Yamana Gold's profit drops, could miss 2013 output target

Reuters

Oct 29 (Reuters) - Yamana Gold Inc reported a 28percent fall in third-quarter profit on Tuesday due to weakermetals prices and lower earnings from the company's stake in theAlumbrera mine in Argentina.

The Canadian-based gold miner did not cut its forecast for2013 production, as some analysts had expected it might. ButYamana Chairman and Chief Executive Peter Marrone said it waspossible the company could fall short of its forecast as theramp up of two new mines made it difficult to know exactly whatproduction would be.

"Give us a few more weeks and we would be able to betterdetermine whether or not we would meet the productionexpectations for 2013," he told Reuters in an interview. "I amconfident with what we have done in Q3 and how it bodes for Q4."

Yamana, which has mines in Brazil, Mexico and Argentina, cutits 2013 production forecast in July to between 1.32 million and1.37 million gold equivalent ounces (GEO) from a previousforecast of 1.44 million ounces. Yamana defines gold equivalentounces as gold plus the gold equivalent of silver using a ratioof 50:1.

In the third quarter, Yamana produced a total of 306,935gold equivalent ounces, down 1 percent on the third quarter of2012. Total production consisted of 263,830 ounces of gold and2.2 million ounces of silver.

Marrone said that while the company was striving forincreased production its main focus was reducing costs, a mantraechoed by other miners as the sector tries to recover from majorcost blow-outs at a time of weaker metals prices.

To that end, the company has no immediate plans for its $1billion in cash and undrawn credit, he said.

Yamana said by-product all-in sustaining cash costs were$730 per GEO for the third quarter, below the company's targetof $850 an ounce and helped by cost-reduction initiativesimplemented since the second quarter of this year.

Yamana reported a net profit of $43.5 million, or 6 cents ashare, in the third quarter compared with $60.0 million, or 8cents a share, in the same year-ago period.

Adjusted earnings came in at $69.5 million, or 9 cents pershare, down from $177.6 million or 24 cents a share a year ago,but slightly ahead of analysts' expectations of 8 cents a share,according to Thomson Reuters I/B/E/S.

Yamana's average realized gold price for the quarter was$1,332 per ounce, down from $1,680 an ounce a year earlier. Goldprices are down 20 percent this year, and on Tuesday werelast at $1,343.56.

Revenue in the quarter was $456.7 million, down from $611.8million in the year-age period.

Earnings from the large Alumbrera mine, in which Yamana hasa 12.5 percent stake, were hit by lower metal prices and lowersales volume of concentrate, gold and copper.

Yamana's shares ended down 4 percent at C$10.22 on theToronto Stock Exchange on Tuesday. They are down around 37percent this year, in line with other large and mid-sizedminers.

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