines (ii)
Corporate
and other
Total
224.0 $
299.6 $
297.0 $
103.8
$
(94.9)
(153.8)
(153.4)
(70.6)
129.1 $
145.8 $
143.6 $
33.2
$
(56.7)
(121.7)
(102.0)
(35.7)
72.4 $
24.1 $
41.6 $
(2.5) $
227.3 $
(111.2)
116.1 $
(11.9)
104.2 $
— $ 1,612.2
—
(782.8)
— $
829.4
(8.3)
(471.7)
(8.3) $
357.7
Other expenses (iii)
Earnings before taxes $
Income tax expense
Net earnings $
(47.4)
310.3
(84.7)
225.6
Annual Report 2019
103
Cerro
Moro
El Peñón
Minera
Florida
Other
mines (ii)
Corporate
and other
Total
For the year ended December 31, 2018
Revenue
Cost of sales excluding DDA (i)
Gross margin excluding DDA
DDA
(Impairment) reversal of
impairment of mining
properties and goodwill
Segment income (loss)
$
$
$
179.4 $
Canadian
Malartic Jacobina
447.6 $
(200.4)
247.2 $
(137.8)
(41.4)
(95.7)
83.7 $
126.8 $
253.6 $
102.6 $
(66.1)
(171.0)
(74.7)
60.7 $
82.6 $
27.9 $
(49.1)
(92.9)
(39.2)
(45.0)
64.4 $
150.0
—
—
(151.0)
192.3 $
11.6 $
(10.3) $ (162.3) $
688.5 $
(402.1)
286.4 $
(69.9)
(103.0)
113.5 $
— $
1,798.5
—
(1,010.0)
— $
788.5
(8.0)
(438.3)
—
(149.0)
(8.0) $
201.2
Other expenses (iii)
Loss before taxes $
Income tax expense
Net loss $
(377.9)
(176.7)
(121.0)
(297.7)
(i)
(ii)
(iii)
Depletion, depreciation and amortization ("DDA").
Other mines includes Chapada (divested July 2019) in 2019, and Chapada, Gualcamayo (divested December 2018) and Brio Gold (divested May 2018) for
2018.
Other expenses are comprised of general and administrative expenses, exploration and evaluation expenses, share of (loss) earnings of associate, other
operating income, net, finance costs, other (costs) income net, and expenses related to impairment of non-operating mining properties as per the
consolidated statement of operations.
Information about Geographical Areas
Revenue is attributed to regions based on the source location of the product sold.
For the years ended December 31,
Canada
Chile
Brazil
Argentina
Total revenue
Non-current assets for this purpose exclude deferred tax assets.
As at December 31,
Canada
Chile
Brazil
Argentina
United States
Total non-current assets
Information about Major Customers
2019
460.5 $
400.8
451.3
299.6
2018
447.5
356.2
748.7
246.1
1,612.2 $
1,798.5
2019
1,863.9 $
1,341.0
949.2
2,447.7
33.0
6,634.8 $
2018
1,910.0
1,348.4
1,704.6
2,497.0
32.6
7,492.6
$
$
$
$
The Company sells its metals through the corporate office to major metal exchange markets or directly to major Canadian financial
institutions and to smelters. Given the nature of the Company's products, there are always willing market participants ready to
purchase the Company's products at the prevailing market prices.
The following table presents sales to individual customers that exceeded 10% of annual metal sales for the following periods:
For the years ended December 31,
Customer (i)
1
2
3
4
5
Total sales to customers exceeding 10% of annual metal sales
Percentage of total metal sales
—
1,159.6 $
71.9 %
371.8 $
320.5
2019
192.3
275.0
$
$
343.9
270.5
229.6
182.3
1,386.7
360.4
2018
77.1 %
(i)
A balance is only included for a customer in each year where total sales to that customer exceeded 10% of annual metal sales in the period.
104
Yamana Gold
8.
REVENUE
Disaggregation of Revenue
The following table disaggregates revenue by metal:
For the years ended December 31,
Gold
Silver
Copper
Total revenue from contracts with customers
Provisional pricing adjustments (i)
Total revenue
$
$
2019
1,262.8 $
178.5
162.7
1,604.0 $
8.2
2018
1,357.6
107.6
340.1
1,805.3
(6.8)
1,798.5
Amount represents the provisional pricing adjustments related to silver and copper concentrate from the Cerro Moro and Chapada mines, respectively.
1,612.2 $
$
(i)
Transaction Price Allocated to the Remaining Performance Obligations
Revenue allocated to remaining performance obligations represents contracted revenue that has not yet been recognized, which
includes deferred revenue amounts relating to the Company's streaming arrangements and advanced metal sales agreement that
will be invoiced and recognized as revenue in future periods. The Company applies the practical expedient in paragraph 121 of
IFRS 15 and does not disclose information about remaining performance obligations that have original expected durations of one
year or less.
At December 31, 2019 the aggregate amount of the revenue allocated to unsatisfied performance obligations was $89.2 million.
The Company expects to recognize approximately $11.7 million of this revenue over the next 12 months and the remainder over
a period of approximately 6 years.
9.
EMPLOYEE COMPENSATION AND BENEFITS EXPENSES
Employee compensation and benefits expense included in the statement of operations is as follows:
For the years ended December 31,
Wages and salaries
Social security, pension and government-mandated programs (i)
Other benefits (ii)
Total employee compensation and benefits expenses
2019
174.5 $
77.2
20.1
271.8 $
$
$
2018
214.2
96.7
15.4
326.3
(i)
(ii)
Included in this item are defined contribution pension plans for all full-time qualifying employees of the Company. Contributions by the Company are based
on a contribution percentage using the annual salary as the base and are made on a quarterly basis or as otherwise determined by the Company. The
assets of the plans are held separately from those of the Company and are managed by independent plan administrators. The total expense recognized in
the consolidated statement of operations of $5.9 million (2018: $7.9 million) represents contributions payable to these plans by the Company at rates
specified in the rules of the plans. As at December 31, 2019, contributions of $2.6 million due in respect of the 2019 reporting period (2018: $3.7 million)
had not been paid over to the plans but were paid subsequent to the end of the year.
Included in Other benefits are share-based payment transactions. Refer Note 31 for further information.
Annual Report 2019
105
10.
OTHER OPERATING INCOME, NET
For the years ended December 31,
Change in provisions (i)
Write-down of tax recoverables and other assets
Gain on sale of subsidiaries (Note 6)
Loss (gain) on sale of other assets
Mark-to-market loss (gain) on deferred share compensation
Net mark-to-market (gain) loss on investments
Reorganization costs
Other expenses (ii)
Other operating income, net
2019
6.8 $
$
25.6
(273.1)
2.4
3.3
(1.9)
3.8
10.7
2018
12.9
25.6
(73.7)
(3.6)
—
9.8
10.1
9.5
(i)
(ii)
(222.4) $
Amount represents the recording (reversal) of certain existing provisions based on management's best estimate of the likely outcome.
Other expenses is comprised primarily of contributions to social and infrastructure development causes in jurisdictions where the Company is active, and
legal expenses. In 2018, other expenses also included $7.2 million of business transaction costs.
(9.3)
$
11.
OTHER COSTS (INCOME), NET
For the years ended December 31,
Finance income
Net gain on derivatives
Net foreign exchange loss
Other costs (income), net
12.
FINANCE COSTS
For the years ended December 31,
Unwinding of discounts on provisions
Interest expense on long-term debt
Financing costs paid on early note redemption (Note 28)
Interest expense on lease liabilities (Note 34)
Amortization of deferred financing, bank, financing fees and other finance costs (i)
Finance costs
2019
(2.2) $
(7.2)
29.0
19.6 $
2019
11.1 $
71.8
35.0
4.4
21.9
144.2 $
$
$
$
$
2018
(2.6)
(9.4)
9.5
(2.5)
2018
16.7
75.6
14.7
—
30.4
137.4
(i)
Included in other finance costs for the years ended December 31, 2019 and 2018 is $9.4 million and $16.0 million, respectively, of non-cash interest expense
related to the financing component of deferred revenue contracts.
13.
IMPAIRMENT AND REVERSAL OF IMPAIRMENT
In the fourth quarter of 2019, the Company reviewed its CGUs for indicators of impairment or impairment reversal and performed
the annual impairment test for the Canadian Malartic CGU to which goodwill has been allocated. No indicators of impairment or
impairment reversal were identified at any of the Company's CGUs, and no impairment was identified based on the impairment
test performed for the Canadian Malartic CGU.
106
Yamana Gold
For the year ended December 31, 2018, the Company's net impairment expense in respect of the following CGUs was as follows:
Brio Gold
Gualcamayo
Jacobina
Minera Florida
Canadian Malartic
Net impairment loss
2018
Operating
mining
properties
Non-operating
mining
properties
$
103.0
$
—
(150.0)
151.0
—
78.0 $
75.0
—
—
—
$
104.0
$
153.0 $
Goodwill (i)
Total
— $
—
—
—
45.0
45.0 $
181.0
75.0
(150.0)
151.0
45.0
302.0
(i)
The goodwill impairment pertaining to Canadian Malartic and is included in the impairment of operating mines line in the consolidated statement of
operations.
2018 Impairments (Impairment Reversal)
Jacobina
The Company recorded an impairment of its Jacobina mine in 2014. The impairment was the result of the average processing rate
declining to below 4,000 tonnes per day with life of mine plans contemplating a processing rate at less than 60% of capacity.
Additionally, the mine experienced dilution controls issues resulting in lower than expected grades and higher costs leading to an
impairment charge. Following several years of improvements to the life of mine plans, the Company considered the following
factors to be an indicator of reversal of the previous impairment charge:
•
•
A significant increase in mineral reserves and mineral resources for 2018, which both extended the life of the mine and
improved the life of mine models.
A second consecutive year of meaningful improvements, leading to a record production closer to long-term goal of
150,000 ounces per year.
A reduction in costs to expected levels benefiting from the higher production and continuous cost reduction initiatives.
•
• Milling rates in excess of 95% of plant capacity reaching a sustainable level, following plant optimization initiatives
including the commissioning of the advanced control system in the third quarter, which enhanced plant stability. A modest
investment in 2019 is expected to increase processing capacity further.
• During the year, the Company developed underground areas and surface stockpiling, and achieved the goals of one
month ahead of ready-to-blast tonnage and additional five months of ready to drill ore.
As a result, an assessment was performed for the Company's Jacobina CGU, and it was determined that the recoverable amount,
representing the CGU’s FVLCD, exceeded the carrying amount. This resulted in a reversal of the impairment charge recorded in
2014, which was limited to the carrying amount of the Jacobina CGU that would have been determined had no impairment charge
been recognized in prior years, net of depletion, depreciation and amortization charges.
Minera Florida
During 2018, the Minera Florida mine experienced lower production at higher than expected unit costs. As part of the Company’s
annual process, in the fourth quarter of 2018 an updated life of mine (“LOM”) plan was developed, the focus of which, was to right-
size the operation at a sustainable production level (similar to the approach taken at El Peñón and Jacobina in the past). The focus
of the new life of mine plan is to maximize operating margins and to advance mine development and mineral reserve delineation
to deliver mine flexibility and scope for future potential production increases, driven by either throughput or grade.
The Company considered the decreased mine profitability resulting from the updated LOM plan and the impact of the LOM plan
on the value of exploration potential and land interest; along with the anticipated disposal of certain exploration land holdings of
the Minera Florida CGU not contiguous to the area of the mine, to be indicators of impairment.
As a result, an assessment was performed for the Company’s Minera Florida CGU, and it was determined that the carrying amount
of the CGU exceeded its recoverable amount, representing the CGU’s FVLCD. This resulted in a non-cash accounting impairment
of $151.0 million being recognized in the consolidated statement of operations.
The optimization of operations also prompted the review of a detailed plan for future exploration during the fourth quarter, both
from a budget and a strategic perspective. As the land holdings of the Minera Florida CGU are significant in size and breadth,
rationalization of the portfolio presented the opportunity to save on the ongoing maintenance and licensing costs that are currently
incurred. The value attributable to the land arose from a purchase price allocation associated with its acquisition.
Annual Report 2019
107
Canadian Malartic
On June 16, 2014, the Company acquired a 50% interest in the Canadian Malartic mine. Goodwill of $427.6 million was recognized.
As a result of the deferred income tax liability recognized in purchase accounting, an additional "gross up" of the fair value of the
acquired assets is required, which resulted in the recognition of goodwill. As goodwill is tested annually for impairment and not
amortized, unless the mine as a CGU can continuously replenish mineral reserves and mineral resources, it may result in the
gradual impairment of goodwill. As at December 31, 2018, the FVLCD of Canadian Malartic exceeded the mine's book value.
However, the sum of the carrying value of the Canadian Malartic CGU and goodwill from its acquisition was deemed to be in
excess of the FVLCD of the Canadian Malartic CGU by $45.0 million, due to the 2018 mineral depletion. The impairment represents
approximately 10% of the total goodwill balance.
Gualcamayo
The fair value of the consideration receivable in the transaction with Mineros (see Note 6), which was in line with market valuations
for comparable assets in Argentina, and reflective of the commodity price environment at the time; was approximately $85.0 million.
Accordingly, the Company recorded an impairment loss of $75.0 million in the period ended September 30, 2018 to write the
carrying amount of the disposal group down to its FVLCS. The Company recognized a gain of $2.6 million upon closing of the sale
on December 14, 2018, resulting from movements in Gualcamayo's balance sheet, including taxes, prior to disposal.
