Q1 2021 Yamana Gold Inc Earnings Call
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And <unk>.
Please standby the conference will now begin thank.
Thank you all for joining us this morning before I turn the call over I need to advise that certain statements made during this call today may contain forward looking information and actual results could differ from the conclusions or projections and that forward looking information, which include but are not limited to.
<unk> with respect to the estimation of mineral reserves and resources.
And the timing and amount of estimated future production car.
Cost of production capital expenditures future metal prices and the cost and timing of the development of new projects.
For a complete discussion of the risks uncertainties and factors, which may lead to actual financial results and performance being different from the estimates contained in the forward looking statements. Please refer to Yamana press release issued yesterday announcing first quarter 2021.
<unk> as well as the management's discussion and analysis for the same period and other regulatory filings and the Canada and the United States.
I would like to remind everyone that this conference call is being recorded and will be available for replay today at 12 P. M Eastern time.
Replay information and the presentation slides accompanying this conference call and webcast are available and humana's website at Yamana Dot com.
I'll now turn the call over to Mr. Daniel Racine, President and CEO.
Thank you operator, thank you all for joining us and welcome to our first quarter 2021 conference call.
With me today, and Jason Leblanc, our CFO, we have also Johan Bouchard and arrow and other.
And both of them to answer questions.
And we'll start as always with health and safety.
Our total recordable injury rate was <unk> 42, and the first quarter of 2021.
Both media and afternoon, and they'll opinion on for the first and second underground mines and Chile to be recognized with this year of quality Award.
<unk>, 100% compliance with COVID-19, 19 prevention and control and standard.
A C H S.
As the pandemic stretches into the second.
The water and we continue to take every precaution to keep our people and communities safe and to work closely with our community partners to support them in the fight against COVID-19.
As disclosed during the quarter, we have for money adopted a board approved climate change strategy as they can.
Continuation of Yamana and commitment to a low carbon future.
The strategy is underpinned by the adoption of a too high level target.
Our science based stood and recessionary target compared to pre industrial levels and then that's for ethanol net zero by 2050.
This is a fundamental year for this strategy during which we are that the remaining greenhouse gases emission baseline and laying out the groundwork for debt ghd.
Hi, Beckman pathways required to meet our two degrees science based target.
Yeah.
Turning now to our <unk> operation.
Operational highlights.
We had a strong production with just over 201000 ounces of gold debt by standout performances and Canadian Mill, Arctic and Minera, Florida.
It is also worth noting that in March Jacobina achieved an all time monthly high production of 16348.
Ounces of gold.
We produced 212 million ounces of silver during the quarter underpinned by a strong performance from several model.
Geo production for the quarter was 231988 offices and align with that.
We are maintaining our 2000 and 'twenty one guidance of 1 million gold and copper head offices included including 632000 and officers of gold and <unk>.
And 10 million ounces of silver at an all in sustaining cost between $9 80 and $1.
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Our cash cost guidance is also unchanged at between $6 65, and $6 95 per Teu.
As with prior years, we expect stronger production and lower cost and the second half of the year with the fourth quarter being the highest production and lower cost quarter.
Our production results translated into strong financial performance net earnings during the quarter for $54 7 million or <unk> <unk> per shares.
While adjusted net earnings for $67 2 million or <unk> <unk> per share.
We generated generated strong cash flows with cash flow from operating activities before net change in working capital coming at the $183 4 million.
Free cash flow before dividend and debt repayment and was $676 million.
Taking a closer look at the operation.
And it will be enough for reduced 43102 ounces of gold during the quarter.
Mill throughput for the quarter was above plan with recoveries right and grade as expected.
I'll talk more about the phase expansion net triple meat in a moment.
Shifting to alpine young Geo production for the quarter was 43277 ounces, including 31437 ounces of gold and 860, <unk> 16000 ounces of silver.
We continue to expect the second half of 2021 to account for 60% of the gold and silver production and that they'll opinion.
Your grade zone come into production.
Canadian Arctic at an exceptional quarter for those being 89550 ounces of gold exceeding plan due to higher grades and recoveries from our film deeper and the matter.
Overburden removal and Barnett was completed as planned with topographic drilling and blasting on track to be completed by the third quarter of 2021.
The transition for Matt uptick bid for the Barnett that continues.
Many of our absolute EBITDA had a great first quarter with production above plan, particularly during March and ore development advanced well ahead of plan and exploration results continue to demonstrate extension of identified areas of mineralization and new discoveries.
Production of 35 to 140 <unk> at several novel was in line with plan.
Mind returned to more normalized activity for.
Following COVID-19 related challenges in 2020.
