Q1 2021 Yamana Gold Inc Earnings Call
[music].
He's done by 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 in that forward looking information, which include but are not limited to.
<unk> with respect to the estimation of mineral reserves and resources.
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.
On results as well as the management's discussion and analysis for the same period and other regulatory filings in Canada, and the United States.
I would like to remind everyone that this conference call is being recorded and will be available for replay today at 12 P. M Eastern time.
Replay information and the presentation slides accompanying this conference call and webcast are available on humana's website at Yamana Dot com.
I will 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 is Jason Leblanc, our CFO, we have also Johan Bouchard and Arrow.
On adult for them to answer questions.
I will start as always with health and safety.
Our total recordable injury rate was <unk> 42 in the first quarter of 2021.
Both absolute EBITDA and our opinion on where the first and second underground mines in Chile to be recognized with the sea of quality Award.
<unk>, 100% compliance with COVID-19 prevention and control standard by the a C H S.
As the pandemic stretches into the second.
Quarter, we continue to take every precaution to keep our people and communities safe and work closely with our community partners to support them in the fight against COVID-19.
As disclosed during the quarter, we have formally adopted a board approved climate change strategy.
Continuation of Yamana commitment to a low carbon future.
The strategy is underpinned by the adoption of a too high level target.
Our science based to a degree Celsius target compared to pre industrial levels and.
And then that's bearish on the net zero by 2050.
This is a fundamental year for this strategy during which we are that the remaining <unk>.
Our gases emission baseline and laying out the groundwork for the GE H D.
Hi, Beckman pathways required to meet our two degrees science based target.
Yeah.
Turning now to our could you on operation.
Operational highlights.
We had a strong production with just over 201000 ounces of gold led by standout performances at Canadian Mill, Arctic and Minera, Florida.
It is also worth noting that in March Jack will be achieved on all time monthly high production of 16348.
Ounces of gold.
We produced 12 million ounces of silver during the quarter underpinned by a strong performance from several model.
Geo production for the quarter was 231988 offices in line with that.
We are maintaining our 2021 guidance of 1 million gold equivalent ounces included including 632000 officers on gold.
10 million ounces of silver at an all in sustaining cost between $9 80, and 1008 per Gilles.
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 costs in the second half of the year with the fourth quarter being the highest production and lower cost quarter.
Our production result price leaders into strong financial performance net earnings during the quarter or <unk>, $54 7 million or <unk> <unk> per shares.
While adjusted net earnings were $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.
Free cash flow before dividend and debt repayment was $676 million.
Taking a closer look at the operation.
We will be number reduced 43102 ounces of gold during the quarter.
Mill throughput for the quarter was above plan with recoveries right in grade as expected.
I'll talk more about the phased expansion net triple in a moment.
Shifting to our opinion on 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 on that Delek Daniela.
Your grade zone come into production.
Canadian Arctic at an exceptional quarter for those being 89550 ounces of gold exceeding blind due to higher grades and recoveries from <unk> deeper in Nevada.
Overburden removal at Barnett was completed as planned with topographic drilling and blasting on track to be completed by the third quarter of 2021.
The transition from that uptick fit to the Barnett pit continues.
Many of our absolute EBITDA on a great first.
Quarter with production above plan, particularly during March and April.
Development at Vince well ahead of plan and exploration results continue to demonstrate extension of identified areas of mineralization and new discoveries.
Production of 35240, Geo I'd say low model was in line with plan as demand returns to more normalized activity.
Following COVID-19 related challenge in 2020.
Strong silver production of 131 million ounces was actually positive.
Our strong silver fee rates.
The mine and processing plant are currently running at full capacity.
The availability of personnel is expected to improve as we move through 2021.
On 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 in the first half with the.
<unk> returning to reserve grades.
We have a number of compelling growth opportunities on our portfolio.
That we are that we're very excited about one of these is wasn't Mac project, which has proven and probable mineral reserve of $1 8 million officers of gold supported 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 incorporate increased levels of automation in the underground mine and optimize on materials and link system to sustain a throughput of 7000 tonnes per day.
These opportunities 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 an update of the feasibility study schedule for completion in Q3 of 2021.
Canadian Arctic as we announced with our Q4 result will transition from on the open pit mine to an underground operations from 2023 to 2028 as we develop the Odyssey underground project.
<unk> on outstanding project that will extend mine life through at least 2039 with on average annual production of 545000 ounces at a cash cost of approximately 630 per ounce.
I spent a significant portion of my career working in the <unk> District.
On some of the provinces most successful gold project and from asset quality to mine plan I believe Odyssey will tuck them all.
