Yamana Gold Announces Fourth Quarter and Year End 2013 Results

TORONTO, ONTARIO--(Marketwired - Feb 18, 2014) - YAMANA GOLD INC. (YRI.TO) (AUY) ("Yamana" or "the Company") today announced its financial and operating results for the fourth quarter and year end 2013.

HIGHLIGHTS FOR THE YEAR 2013
FINANCIAL -- Cash flow trend is positive in new price environment
  • Revenue for the fourth quarter of $420.7 million and $1.84 billion for full year.
  • Adjusted earnings(1) of $273.4 million or $0.36 per share for full year after adjusting for one time and non-cash items of $719.6 million; net loss(2) for full year of $446.2 million or $0.59 per share.
  • Adjusted earnings of $36.7 million or $0.05 per share for the fourth quarter after adjusting for one time and non-cash items of $620.7 million; net loss(2) for the fourth quarter of $583.9 million or $0.78 per share.
  • Cash flows from operating activities before changes in non-cash working capital(1) of $0.22 per share for the fourth quarter or $165.3 million and $0.94 per share for the full year or $707.9 million.
  • Cash flows from operating activities after changes in non-cash working capital of $0.25 per share for the fourth quarter or $184.8 million and $0.87 per share for the full year or $653.1 million.
  • General and administrative expenses of $135.3 million, a decrease of 7% year over year.
OPERATIONAL -- Costs stabilizing at industry low levels
  • Production of 1.2 million gold equivalent ounces (GEO)(3) , at all-in sustaining cash costs ("AISC")(1,4) on a co-product basis for the full year were $947 per GEO and $814 per GEO on a by-product basis.
    • Gold production of 1.03 million ounces
    • Silver production of 8.4 million ounces
  • Gold production of 1.03 million ounces
  • Silver production of 8.4 million ounces
  • Production in the fourth quarter of 303,768 GEO at AISC of $935 per GEO on a co-product basis and $754 per GEO on a by-product basis.
  • AISC on a co-product basis for the last three quarters was $924 per GEO, exceeding expectations of the cost containment initiative announced in the second quarter.
  • Cash costs(1) for 2013 of $596 per GEO on a co-product basis and $410 per GEO after by-product credits which is consistent with previous guidance.
  • Cash costs for the fourth quarter of $647 per GEO on a co-product basis and $417 per GEO after by-product credits .
(All amounts are expressed in United States dollars unless otherwise indicated, unaudited.)
  1. Refers to a non-GAAP measure. Reconciliation of non-GAAP measures are available at www.yamana.com/2013
  2. Attributable to Yamana equity holders, after deducting non-controlling interest's share of non-recurring impairment charge.
  3. GEO assumes gold plus the gold equivalent of silver using a ratio of 50:1.
  4. Includes cash costs, sustaining capital, corporate general and administrative expense and exploration expense.
KEY STATISTICS
Three Months Ending Dec 31st Twelve Months Ending Dec 31st
(In thousands of United States Dollars except for shares and per share amounts, unaudited) 2013 2012 2013 2012
Revenue 420,663 629,505 1,842,682 2,336,762
Cost of sales excluding depletion, depreciation and amortization (239,030 ) (207,228 ) (900,789 ) (831,754 )
Depletion, depreciation and amortization (111,520 ) (100,195 ) (401,115 ) (383,738 )
General and administrative expenses (29,800 ) (39,000 ) (135,320 ) (145,856 )
Impairment of mineral properties and other assets (672,000 ) (10,896 ) (682,273 ) (67,684 )
Exploration and evaluation expenses (8,000 ) (15,100 ) (30,151 ) (58,049 )
Equity (losses)/earnings from associate (Alumbrera) (5,086 ) 18,147 (3,905 ) 50,642
Mine operating earnings 70,113 322,082 540,778 1,121,270
Net (loss)/earnings (i) (583,936 ) 169,161 (446,247 ) 442,064
Net (loss)/earnings per share (i) (0.78 ) 0.23 (0.59 ) 0.59
Adjusted earnings 36,719 197,368 273,358 694,333
Adjusted earnings per share 0.05 0.26 0.36 0.93
Cash flow from operating activities after changes in non-cash working capital 184,845 367,881 653,135 1,158,057
Per share 0.25 0.49 0.87 1.55
Cash flow from operating activities before changes in non-cash working capital 165,315 298,064 707,861 1,044,946
Per share 0.22 0.40 0.94 1.40
Average realized gold price per ounce 1,277 1,692 1,408 1,670
Average realized silver price per ounce 20.63 31.37 23.73 30.46
Average realized copper price per pound 3.37 3.54 3.28 3.60
(i) Attributable to Yamana equity holders, after deducting non-controlling interest's share of non-recurring impairment charge.
PRODUCTION SUMMARY - FINANCIAL AND OPERATING SUMMARY
Three Months Ending Dec 31st Twelve Months Ending Dec 31st
2013 2012 2013 2012
Total gold equivalent ounces - produced 303,768 322,990 1,197,559 1,201,010
Gold produced 260,187 276,373 1,029,863 1,019,969
Silver produced (millions of ounces) 2.2 2.3 8.4 9.0
Total gold equivalent ounces - sold 305,376 317,615 1,178,972 1,186,991
Total copper produced - Chapada (millions of pounds) 36.0 40.5 130.2 150.6
Total copper sold - Chapada (millions of pounds) 34.5 37.3 126.0 139.0
Three Months Ending Dec 31st Twelve Months Ending Dec 31st
(in GEO) 2013 2012 2013 2012
Co-product cash costs per gold equivalent ounce $647 $517 $596 $525
Cash cost per pound of copper - Chapada $1.53 $1.38 $1.65 $1.40
By-product cash costs per gold equivalent ounce $417 $198 $410 $230
All-in sustaining cash costs per GEO, by-product basis $754 n/a $814 n/a
All-in sustaining cash costs per GEO, co-product basis $935 n/a $947 n/a
PRODUCTION BREAKDOWN
Three Months Ending Dec 31st Twelve Months Ending Dec 31st
(in GEO) 2013 2012 2013 2012
Chapada 29,817 32,498 110,618 128,171
El Peñón 101,364 128,119 467,523 462,496
Gualcamayo 34,929 31,502 120,337 147,310
Jacobina 19,519 28,337 73,695 116,863
Minera Florida 30,513 32,797 118,590 105,679
Fazenda Brasiliero 18,270 18,251 70,079 67,130
Mercedes* 31,716 39,443 141,618 126,010
Ernesto/Pau-a-Pique** 9,707 1,274 27,571 1,274
C1 Santa Luz** 6,120 - 12,997 -
Pilar** 10,494 - 15,374 -
Alumbrera 11,319 10,769 39,157 46,077
TOTAL 303,768 322,990 1,197,559 1,201,010
* Includes commissioning production of 8,959 GEO in January of 2012, commercial production started on February 1, 2012.
** Commissioning production as the mine is not yet in commercial operation.