Strong silver production of 131 million non CIS was actually positive.
Strong sales of our fee rates.
The mine and processing plant are currently running at full capacity.
Variability of personnel is expected to improve as we move through 2021.
And the transition to underground ore will increase mining flexibility.
Particularly in the second half of the year, which is expected to account for higher gold production and the first half with.
With the email and returning to reserve grades.
Yeah.
We have a number of compelling growth opportunities and our portfolio.
Debt, we are debt, we're very excited about one of these was a Mac project, which has proven and probable mineral reserve of $1 8 million ounces of gold.
And <unk> by its 2018 feasibility study.
Following our need and in depth review of the study, we've indentified opportunities to optimize the processing plant design and corporate increased levels of automation and the underground mine and optimize the materials and link system to sustain a throughput of 7000 tonnes per day.
These opportunities and support our vision of what that Mac as a low cost operation with minimal impact on the environment and the neighboring communities and they will be reflected in and updates of the feasibility study schedule for completion in Q3 of 2021.
Canadian <unk> as we announced with our Q4 result will transition from an open pit mine to an underground operation from 2023 to 2028 as we develop the Odyssey underground project.
<unk> and outstanding project that will extend mine life through at least 2039 with an average annual production of 545000 ounces at a cash cost of approximately 630 per ounce.
I spent a significant portion of my career working and <unk> on some of the provinces. Most successful gold project and from asset quality to mine plant and I believe others will tuck them all.
And this Odyssey will enter production in 2023 and gradually ramp up through 2028, largely offsetting the corresponding decline and open pit production as you can see here on debt slide.
<unk> is expected to produce 932000 ounces during the 2023 to 2028 ramp up for you it and the proceeding. The proceed that we derived from this production will significantly reduce our capital requirement.
Assuming the gold price use and the financial and it is this for.
For the project of $15 50 per ounce the project capital.
And would be cut in half for.
Furthermore, capital costs will be modest and any given years are going to fully fund construction using Canadian dollar cash on.
And free cash flow generation with no external funding required.
Staying with Odyssey you may have noticed last night that we announced new results from our exploration campaign for their project.
The focus of exploration during Q1 was to provide support for and aggressive infill drilling program at East Goldie.
We're at 10 and available rigs company to 23400 meters upgrading.
One of our drill all generated extra that's resolved and you intercept located more than one kilometer from the eastern and the amount of the east gold mineral resources reported at the end of the year.
Yes.
This is a lot and noteworthy result, because it opens the possibility for significant expansion of the east Goldie zone to the East and the addition, with no debt. The infill drilling continues to generate extra net result, as you can see on this slide.
Result, demonstrating consistent grade and width throughout the mineralized zone further demonstrating the quality of the inferred resource at these gold.
And I would also note that the company's us develop and exploration program for the council of property, which given the proximity of cash flow to the Kingdom Arctic mining is being considered for inclusion in the Canadian Arctic General partnership exploration program.
Cash flow is a former underground mine that produced 165 million ounces of gold over 27 years before closing and $19 92.
Turning to Jacobina, and <unk> will be and us phase expansion continue to advance and we will announce the operations already low cost structure further benefiting from benefiting margins.
Jack will be and those all in sustaining costs in Q1 or more than $1000 per ounce lower than the average gold price during the quarter.
With the phase two expansion, which will increase throughput to 8500 tonnes per day and raised production to 230000 ounces per year costs are expected to decrease even further.
The optimization is continuing to advance we've identified opportunities to further optimize the result, and recoveries achieve and fees and one.
As part of this initiative default and concentrate or and cycle and so were installed during the quarter and the announcement comes through and concentrate or the schedule to be installed in Q2.
With an objective of optimizing gold recoveries at higher throughput rates.
We also have adopted the comprehensive life of mine sales management strategy.
And to reduce surface disposition updating with underground <unk> disposal as backfill.
The company has initiated several studies to ensure long term sustainability and redo the environment environmental footprint of the operation.
Debt toward conductor and in 2020 conference that bulk paste backfill backfill and hydraulic backfill are technically feasible option for disposal updating into the underground voids, thereby minimizing the quantity of data stored on surface.
Additionally, use of backfill is expected to improve underground stope stability and minimize the requirement to leave behind pillars and or <unk>.
Resulting in increasing mining recovery and reduce dilution as.
And as a first step we have decided to move forward within the hydraulic backfill plant project cash.
<unk> cost is estimated at $8 million.
And we are and the permitted face right now.
The concept for all studies underway to evaluate further opportunities for dry stack tailings facility and or a paste backfill plant and parallel to the other day backfill plan, which could provide opportunities and the future for additional storage of stating to support future material Reserve development.