This Odyssey will enter production in 2023 and gradually ramp up through 2028, largely offsetting the corresponding decline in open pit production as you can see here on that site.
Odyssey is expected to produce 932000 ounces during the 2023 to 2028 ramp up per unit and the proceeding. The proceed that we derived from this production will significantly reduce our capital requirement.
Assuming the gold price using the financial than it is this for the project of $15 50 per ounce the project capital.
Would be cut in half.
Furthermore, catheter low cost will be modest in any given years, allowing to fully fund construction using Canadian dollar cash on and.
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 an aggressive infill drilling program at East Goldie.
We're at 10 available rigs company that 23400 meters of drilling.
One of our drill all generated extra that result in new intercept located more than one kilometers from the eastern limit of the east Goldie mineral resources reported at the end of the year.
Yes.
This is noteworthy result, because it opens the possibility for significant extension of the East Goldie Zone stood at East. In addition, I would note that the infill drilling continues to generate excellent net result, as you can see on this slide.
Resolve them on street inconsistent grade and width throughout the mineralized zone further demonstrating the quality of the inferred resource at feasibility.
I would also note that the company's develop on exploration program for the council of property, which given the proximity of cash flow to the Canadian Arctic mining is being considered for inclusion in the Canadian Arctic General partnership exploration program.
Cash flow was a former underground mine that produced 165 million ounces of gold over 27 years before closing and $19 92.
Turning to Jacobina Jacobina phase expansion continue to advance and we'll enhance the operations already low cost structure further benefiting from benefiting margins.
Jacobina is 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 indentified opportunities to further optimize the result in recoveries achieve in season one.
As part of this initiative default on concentrate are in cycle loans were installed during the quarter and announcement comes from Thomson on trader is scheduled to be installed in Q2 with.
With an objective of optimizing gold recoveries at higher throughput rates.
We also have adopted the comprehensive life of mine setting management strategy.
Reduced surface disposition of dating with underground tailings disposal as backfill.
The company has initiated several studies to ensure long term sustainability and reviewed the environment environmental footprint of the operation.
<unk> conducted in 2020 conference at both base backfill paste backfill in hydraulic backfill or 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 pillar is <unk>.
Resulting in increasing mining recovery and reduce dilution as.
As a first step we have decided to move forward with on the hydraulic backfill plant project.
<unk> cost is estimated at $8 million.
And we are in the permitting phase right now.
Our concept from all studies underway to evaluate further opportunities for dry stack tailings facility and or a paste backfill plant in parallel to the other day backfill plan, which would provide opportunities in 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 mirror is obtained.
Update all of the permits for advanced exploration work from the local authorities, including program of community participation in social consultation to conduct field work for the <unk> study.
Kodak additional information for the environmental assessment.
Working day feel has begun with baseline and environmental study activities progressing during the quarter and drilling contractor and mobilization completed in March.
Selling campaign aimed to connect sample for the geotechnical and metallurgical studies is currently progressing as per that.
The full feasibility study and completion of the 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 in more detail.
Okay. Thank you Daniel and good morning, everyone.
Turning now to our financial performance.
Revenue in the first quarter with $422 million compared with $365 $5 million on the same period of 2020, and 11, an 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% to $258 $1 million from $202 1 million in the year earlier period.
Earnings during the quarter were six cents per share compared to <unk> a year earlier.
On an adjusted basis earnings were <unk> <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.
Spansion Aerie Capex should average between $30 million on $40 million per quarter for the balance of the year with the highest percentage attributable to the construction of an oddity, which is starting to ramp up.
Sustaining capex will be between $45 million and $50 million per quarter, so a little bit higher than what you see here in Q1.
For exploration, we spent about $15 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 continue to generate strong free cash flows and cash flow from operating activities increased to $162 million in Q1 versus $129 $4 million on the same period last year cash flow from operating activities before net change in working capital.
$183 4 million, an 11% increase over last year during the quarter, we generated free cash flow before dividends and debt repayments on the <unk>.
$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 our <unk> project.
Similar to our first half second half split 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 on 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.
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 in the second half of the year, which I just mentioned.
To recap here some some of the highlights from our first quarter of 2021.
We completed the acquisition of the <unk> and can't flow properties and began to advance the <unk> development plan. We delivered impressive technical study results from the audits the underground and announced the positive construction decision on the project.
And we formally adopted a climate change climate change strategy to transition to a low carbon future.
Looking ahead, there are several key milestones coming up in May.
Mid 2021, we expect to provide an update on our Jacobean a phase II expansion plan and release Army material issues report for 2020.
I'll be providing an update on the optimizing optimization initiatives at the <unk> project in the third quarter.
In the second half of the year, we will be providing an update on exploration results on our operations and projects.