Brio Gold
During the first quarter of 2018, the assets and liabilities of Brio Gold were classified as assets and liabilities (a disposal group)
held for sale (see Note 6). The Company recorded an impairment loss upon initial classification of Brio Gold as held for sale, and
a further impairment loss at March 31, 2018 to write the carrying amount of the disposal group down to its FVLCS for a combined
impairment write down of $181.0 million ($175.0 million net of tax) in the three months ended March 31, 2018. The FVLCS was
estimated based on the consideration expected to be received in the sale transaction using the Leagold share price per the TSX
on the dates of the respective write downs, a level 1 input per the fair value hierarchy.
The Company continues to consider, on a regular basis, whether other indicators exist that suggest that the carrying values of its
assets are impaired for accounting purposes. While the market capitalization relative to the carrying value of the Company’s assets
is reviewed on a regular basis, it is not considered as the sole indicator of impairment. Given recent strategic developments the
Company has achieved, and the volatility of the market reflecting the current economic sentiment, using the current share price as
a sole determinant of fair value is not reasonable; however, the Company monitors the magnitude of the gap between the Company
market capitalization and the asset carrying values. Although the Company's market capitalization as at December 31, 2019 was
below the carrying value of the net assets, the Company believes that its share price does not impact its ability to generate cash
flows from its assets which support the net book values on a discounted cash flow basis.
Impairment Testing: Key Assumptions
The determination of FVLCD, with level 3 input of the fair value hierarchy, includes the following key applicable assumptions:
•
Production volumes: In calculating the FVLCD, the production volumes incorporated into the cash flow models based
on detailed life of mine plans and take into account development plans for the mines agreed by management as part of
the long-term planning process. Production volumes are dependent on a number of variables, such as: the recoverable
quantities; the production profile; the cost of the development of the infrastructure necessary to extract the reserves; the
production costs; the contractual duration of mining rights; and the selling price of the commodities extracted. As each
producing mine has specific reserve characteristics and economic circumstances, the cash flows of the mines are
computed using appropriate individual economic models and key assumptions established by management. The
production profiles used were consistent with the reserves and resource volumes approved as part of the Company’s
process for the estimation of proved and probable reserves, resource estimates and in certain circumstances, include
expansion projects. These are then assessed to ensure they are consistent with what a market participant would estimate.
• Commodity prices: Forecast commodity prices are based on management’s estimates and are derived from forward
price curves and long-term views of global supply and demand, building on past experience of the industry and consistent
with external sources. Estimated long-term gold, silver and copper prices of $1,350 per ounce (2018: $1,300 per ounce),
$17.50 per ounce (2018: $19.00 per ounce) and $3.04 per pound (2018: $3.00 per pound) respectively, have been used
to estimate future revenues.
• Discount rates: In calculating the FVLCD, a real post-tax discount rate of 3.75% (2018: 4.50%) based on the Company's
weighted average cost of capital (“WACC”). The WACC used in the models is in real terms, consistent with the other
assumptions in the models.
Exchange rates: Foreign exchange rates are estimated with reference to external market forecasts and based on
observable market data including spot and forward values. In the current year, there was a depreciation in the long-term
rates of the local currencies in which the Company operates.
•
108
Yamana Gold
The Company performed a sensitivity analysis on key assumptions and determined that no reasonably possible change in any of
the key assumptions would cause the carrying value of the Canadian Malartic CGU to exceed its recoverable amount.
14.
INCOME TAXES
Income Tax Expense (Recovery)
For the years ended December 31,
Current tax expense (recovery)
Current tax expense in respect of the current year
Adjustment for prior periods
Impact of foreign exchange
Interest and penalties
Deferred income tax (recovery) expense
Deferred income tax recovery recognized in the current year
Adjustment for prior periods
Impact of foreign exchange
Net income tax expense
2019
91.8 $
1.6
0.7
0.9
95.0 $
(30.3) $
2.9
17.1
(10.3) $
84.7 $
2018
97.5
35.0
3.8
2.5
138.8
(158.4)
(7.5)
148.1
(17.8)
121.0
$
$
$
$
$
$
$
2018
(176.7)
2019
The following table reconciles income taxes calculated at statutory rates with the income tax expense in the consolidated
statements of operations:
For the years ended December 31,
Earnings (loss) before income taxes
Canadian statutory tax rate (%)
Expected income tax expense (recovery)
Impact of higher foreign tax rates (i)
Impact of change in enacted tax rates (ii)(iii)
Permanent differences
Change in recognition of deferred tax assets
Foreign exchange and other translation amounts
True-up of tax provisions in respect of prior years
Withholding taxes
Mining taxes on profit
Planned distribution of foreign earnings of the company
Other
Net income tax expense
Income tax expense (recovery) is represented by:
Current income tax expense
Deferred income tax recovery
Net income tax expense
310.3
26.5 %
82.2
42.2
6.3
(63.2)
(20.6)
(11.0)
4.5
6.7
29.1
9.0
(0.5)
84.7
95.0
(10.3)
84.7
26.5 %
(46.8)
(17.8)
121.0
121.0
138.8
(5.0)
27.5
20.0
26.4
32.2
14.3
38.8
8.7
0.9
4.0
$
$
$
$
$
$
(i)
(ii)
(iii)
The Company operates in multiple foreign tax jurisdictions that have tax rates that differ from the Canadian statutory rate.
In November 2016, the Quebec government enacted changes to the income tax rate as proposed in the 2016 provincial budget. Beginning in 2017, the
provincial rate has been decreasing by 0.1% per year, and over 4 years will decrease from 11.9% to 11.5% in 2020.
On December 29, 2017 the Argentine government enacted tax reform legislation, which reduces the corporate rate from 35% to 30% in 2018 with a further
reduction to 25% starting in 2020. On December 23, 2019, the Argentine government enacted a new law that would postpone the reduction to 25% until
2021.
Annual Report 2019
109
Deferred Income Taxes
The following is the analysis of the deferred income tax assets (liabilities) presented in the consolidated balance sheets:
As at December 31,
The net deferred income tax assets (liabilities) are classified as follows:
Deferred income tax assets
Deferred income tax liabilities
2019
2018
$
$
80.8 $
(1,041.4)
(960.6) $
88.5
(1,129.3)
(1,040.8)
For the year ended December 31, 2019
Deductible temporary differences
Amounts related to tax losses
Financing costs
Environmental rehabilitation provision
Derivative liability
Property, plant and equipment
Other
Net deferred income tax liabilities
For the year ended December 31, 2018
Deductible temporary differences
Amounts related to tax losses
Financing costs
Environmental rehabilitation provision
Derivative liability
Property, plant and equipment
Other
Net deferred income tax liabilities
Opening
balance
Recognized in
profit or loss
Recognized in
OCI
Divestitures
$
16.3 $
0.1 $
— $
(4.6) $
105.1
87.4
11.0
(0.9)
(1,260.3)
0.6
(2.5)
(15.7)
7.9
0.9
21.4
(1.8)
—
—
—
0.5
—
—
—
—
(14.4)
—
88.4
$
(1,040.8) $
10.3 $
0.5 $
69.4 $
Opening
balance
Recognized in
profit or loss
Recognized in
OCI
Divestitures
24.7 $
(1.4) $
— $
(7.0) $
133.7
2.6
15.8
(1.4)
(1,226.0)
1.3
(26.8)
84.8
(0.6)
(6.6)
(30.9)
(0.6)
—
—
—
—
—
—
(1.8)
—
(4.2)
7.1
(3.4)
(0.1)
$
$
(1,049.3) $
17.8 $
— $
(9.3) $
(1,040.8)
Closing
balance
11.8
102.6
71.7
4.5
0.5
(1,150.5)
(1.2)
(960.6)
Closing
balance
16.3
105.1
87.4
11.0
(0.9)
(1,260.3)
0.6
A deferred income tax asset in the amount of $77.6 million has been recorded in Canada (2018: $82.0 million in Canada and $4.1
million in Argentina). The deferred income tax asset consists mainly of unused tax losses and deductible temporary differences
which arose primarily from financing costs and general and administrative expenses. Projections of taxable profits from various
sources and tax planning were used to support the recognition of the losses. The future projected income could be affected by
metal prices and quantities of proven and probable reserves. If these factors or other circumstances change, we would reassess
our ability to record the deferred income tax asset relating to the unused tax losses.
Unrecognized Deductible Temporary Differences and Unused Tax Losses
Deferred tax assets have not been recognized in respect of the following items:
As at December 31,
Deductible temporary differences (no expiry)
Capital losses (no expiry)
Operating losses
2019
166.4 $
149.1
121.6
437.1 $
2018
63.1
148.8
342.8
554.7
$
$
110
Yamana Gold
Unrecognized operating losses at December 31, 2019 will expire as follows:
2020
2021
2022
2023
2024
2025 and onwards
Unlimited
Canada
U.S.
Brazil
Chile
Argentina
$
$
$
$
$
$
$
$
— $
— $
— $
— $
— $
23.0 $
— $
5.6 $
16.8 $
19.3 $
34.8 $
144.9 $
— $
3.3 $
— $
— $
— $
— $
— $
— $
185.3 $
23.0 $
224.8 $
185.3 $
— $
— $
— $
— $
— $
— $
80.7 $
80.7 $
— $
— $
— $
— $
— $
— $
— $
— $
Other
0.1 $
0.1 $
— $
— $
— $
12.9 $
— $
13.1 $
Total
5.7
16.9
19.3
34.8
144.9
35.9
269.3
526.8
Unrecognized Taxable Temporary Differences Associated with Investments and Interests in Subsidiaries
As at December 31, 2019, an aggregate temporary difference of $2.8 billion (2018: $2.8 billion) related to investments in
subsidiaries was not recognized because the Company is able to control the timing of the reversal of the of the temporary difference
and it is probable that the temporary difference will not reverse in the foreseeable future.
15.
EARNINGS (LOSS) PER SHARE
Earnings (loss) per share for the years ended December 31, 2019 and 2018 was calculated based on the following:
Attributable to Yamana Gold Inc. equity holders
Net earnings (loss)
2019
2018
$
225.6 $
(284.6)
Earnings (loss) per share is based on the weighted average number of common shares of the Company outstanding during the
period. The diluted earnings (loss) per share reflects the potential dilution of common share equivalents, such as outstanding share
options, in the weighted average number of common shares outstanding during the period, if dilutive.
The weighted average number of shares used in the calculation of earnings (loss) per share for the years ended December 31
was based on the following:
(in thousands of units)
Weighted average number of common shares - basic
Weighted average number of dilutive share options
Weighted average number of dilutive Restricted share units
Weighted average number of common shares - diluted
2019
950,266
951,924
949,030
949,030
1,658
2018
—
—
—
The following securities could potentially dilute basic earnings per share in the future, but were not included in the computation of
diluted earnings (loss) per share because they were anti-dilutive:
(in thousands of units)
Potential dilutive securities
Share options
Restricted share units
1,286
1,772
2,284
2018
2019
790
16.
SUPPLEMENTARY CASH FLOW INFORMATION
Non-Cash Investing and Financing Transactions
For the years ended December 31,
Interest capitalized to assets under construction (Note 22)
Issue of common shares on vesting of restricted share units (Note 30(a))
2,076
4,056
2019
— $
3.4 $
2018
8.3
2.3
$
$
Annual Report 2019
111
Net Change in Working Capital
For the years ended December 31,
Net (increase) decrease in:
Trade and other receivables
Inventories
Other assets
Net increase (decrease) in:
Trade and other payables
Other liabilities
Movement in above related to foreign exchange
Net change in working capital (i)
(i)
Change in working capital is net of items related to Property, Plant and Equipment.
Cash and Cash Equivalents
As at December 31,
Cash at bank
Bank short-term deposits
Total cash and cash equivalents (i)
2019
$
18.0 $
(1.5)
10.6
(56.5)
(15.6)
(23.7)
$
(68.7) $
2018
1.7
(67.0)
(28.0)
(39.9)
(2.3)
(26.6)
(162.1)
$
$
2019
156.3 $
2.5
158.8 $
2018
97.8
0.7
98.5
(i)
Cash and cash equivalents consist of cash on hand, cash on deposit with banks, bank term deposits and highly liquid short-term investments with terms of
less than 90 days from the date of acquisition.
Other Non-Cash Expenses
For the years ended December 31,
Loss on disposal and write-down of assets
Amortization of union negotiation bonuses
Provision on indirect taxes
Other expenses
Total non-cash expenses
2019
31.5 $
10.0
(2.5)
7.2
46.2 $
$
$
2018
19.7
10.8
13.0
6.9
50.4
112
Yamana Gold
Changes in Liabilities Arising from Financing Activities
The table below details changes in the Company’s liabilities arising from financing activities. Liabilities arising from financing
activities are those for which cash flows were, or future cash flows will be, classified in the Company’s consolidated statement of
cash flows as cash flows from financing activities.
At January 1,
Changes from financing cash flows
Debt issued
Debt repayments
Interest paid
Payment of lease liabilities
Other changes
Interest expense
Capitalized interest
Capitalized interest paid
New leases
Changes arising from disposal of subsidiaries
Other
At December 31,
(i)
Included in Note 25: Trade and Other Payables.