Tomorrow Gold copper project is a significant asset valued at over 4 billion based on current metal price.
It has attractive economics and the project is advancing morale is obtained.
Update all of the permits for advanced exploration and the work from the local authorities, including program of community participation and social consultation to conduct field work for the <unk> study and.
Got it and additional information for the environmental assessment.
Work and the field has begun with baseline and environmental study activities progressing and during the quarter and drilling contractor and mobilization completed in March.
Selling campaign aimed to codec sample for the geotechnical and metallurgical studies is currently progressing as for that.
The full for the BT study and completion of the and environmental and social impact assessment are expected in 2022.
And with that I will now turn it over to Jason who will go over our financial resort and more detail.
Okay. Thank you Daniel and good morning, everyone.
Turning now to our financial performance.
Revenue and the first quarter with $422 million compared with $365 5 million and the same period of 2020, and 11, and 18% increase which is attributable to both higher sales volumes as well as higher prices compared with the last quarter.
Gross margin, excluding DD&A rose, 28% for $258 $1 million from $202 1 million and the year earlier period.
Earnings during the quarter were six cents per share compared to <unk> a year earlier.
On an adjusted basis earnings for <unk> per share versus the same <unk> unchanged from last year.
Our expansionary and sustaining capital was approximately $22 million and $42 million, respectively. During the quarter ex.
Spansion and Capex should average between $30 million and $40 million per quarter for the balance of the year with the highest percentage attributable to the construction and oddity, which is starting to ramp up.
Sustaining capex will be between $45 million and $50 million per quarter, So a little bit higher and what you see here in Q1.
For exploration, we spent about $16 million on Capex and $6 million was expense during the quarter for the rest of the year those numbers should be a little bit higher on a quarterly basis compared with Q1.
We.
And to generate strong free cash flows and cash flow from operating activities increased to $160 2 million and Q1 versus $129 4 million and the same period last year cash flow from operating activities before net change in working capital.
$183 4 million and 11% increase over last year during the quarter, we generated free cash flow before dividends and debt repayments.
Strong $76 million.
Combined cash and cash equivalents at quarter end totaled $678 1 million.
This includes about $222 million that has been made available for RMR project.
Similar to our first half second half for blade on production that is weighted to the second half of the year and a declining cost profile for <unk> H, our operating cash flow will follow a similar trend of stronger second half cash flow generation, but overall, we will be generating stronger year over year cash flow this year compared with last year.
One impact I wanted to know for Q2 is that we'll make most of our final tax installment payments relating to 2020 over the course of Q2. This year for quarterly cash taxes will be the highest for the year during Q2, which will impact our operating cash flows as we transition to our strongest cash flow generation and the second half of the year, which I just mentioned.
To recap here some some of the highlights for my first quarter of 2021.
We completed the acquisition of the wasn't Mac and Cam flow properties and began to advance the laws and act development plan. We delivered impressive technical study results for the oddity underground and announced a positive construction decision on the project and.
And we formally adopted a climate change and climate change strategy to transition to a low carbon future.
Looking ahead, there are several key milestones coming up.
And mid 2021, we expect to provide and update on our Jack and be in a phase II expansion plan and release Army material issues report for 2020.
We will be providing an update on the optimizing optimization initiatives at the <unk> project and the third quarter.
And the second half of the year, we will be providing an update on exploration results and our operations and projects.
And 2022, we will complete the feasibility study and EIA assessment.
Lastly, a little little further down the road production from Odyssey is expected to begin in 2023.
And with that I'll now hand, the call back over to Daniel.
Thank you Jason to close I will repeat the same message has been delivered and delivered over the last several quarters, which is to acknowledge the resilience of our people.
Continue to do outstanding work.
Against the challenging backdrop of the global pandemic.
They embody that density and commitment to set the Amanda apart and that could be prouder and with debt will be happy to take your questions.
Peter.
Thank you.
And we will now take questions from the telephone lines. If you have a question and you are.
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We thank you for your patience.
Thank you. The first question is from Anita Soni from CIBC World markets.
Please go ahead.
Good morning, everyone.
And my question starts off with the grades at Alpine your line can we expect a sequential increase and grades over the course of the year or will you be sort of at this at.
And at the level, you're at in and Q2, and then more rapid.
And sort of hockey stick into the back half liter.
Good morning, and Utah.
And you're absolutely right the grade will increase and like we've mentioned a few times.
And second half for it's about 60% of our production coming in the second half so youll see grade going up.
And Q2, and then more importantly, and Q3 ending Q4.
