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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 40-F
(Check One) | | | | | |
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☐ | Registration statement pursuant to Section 12 of the Securities Exchange Act of 1934 |
or
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| ☒ | Annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 |
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For fiscal year ended: December 31, 2021 | Commission File number: 1-31880 | |
YAMANA GOLD INC.
(Exact name of registrant as specified in its charter) | | | | | | | | |
| | |
Canada (Province or Other Jurisdiction of Incorporation or Organization) | 1041 (Primary Standard Industrial Classification Code Number, if applicable) | Not Applicable (I.R.S. Employer Identification Number, if applicable) |
| | Royal Bank Plaza, North Tower 200 Bay Street, Suite 2200 Toronto, Ontario M5J 2J3 (416) 815 0220 | |
| (Address and Telephone Number of Registrant’s principal executive office) |
| | Meridian Gold Company 4635 Longly Lane Unit 110-4A Reno, Nevada 89502 (775) 850-3700 | |
| (Name, Address and Telephone Number of Agent for Service in the United States) |
Securities registered or to be registered pursuant to Section 12(b) of the Act: | | | | | | | | |
| | |
| Title of Each Class | Trading Symbol(s) | Name of Each Exchange
On Which Registered |
| Common Shares, no par value | AUY | New York Stock Exchange |
Securities registered or to be registered pursuant to Section 12(g) of the Act: none
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: none
For annual reports, indicate by check mark the information filed with this form:
☒ Annual Information Form ☒ Audited Annual Financial Statements
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report: 959,805,965
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements in the past 90 days.
Yes x No o
Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes x No o
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 12b-2 of the Exchange Act.
Emerging growth company ☐
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
| | | | | | | | |
| Auditor Firm Id: | Auditor Name: | Auditor Location: |
| 1208 | Deloitte LLP | Toronto, Canada |
FORWARD-LOOKING STATEMENTS
This annual report on Form 40-F and the exhibits attached hereto contain “forward-looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995 and “forward-looking information” under applicable Canadian and United Kingdom securities legislation. Except for statements of historical fact relating to the Company (as defined herein), information contained herein constitutes forward-looking statements, including, but not limited to, any information as to the Company’s strategy, plans or future financial or operating performance. Forward-looking statements are characterized by words such as “plan”, “expect”, “budget”, “target”, “project”, “intend”, “believe”, “anticipate”, “estimate” and other similar words or negative versions thereof, or statements that certain events or conditions “may”, “will”, “should”, “would” or “could” occur. In particular, forward looking information included in this annual report on Form 40-F and the documents incorporated herein includes, without limitation, statements with respect to: 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 Company’s plans to continue building on its base of significant gold and silver production, development-stage properties, exploration properties and land positions in Canada, Brazil, Chile, and Argentina through 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 expectations relating to the performance of its mineral properties; the estimation of Mineral Reserves (as defined below) and Mineral Resources (as defined below); the timing and amount of estimated future production; the estimation of the life of mine of the Company’s projects; the timing and amount of estimated future capital and operating costs; the costs and timing of exploration and development activities; the Company’s expectation regarding the timing of feasibility or pre-feasibility studies, conceptual studies or environmental impact assessments; expectations regarding the effects of COVID-19; the impact of proposed optimizations at the Company’s projects; the effect of government regulations (or changes thereto) with respect to the restrictions on production, export controls, income taxes, expropriation of property, repatriation of profits, environmental legislation, land use, water use, land claims of local people, mine safety and receipt of necessary permits; the Company’s investments and development of infrastructure improvements to enhance community relations in the locations where it operates and the further development of the Company’s social responsibility programs; future purchases of common shares of the Company under its NCIB (as defined herein); the payment of any future dividends; expectations regarding HSSD (as defined herein) performance; and the Company’s goals and targets set out in its climate strategy.