2019
2018
Debt
Accrued
interest (i)
Lease
liabilities
Debt
Accrued
interest (i)
$
1,758.7
$
12.6 $
41.8 $
1,857.7 $
12.6
240.0
(952.5)
—
—
—
—
—
—
—
—
—
(80.0)
—
71.8
—
—
—
—
1.7
(0.4)
$
1,047.9
$
4.0 $
—
—
(4.4)
(16.8)
4.4
—
—
26.2
(7.7)
—
43.5 $
460.0
(486.5)
—
—
—
—
—
—
(75.0)
2.5
1,758.7 $
—
—
(76.3)
—
75.6
8.3
(6.3)
—
—
(1.3)
12.6
17.
(a)
FINANCIAL INSTRUMENTS
Financial Assets and Financial Liabilities by Categories
As at December 31, 2019
Financial assets
Cash and cash equivalents
Trade and other receivables
Investments in equity securities (i)
Warrants
Derivative assets - Hedging instruments
Derivative assets - Non-hedge
Other financial assets
Total financial assets
Financial liabilities
Total debt
Trade and other payables
Derivative liabilities - Hedging instruments
Other financial liabilities
Total financial liabilities
$
$
$
$
Amortized cost
FVOCI - equity
instruments
Mandatorily at
FVTPL - others
FV - Hedging
Instruments
Total
— $
— $
158.8 $
— $
158.8
3.4
—
—
—
—
8.6
—
8.4
—
—
—
—
—
—
2.8
—
3.8
—
—
—
—
0.1
—
—
3.4
8.4
2.8
0.1
3.8
8.6
12.0 $
8.4 $
165.4 $
0.1 $
185.9
1,047.9 $
— $
— $
— $
1,047.9
219.5
—
171.1
—
—
—
—
—
—
—
1.8
—
219.5
1.8
171.1
1,438.5 $
— $
— $
1.8 $
1,440.3
Annual Report 2019
113
As at December 31, 2018
Financial assets
Cash and cash equivalents
Trade and other receivables
Receivables from provisional metal sales
Investments in equity securities (i)
Warrants
Derivative assets - Hedging instruments
Derivative assets - Non-hedge
Other financial assets
Total financial assets
Financial liabilities
Total debt
Trade and other payables
Derivative liabilities - Hedging instruments
Derivative liabilities - Non-hedge
Other financial liabilities
Total financial liabilities
$
$
$
$
Amortized cost
FVOCI - equity
instruments
Mandatorily at
FVTPL
- others
FV- Hedging
instruments
— $
10.3
—
—
—
—
—
13.1
23.4 $
1,758.7 $
294.8
—
—
129.9
— $
98.5 $
—
—
9.1
—
—
—
—
—
14.0
—
0.5
—
2.0
—
9.1 $
115.0 $
— $
— $
—
—
—
—
—
—
0.6
—
2,183.4 $
— $
0.6 $
— $
—
—
—
—
1.6
—
—
1.6 $
— $
—
5.9
—
—
5.9 $
Total
98.5
10.3
14.0
9.1
0.5
1.6
2.0
13.1
149.1
1,758.7
294.8
5.9
0.6
129.9
2,189.9
(i)
Investments in publicly quoted equity securities that are neither subsidiaries nor associates are categorized as FVOCI pursuant to the irrevocable election
available in IFRS 9 for these instruments. The Company’s portfolio of equity securities is primarily focused on the mining sector. These are strategic
investments and the Company considers this classification to be more relevant.
(b)
Fair Value of Financial Instruments
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. In assessing the fair value of a particular contract, the market participant
would consider the credit risk of the counterparty to the contract. Consequently, when it is appropriate to do so, the Company
adjusts its valuation models to incorporate a measure of credit risk.
i)
Fair Value Measurements of Financial Assets and Financial Liabilities Measured at Fair Value
The Company uses the following hierarchy for determining and disclosing the fair value of financial instruments that are measured
at fair value:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company can access at
the measurement date.
Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly
or indirectly.
Level 3: Unobservable inputs for the asset or liability.
The levels in the fair value hierarchy into which the Company’s financial assets and liabilities that are measured and recognized
on the consolidated balance sheets at fair value on a recurring basis were categorized as follows:
December 31, 2019
December 31, 2018
Level 1
input
Level 2
input
Aggregate
fair value
Level 1
input
Level 2
input
Aggregate
fair value
Assets
Cash and cash equivalents
Receivables from provisional metal
sales
Investments in equity securities
Warrants
Derivative related assets
Liabilities
Derivative related liabilities
$
158.8 $
— $
158.8 $
98.5 $
— $
—
8.4
—
—
—
—
2.8
3.9
—
8.4
2.8
3.9
—
9.1
—
—
14.0
—
0.5
3.6
98.5
14.0
9.1
0.5
3.6
$
$
$
167.2 $
6.7 $
173.9 $
107.6 $
18.1 $
125.7
— $
— $
1.8 $
1.8 $
1.8 $
1.8 $
— $
— $
6.5 $
6.5 $
6.5
6.5
114
Yamana Gold
At December 31, 2019, there were no financial assets and liabilities measured and recognized at fair value on a non-recurring
basis.
There were no transfers between Level 1 and Level 2 during the year ended December 31, 2019. At December 31, 2019, there
were no financial assets or liabilities measured and recognized on the consolidated balance sheets at fair value that would be
categorized as Level 3 in the fair value hierarchy.
ii)
Valuation Methodologies Used in the Measurement of Fair Value for Level 2 Financial Assets and Financial
Liabilities
Receivables from Provisional Metal Sales
The Company's metal concentrate sales are subject to provisional pricing with the final selling price adjusted at the end of the
quotational period. At the end of each reporting period, the Company's accounts receivable relating to these contracts are marked-
to-market based on quoted forward prices for which an active commodity market exists.
Warrants
The fair value of warrants is calculated using the Black-Scholes option pricing model, which uses a combination of quoted prices
and market-derived inputs, including volatility estimates.
Derivative Assets and Liabilities
The fair value of derivative instruments is determined using either present value techniques or option pricing models that utilize a
variety of inputs that are a combination of quoted prices and market-corroborated inputs. The Company continues to monitor the
potential impact of the recent instability of the financial markets, and will adjust its derivative contracts for credit risk based upon
the credit default swap spread for each of the counterparties as warranted.
iii)
Carrying Value versus Fair Value
Set out below is a comparison by class of the carrying amounts and fair value of the Company's financial instruments, other than
those whose carrying amounts are a reasonable approximation of fair value:
December 31, 2019
December 31, 2018
Debt
Senior notes
Financial instrument
classification
Carrying amount
Fair value (i)
Carrying amount
Fair value (i)
Amortized cost
$
1,051.3 $
1,042.2 $
1,465.3 $
1,455.0
(i)
The Company's senior notes are accounted for at amortized cost, using the effective interest method. The fair value required to be disclosed is determined
by discounting the future cash flows by a discount factor based on an interest rate of 5%, which reflects the Company's own credit risk.
Management assessed that the fair values of trade and other receivables, trade and other payables, and other financial assets and liabilities
approximate their carrying amounts, largely due to the short-term maturities of these instruments. Derivative assets and liabilities are already
carried at fair value.
(c)
Derivative Instruments ("Derivatives")
Summary of Derivatives at December 31, 2019
Currency contracts
Option contracts
BRL option contracts (millions) (i)
BRL option contracts (millions) (i)
Forward contracts
BRL forward contracts (millions) (ii)
CLP forward contracts (billions) (iii)
BRL forward contracts (millions) (ii)
Other
DSU contracts (millions of DSUs) (iv)
Notional Amount
Average
call strike
price
(per USD)
Average
put strike
price
(per USD)
R$3.87
R$3.85
R$4.36
R$4.32
Average FX/USD
forward rate
R$4.06
740.19
R$4.07
Per share value (C$)
$3.5002
Remaining term
Cash flow
hedge Non-hedge
Fair value
(USD)
January - December 2020
January - June 2021
January - December 2020
January - December 2020
January - June 2021
R$192.9
R$93.0
R$133.2
69.6
R$93.0
—
—
—
—
—
—
—
(0.1)
(1.2)
(0.4)
January - March 2020
—
3.0
3.8
Annual Report 2019
115
(i)
(ii)
(iii)
(iv)
The Company has designated zero cost collar option contracts as cash flow hedges for its highly probable forecasted BRL expenditure requirements. The
Company has elected to only designate the change in the intrinsic value of options in the hedging relationships. The change in fair value of the time value
component of options is recorded in OCI as a cost of hedging. These cash flow hedges are expected to cover approximately 53% and 45% of the BRL
denominated forecasted operating costs from January 2020 to December 2020 and January 2021 to June 2021, respectively.
On November 5 and 6, 2019, the Company entered into forward contracts totalling BRL 226.2 million (approximately US$56.5 million) split evenly from
January 2020 to December 2020 as well as January 2021 to June 2021 at a weighted average BRL to US Dollar forward rate of BRL 4.06 per US Dollar.
These forward contracts are expected to cover approximately 37% and 45% of the BRL denominated forecasted costs from January 2020 to December
2020 and January 2021 to June 2021 respectively.
On November 5 and 6, 2019, the Company entered into forward contracts totalling CLP 69.6 billion (approximately US$94.7 million) split evenly from January
2020 to December 2020 at a weighted average Chilean Peso to US Dollar forward rate of CLP 740.19 per US Dollar. These forward contracts are expected
to cover approximately 58% of the Chilean Peso denominated forecasted costs from January 2020 to December 2020.
During the first quarter of 2017, the Company entered into a derivative contract to mitigate the volatility of its share price on DSU compensation, effectively
locking in the exposure of the Company for three million DSUs (approximately 80% of outstanding DSUs at the time) at a value of C$3.5002 per share.
Fair values of Derivatives
At as December 31,
Derivatives designated as hedging instruments
Currency contracts
Total derivatives designated as hedging instruments
Derivatives not designated as hedging instruments
Commodity contracts
DSU contracts
Total derivatives not designated as hedges
Total derivative instruments (Note 20 and Note 26)
$
$
$
$
Asset derivatives
Liability derivatives
2019
2018
2019
2018
0.1 $
0.1 $
—
3.8
3.8 $
3.9 $
1.6
1.6
2.0
—
2.0
3.6
$
$
$
$
1.8 $
1.8 $
—
—
— $
1.8 $
5.9
5.9
—
0.6
0.6
6.5
Cash Flow Hedge Gains (Losses) in Accumulated Other Comprehensive Income (“AOCI”)
Gain (loss) recognized in cash flow
hedge reserve
Gain (loss) reclassified or adjusted
from cash flow hedge reserve
For the year ended December 31,
Exchange rate risk
Currency option contracts
Time value of option contracts excluded from
hedge relationship
2019
2018
(4.3)
(4.3) $
(1.3)
(5.6) $
(15.9)
(15.9) $
5.4
(10.5) $
$
$
2019
9.3
9.3 $
—
9.3 $
Gains (Losses) on Non-hedge Derivatives
The net gain (loss) on derivatives not designated as hedging instruments was comprised of the following:
For the years ended December 31,
Realized gains (losses)
Commodity contracts
Unrealized gains (losses)
Foreign currency contracts
Commodity contracts
DSU contracts
$
$
$
2019
2.9
2.9 $
— $
(2.0)
4.4
2.4 $
2018
3.4
3.4
—
3.4
2018
6.7
6.7
(0.5)
9.8
(1.6)
7.7
116
Yamana Gold
18.
FINANCIAL RISK MANAGEMENT
Exploration, development and mining of precious metals involve numerous risks as a result of the inherent nature of the business,
global economic trends and the influences of local social, political, environmental and economic conditions in the various
geographical areas of operation. As such, the Company is subject to several financial and operational risks that could have a
significant impact on its profitability, financial instruments and levels of operating cash flows. In particular, financial risks include
market risk (including currency risk, commodity price risk and interest rate risk), credit risk, and liquidity risk.
Market Risk
Market risk is the risk that changes in market factors, such as foreign exchange, commodity prices or interest rates will affect the
value of the Company's financial instruments. Market risks are managed by either accepting the risk or mitigating it through the
use of derivatives and other economic hedges.
(a)
Currency Risk
The Company’s sales are predominantly denominated in US Dollars. The Company is primarily exposed to currency fluctuations
relative to the US Dollar as a portion of the Company’s operating costs and capital expenditures are denominated in foreign
currencies; predominately the Brazilian Real, the Argentine Peso, the Chilean Peso, and the Canadian Dollar. Monetary assets
denominated in foreign currencies are also exposed to foreign currency fluctuations. These potential currency fluctuations could
have a significant impact on production costs and affect the Company’s earnings and financial condition. To limit the variability in
the Company’s expected operating expenses denominated in foreign currencies, the Company restarted its hedging program in
May 2016, entering into forward contracts and zero-cost collar option contracts.
Details of outstanding derivative instruments can be found in Note 17.
The following table outlines the Company's exposure to currency risk and the pre-tax effects on net earnings and other
comprehensive income at the end of the reporting period of a 10% change in the foreign currency for the foreign currency
denominated monetary items. The sensitivity analysis includes cash and cash equivalents and trade payables. The number below
indicates an increase or decrease in net earnings or other comprehensive income where the US dollar strengthens or weakens by
10% against the relevant foreign currency.