Financial Results for the year ended December 31, 2013

Cash flows from operating activities before changes in non-cash working capital for the year ended December 31, 2013 were $653.1 million compared to $1.16 billion for the year ended December 31, 2012. Cash flows from operating activities before changes in non-cash working capital items for the year ended December 31, 2013 were $707.9 million compared to $1.04 billion for the year ended December 31, 2012. Cash and cash equivalents as at December 31, 2013 were $220.0 million compared to $349.6 million as at December 31, 2012.

Net loss for the year 2013 was $446.2 million or $0.59 per share compared with net earnings of $442.1 million or basic and diluted earnings per share of $0.59 for the year 2012. Net loss for the year includes an impairment charge of $574.2 million, net of taxes in respect to certain mineral properties. Adjusted earnings were $273.4 million or $0.36 per share in 2013, compared with $694.3 million or $0.93 per share in 2012. Lower adjusted earnings were mainly attributed to the decline in metal prices and lower sales volume of gold, copper and silver, combined with inflationary impacts on costs and lower equity earnings from the Company's 12.5% of interest in Alumbrera.

Revenues were $1.84 billion in 2013 compared with $2.3 billion in 2012. Mine operating earnings were $540.8 million, compared with $1.12 billion in 2012. Lower revenues and mine operating earnings were due to lower metal prices and lower sales volumes of gold, copper in concentrate and silver. Higher cost of sales, including depletion, depreciation and amortization expenses, was mainly related to higher cost inflation relative to that of 2012.