In 2022, we will complete the Mira 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 will continue to do outstanding work.
The challenging backdrop of the global pandemic.
Embody that diversity and commitment to set him apart and that could be prouder and with that we'll be happy to take your questions operator.
Thank you.
We will now take questions from the telephone lines.
Have a question and you are using a speaker phone. Please lift your handset before making your selection.
If you have a question.
Please press star one on your day.
License key pad.
Cash with your question at any time by pressing star two.
So please press star one at this time, if you have a question there will be a brief pause while the participants register.
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.
On my question starts off with them.
The grades at El Pen your line can we expect a sequential increase in grades over the course of the year or will you be sort of add on.
At the level you're at.
In Q2, and then more rapid.
Net of hockey stick into the back half liter.
Hi, good morning on Utah.
You're absolutely right. The grade will increase on like we've mentioned a few times the <unk>.
Second half will it's about 60% of our production coming in the second half so youll see grade going up.
<unk> Q2, and then more importantly in Q3 in Q4.
Okay, and then secondly, with respect to Jacobean I noticed you guys are talking about.
That is true in phase, one and continuing to maintain the current recovery rates and higher throughput.
It seems like you've already achieved that I mean, it was 96 H and.
$68 two.
With the throughput levels.
We'll continue to 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 will be already installed but it's also at the same time to recover more by gravity and he does so we just up onto income recoveries will stay that basically this is just more gold will report to gravity instead to go through the the leaching circuit.
And then it's.
Your savings cyanide in cost by doing that but it's also going to be.
Used for the future phase II, so we won't need to install on more equipment in that area for phase II.
Okay, and then moving to Canadian Malarchuk.
So coming in at $1, one eight and that is that predominantly because you're from bottom now of the Canadian electric Ted.
Not really necessarily that you are in the Barnett grades that are coming through and the second thing on that was.
Michael on the stripping it seemed like there was a little bit of.
Maybe the numbers are not correct that it was $2 5 million of waste that was moved in the quarter on I think I was expecting a little bit more compared to the technical report from this.
I'm wondering if that number just watson reported on lease correct.
Okay I'll answer the first drawdown on that Joanne answer the stripping, but on on the grade at both so as we go down deeper in the main can you just want to take that.
Great is getting better as does less stope that we're mindful on underground but also.
Great and Barnett.
Is getting higher as we go down to the pit. So it's both at the same time and then Youll see grade continue to go up.
During the year as we mine more of the Barnett open pit.
Maybe you on on the stripping and the waste.
Sure Danielle.
In Q1 basically.
I mean as you can see the number I mean for the gold.
Thanks.
I would like to remove less tonnes, but capitalized tonnes mammals mall. So overall I mean this is just different than I would say.
But in Q1, we did move more tons than.
On our budget overall.
Okay. So you just reported the operating waste, yes, exactly further capitalizing on okay. Yes, Okay and then my last question was with regards to.
On the Mara Karen maintenance costs.
Net debt to continue through the rest of the year end.
Until I guess Morris Darko.
Great and then or are Aldo.
We will continue.
Any day will continue through the year.
Yes.
Not to the start up of once the project gets into construction.
What kind of care and maintenance get absorbed by construction overall costs.
Okay and that that similar level that night.
Yes.
Okay I'll, let some other people ask questions. Thank you.
The next question is from Mike Parkin National Bank. Please go ahead. Your line is open.
Great. Thanks, guys for taking my questions.
Can you just give Jason maybe a bit more color in terms of what you expect in with regards to the heightened taxes in Q2 anyway, you can kind of quantify of course.
Yes sure Mike.
Yes, I think we actually guided I think we guide on taxes pretty much every day, we get again this year I think it was.
Well, Ken the $180 million to $200 million, probably expect that towards the lower lower end is actually where we're seeing that come in.
We had 2000 20 million of cash taxes paid in Q1, and I kind of pencil out at call. It 40%, 40% of the range remaining here in Q2 balance split Q3, Q4, So I think a pretty similar trend that you see at other people Q2 tends to be the.
The tax season, I know if I on my taxes. This week as well. So just wanted to point that out because it'll be it'll be a little bit up in the in this quarter here that we have zone.
Okay.
And then just speaking on Minera, Florida, which you had a really good margin and Jakob Bina as well.
Or should we kind of expect that carryover at those kind of <unk>.
Rates or that's just you kind of had a really strong finish to the quarter.
Really just kind of rely on on the overall average guidance that you gave for the year to estimate Q2.
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.
We maintain the guidance for both but sure both mines achieve better than plan in Q1. So.
Should continue to do quite well in Q2 us.