(On 10% change in US Dollars exchange rate)
BRL
ARS
C$
CLP
Effect on net earnings
before tax
2019
2018
$
$
$
$
1.1
1.1
5.1
2.6
$
$
$
$
5.0 $
1.9 $
2.9 $
5.6 $
Effect on other comprehensive
income, before tax
2019
0.5 $
— $
— $
0.1 $
2018
1.2
—
—
—
The sensitivity analysis included in the tables above should be used with caution as the results are theoretical, based on
management's best assumptions using material and practicable data which may generate results that are not necessarily indicative
of future performance. In addition, in deriving this analysis, the Company has made assumptions based on the structure and
relationships of variables as at the balance sheet date which may differ due to fluctuations throughout the year with all other
variables assumed to remain constant. Actual changes in one variable may contribute to changes in another variable, which may
amplify or offset the effect on earnings.
(b)
Commodity Price Risk
The Company's profitability and long-term viability depend, in large part, upon the market price of metals that may be produced
from the Company's properties, primarily gold, silver and copper. Market price fluctuations of these commodities could adversely
affect profitability of operations and lead to impairments of mineral properties. Metal prices fluctuate widely and are affected by
numerous factors beyond the Company's control including but not limited to supply and demand, consumption patterns,
macroeconomic factors (interest, exchange and inflation), banking and political conditions, and mining specific factors. The
Company periodically uses forward contracts to economically hedge against the risk of declining metal prices for a portion of its
forecast sales.
No derivatives to hedge metal sales were outstanding at December 31, 2019. At December 31, 2018, the Company had 25.7
million pounds of copper forward contracts in place to May 2019 at an average sales price of $2.79 per pound.
Annual Report 2019
117
Interest Rate Risk
Interest rate risk is the risk that the fair values and future cash flows of the Company’s financial instruments will fluctuate because
of changes in market interest rates. The Company monitors its exposure to interest rates and its exposures with a mix of fixed-and
floating-rate debt. As at December 31, 2019, all of the Company’s long-term debt was at fixed rates. The Company's revolving
credit facility, which is subject to floating rates of interest, was not drawn at December 31, 2019.
A 10% increase or decrease in the interest earned from financial institutions on deposits held would result in a nominal increase
or decrease in the Company’s net earnings. There was no significant change in the Company’s exposure to interest rate risk during
the year ended December 31, 2019.
Credit Risk
Credit risk is the risk that a third party might fail to discharge its obligations under the terms of a financial instrument. The Company
is exposed to various counterparty risks including, but not limited to: (i) financial institutions that hold the Company’s cash and
short-term investments; (ii) companies that have payables to the Company, including concentrate and bullion customers; (iii)
providers of risk management services (including hedging arrangements); (iv) shipping service providers that move the Company’s
material; (v) the Company’s insurance providers; (vi) refineries contracted that hold and process the Company's precious metals;
and (vii) the Company’s lenders. The Company seeks to limit counterparty risk by entering into business arrangements with high
credit-quality counterparties, limiting the amount of exposure to each counterparty and monitoring the financial condition of
counterparties. In addition, credit risk is further mitigated in specific cases by maintaining the ability to novate contracts from lower
quality credit counterparties to those with higher credit ratings. For cash and cash equivalents and trade and other receivables,
credit risk is represented by the carrying amount on the consolidated balance sheets.
Cash and cash equivalents are deposited with highly rated corporations and the credit risk associated with these deposits is low.
The Company sells its products to large international financial institutions and other organizations with high credit ratings. Historical
levels of receivable defaults and overdue balances over normal credit terms are both negligible, thus the credit risk associated with
trade receivables is also considered to be negligible. For derivatives, the Company assumes no credit risk when the fair value of
the instruments is negative. When the fair value of the instruments is positive, this is a reasonable measure of credit risk. The
Company does not have any assets pledged as collateral.
The Company's maximum credit exposure to credit risk is as follows:
As at December 31,
Cash and cash equivalents
Trade and other receivables
Derivative assets (Note 17)
Loans and other receivables
Liquidity Risk
2019
158.8 $
3.4
3.9
8.6
2018
98.5
24.3
3.6
13.1
174.7 $
139.5
$
$
Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities. The Company
has in place a rigorous planning, budgeting and forecasting process to help determine the funds required to support the Company’s
normal operating requirements on an ongoing basis, its expansionary plans and its dividend distributions. The Company ensures
that sufficient committed loan facilities exist to meet its short-term business requirements, taking into account its anticipated cash
flows from operations and its holdings of cash and cash equivalents. Details of the undrawn credit facility are included in Note 28.
118
Yamana Gold
The following table summarizes the remaining contractual maturities of the Company's significant financial liabilities, shown in
contractual undiscounted cash flows.
As at December 31,
Trade and other payables
Debt repayments
Interest payments on debt
Lease liabilities
Derivative liabilities
Other financial liabilities
Total
Within 1
year
2 - 3
years
$ 219.5 $
— $
56.2
48.4
19.6
1.4
190.7
88.7
20.0
0.4
2019
4 - 5
years
— $
528.3
51.1
9.6
—
2018
Over 5
years
Total
Total
— $ 219.5 $ 294.8
1,770.5
1,058.0
282.9
38.7
226.9
437.2
1.6
—
50.8
1.8
—
6.5
59.2
129.9
$ 404.3 $ 307.8 $ 589.2 $ 385.1 $ 1,686.3 $2,638.9
129.3
61.9
8.0
0.2
At December 31, 2019, the Company had letters of credit outstanding in the amount of $85.7 million (December 31, 2018:
$71.0 million) of which $83.7 million (December 31, 2018: $71.0 million) represented guarantees for reclamation obligations. These
letters of credit are automatically extended for one year periods from their expiration dates.
19.
INVENTORIES
As at December 31,
Product inventories
Work in process
Ore stockpiles
Materials and supplies
Less: non-current ore stockpiles included in other non-current assets (Note 21)
2019
23.8 $
9.0
142.8
89.7
265.3 $
(131.9)
133.4 $
$
$
$
2018
55.8
12.6
209.0
95.6
373.0
(192.0)
181.0
For the year ended December 31, 2019, a total charge of $0.7 million was recorded to adjust inventory to net realizable value
(2018: charge of $13.8 million), which is included in cost of sales excluding depletion, depreciation and amortization.
20.
OTHER FINANCIAL ASSETS
As at December 31,
Derivative assets (Note 17)
Loans and other receivables
Investments in financial securities
Current
Non-current
2019
3.9 $
8.6
11.2
23.7 $
8.5 $
15.2
23.7 $
2018
3.6
13.1
9.6
26.3
7.4
18.9
26.3
$
$
$
$
Annual Report 2019
119
21.
OTHER ASSETS
As at December 31,
Non-current portion of ore stockpiles (Note 19) (i)
Income tax recoverable and installments
Tax credits recoverable (ii)
Advances and deposits
Other long-term advances
Current
Non-current
2019
131.9 $
1.8
64.6
36.2
17.2
251.7 $
97.5 $
154.2
251.7 $
$
$
$
$
2018
192.0
9.3
95.2
42.9
12.7
352.1
118.0
234.1
352.1
(i)
(ii)
Non-current ore stockpiles represent material not scheduled for processing within the next twelve months at certain of the Company's mines. At December
31, 2018, the balance included non-current ore stockpiles at the Company's Chapada, Jacobina and Canadian Malartic mines. At December 31, 2019, the
balance no longer includes non-current ore stockpiles at the Company's Chapada mine, which was sold on July 5, 2019. Refer Note 6.
Tax credits recoverable consist of sales taxes which are recoverable either in the form of a refund from the respective jurisdictions in which the Company
operates or against other taxes payable and value-added tax.
22.
PROPERTY, PLANT AND EQUIPMENT
Cost
At January 1, 2019
Additions
Reclassifications, transfers and other non-cash
movements (ii)
Gross cost reclassified as held for sale and
disposals
At December 31, 2019
Accumulated depletion, depreciation and
amortization ("DDA") and impairment
At January 1, 2019
DDA
Gross accumulated DDA and impairment
eliminated on reclassification as held for sale
and disposals
At December 31, 2019
Carrying amount, December 31, 2019
Mining properties
Depletable
Non-
depletable
Land,
building,
plant &
equipment
Construction
in progress
Exploration
& evaluation
Total
$
5,379.8 $
1,413.5 $
2,182.7
$
— $
3,487.4 $
12,463.4
138.6
73.5
93.3
(100.9)
38.0
(62.6)
(469.6)
(8.7)
(637.8)
25.7
60.7
—
57.9
95.6
333.7
86.1
(64.2)
(1,180.3)
$
5,142.1 $
1,377.4 $
1,520.3
$
86.4 $
3,576.7 $
11,702.9
$
(3,269.3) $
(316.5) $
(1,279.2) $
(315.0)
119.7
—
—
—
—
$
$
(3,464.6) $
(316.5) $
(1,279.2) $
1,677.5 $
1,060.9 $
241.1
$
— $
—
—
— $
86.4 $
(901.9) $
(5,766.9)
(154.2)
(469.2)
366.4
486.1
(689.7) $
(5,750.0)
2,887.0 $
5,952.9
120
Yamana Gold
Cost
At January 1, 2018
Additions
Reclassification, transfers and other non-cash
movements (ii)
Gross cost reclassified as held for sale and
disposals
At December 31, 2018
Accumulated depletion, depreciation and
amortization ("DDA") and impairment
At January 1, 2018
DDA
Impairment (iii)
Gross accumulated DDA and impairment
eliminated on reclassification as held for sale
and disposals
At December 31, 2018
Carrying amount, December 31, 2018
$
$
$
$
$
Mining properties
Depletable
Non-
depletable
Land,
building,
plant &
equipment
Construction
in progress (i)
Exploration
& evaluation
Total
5,527.0
$
1,708.6 $
2,490.4
$
148.0
313.0
130.4
(221.3)
64.0
310.4
261.6 $
58.6
(320.2)
3,449.5 $
13,437.1
14.5
20.2
415.5
102.1
(608.2)
(204.2)
(682.1)
5,379.8
$
1,413.5 $
2,182.7
$
(3,270.9) $
(786.4) $
(1,398.5) $
(285.8)
99.0
—
—
(157.3)
(26.2)
188.4
469.9
302.8
(3,269.3) $
(316.5) $
(1,279.2) $
2,110.5
$
1,097.0 $
903.5
$
—
— $
— $
—
—
—
— $
— $
3.2
(1,491.3)
3,487.4 $
12,463.4
(828.1) $
(6,283.9)
—
(73.8)
(443.1)
(1.0)
—
961.1
(901.9) $
(5,766.9)
2,585.5 $
6,696.4
(i)
(ii)
(iii)
(iv)
During 2018, the Company capitalized interest of $8.3 million related to qualifying capital expenditures at Cerro Moro at a weighted average capitalization
rate of 4.59%. There was no interest capitalized in 2019.
Reclassifications, transfers and other non-cash movements includes non-cash additions to PPE and changes in the environmental rehabilitation provision
as per Note 29.
During the year ended December 31, 2018, the Company recognized an impairment charge totalling $151.0 million related to Minera Florida and an
impairment reversal of $150.0 million related to Jacobina. Refer to Note 13 for additional details.
In addition to entering into various operational commitments in the normal course of business, the Company had commitments of approximately $9.4 million
at December 31, 2019 (December 31, 2018: $17.4 million) for construction activities at its sites and projects.
23.
GOODWILL AND OTHER INTANGIBLE ASSETS
Cost
At January 1, 2019
Dispositions
At December 31, 2019
Accumulated amortization and impairment
At January 1, 2019
Amortization
At December 31, 2019
Net book value at December 31, 2019
Cost
At January 1, 2018 and December 31, 2018
Accumulated amortization and impairment
At January 1, 2018
Amortization
Impairment (Note 13)
At December 31, 2018
Net book value at December 31, 2018
(i)
Goodwill (i)
Other intangible
assets (ii)
403.7 $
—
403.7 $
(45.0) $
—
(45.0) $
358.7 $
77.6 $
(1.6)
76.0 $
(36.5) $
(6.0)
(42.5) $
33.5 $
Goodwill (i)
Other intangible
assets (ii)
Total
481.3
(1.6)
479.7
(81.5)
(6.0)
(87.5)
392.2
Total
403.7 $
77.6 $
481.3
— $
(31.8) $
—
(45.0)
(45.0) $
358.7 $
(4.7)
—
(36.5) $
41.1 $
(31.8)
(4.7)
(45.0)
(81.5)
399.8
$
$
$
$
$
$
$
$
$
Goodwill represents the excess of the purchase cost over the fair value of net assets acquired in a business acquisition. On June 16, 2014, the Company
acquired a 50% interest in Canadian Malartic. Goodwill of $427.7 million was recognized on the excess of the purchase consideration over the fair value of
the assets and liabilities acquired. In March 2018, the Company sold certain jointly owned exploration properties of the Canadian Malartic Corporation, and
Annual Report 2019
121
derecognized $24.0 million of goodwill allocated to the exploration properties, which had been reclassified as held for sale in December 2017. Refer to Note
6.
Other intangible assets primarily comprise capitalized system development costs.
(ii)
24.