The average realized gold price in 2013 was $1,408 per ounce versus $1,670 per ounce in 2012 or 16% lower. The average realized copper price was $3.28 per pound versus $3.60 per pound in 2012 or 9% lower. The average realized silver price was $23.73 per ounce compared to $30.46 per ounce in 2012 or 22% lower.

Revenues for 2013 were generated from the sale of 925,496 ounces of gold, 8.3 million ounces of silver and 126.0 million pounds of copper, excluding Alumbrera which is accounted for as an equity investment. This compares to sales, excluding Alumbrera, of 963,833 ounces of gold, 9.0 million ounces of silver and 139.0 million pounds of copper in 2012.

Cost of sales excluding depletion, depreciation and amortization for 2013 was $900.8 million compared with $831.8 million in the same period of 2012. The increase in cost of sales was mainly due to higher co-product cash costs as a result of inflationary pressures in the countries where the Company operates.

Depletion, depreciation and amortization ("DDA") expense for the year 2013 was $401.1 million, compared to $383.7 million in the same period of 2012. The increase in DDA is attributable to higher levels of depletable capital expenditures and higher cost ore bodies being depleted.

Other expenses including general and administrative, exploration and evaluation, other operating and net finance expenses were $249.8 million in the year ended December 31, 2013, compared to $289.1 million in the year ended December 31, 2012. The net decrease in other expenses is detailed below:

General and administrative expenses were $135.3 million in 2013 compared to $145.9 million in the twelve months ended December 31, 2012. General and administrative expenses have declined mainly as a result of the Company's cost containment initiative introduced in May 2013, and are expected to be maintained at these lower levels in 2014.

Exploration and evaluation expenses were $30.2 million in 2013, compared to $58.0 million incurred in 2012 as a result of the Company's reduced focus on greenfield exploration.

Other operating expenses were $78.1 million in the year compared to $99.3 million in 2012. Lower other operating expenses reflect lower impairment of investments in available-for-sale securities of $16.3 million for the year compared to $67.7 million in 2012, an $18.1 million write-off of long-term tax credits and a loss of $38.4 million incurred on the sale of non-core exploration properties with no 2012 comparative.

Net finance expenses were $6.3 million for the year compared with net finance expenses of $53.5 million in the same period of 2012. Lower net finance expense was mainly due to higher foreign exchange gains in the amount of $17.7 million compared to a foreign exchange loss of $25.9 million in the comparative period.

Equity loss from associate was $3.9 million for 2013 compared with earnings of $50.6 million in 2012. The equity loss was driven by lower revenues as a result of lower metal prices and lower sales volume of copper and gold concentrate due to lower production from Alumbrera. Cash dividends from the Company's equity investment in Alumbrera during 2013 were $27.9 million compared to $nil in 2012. During the year, the Company also received loan proceeds of $44.6 million from Alumbrera.

The Company recorded an income tax expense of $79.1 million in 2013 compared to $373.1 million in the same period of 2012. The decrease in the income tax expense is a result of lower earnings relative to the comparative year. The income tax provision for theyear ended December 31, 2013 reflects a current income tax expense of $140.6 million compared to current tax expense of $265.5 million in 2012, and a deferred income tax recovery of $61.5 million compared to deferred tax expense of $107.6 million. The effective tax rate on adjusted earnings for the year of 2013 was 30.0% compared to 25.0% for 2012.

Financial Results for the three months ended December 31, 2013

Cash flows from operating activities before changes in non-cash working capital for the quarter ended December 31, 2013 were $165.3 million, lower than the $298.1 million generated for the same period of 2012. Lower cash flows from operating activities compared to that of the same quarter in the prior year were mainly due to a decline in revenue as a result of a decline in metal prices and lower sale volumes. However, cash flows from operating activities before changes in non-cash working capital were 10% above levels in the second quarter when the Company's cost savings and containment program was initiated. Cash flows from operating activities after taking into effect changes in non-cash working capital items for the three month period ended December 31, 2013 were inflows of $184.8 million, compared to inflows of $367.9 million for the three month period ended December 31, 2012, which reflects a decrease in trade receivables.