Okay and then.
Secondly, with respect to Jakafi and I noticed you guys are talking about.
Ladies and through and phase, one and and continuing to maintain the current recovery rates and higher throughput.
It seems like you've already achieved that and it was 96 eight and six.
$68 two.
With the throughput levels and I'm, just a little confused as to why you guys are a little worried that that wouldn't be wouldn't be sustained.
No. It will be it's just that we were going to go to phase II and the equipment and will be already installed but it's also at the same time to recover and more by gravity and Utah. So we just up onto income recoveries will stay basically and it's just a more gold will report to gravity and set to go to the the leaching circuit.
And then it's you.
Your savings cyanide and then cost by doing that but it's also going to be.
Used for the future phase II, so we won't need to install and more equipment and that area for phase II.
Okay, and then moving to Canadian Malarchuk.
Rates are coming in at $1, one eight and that is that predominantly because euro for bottom now of the Canadian <unk> pit not not really necessarily that you are and the barnett grades that are coming through and the second thing on that was.
And Michael Lubbock, and stripping it seemed like there was a little bit of that.
And maybe the numbers are not correct that it was $2 5 million of waste that was moved in the quarter and I think I was expecting a little bit more compared today, the technical report and just.
I'm wondering if that number and just luck and reported on Easter.
Okay I'll answer the first part and I'll, let Joanne answer the stripping and but on the grade at both so as we go down deeper and the main Canadian monolithic that the grade is getting better as there's less stope debt, we're mindful and underground but also.
Great and Barnett and.
And is getting higher as we go down to the pit. So it's both at the same time and then you will see great continue to go up.
During the year as and we mined more of the Barnett open pit.
Maybe youll and on the stripping and the waste.
Yes for sure Danielle.
And Q1 basically.
I mean as you can.
And so the number I mean for the gold.
I mean, it seems like remove less tonnes, but capitalized tonnes meatballs mall. So overall and I mean, this is just different than I would say and.
But in Q1, we did move more tons.
And our budget overall.
Okay. So you just reported the operating waste, yes, exactly for the capitalized Okay. Yes, Okay. And then my last question was with regard to the.
Tomorrow care and maintenance cost could I expect that to continue through the rest of the year and and until I guess Mara and starts up.
And then R. R.
Although.
And we'll continue.
Good morning, I think that will continue through the year and.
Yes.
And not to start up at once the project gets into.
<unk> construction.
The care and maintenance get absorbed by construction overall costs.
And at that similar level run rate yes.
Okay. That's I'll, let for other people ask questions and thank you Anita.
The next question is from Mike Parkin National Bank. Please go ahead. Your line is open.
Great. Thanks, guys for taking my questions.
Just give jason maybe a bit more color in terms of what you expect and with regards to the heightened taxes and Q2 anyway, you can kind of quantified the force.
Yes sure Mike.
Yes, I think we actually guided and I think we guide on taxes pretty much every day, we get again this year I think it was.
Book and $180 million to $200 million, probably expect that towards the lower lower and is actually where we're seeing that come in.
And we had 2000 $20 million of cash taxes paid in Q1, and I kind of pencil a day call. It 40%, 40% of the range remainder in Q2 balance split Q3, Q4, So I think a pretty similar trend and that you see and other people Q2 tends to be the.
The tax season, and I know my taxes. This weekends as well so just wanted to point that out because it'll be it'll be a little bit up and in this quarter here and that we have so.
Okay.
And then just speaking on Minera, Florida, which you had a really good margin and Jack had been and as well.
Or should we kind of and expect that carryover and those kind of <unk>.
<unk> or that's just you kind of had a really strong finish to the quarter and we.
And really just kind of rely on the overall credit guidance that you gave for the year to estimate Q2 are based.
And basically are you seeing great day performance that you could see potential.
For kind of the upper end or potentially beat on those assets.
Good morning.
Mike So yes.
Yes, we maintained the guidance for both but sure both mines achieve better than plan and Q1 so.
Should continue to do quite well and Q2 us everybody probably knows we weighted our core our first half a 47% of our production and the second half 53. So if you look at Q2 Q2 will be a better quarter than Q1, and then again in Q3 and Q4, but for both mines.
And they delivered better than expectation and then you can assume day will continue to do the same and the next few quarters, but for now we'll maintain the guidance and then we will revise after Q2, if it continues to build it the same way both at extremely impressive March production.
Okay excellent and.
And then one kind of youre hearing ever increasing chatter around inflationary pressures.
And I, especially on steel prices.
We're still not seeing really management teams talk about inflationary pressures in terms of cash costs can you give some color there are you seeing.