INVESTMENT IN ASSOCIATE
Details of the Company's investment in associate as at December 31, 2019 and 2018 are as follows:
Principal
Name of Associate
activity
Leagold Mining Corporation (i) Gold mining
Country of
incorporation
Principal
place of
business
2019
Canada
Brazil, Mexico
20.4 % 20.5 % $
% ownership
interest Quoted fair value (ii) Carrying amount
2018
2018
2019
144.5 $
2018
73.7 $ 120.3 $ 146.0
2019
(i)
(ii)
On May 24, 2018, the Company completed the disposal of its 53.6% controlling interest in Brio Gold to Leagold. Pursuant to the terms of the sale, the
Company received 20.5% of Leagold's issued and outstanding shares. Refer to Note 6.
The fair value of the Company's interest in Leagold, which is listed on the TSX, was based on the quoted market price at December 31, 2019, which is a
Level 1 input in terms of IFRS 13.
For the purposes of applying the equity method of accounting, the consolidated financial statements of Leagold as at September
30, 2019 have been used and appropriate adjustments have been made for the effects of significant transactions between that
date and December 31, 2019.
The following table summarizes the change in the carrying amount of the Company's investment in associate:
2019
146.0 $
—
$
Balance as at January 1
Acquisition of interest in Leagold (Note 6)
Company's share of net (loss) earnings of Leagold
Company's share of other comprehensive loss of Leagold
Balance as at December 31
(16.3)
(9.4)
120.3 $
$
Summarized financial information in respect of the Company’s associate is set out below. The summarized financial information
below represents amounts in the associate's consolidated financial statements prepared in accordance with IFRS, adjusted for fair
value adjustments at acquisition and differences in accounting policies.
Summarized consolidated balance sheet information
As at December 31,
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets of associate
Yamana's share of net assets
Goodwill
Other equity adjustments
Carrying Amount
$
$
$
$
$
$
2019
238.8 $
800.4
2018
190.0
852.2
1,039.2 $
1,042.2
111.1
440.8
551.9 $
487.3 $
99.4 $
26.5
(5.6)
120.3 $
Summarized consolidated statement of operations and comprehensive (loss) income information
For the year ended December 31,
Revenue
Net (loss) earnings
Other comprehensive loss
Total comprehensive (loss) income
$
$
2019
519.1 $
(79.9)
(46.1)
(126.0) $
122
Yamana Gold
2018
—
140.5
5.5
—
146.0
142.4
317.1
459.5
582.7
119.5
26.5
—
146.0
2018
344.8
26.8
—
26.8
25.
TRADE AND OTHER PAYABLES
As at December 31,
Trade payables
Other payables (i)
(i)
Other payables include dividends, salaries, bonuses, pension, and interest payable, among other accruals.
26.
OTHER FINANCIAL LIABILITIES
As at December 31,
Lease liabilities (Note 34) (i)
Royalty payable (ii)
Severance accrual
Deferred share units/performance share units liability (Note 31)
Accounts receivable and value added tax financing credit (iii)
Current portion of long-term debt (Note 28)
Derivative liabilities (Note 17)
Other
Current
Non-current
2019
153.9 $
65.6
219.5 $
2019
43.5 $
9.6
33.2
28.0
34.5
56.2
1.8
22.3
229.1 $
131.1 $
98.0
229.1 $
$
$
$
$
$
$
2018
221.3
73.5
294.8
2018
—
16.8
33.9
18.6
40.6
1.9
6.5
20.0
138.3
62.3
76.0
138.3
(i)
(ii)
(iii)
Lease liabilities were recognized in connection with the adoption of IFRS 16. Refer to Note 5 for further information.
Included in Royalty payable is an agreement with Miramar Mining Corporation (“Miramar” acquired by Newmont Mining Corporation) for a Proceeds Interest
of C$15.4 million. The agreement entitles Miramar to receive payment of this interest over time calculated as the economic equivalent of a 2.5% net smelter
return royalty on all production from the Company’s mining properties held at the time of Northern Orion entering into the agreement, or 50% of the net
proceeds of disposition of any interest in the Agua Rica property until the Proceeds Interest of C$15.4 million is paid. Since inception, partial payments of
$6.0 million and appreciation of the US Dollar have resulted in the liability being measured at $5.5 million as at December 31, 2019.
Accounts receivable and value added tax ("VAT") financing credits are payable within 30 days from the receipt of proceeds on doré or concentrate sales,
or payable in the month of approval of the VAT credit, respectively.
27.
OTHER PROVISIONS AND LIABILITIES
As at December 31,
Other taxes payable
Provision for repatriation taxes payable (i)
Provision for taxes
Deferred revenue on metal streaming agreements (ii)
Deferred revenue on advanced metal sales (iii)
Other provisions and liabilities (iv)
Current
Non-current
2019
19.3 $
27.9
10.8
89.2
—
35.4
182.6 $
39.5 $
143.1
182.6 $
$
$
$
$
2018
17.4
23.8
21.9
228.3
52.3
52.2
396.0
106.8
289.2
396.0
(i)
(ii)
The Company is subject to additional taxes in Chile on the repatriation of profits to its foreign shareholders. Total taxes in the amount of $27.9 million
(December 31, 2018: $23.8 million) have been accrued on the assumption that the profits will be repatriated.
On March 31, 2016, the Company entered into a copper purchase agreement with Altius, pursuant to which, the Company received advanced consideration
of $61.1 million against future deliveries of copper produced by the Company's Chapada mine in Brazil. On October 27, 2015 the Company entered into
three metal purchase agreements with Sandstorm pursuant to which, the Company received advanced consideration of $170.4 million against future
deliveries of silver production from Cerro Moro, Minera Florida and Chapada, copper production from Chapada, and gold production from Agua Rica. The
advanced consideration is accounted for as deferred revenue, with revenue recognized when the respective metals are delivered to the respective
counterparties. The Company's Chapada mine was sold in July 2019, and accordingly, the deferred revenue balances relating to future copper deliveries
from Chapada were derecognized. The following table summarizes the changes in deferred revenue from metal streaming arrangements:
Annual Report 2019
123
As at December 31, 2018
Recognition of revenue during the year net of interest accretion
Reclassified as held for sale in conjunction with the sale of the Chapada mine
$
$
2019
228.3
(9.7)
(129.4)
89.2
Current portion
Non-current portion
As at December 31, 2019
On January 10, 2018, the Company entered into an advanced metal sales agreement pursuant to which, the Company received advanced consideration of
$125.0 million in exchange for approximately 40.3 million pounds of copper to be delivered in the second half of 2018 and the first half of 2019. The advanced
consideration was accounted for as deferred revenue, with revenue recognized as copper was delivered to the counterparty. The Company made the final
delivery under the agreement in June 2019, reducing the deferred liability to nil.
Other provisions and liabilities include the short term portion of the environmental rehabilitation provision, and provisions relating to silicosis and other.
Decrease during the year reflects, settlements, change in provisions and the depreciation of local currencies.
77.5
11.7
89.2
$
$
(iii)
(iv)
28.
LONG-TERM DEBT AND CREDIT FACILITY
As at December 31,
Senior Notes
$300 million notes issued December 2017
4.625% 10-year notes due December 2027
$500 million notes issued June 2014
4.95% 10-year notes due July 2024
$300 million notes issued June 2013
Series B - 4.78% 10-year notes due June 2023 ($265 million)
$500 million notes issued March 2012
Series B - 4.36% 8-year notes due March 2020 ($85 million)
Series C - 4.76% 10-year notes due March 2022 ($200 million)
Series D - 4.91% 12-year notes due March 2024 ($140 million)
Revolving Credit Facility
Revolving credit facility (net of capitalized debt issuance costs)
Debt from 50% interest in Canadian Malartic
Total debt (i)
Less: current portion of long-term debt (Note 26)
Long-term debt
2019
2018
$
280.1 $
296.8
149.2
240.2
56.2
190.3
135.3
1,051.3
(3.4)
—
1,047.9
(56.2)
$
496.8
260.4
84.0
192.1
135.2
1,465.3
291.5
1.9
1,758.7
(1.9)
1,756.8
991.7
Balances are net of unamortized discounts and capitalized transaction costs of $10.1 million (December 31, 2018: $11.8 million).
$
(i)
Senior notes
The Company's senior notes are unsecured and interest is payable semi-annually. Each series of senior notes is redeemable, in
whole or in part, at the Company's option, at any time prior to maturity, subject to make-whole provisions. The senior notes are
accreted to the face value over their respective terms. In the third quarter of 2019, the Company repaid principal in the amount of
$415.6 million, using proceeds received from the sale of the Chapada mine (refer Note 6).
Revolving credit facility
In July 2019, the Company extended the term of the revolving credit facility ("the Facility") from June 2023 to July 2024, under
existing terms and conditions, and the maximum amount available under the Facility was reduced from $1.0 billion to
$750.0 million. The Facility is unsecured and has an interest rate on drawn amounts of LIBOR plus an interest margin of between
1.20% and 2.25% depending on the Company's credit rating, and a commitment fee of between 0.24% and 0.45% depending on
the Company's credit rating. The Company drew $120.0 million during the first quarter of 2019, repaid $30.0 million during the
second quarter of 2019, and repaid the full outstanding balance of $385.0 million during the third quarter of 2019 using proceeds
received from the sale of the Chapada mine (refer to Note 6).
124
Yamana Gold
Covenants
The senior notes and revolving credit facility are subject to various financial and general covenants. The principal covenants are
tangible net worth of at least $2.3 billion; maximum net total debt (debt less cash) to tangible net worth of 0.75; and leverage ratio
(net total debt/EBITDA) to be less than or equal to 3.5:1. The Company was in compliance with all covenants as at December 31,
2019.
29.
ENVIRONMENTAL REHABILITATION PROVISION
The Company incurs environmental rehabilitation liabilities relating to its operating and closed mines and development projects.
Significant rehabilitation activities include land rehabilitation, demolition of buildings and mine facilities, and ongoing care and
maintenance and monitoring.
The Company estimates future rehabilitation costs based on the level of current mining activity and estimates of costs required to
fulfill the Company’s future obligations. Changes in environmental rehabilitation provision estimates during the year reflect changes
in cash flow estimates as well as assumptions including discount and inflation rates.
At December 31, 2019, the present value of the environmental rehabilitation provision relating to the Company's mining properties
was estimated at $220.4 million (December 31, 2018: $250.3 million) using discount rates ranging between 1.77% and 16.16%
(December 31, 2018: 2.14% and 11.41%). The undiscounted value of these liabilities was $272.0 million (December 31, 2018:
$365.1 million).
The following table reconciles the beginning and ending carrying amounts of the Company's environmental rehabilitation provision.
The majority of the expenditures are expected to take place over the next 100 years. Certain obligations related to post closure
monitoring and maintenance at the Company's Chilean mines are expected to continue in perpetuity.
Balance, beginning of year
Accretion expense included in finance costs
Revisions in estimates and obligations
Expenditures during the current year
Foreign exchange impact
Reclassified to liabilities relating to assets held for sale
Balance, end of year
Current (i)
Non-current
$
$
$
$
2019
250.3 $
12.1
25.9
(4.3)
(3.8)
(59.8)
220.4 $
5.7 $
214.7
220.4 $
2018
274.3
14.9
31.2
(5.3)
(30.6)
(34.2)
250.3
9.1
241.2
250.3
(i)
The current portion of the environmental rehabilitation provision is included in the current portion of Other Provisions and Liabilities. Refer to Note 27.
Regulatory authorities in certain jurisdictions require that security be provided to cover the estimated environmental rehabilitation
obligations. As at December 31, 2019, the Company had outstanding letters of credit in the amount of $70.1 million (C$91.1 million)
(December 31, 2018: $57.4 million (C$78.3 million)) representing guarantees for reclamation obligations and road construction
relating to the Company's share of mining interest in Canadian Malartic, and $13.6 million (December 31, 2018: $13.6 million)
representing guarantees for reclamation obligations relating to the Company's US properties. These letters of credit are
automatically extended for one year periods from their expiration dates.
Annual Report 2019
125
30.
SHARE CAPITAL
Common Shares Issued and Outstanding
The Company is authorized to issue an unlimited number of common shares at no par value and a maximum of eight million first
preference shares. There were no first preference shares issued or outstanding as at December 31, 2019 (2018: nil). Under the
Company's normal course issuer bid, the Company is able to purchase up to 47,513,266 common shares no later than May 5,
2020.
For the years ended December 31,
2019
2018
Issued and outstanding - 950,435,244 common shares
(December 31, 2018 - 949,341,830 common shares):
Balance, beginning of year
Issued on vesting of restricted share units
Dividend reinvestment plan (i)
Share cancellations (ii)
Balance, end of year
Number of
common shares
(In thousands)
949,342
$
Amount
(In millions)
7,636.4
Number of
common shares
Amount
(In thousands)
(In millions)
948,525 $
7,633.7
1,021
77
(5)
3.4
0.2
(0.1)
687
130
—
2.3
0.4
—
950,435
$
7,639.9
949,342 $
7,636.4
(i)
(ii)
The Company has a dividend reinvestment plan to provide holders of common shares a simple and convenient method to purchase additional common
shares by electing to automatically reinvest all or any portion of cash dividends paid on common shares held by the plan participant without paying any
brokerage commissions, administrative costs or other service charges. As at December 31, 2019, a total of 4,638,861 shares have subscribed to the plan.
During the year ended December 31, 2019, the Company cancelled 5,042 common shares that related to entitlement from un-exchanged predecessor
shares following the expiry of the period of surrender.
Dividends Paid and Declared
For the years ended December 31,
Dividends paid
Dividends declared in respect of the year
Dividend paid (per share)
Dividend declared in respect of the year (per share)
31.