Net loss for the quarter was $583.9 million or $0.78 per share compared with net earnings of $169.2 million or basic earnings per share of $0.23 and diluted earnings per share of $0.22 for the three months ended December 31, 2012. Net loss for the quarter includes an impairment charge of 535.8 million, net of taxes in respect to certain mineral properties. Adjusted earnings were $36.7 million or $0.05 per share in the fourth quarter, compared with $197.4 million or $0.26 per share in the fourth quarter of 2012. Lower adjusted earnings were attributed to lower realized metal prices, lower volume of metal sales, higher cash costs and an equity loss from the Company's 12.5% of interest in Alumbrera.

Revenues were $420.7 million in the fourth quarter compared with $629.5 million in the fourth quarter of 2012. Mine operating earnings were $70.1 million, compared with $322.1 million in the fourth quarter of 2012. Lower revenues and mine operating earnings were primarily due to lower metal prices in addition to lower volume of gold and copper sales. Lower metal prices accounted for 58% of the variance in revenues in comparison to the fourth quarter of 2012 representing approximately $0.16 per share in earnings. Lower cost of sales, including depletion, depreciation and amortization expenses, corresponded to lower sales volumes of gold and copper.

Revenues for the fourth quarter were generated from the sale of 218,223 ounces of gold, 2.1 million ounces of silver and 34.5 million pounds of copper, excluding Alumbrera which is accounted for as an equity investment. This compares to sales, excluding Alumbrera, of 258,978 ounces of gold, 2.3 million ounces of silver and 37.1 million pounds of copper in the three months ended December 31, 2012.

The average realized price of gold in the fourth quarter of 2013 was $1,277 per ounce compared to $1,692 per ounce in the same quarter of 2012, representing a decrease of 24%. The average realized price of copper was $3.37 per pound compared to $3.54 per pound in the fourth quarter of last year, representing a decrease of 5%, and the average realized silver price was $20.63 per ounce compared to $31.37 per ounce in the fourth quarter of 2012, representing a decrease of 33%.

Cost of sales excluding depletion, depreciation and amortization for the fourth quarter of 2013 was $239.0 million compared with $207.2 million in same quarter of 2012. Cost of sales excluding depletion, depreciation and amortization was higher compared to the same period in 2012 was mainly due to the higher co-product cash cost of production.

Depletion, depreciation and amortization ("DDA") expense for the quarter was $111.5 million, compared to $100.2 million in the fourth quarter of 2012. The increase was attributable to higher DDA at Gualcamayo from AIM which contributed to production levels in 2013 and DDA from the tailings retreatment plant at Minera Florida which also started to contribute to production in 2013.

Other expenses including of general and administrative, exploration and evaluation, other operating and net finance expenses were $62.7 million in the quarter, compared to $66.9 million in the three months ended December 31, 2012. The net decrease in other expenses is detailed below:

General and administrative expenses were $29.8 million in the fourth quarter compared to $39.0 million in the same quarter of 2012. It is expected that general and administrative expenses will continue to be maintained at current levels as a result of the cost containment initiatives undertaken by the Company.

Exploration and evaluation expenses were $8.0 million, compared to $15.1 million incurred in the fourth quarter of 2012 as a result of the Company's reduced focus on greenfield exploration relative to 2012.

Other operating expenses were $47.1 million in the quarter compared to $5.8 million in the fourth quarter of 2012. The increase in other operating expenses primarily reflects a $38.4 million loss on sale of non-core exploration properties during the quarter.

Net finance income was $22.1 million mainly related to foreign exchange gains in the quarter compared to net finance expenses of $7.0 million in the fourth quarter of 2012. Foreign exchange gains resulted from favourable exchange rates of country currencies with which the Company settled its mine operating expenses compared to foreign exchange losses in the comparative period of 2012.

Equity loss from associate was $5.1 million for the quarter compared with earnings of $50.6 million in the fourth quarter of 2012. The lower equity earnings were mainly due to lower revenues as a result of lower metal prices and lower sales volume of concentrate in addition to higher co-product cash costs from Alumbrera. Lower volume of concentrate produced was due to mining in lower grade areas. Cash dividends from the Company's equity investment in Alumbrera received in the quarter were $6.8 million compared to $nil in the fourth quarter of 2012.