And any kind of pressure in terms of labor costs for your consumables.
Beyond kind of normal rates or our cost inflationary pressures pretty modest at this point.
Pretty modest for Jason any color.
Yes, I know and then it might be we.
For for all of our activities and pretty much locked up for the course of this year and a semi reported we put foreign exchange hedges and this year covers off the better part of that three gold.
For two thirds of three quarters of our local Opex I guess, just that certainty on a line item basis for for cost and procurement is the same as we stretch out and the end of this year, then contracts start to rollover and maybe that flips and a bit we haven't seen it really manifest and numbers yet, but it came true part of our overall procurement activities.
We've been ramping up as we go into the third and fourth suppliers now as part.
Part of our tendering processes, so we've been able to.
And you're seeing very competitive pricing, but acknowledge what we're all seeing in terms of steel prices copper prices et cetera, but.
And now we're going to get in front of that Havent seen anything yet so not concerned as of yet Mike.
Super Thanks, and congrats and good quarter guys. Thank.
Thank you.
Thank you.
The next question is from Tanya <unk> from Scotia Capital. Please go ahead. Your line is open.
Thanks, and good morning, everyone and thank you for taking my question and Jason and then just following up on what Mike was talking about inflationary pressures and the cost structure and you mentioned youre not seeing anything at this point and can you just remind me and you.
<unk> traction and what percentage is <unk>.
And what percentage is fuel and what percentage is consumables.
Yeah, sure Tanya and to start with the fuel for.
5% across the board and then the other two categories call it.
30%, 35% plus or minus something like that.
So 30% to 35% for labor and that sort of range for all sell consumables and I think thats good.
Okay.
Thank you and then maybe just on the bigger theme that picture still I'm Danielle.
Again, just circling back on higher volume price and with COVID-19 impact around the world are you hearing anything from the jurisdictions that you operate and with respect to changes and taxation and all royalties and Brazil, Chile, Argentina.
And.
It all and lay offering.
Well there is discussion and good morning, Tanya first so theres discussion and the countries as you've probably seen and and Chile.
<unk>.
And Argentina, it seems that actually it might go the other way for for US so debt can be good and the future or for the future project, we have and the and the country and they have in Brazil.
Its pretty quiet Noel and now tool with.
And with COVID-19 and all of our operation.
I'm happy and touching wood here, there have not been really impacted by by COVID-19, but we don't really hear anything I don't know Jayson and if you. If you want to have something but so far we heard that Judy might do something.
And maybe that will impact more of that.
Copper and the big copper business than the gold business.
And so far this theres no changes.
Up to now.
Okay I'll have to ask every quarter you are now.
Thank you.
And once again.
Please press star one on your devices keypad, if you have a question.
The next question is from Fahad Tariq from credit Suisse.
Please go ahead your line is open.
Hi, Good morning, just two quick ones for me so on Jacobina phase two.
Can you just confirm that the.
And the Capex is still expected to be below 57 million and I think thats. The number you provided before.
Good morning.
Absolutely right the debt capital for phase two will be below 57.
Okay, Great and then on Cerro Moro so it sounds like there is more normalized activity, but the work for there is still some workforce availability and constraints. There can you just.
And maybe walk us through what would change. If for example, you got back to a 100% of the work for US like what would you and would it be the cost would it be access to certain parts of the mine.
Just any color there would be helpful.
Yes, we're running at about 80%, 85% of the the manpower and we're running the mill at full capacity like we mentioned the mine is getting back. So so it's basically access to more area and the development.
Underground.
And that all debt debt, so that will improve flexibility for us and in the future. When we will be able to be at full capacity at the threat and the transportation and then that's been that's been lifted and between provinces. So that's going a lot better for us, it's a lot easier for being our people and thats, increasing that's why Q1.
We saw a net improvement and then as we see it and Q2, it's going fairly well at several models. So as more people are able to travel to sites, we will get back to normal activity. So it's basically got named back more of the underground.
Underground mine that we are going to be able to do to do more than we do right now even if Q1, we and we saw great improvement we were blasting seven and eight rounds per day and one of the last year something we were at five for five or six <unk> per day. So it has improved significantly compared to last year, and and we see going forward and Q2.
Most of the and second half I would say five debt, we think we'll be back to full operation and that sale and model.
Okay, Great that's very clear thank you.
Thank you.
No further questions registered at this time I will return the call back to Mr. Ritchie.
Well. Thank you operator, thanks, everyone for joining us today, and we look forward to update you on our second quarter.
Call and July these take care and stay safe thanks, everyone Bye bye.
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