SHARE-BASED PAYMENTS
2019
23.7 $
28.8 $
0.03 $
0.03 $
$
$
$
$
2018
19.0
19.2
0.02
0.02
The total expense relating to share-based payments includes accrued compensation expense related to plans granted in the
current period, plans granted in the prior period and adjustments to compensation associated with mark-to-market adjustments on
cash-settled plans, as follows:
For the years ended December 31,
Expense related to equity-settled compensation plans
Expense related to cash-settled compensation plans
Total expense recognized as compensation expense
As at December 31,
Total carrying amount of liabilities for cash-settled arrangements (Note 26)
2019
4.6 $
10.4
15.0 $
2019
28.0 $
$
$
$
The following table summarizes the equity instruments outstanding related to share-based payments.
As at December 31, (In thousands)
Share options outstanding (i)(ii)(iii)
Restricted share units ("RSU") (iv)
Deferred share units ("DSU") (v)
Performance share units ("PSU") (vi)
2019
1,286
2,448
4,881
2,274
2018
5.2
0.1
5.3
2018
18.6
2018
1,772
2,284
4,802
2,457
(i)
(ii)
(iii)
The aggregate maximum number of common shares that may be reserved for issuance under the Company's Share Incentive Plan is 24.9 million (2018:
24.9 million).
As at December 31, 2019, 1,286,448 share options with a weighted average exercise price of C$7.98 were outstanding and exercisable (December 31,
2018: 1,772,365 share options with a weighted exercise price of C$7.80 outstanding and exercisable).
During the year ended December 31, 2019, no share options were granted, and 485,917 share options expired.
126
Yamana Gold
(iv)
(v)
(vi)
During the year ended December 31, 2019, the Company granted 1,240,135 RSUs with a weighted average grant date fair value of C$3.45 per RSU; a
total of 1,021,282 RSUs vested and the Company credited $3.4 million (2018: $2.3 million) to share capital in respect of RSUs that vested during the year.
There were a total of 54,873 RSUs cancelled during the year ended December 31, 2019.
During the year ended December 31, 2019, the Company granted 490,576 DSUs and recorded an expense of $1.3 million, and 411,790 DSUs were settled.
During the first quarter of 2017, the Company entered into a derivative contract to mitigate the volatility of share price on DSU compensation, effectively
locking in the exposure of the Company for 3 million DSUs (approximately 80% of outstanding DSUs at the time) at a value of C$3.5002 per share. For the
year ended December 31, 2019, the Company recorded a mark-to-market loss on DSUs of $7.1 million and a mark-to-market gain on the DSU hedge of
$4.4 million.
During the year ended December 31, 2019, 1,094,266 PSU units were granted with an expiry date of December 31, 2021 and a fair value of C$6.76 per
unit at December 31, 2019. There were payouts of 1,226,393 PSU units and cancellation of 51,280 PSU units during the year ended December 31, 2019.
32.
NON-CONTROLLING INTERESTS
As at December 31,
Agua De La Falda S.A. (i)
Estelar Resources Ltd. (ii)
2019
18.7 $
16.0
34.7 $
$
$
2018
18.7
16.0
34.7
(i)
(ii)
The Company holds a 56.7% interest in the Agua De La Falda ("ADLF") project along with Corporación Nacional del Cobre de Chile ("Codelco"). The ADLF
project is an exploration project that includes the Jeronimo Deposit and is located in northern Chile.
During the second quarter of 2018, the Company entered into an arrangement with Fomento Minero de Santa Cruz S.E. ("FOMICRUZ") pursuant to which,
FOMICRUZ is entitled to certain subordinated shares in the legal entity that directly owns Cerro Moro, Estelar Resources Ltd. These subordinated shares
entitle FOMICRUZ to a 5% interest in future dividends after the Company's investment in Cerro Moro, which includes construction and development along
with acquisition costs, has been recovered in full. As part of the arrangement and as further consideration to the Company, the right to use the land related
to the Bahía Laura properties, a significant land package to the west and south west of Cerro Moro, was obtained at an approximate value of $16.0 million.
33.
CAPITAL MANAGEMENT
The Company’s objectives in managing capital are to ensure sufficient liquidity to pursue its strategy of organic growth combined
with strategic acquisitions, to ensure the externally imposed capital requirements relating to its long-term debt are being met, and
to provide returns to its shareholders. The Company defines capital that it manages as net worth, which is comprised of total
shareholders’ equity and debt obligations (net of cash and cash equivalents). Refer to Notes 30 and 28, respectively, for a
quantitative summary of these items.
The Company manages its capital structure and makes adjustments to it in light of general economic conditions, the risk
characteristics of the underlying assets and the Company’s working capital requirements. In order to maintain or adjust its capital
structure, the Company, upon approval from its Board of Directors, may issue shares, pay dividends, or undertake other activities
as deemed appropriate under the specific circumstances. The Board of Directors reviews and approves any material transactions
out of the ordinary course of business, including proposals on acquisitions or other major investments or divestitures, as well as
capital and operating budgets. The Company has not made any changes to its policies and processes for managing capital during
the year.
34.
LEASES
Leases under IFRS 16 (from January 1, 2019)
A significant proportion of the Company’s lease arrangements, by value, relate to equipment and vehicles used at the Company's
mine sites. Other leases include offices and various IT equipment. The majority of lease terms are negotiated through the
Company’s procurement function, although agreements contain a wide range of different terms and conditions. Information about
leases for which the Company is a lessee is presented below.
(a)
Right-of-use assets
Balance at January 1, 2019
Additions
Depreciation charge for the year
Net right-of-use assets reclassified to assets held for sale
Balance at December 31, 2019
$
$
Buildings
Vehicles
5.3 $
17.0 $
2.9
(1.1)
—
8.0
(7.0)
(4.5)
7.1 $
13.5 $
Machinery and
Equipment
19.2 $
15.3
(9.1)
(2.7)
22.7 $
Total
41.5
26.2
(17.2)
(7.2)
43.3
Annual Report 2019
127
(b)
Lease liabilities
Maturity analysis - contractual undiscounted cash flows
Less than one year
Two to three years
Four to five years
More than five years
Total undiscounted lease liabilities at December 31
Lease liabilities included in the balance sheet at December 31 (Note 26)
Current
Non-current
(c)
Amounts recognized in net earnings
Depreciation expense on right-of-use assets
Interest expense on lease liabilities (Note 12)
Variable lease payments not included in the measurement of lease liabilities (i)
Expenses relating to short-term leases
Expenses relating to leases of low value assets, excluding short-term leases of low value assets
2019
19.6
20.0
9.6
1.6
50.8
43.5
15.5
28.0
2019
17.2
4.4
73.8
32.9
1.9
$
$
$
$
$
$
$
$
$
$
(i) Certain of the equipment leases in which the Company is the lessee contain variable lease payment terms that are linked to the usage of the equipment (i.e.
tonnes mined), either for the contract as a whole or only when a fixed minimum is exceeded. Variable payment terms are used to link rental payments to
usage and reduce fixed costs. The Company expects the level of variable lease payments to remain broadly consistent in future years.
(d)
Amounts recognized in the consolidated statement of cash flows
Total cash outflow for leases
Operating leases under IAS 17 (prior to January 1, 2019)
$
2019
129.9
The Company leases office premises under non-cancellable operating leases. The total of future minimum lease payments under
non-cancellable operating leases are as follows:
As at December 31,
Within 1 year
Between 1 and 5 years
After 5 years
$
$
2018
2.2
8.7
3.9
14.8
The total operating lease payments that were expensed during 2018 amounted to $2.3 million.
35.
CONTINGENCIES
Due to the size, complexity and nature of the Company’s operations, various legal and tax matters arise in the ordinary course of
business. The Company accrues for such items when a liability is both probable and the amount can be reasonably estimated.
Certain conditions may exist as of the date the Condensed Consolidated Interim Financial Statements are issued that may result
in a loss to the Company, but which will be resolved only when one or more future events occur or fail to occur. The impact of any
resulting loss from such matters affecting these Condensed Consolidated Interim Financial Statements of the Company may be
material.
128
Yamana Gold
Canadian Malartic
On August 2, 2016, Canadian Malartic General Partnership (the “Partnership”), a general partnership jointly owned by the
Company and Agnico Eagle Mines Limited (the "Partnership"), was served with a class action lawsuit with respect to allegations
involving the Canadian Malartic mine. The complaint is in respect of "neighbourhood annoyances" arising from dust, noise,
vibrations and blasts at the mine. The plaintiffs are seeking damages in an unspecified amount as well as punitive damages in the
amount of $20.0 million. The class action was certified in May 2017. In November 2017, a declaratory judgment was issued allowing
the Partnership to settle individually with class members for 2017 under its Good Neighbor Guide (the “Guide”). In September
2018, the Superior Court introduced an annual revision of the ending date of the class action period and a mechanism for the
partial exclusion of class members, allowing the residents to individually settle for a specific period (usually a calendar year) and
to opt-out from the class action for such specific period. Both judgments were confirmed by the Court of Appeal and the class
members will thus continue to have the option to benefit from the Guide. In January 2018, a judgment was rendered in favor of the
Partnership, resulting in the removal from the class action of the pre-transaction period, spanning from August 2013 to June 16,
2014, during which the Canadian Malartic mine was not operated by the Partnership. The plaintiff did not seek leave to appeal this
decision and rather added new allegations in an attempt to recapture the pre-transaction period. On July 19, 2019, the Court
refused to add back the pre-transaction period based on these new allegations. An application for leave to appeal was filed by the
Plaintiff.
On August 15, 2016, the Partnership received notice of an application for injunction relating to the Canadian Malartic mine, which
had been filed under the Environment Quality Act (Quebec). A hearing related to an interlocutory injunction was completed on
March 17, 2017 and a decision of the Superior Court of Quebec dismissed the injunction. An application for permanent injunction
is currently pending. The Partnership has reviewed the injunction request and filed a motion for the dismissal of the application for
injunction.
On June 1, 2017, the Partnership was served with an application for judicial review to obtain the annulment of a governmental
decree. The Partnership is an impleaded party in the proceedings. The applicant seeks to obtain the annulment of a decree
authorizing the expansion of the Canadian Malartic mine. Following a hearing on the merits in Fall 2018, the Superior Court
dismissed the judicial review on May 13, 2019. An application for leave to appeal was filed by the Plaintiff on June 20, 2019 and
allowed on September 19, 2019.
On October 15, 2019, an agreement in principle was announced by the parties with respect to the class action, the permanent
injunction and the judicial review proceedings. A formal settlement agreement was executed on November 11, 2019 and approved
by the Court on December 13, 2019. This agreement includes: (i) the reopening of the 2013 to 2018 compensation periods of the
Guide for the benefits of the residents who did not individually settle for these periods under the Guide; (ii) the implementation of
a new $1.5 to $1.7 million renovation program for the benefit of property owners in the South sector, whether they are class
members or not; (iii) the full and final release of the Partnership for the class action period; (iv) the current compensations under
the Guide as a threshold for the three upcoming compensation years (2019 to 2021); and (v) the Plaintiff’s withdrawal from the
injunction and the judicial review proceedings. The Court also approved other considerations agreed by the parties before and
during the settlement approval hearing held on December 11, 2019: (i) the reimbursement by the Partnership of $84,622.92 to the
Fonds d’aide aux actions collectives on behalf of the Plaintiff; (ii) the installation of two temporary measuring stations to monitor
dust and noise at the Chemin des Merles, located south of the tailings site; and (iii) the addition of a new zone in the Guide to
compensate the residents of the Chemin des Merles. As no appeal was filed, the judgement approving the settlement is definitive
and the Plaintiff consequently withdrew from the injunction and the judicial review proceedings on January 20, 2020.
36.
RELATED PARTY TRANSACTIONS
Related Parties and Transactions
The Company’s related parties include its subsidiaries, associate, joint arrangement in which the Company is a joint operator, and
key management personnel. During its normal course of operations, the Company enters into transactions with its related parties
for goods and services. Transactions between the Company and its subsidiaries, which are related parties of the Company, have
been eliminated on consolidation and are not disclosed in this note. There were no other related party transactions for the years
ended December 31, 2019 and 2018.
Annual Report 2019
129
Compensation of Key Management Personnel
Key management personnel compensation comprises:
For the years ended December 31,
Short-term employee benefits (i)
Post-employment benefits
Termination benefits
Share-based payments (ii)
2019
14.2 $
1.7
3.4
9.6
28.9 $
$
$
2018
14.9
1.9
3.7
4.7
25.2
(i)
(ii)
Short-term employee benefits include salaries, bonuses payable within 12 months of the balance sheet date and other annual employee benefits.
Relates to share option, RSU, DSU and PSU grants. Balances exclude the periodic fair value adjustment on the DSUs.
37.
SUBSEQUENT EVENTS
On December 16, 2019, Equinox Gold Corp. ("Equinox") and Leagold jointly announced that the companies had entered into a
definitive agreement to combine in an at-market merger. Pursuant to the transaction, Leagold shareholders will receive 0.331 of
an Equinox share for each Leagold share held. At closing, existing Equinox and Leagold shareholders will own approximately 55%
and 45% of the merged company, respectively, on an issued share basis, with Yamana owning approximately 9% of the combined
company. The combined company will continue as Equinox Gold under the ticker symbol “EQX” on both the Toronto Stock
Exchange and the NYSE American Stock Exchange. On January 28, 2020, both Leagold and Equinox held special meetings at
which shareholders of both companies approved the transaction. The transaction is expected to close in February 2020, subject
to regulatory approvals, including approvals from the TSX, the NYSE-A and other customary conditions.