The Company recorded an income tax recovery of $57.6 million in the fourth quarter of 2013 compared to tax expense of $93.2 million in the same quarter of 2012. The lower income tax expense in the fourth quarter of 2013 is attributable to lower earnings relative to that of the fourth quarter of 2012. The income tax provision for the fourth quarter of 2013 reflects a current income tax expense of $40.7 million compared to tax expense of $46.8 million in the same quarter of 2012, and a deferred income tax recovery of $98.3 million compared to tax expense of $98.9 million. During the quarter, the exchange rates of Brazilian Real and Argentinean Peso against the US Dollar increased. As a result for local purposes, a reduction of $2.4 million relating to unrealized foreign exchange gain was recorded in the deferred tax expense. The impact of these foreign exchange movements on taxes are non-cash and as such excluded from adjusted earnings. The adjusted tax rate for the fourth quarter of 2013 was 22.3% compared to 29.7% for the fourth quarter of 2012.

Operating Results for the year ended December 31, 2013

Total production for the Company was 1.20 million GEO comparable to 2012 production level of 1.20 million GEO. Total production for the year consisted of 1.03 million ounces of gold and 8.4 million ounces of silver, representing an increase of 1% in gold production and a 7% decrease in silver production over the period of 2012. Total production included the Company's attributable production from Alumbrera of 39,157 ounces of gold and production during commissioning from Ernesto/Pau-a-Pique, C1 Santa Luz and Pilar of 55,942 ounces of gold. This compares with total production in 2012 of 1.20 million GEO that consisted of 1.01 million ounces of gold and 9.0 million ounces of silver. The 2012 production also included commissioning production of 12,094 GEO from Mercedes, Minera Florida and Ernesto/Pau-a-Pique.

Commercial production for the year consisted of 1.14 million GEO compared with 1.19 million GEO produced in 2012. Commercial production for 2013 consisted of 973,921 ounces of gold and 8.38 million ounces of silver, representing a 1% increase in gold production and a 7% decrease in silver production over the commercial production of 733,910 ounces of gold and 8.93 million ounces of silver in 2012.

By-product cash costs for the year averaged $410 per GEO, compared with $230 per GEO in the same period of 2012. By-product cash costs were impacted by a lower copper credit contribution due to lower copper market prices and lower copper sales volume. The average market price for copper in 2013 was 8% lower than the average of 2012. By-product cash costs for 2013 exceeded the Company's previous guidance for a 2013 year-average of below $365 per GEO, which assumed a copper price of $4.00 per pound compared to average market price for the year of $3.32 per pound and the Company's average realized price of $3.28 per pound.

Co-product cash costs for the year were $596 per GEO compared with $525 per GEO in 2012.

Effective January 1, 2013, the Company began reporting all-in sustaining cash costs, which seeks to represent total sustaining expenditures of producing gold equivalent ounces from current operations, based on by-product and co-product cash costs, including cost components of mine sustaining capital expenditures, corporate general and administrative expense excluding stock-based compensation and exploration and evaluation expense. For 2013, all-in sustaining cash costs were $814 per GEO on a by-product basis and $947 per GEO on a co-product basis. Average all-in sustaining cash cost on a co-product basis for the last three quarters was below $925 per GEO meeting expectations of the cost containment initiative implemented in the second quarter.

Copper production for the year was 130.2 million pounds from the Chapada mine, compared with 150.6 million pounds for the same period of 2012. Chapada copper production was lower primarily as a result of expected lower copper grade and recovery rate compared with 2012. A total of 30.2 million pounds of copper produced from Alumbrera were attributable to the Company in 2013, compared to 37.4 million pounds for the year ended December 31, 2012. Total copper production for 2013 was 160.5 million pounds, compared with 188.0 million pounds in 2012. The new ore body, Corpo Sul, and the regrinding project at Chapada are expected to contribute to future gold and copper production.

Co-product cash costs per pound of copper averaged $1.65 per pound from the Chapada mine in 2013, compared with $1.40 per pound in the year ended December 31, 2012. Co-product cash costs per pound of copper for the year including the Company's interest in the Alumbrera mine were $1.75 per pound compared to $1.48 per pound for the year ended December 31, 2012.