Probably no.
Weighted on core our first half a 47% of our production in the second half of 53. So if you look at Q2 Q2 will be a better quarter than Q1, and then again in Q3 and Q4, but.
<unk> mines.
<unk> delivered better than expectation and then you can assume day will continue to do the same in the next few quarters, but for now we'll maintain the guidance and then we'll we'll revise after Q2 if it continues to grow at the same way both at extremely impressive margin production.
Okay excellent and then one kind of youre hearing ever increasing chatter around inflationary pressures.
Especially on steel prices, but were still not seeing really management teams talk about inflationary pressures in terms of cash cost can you give some color. There are you seeing.
Any kind of pressure in terms of labor costs or your consumables.
Beyond kind of normal rates or our cost inflationary pressures pretty modest at this point.
Pretty modest Jason any color.
Yes, I know I think Mike you we.
For all of our activities are pretty much locked up for the course of this year semi reported we put foreign exchange hedges in this year covers off the better part of that three.
Call. It two thirds to three quarters of our local Opex I guess just that certainty on a line item basis for cost and procurement is the same as we stretch out to the end of this year then contracts start to rollover, maybe that flips in a bit we haven't seen it really manifest in numbers, yet, but I think as part of our overall procurement activities.
We've been ramping up as we go into kind of the third and fourth suppliers now as part of our tendering processes. So we've been able to continue seeing very competitive pricing, but acknowledged what we're all seeing in terms of steel prices copper prices et cetera, but.
We're going on we're going to get in front of that Havent seen anything yet so no it's not a concern as of yet Mike.
Super Thanks, and congrats on a good quarter guys.
<unk>.
Thank you.
Next question is from Tanya <unk> from Scotia Capital. Please go ahead. Your line is open.
Great. Good morning, everyone and thank you for taking my question from Jason and then just following up on what Mike was talking about some inflationary pressures in the <unk>.
Cost structure, you mentioned youre not seeing anything at this point on can you just remind me in your cost structure on what percentage is labor what percentage is fuel.
What percentage is consumables.
Sure Danielle.
To start with the fuel for.
Sub 5% across the board and then the other two categories call. It.
30%, 35% plus or minus something like that.
So 30% to 35% from labor and that's on a range for also consumables I think thats good.
Okay perfect. Thank you and then maybe just on the bigger theme on picture So I'm Danielle.
Again, just circling back on higher gold price on with COVID-19 impact.
Around the World are you hearing anything from the jurisdictions that you operating with respect to changes on taxation annual royalty, Brazil, Chile, Argentina.
And.
It all and operating.
But there is discussion good morning, Daniel first so there is discussion in the countries as you've probably seen in Chile.
Judy.
In Argentina, it seems that actually it might go the other way for for US so that can be good in the future or for the future project, we have in the in the country in Brazil.
Its pretty quiet Noel and now tool with.
With COVID-19, you know all of our operation.
I'm happy I'm 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. If you if you want to have something but so far we heard that Judy you might do something.
Maybe that will impact more on the copper the big copper business than the gold business.
But so far this theres no changes.
Up to now.
Okay I'll have to ask every quarter you are now.
Thank you.
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.
Please go ahead your line is open.
Hi, Good morning, just two quick ones from me so on Jacobina phase two.
Can you just confirm that.
The Capex is still expected to be the low $57 million I think that's the number you provided before.
Good morning, Yes, absolutely right the the 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 force theres still some workforce availability on constraints. There can you just.
Maybe walk us through what would change if for example, you got back to a 100% of the work force like what would change would it be the cost would it be access to certain parts of the mine.
Just any color there would be helpful.
Yeah, we're running at about 80%, 85% of the the manpower 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 on the development.
On the ground.
That will that.
So that will improve flexibility for us in the future when we will be able to be at full capacity.
The transportation than <unk> been thats been lifted in between provinces. So that's going a lot better for us, it's a lot easier to being on our people and thats, increasing that's why Q1.
We saw a net improvement and then as we see it in Q2, it's going fairly well to what at several models.
More people on.
Are able to travel to sites, we'll get back to normal activity. So it's basically got named back more of the.
The underground mine is going to be able to do to do more than we do right now even if Q1, we we saw great improvement we were blasting seven eight rounds per day on one of the last year something we were at 545 or six <unk> per day. So it has improved significantly compared to last year and then we see going forward in Q.
You too.
Mostly in second half I would say that we think will be back to full operation net sale of normal.
Okay, Great that's very clear thank you.
Thank you.
There are 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 in July these take care and stay safe thanks, everyone Bye bye.
Thank you. The conference has now ended please disconnect your lines at this time.
Thank you for your participation.