38.
GUARANTOR SUBSIDIARIES ANNUAL FINANCIAL STATEMENTS
The obligations of the Company under the senior debt notes and revolver facility are guaranteed by the following 100% owned
subsidiaries of the Company (the ‘‘guarantor subsidiaries’’): Jacobina Mineração e Comércio Ltda., Minera Meridian Limitada,
Minera Florida Limitada, and Yamana Malartic Canada Inc. All guarantees by the guarantor subsidiaries are joint and several, and
full and unconditional, subject to certain customary release provisions contained in the indenture (as supplemented) governing the
senior debt notes. Based on the domestic regulations of jurisdictions of the subsidiaries, collection of funds in the form of dividend
or loan payments would be subject to customary repatriation restrictions.
The following tables outline separate condensed financial information related to the issuer, and the guarantor and non-guarantor
subsidiaries and as set out in the Consolidated Balance Sheets as at December 31, 2019 and December 31, 2018 and the
Consolidated Statements of Operations, Consolidated Statements of Comprehensive Earnings (Loss) and Consolidated
Statements of Cash Flows for the years ended December 31, 2019 and December 31, 2018. For the purposes of this information,
the financial information of the Company and the guarantor subsidiaries reflect investments in subsidiary companies on an equity
accounting basis and are in compliance with Rule 3-10 of Regulation S-X. As provided for under Rule 3-10 of Regulation S-X the
Company’s basis is “pushed down” to the applicable subsidiary columns.
130
Yamana Gold
CONDENSED CONSOLIDATED BALANCE SHEETS
Yamana Gold
Inc.
(parent)
Guarantor
subsidiaries Non-guarantors
Eliminations and
reclassifications
Consolidated
As at December 31, 2019
Assets
Current assets:
Cash and cash equivalents
Trade and other receivables
Inventories
Other financial assets
Other assets
Intercompany receivables
$
121.3 $
5.8 $
31.7 $
0.6
9.3
4.6
3.2
—
1.4
59.6
—
22.5
79.4
1.4
64.5
3.9
71.8
71.7
$
139.0 $
168.7 $
244.9 $
Non-current assets:
Property, plant and equipment
Goodwill and other intangible assets
Investment in associate and subsidiaries
Deferred tax assets
Other financial assets
Other assets
Intercompany receivables
Total assets
Liabilities
Current liabilities:
Trade and other payables
Income taxes payable
Other financial liabilities
Other provisions and liabilities
Intercompany payables
Non-current liabilities:
Long-term debt
Environmental rehabilitation provision
Deferred tax liabilities
Other financial liabilities
Other provisions and liabilities
Intercompany payables
Total liabilities
Equity
Equity attributable to Yamana Gold Inc.
equity holders
Non-controlling interests
Total equity
Total liabilities and equity
$
$
$
$
$
$
$
78.1
28.4
4,936.7
64.1
9.1
—
211.6
1,910.3
1.2
516.5
6.1
1.2
9.7
922.9
3,964.6
362.6
—
10.6
4.9
144.5
—
5,467.0 $
3,536.6 $
4,732.1 $
33.7 $
94.7 $
91.1 $
—
76.1
1.3
151.1
15.4
37.7
8.5
—
2.9
17.3
29.7
—
262.2 $
156.3 $
141.0 $
991.7
—
(1.1)
29.0
—
—
—
111.8
264.2
45.6
41.0
1,461.5
—
102.9
778.3
23.4
102.1
(327.0)
1,281.8 $
2,080.4 $
820.7 $
4,185.2 $
1,456.2 $
3,876.7 $
—
4,185.2 $
5,467.0 $
—
1,456.2 $
3,536.6 $
34.7
3,911.4 $
4,732.1 $
— $
—
—
—
—
(151.1)
(151.1) $
—
—
(5,332.9)
—
—
—
(1,134.5)
(6,618.5) $
— $
—
—
—
(151.1)
(151.1) $
—
—
—
—
—
(1,134.5)
(1,285.6) $
(5,332.9) $
—
(5,332.9) $
(6,618.5) $
158.8
3.4
133.4
8.5
97.5
—
401.6
5,952.9
392.2
120.3
80.8
15.2
154.2
—
7,117.2
219.5
18.3
131.1
39.5
—
408.4
991.7
214.7
1,041.4
98.0
143.1
—
2,897.3
4,185.2
34.7
4,219.9
7,117.2
Annual Report 2019
131
As at December 31, 2018
Assets
Current assets:
Cash and cash equivalents
Trade and other receivables
Inventories
Other financial assets
Other assets
Intercompany receivables
Non-current assets:
Property, plant and equipment
Goodwill and other intangible assets
Investment in associate and subsidiaries
Deferred tax assets
Other financial assets
Other assets
Intercompany receivables
Total assets
Liabilities
Current liabilities:
Trade and other payables
Income taxes payable
Other financial liabilities
Other provisions and liabilities
Intercompany payables
Non-current liabilities:
Long-term debt
Environmental rehabilitation provision
Deferred tax liabilities
Other financial liabilities
Other provisions and liabilities
Intercompany payables
Total liabilities
Equity
Equity attributable to Yamana Gold Inc.
equity holders
Non-controlling interests
Total equity
Total liabilities and equity
$
$
$
$
$
$
$
$
$
Yamana Gold
Inc.
(parent)
Guarantor
subsidiaries Non-guarantors
Eliminations and
reclassifications
Consolidated
67.6 $
14.5
6.7
3.6
2.4
—
9.5 $
21.4 $
2.2
56.9
—
32.6
(10.5)
7.6
117.4
3.8
83.0
292.5
94.8 $
90.7 $
525.7 $
73.7
31.5
4,824.1
72.6
9.9
—
1,904.7
4.0
494.1
9.4
1.9
21.4
1,069.9
1,193.2
4,718.0
364.3
—
6.5
7.1
212.7
—
6,176.5 $
3,719.4 $
5,834.3 $
61.1 $
102.2 $
131.5 $
—
5.9
59.6
282.0
(2.9)
1.5
10.2
—
35.4
54.9
37.0
—
408.6 $
111.0 $
258.8 $
1,756.8
—
2.3
19.5
—
—
—
88.8
259.9
32.3
36.2
1,630.5
—
152.4
867.1
24.2
253.0
632.6
2,187.2 $
2,158.7 $
2,188.1 $
3,989.3 $
1,560.7 $
3,611.5 $
—
3,989.3 $
6,176.5 $
—
1,560.7 $
3,719.4 $
34.7
3,646.2 $
5,834.3 $
— $
—
—
—
—
(282.0)
(282.0) $
—
—
(5,172.2)
—
—
—
(2,263.1)
(7,717.3) $
— $
—
—
—
(282.0)
(282.0) $
—
—
—
—
—
(2,263.1)
(2,545.1) $
(5,172.2) $
—
(5,172.2) $
(7,717.3) $
98.5
24.3
181.0
7.4
118.0
—
429.2
6,696.4
399.8
146.0
88.5
18.9
234.1
—
8,012.9
294.8
32.5
62.3
106.8
—
496.4
1,756.8
241.2
1,129.3
76.0
289.2
—
3,988.9
3,989.3
34.7
4,024.0
8,012.9
132
Yamana Gold
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Yamana Gold
Inc.
(parent)
Guarantor
subsidiaries Non-guarantors
1,588.0
$
1,051.4 $
985.1 $
Eliminations and
reclassifications
(2,012.3) $
(1,552.2)
(756.5)
(490.9)
2,016.8
For the year ended December 31, 2019
Revenue
Cost of sales excluding depletion,
depreciation and amortization
Gross margin excluding depletion,
depreciation and amortization
Depletion, depreciation and amortization
Impairment of mining properties
and goodwill, net
Mine operating earnings/(loss)
$
$
Expenses (i)
General and administrative
Exploration and evaluation
Share of (loss) earnings of associate
Other operating income (expenses), net
Impairment of non-operating mining
properties
Operating earnings (loss)
Finance costs
Other income (costs), net
Earnings (loss) before taxes
Current income tax expense
Deferred income tax recovery
Income tax (expense) recovery
Net earnings (loss)
Attributable to:
Yamana Gold Inc. equity holders
Non-controlling interests
Net earnings (loss)
35.8
$
(7.5)
294.9 $
494.2 $
(194.4)
(269.8)
—
28.3
(56.5)
(1.5)
(151.3)
133.0
—
(48.0)
(113.2)
399.3
238.1
(5.0)
(7.5)
(12.5)
—
100.5
(15.7)
(1.4)
22.4
(15.9)
—
89.9
(111.3)
62.4
41.0
(26.9)
(15.8)
(42.7)
—
224.4
(7.2)
(7.4)
—
105.3
—
315.1
(476.9)
75.9
(85.9)
(63.1)
33.6
(29.5)
225.6
—
225.6
(1.7)
—
(1.7)
(115.4)
—
(115.4)
(5.0) $
— $
— $
$
225.6
$
(1.7) $
(115.4) $
Total other comprehensive loss
Total comprehensive earnings
$
$
220.6
Balances are net of intercompany movements in the respective classifications which are eliminated on consolidation.
(115.4) $
(1.7) $
$
(i)
4.5 $
—
—
4.5
—
—
112.6
—
—
117.1
557.2
(557.2)
117.1
—
—
—
117.1 $
117.1
—
117.1
— $
117.1 $
Consolidated
1,612.2
(782.8)
829.4
(471.7)
—
357.7
(79.4)
(10.3)
(16.3)
222.4
—
474.1
(144.2)
(19.6)
310.3
(95.0)
10.3
(84.7)
225.6
225.6
—
225.6
(5.0)
220.6
Annual Report 2019
133
Yamana Gold
Inc.
(parent)
Guarantor
subsidiaries Non-guarantors
Eliminations and
reclassifications
Consolidated
1,654.0
$
942.6 $
1,243.7 $
(1,631.2)
(759.9)
(676.5)
(2,041.8) $
1,798.5
2,057.6
(1,010.0)
For the year ended December 31, 2018
Revenue
Cost of sales excluding depletion,
depreciation and amortization
Gross margin excluding depletion,
depreciation and amortization
Depletion, depreciation and amortization
Impairment of mining properties and
goodwill, net
Mine operating earnings/(loss)
$
$
Expenses (i)
General and administrative
Exploration and evaluation
Share of (loss) earnings of associate
Other operating income (expenses), net
Impairment of non-operating mining
properties
Operating earnings (loss)
Finance costs
Other income (costs), net
(Loss) earnings before taxes
Current income tax expense
Deferred income tax recovery
Income tax expense, net
Net (loss) earnings
Attributable to:
Yamana Gold Inc. equity holders
Non-controlling interests
Net (loss) earnings
Total other comprehensive loss
Total comprehensive loss
22.8
$
(7.8)
—
15.0
(50.4)
(0.9)
(293.8)
19.1
—
(311.0)
(109.0)
126.6
(293.4)
(6.8)
2.4
(4.4)
182.7 $
567.2 $
(173.5)
(257.0)
(1.0)
8.2
(18.2)
(2.4)
(45.0)
(12.3)
—
(69.7)
(268.8)
88.1
(250.4)
(3.8)
(20.2)
(24.0)
(148.0)
162.2
(23.2)
(9.7)
(0.5)
2.5
(153.0)
(21.7)
(232.9)
261.1
6.5
(128.2)
35.6
(92.6)
$
(297.8) $
(274.4) $
(86.1) $
(297.8)
—
(297.8)
(274.4)
—
(274.4)
(73.0)
(13.1)
(86.1)
$
(10.5) $
— $
(0.7) $
(308.3) $
Balances are net of intercompany movements in the respective classifications which are eliminated on consolidation.
(274.4) $
(86.8) $
$
(i)
15.8 $
—
—
15.8
—
—
344.8
—
—
360.6
473.3
(473.3)
360.6
—
—
—
360.6 $
360.6
—
360.6
0.7 $
361.3 $
788.5
(438.3)
(149.0)
201.2
(91.8)
(13.0)
5.5
9.3
(153.0)
(41.8)
(137.4)
2.5
(176.7)
(138.8)
17.8
(121.0)
(297.7)
(284.6)
(13.1)
(297.7)
(10.5)
(308.2)
134
Yamana Gold
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Yamana Gold
Inc.