Operating Results for the three months ended December 31, 2013

Total production for the fourth quarter of 2013 was 303,768 GEO, a decrease of 6% from the 322,990 GEO produced in the fourth quarter of 2012. Total fourth quarter production consisted of 260,187 ounces of gold and 2.2 million ounces of silver, compared to 276,373 ounces of gold and 2.3 million ounces of silver produced in the same quarter of 2012. Total production included the Company's attributable production from Alumbrera of 11,319 ounces of gold and production during commissioning from Ernesto/Pau-a-Pique, C1 Santa Luz and Pilar of 26,321 ounces of gold.

Commercial production for the fourth quarter comprised of 277,447 GEO compared with 321,716 GEO produced in the fourth quarter of 2012. Total commercial production consisted of 233,866 of gold and 2.2 million ounces of silver, compared to commercial production of 264,888 ounces of gold and 2.2 million ounces of silver in the same quarter of 2012. The decrease in gold production was mainly due to the decreased production levels from Chapada, Jacobina, El Peñón, Minera Florida and Mercedes, partly offset by increased production levels from Gualcamayo and Alumbrera.

By-product cash costs for the fourth quarter of 2013 averaged $417 per GEO, compared with $198 per GEO in the fourth quarter of 2012. By-product cash costs were impacted by a lower copper credit contribution from Chapada and Alumbrera due to the decline in the copper price and lower copper sales volume. The average market price for copper in the fourth quarter of 2013 was 9% lower than the average of the same quarter in 2012.

Co-product cash costs for the fourth quarter averaged $647 per GEO, compared to $517 per GEO for the fourth quarter of 2012. Planned lower grades at certain mines and higher input costs during the quarter relative to the same quarter of 2012 impacted costs compared to the three months ended December 31, 2012. In comparison to the third quarter of 2013, production levels at El Peñón and Mercedes were tapered to contain increasing costs and better position those mines for 2014.

All-in sustaining cash costs were $754 per GEO on a by-product basis well below the guidance level of $850 per GEO and $935 per GEO on a co-product basis for the fourth quarter of 2013 in line with the guidance level of $925 per GEO on a co-product basis.

Copper production for the quarter was 36.0 million pounds from the Chapada mine, compared with 40.5 million pounds for same quarter of 2012. Chapada copper production was lower primarily as a result of expected lower copper grade compared to the fourth quarter of 2012. A total of 9.6 million pounds of copper produced from Alumbrera were attributable to the Company, compared with 8.5 million pounds for the quarter ended December 31, 2012 mainly due to higher copper feed grade. Total copper production for the fourth quarter of 2013 was 45.6 million pounds, compared with 49.0 million pounds in the fourth quarter of 2012.

Co-product cash costs per pound of copper averaged $1.53 per pound from the Chapada mine compared to $1.38 per pound of copper in the same quarter of 2012. Co-product cash costs per pound of copper for the quarter including the Company's interest in Alumbrera were $1.58 per pound compared to $1.51 per pound for the fourth quarter of 2012.

OPERATING MINES

Charts providing a summary of mine-by-mine operating results are presented at the end of this press release.

Chapada, Brazil

Chapada produced a total of 110,618 GEO contained in concentrate in 2013 compared with 128,171 GEO contained in concentrate in 2012. The 2013 production consisted of 104,096 ounces of gold and 326,087 ounces of silver compared with 119,655 ounces of gold and 425,805 ounces of silver contained in 2012. Chapada copper production was 130.2 million pounds in 2013 compared with production of 150.6 million pounds of copper in 2012. Production for the current year was lower than 2012 as a result of anticipated lower grades and recovery rates.

By-product cash costs for 2013 were negative $1,296 per GEO, compared with negative $1,865 per GEO for 2012. Higher by-product cash costs per GEO was mainly due to the effect of lower copper sales volume and lower average copper prices in 2013 compared to 2012 resulting in a lower copper revenue by-product credit. Copper prices were 8% lower in 2013 compared to 2012.

Co-product cash costs were $400 per GEO in 2013, compared to $333 per GE...