(parent)
Guarantor
subsidiaries Non-guarantors
Eliminations and
reclassifications
Consolidated
$
238.1 $
41.0
$
(85.9) $
117.1 $
310.3
For the year ended December 31, 2019
Operating activities
Earnings before taxes
Adjustments to reconcile earnings before
taxes to net operating cash flows:
Depletion, depreciation and amortization
Share-based payments
Other (income) costs, net
Finance costs
Mark-to-market on financial assets and
metal concentrates
Share of earnings of associate
Impairment of mineral properties, net
Amortization of deferred revenue on
metal purchase agreements
Gain on asset disposals
Other non-cash (recoveries)/expenses
Advanced payments received on metal
purchase agreements
Environmental rehabilitation provision
Other payments
Cash flows from operating activities
before income taxes paid and net change
in working capital
Income taxes paid
Cash flows from operating activities
before net change in working capital
Net change in working capital
Intercompany movement in operations
$
$
Cash flows (used in) from operating
activities
Investing activities
Acquisition of property, plant and equipment $
Net proceeds on disposal of subsidiaries
and other assets
$
$
$
Cash flows (used in) from other investing
activities
Cash flows (used in) from investing
activities
Financing activities
Dividends paid
Interest and other finance expenses paid
Financing costs paid on early note
redemption
Repayment of term loan and notes payable
Proceeds from term loan and notes payable
Payment of lease liabilities
Cash used in other financing activities
Proceeds (repayments) of intercompany
financing activities
7.5
14.4
(399.3)
113.2
(4.7)
151.3
—
(59.1)
(150.1)
4.2
—
—
—
194.4
—
(62.4)
111.3
—
(22.4)
—
—
—
25.0
—
(1.9)
—
269.8
0.6
(75.9)
476.9
—
—
—
(20.3)
(123.0)
17.0
—
(2.4)
(8.3)
(84.5) $
285.0
$
448.5 $
—
1.6
(64.6)
(84.5) $
286.6
$
383.9 $
(1.6)
(125.4)
0.7
(82.4)
(67.8)
207.8
(211.5) $
204.9
$
523.9 $
—
—
557.2
(557.2)
—
(112.6)
—
—
—
—
—
—
4.5 $
4.5 $
—
—
4.5 $
471.7
15.0
19.6
144.2
(4.7)
16.3
—
(79.4)
(273.1)
46.2
—
(4.3)
(8.3)
653.5
(63.0)
590.5
(68.7)
—
521.8
(6.1) $
(145.5) $
(180.1) $
— $
(331.7)
166.9
1.0
0.2
—
657.9
(62.3)
161.8 $
(145.3) $
415.5 $
(23.7) $
(80.2)
— $
(1.7)
— $
(2.5)
(35.0)
(952.5)
240.0
(0.7)
(15.1)
970.5
—
—
—
(12.1)
(0.7)
(48.8)
—
—
—
(4.0)
(4.3)
(917.2)
—
—
— $
— $
—
—
—
—
—
—
(4.5)
825.0
(61.3)
432.0
(23.7)
(84.4)
(35.0)
(952.5)
240.0
(16.8)
(20.1)
—
Annual Report 2019
135
Cash flows (used in) from financing
activities
Effect of foreign exchange on non-US Dollar
denominated cash and cash equivalents
(Decrease) Increase in cash and
cash equivalents
Cash and cash equivalents, beginning of
year
Cash and cash equivalents, classified as
held for sale, beginning of year
Cash and cash equivalents, end of year
$
$
$
$
$
103.3 $
(63.3) $
(928.0) $
(4.5) $
(892.5)
0.1
—
(1.1)
53.7 $
67.6 $
— $
121.3 $
(3.7) $
9.5
$
— $
5.8
$
10.3 $
21.4 $
— $
31.7 $
—
— $
— $
— $
— $
(1.0)
60.3
98.5
—
158.8
136
Yamana Gold
For the year ended December 31, 2018 (i)
Operating activities
Earnings (loss) before taxes
Adjustments to reconcile earnings before
taxes to net operating cash flows:
Depletion, depreciation and amortization
Share-based payments
Other (income) costs, net
Finance costs
Mark-to-market on financial assets and
metal concentrates
Share of earnings (loss) of associate
Impairment of mineral properties, net
Amortization of deferred revenue on
metal purchase agreements
Gain on sale of subsidiaries
Other non-cash expenses
Advanced payments received on
metal purchase agreements
Environmental rehabilitation obligations
paid
Other payments
Cash flows from operating activities
before income taxes paid and net
change in working capital
Income taxes paid
Cash flows from operating activities
before net change in working capital
Net change in working capital
Intercompany movement in operations
Cash flows from operating activities
Investing activities
Acquisition of property, plant
and equipment
Net proceeds on disposal of subsidiaries
and other assets
Cash used in other investing activities
Cash flows used in investing activities
Financing activities
Dividends paid
Interest and other finance expenses paid
Financing costs paid on early note
redemption
Repayment of revolving credit facility and
notes payable
Proceeds from drawdown of revolving
credit facility
Payment of lease liabilities
Proceeds from other financing activities
Proceeds (repayments) of intercompany
financing activities
Cash flows (used in) from financing
activities
Yamana Gold
Inc.
(parent)
Guarantor
subsidiaries Non-guarantors
Eliminations and
reclassifications
Consolidated
$
(293.4) $
(250.4) $
6.5 $
360.6 $
(176.7)
7.8
4.7
(126.6)
109.0
17.6
293.8
—
(72.7)
(39.1)
2.5
127.8
—
—
173.5
—
(88.1)
268.8
—
45.0
1.0
—
—
24.3
—
(2.6)
—
257.0
0.6
(261.1)
232.9
—
0.5
301.0
(26.8)
(35.1)
23.6
—
(2.7)
(6.7)
31.4 $
(0.1)
171.5 $
489.7 $
7.6
(149.6)
31.3 $
179.1 $
340.1 $
(26.4)
118.1
(32.3)
30.5
(103.4)
(148.6)
123.0 $
177.3 $
88.1 $
(14.4) $
(158.9) $
(273.6) $
4.3
(3.9)
—
(5.9)
185.6
(62.8)
(14.0) $
(164.8) $
(150.8) $
(19.0) $
(76.3)
(14.7)
(486.5)
460.0
—
2.2
(5.4)
— $
— $
—
—
—
—
—
—
—
—
—
—
—
—
(20.9)
42.1
$
$
$
$
$
$
$
(139.7) $
(20.9) $
42.1 $
—
—
473.3
(473.3)
—
(344.8)
—
—
—
—
—
—
—
15.8 $
—
15.8 $
—
—
15.8 $
— $
—
—
— $
— $
—
—
—
—
—
—
(15.8)
(15.8) $
438.3
5.3
(2.5)
137.4
17.6
(5.5)
302.0
(99.5)
(74.2)
50.4
127.8
(5.3)
(6.7)
708.4
(142.1)
566.3
(162.1)
—
404.2
(446.9)
189.9
(72.6)
(329.6)
(19.0)
(76.3)
(14.7)
(486.5)
460.0
—
2.2
—
(134.3)
Annual Report 2019
137
Effect of foreign exchange on non-US
Dollar denominated cash and cash
equivalents
(Decrease) Increase in cash and
cash equivalents
Cash and cash equivalents, beginning of
year
$
$
Cash and cash equivalents, classified as
held for sale, beginning of year
$
Cash and cash equivalents, end of year $
0.1
1.1
1.8
(30.6) $
(7.3) $
(18.8) $
98.2 $
16.8 $
33.9 $
— $
67.6 $
— $
9.5 $
6.3 $
21.4 $
—
— $
— $
— $
— $
3.0
(56.7)
148.9
6.3
98.5
*************
138
Yamana Gold
Corporate Governance & Committees of the Board
Corporate Governance
Committees of the Board
Yamana and the board recognize the importance of corporate
governance to the effective management of the Company and to
the protection of its employees and shareholders. The Company’s
approach to significant issues of corporate governance is designed
with a view to ensuring that Yamana’s business and affairs are
effectively managed so as to enhance shareholder value.
The Company’s corporate governance practices have been
designed to be in compliance with applicable Canadian and
United States legal requirements and best practices. The
Company continues to monitor developments in Canada and the
United States, with a view to keeping its governance policies and
practices current.
Although, as a regulatory matter, the majority of the corporate
governance listing standards of the New York Stock Exchange
are not applicable to the Company, Yamana has corporate
governance practices that comply with such standards.
The board has the following four standing committees:
Audit Committee
The Audit Committee provides assistance to the board in
fulfilling its financial reporting and control responsibilities to the
shareholders of the Company and the investment community.
The external auditors of the Company report directly to the
Audit Committee.
Compensation Committee
The Compensation Committee, which is composed entirely
of independent directors, among other things may determine
appropriate compensation for the Company’s directors and
senior officers. The process by which appropriate compensation
is determined is through periodic and annual reports from
the Compensation Committee on the Company’s overall
compensation and benefits philosophies.
Code of Conduct
The board has adopted a Code of Conduct (the “Code”) for
its directors, officers, employees and any third party acting on
our behalf or representing Yamana such as contractors, agents
and consultants. The board encourages and promotes an overall
culture of ethical business conduct by promoting compliance
with applicable laws, rules and regulations in all jurisdictions in
which the Company conducts business; providing guidance to
directors, officers, employees and third parties to help them
recognize and deal with ethical issues; promoting a culture of
open communication, honesty and accountability; and ensuring
awareness of disciplinary action for violations of ethical business
conduct.
Yamana has established a toll-free compliance call line and
website to allow for anonymous reporting of any suspected Code
violations, including concerns regarding accounting, internal
controls over financial reporting or other auditing matters.
Corporate Governance and Nominating Committee
This committee is responsible for conducting an annual review of
the board’s relationship with management to ensure the board is
able to, and in fact does, function independently of management;
develops and recommends to the board for approval a long-term
plan for board composition that takes into consideration the
independence of directors, competencies and skills of the board as
a whole; reviews retirement dates and the appropriate size of the
board with a view to facilitating effective decision making and the
strategic direction of the Company; and develops and implements
a process to handle any director nominees who are recommended
by security holders.
Sustainability Committee
The board also has a Sustainability Committee to assist in
oversight of sustainability, environmental, health and safety
matters, including monitoring the implementation and
management of the Company’s policies, procedures and practices
relating to sustainability, environmental, health and safety matters.
To view Yamana’s board and committee charters, code of conduct,
corporate governance practices as well as how they compare to
the NYSE standards, please visit www.yamana.com/Governance.
More information can also be found in Yamana’s Management
Information Circular.
Annual Report 2019
139
Corporate Information
Board of Directors
Senior Management
Peter Marrone
Executive Chairman
Daniel Racine
President and Chief Executive Officer
Jason LeBlanc
Senior Vice President,
Finance and Chief Financial Officer
Yohann Bouchard
Senior Vice President, Operations
Ross Gallinger
Senior Vice President,
Health, Safety and Sustainable
Development
Henry Marsden
Senior Vice President, Exploration
Sofia Tsakos
Senior Vice President,
General Counsel and
Corporate Secretary
Richard Campbell
Senior Vice President,
Human Resources
Gerardo Fernandez
Senior Vice President,
Corporate Development
John Begeman(1)(4)
Company Director
Christiane Bergevin(2)(3)
Company Director
Andrea Bertone(1)
Company Director
Alex Davidson(4)
Company Director
Richard Graff(1)(2)
Lead Director
Kimberly Keating(2)(4)
Company Director
Peter Marrone*
Executive Chairman
Jane Sadowsky(1)(3)
Company Director
Dino Titaro(2)(3)(4)
Company Director
* Non-independent Board Member
(1) Member of the Audit Committee
(2) Member of the Compensation Committee
(3) Member of the Corporate Governance and
Nominating Committee
(4) Member of the Sustainability Committee
140
Yamana Gold
Shareholder Information
Share Listings
Toronto Stock Exchange: YRI
New York Stock Exchange: AUY
2019 Common Share Trading Information
Capitalization
(millions of common shares)
Outstanding at December 31, 2019
Weighted average 2019
Basic
Fully diluted
Closing price
C$5.14
US$3.95
High
C$5.17
US$3.95
Low
C$2.44
US$1.80
Ticker
YRI
AUY
Dividends
950.4
950.3
951.9
Average Daily
Trading Volume
5,629,355
14,457,932
Yamana currently pays a quarterly dividend of US $0.0125 per share
2019 Dividend Schedule
Anticipated 2020 Dividend Schedule
Record Date
March 29, 2019
June 28, 2019
September 30, 2019
December 31, 2019
Payment Date
April 12, 2019
July 12, 2019
October 15, 2019
January 14, 2020
Record Date
March 31, 2020
June 30, 2020
September 30, 2020
December 31, 2020
Payment Date
April 14, 2020
July 14, 2020
October 14, 2020
January 14, 2021
Annual Report 2019
141
Auditors
Deloitte LLP
Executive Office
200 Bay Street
Royal Bank Plaza, North Tower
Suite 2200
Toronto, Ontario
M5J 2J3
Phone: 416-815-0220
Fax: 416-815-0021
Annual General Meeting
Thursday, April 30, 2020
11:00 a.m. Eastern DST
Meeting to be held via live webcast.
Information is available on Yamana’s website
at www.yamana.com
Electronic Delivery of Shareholder Documents
If you would like to receive your shareholder and financial
documents electronically, please enroll in Yamana’s electronic
delivery program through AST Trust Company (Canada) at
https://ca.astfinancial.com/edelivery
Transfer Agent
For information regarding shareholdings, dividends, certificates,
change of address, electronic delivery, or exchange of share
certificates due to an acquisition please contact:
AST Trust Company (Canada)
P.O. Box 700
Station B
Montreal, QC
H3B 3K3
1-800-387-0825 (toll free in North America)
416-682-3860 (outside North America)
Email: inquiries@astfinancial.com
www.astfinancial.com/ca-en
Investor Contact
For additional financial information, industry developments,
latest news and corporate updates:
Phone: 416-815-0220
Email: investor@yamana.com
Website: www.yamana.com
142
Yamana Gold
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Typesetting & Pre-Press Production: Mary Acsai
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Portrait Photography: Zanetti Photography
Printed in Canada
www.yamana.com