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 impact of general domestic and foreign business, economic and political 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, copper, silver and zinc), currency exchange rates (such as the Brazilian real, the Chilean peso, the Argentine peso, and the Canadian dollar versus the United States dollar), interest rates, possible variations in ore grade or recovery rates, changes in the Company’s hedging program, changes in accounting policies, changes in Mineral Reserves (as defined herein) and Mineral Resources (as defined herein), risks related to acquisitions and/or dispositions, changes in project parameters as plans continue to be refined, changes in project development, construction, production and commissioning time frames, higher prices for fuel, steel, power, labor and other consumables contributing to higher costs, risks associated with infectious diseases, including COVID-19, nature and climatic condition risks, risks related to joint venture operations, the possibility of project cost overruns or unanticipated costs and expenses, potential impairment charges, and general risks of the mining industry, including but not limited to, 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, environmental and 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, title disputes or claims, limitations on insurance coverage, timing and possible outcome of pending and outstanding litigation and labor disputes, risks related to enforcing legal rights in foreign jurisdictions, vulnerability of information systems including cyber attacks and risks related to global financial conditions, as well as those risk factors discussed or referred in the Company's annual Management's Discussion and Analysis and Annual Information Form for the year ended December 31, 2021 included as exhibits to this annual report on Form 40-F. 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.
CURRENCY
Unless otherwise indicated, all dollar amounts in this annual report on Form 40-F are in United States dollars. The exchange rate of United States dollars into Canadian dollars on December 31, 2021, based upon the daily average exchange rate as reported by the Bank of Canada, was U.S.$1.00 = CDN$1.2678.
RESOURCE AND RESERVE ESTIMATES
This annual report on Form 40-F 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 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 annual report on Form 40-F, the documents attached hereto and the documents incorporated by reference herein, may not be comparable to similar information made public by U.S. companies reporting pursuant to SEC disclosure requirements.
DISCLOSURE CONTROLS AND PROCEDURES
A. Evaluation of disclosure controls and procedures. Disclosure controls and procedures are designed to provide reasonable assurance that (i) information required to be disclosed by the Company in reports that it files or submits to the Commission under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in applicable rules and forms and (ii) material information required to be disclosed in the Company's reports filed under the Exchange Act is accumulated and communicated to the Company's management, including its President and Chief Executive Officer (“CEO”) and its Senior Vice President, Finance and Chief Financial Officer (“CFO”), as appropriate, to allow for timely decisions regarding required disclosure.
At the end of the period covered by this report, an evaluation was carried out under the supervision of and with the participation of the Company's management, including the CEO and CFO, of the effectiveness of the design and operation of the Company's disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Exchange Act). The evaluation included documentation review, enquiries and other procedures considered by management to be appropriate in the circumstances. Based on that evaluation, the Company's CEO and CFO have concluded that, as of the end of the period covered by this report, the Company's disclosure controls and procedures were effective.
B. Management's report on internal control over financial reporting. The Company's management is responsible for establishing and maintaining effective internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. The Company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of the Company's financial reporting and the preparation of financial statements for external purposes in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect all misstatements. 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.
Management assessed the effectiveness of the Company's internal control over financial reporting as of December 31, 2021, based on the criteria set forth in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. This evaluation included review of the documentation of controls, evaluation of the design effectiveness of controls, testing of the operating effectiveness of controls and a conclusion on this evaluation. Based on this evaluation, management has concluded that the Company's internal control over financial reporting was effective as of December 31, 2021.
The Company's independent registered public accounting firm, Deloitte LLP, have audited the consolidated financial statements included in this annual report and have issued a report dated February 17, 2022 on the Company's internal control over financial reporting based on the criteria set forth in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
C. Attestation report of the registered public accounting firm. Deloitte LLP's attestation report, “Report of Independent Registered Public Accounting Firm”, accompanies the Company's Audited Consolidated Financial Statements for the fiscal year ended December 31, 2021, dated as at February 17, 2022, which are attached hereto as Exhibit 99.3.
D. Changes in internal control over financial reporting. During the period covered by this annual report on Form 40-F, no change occurred 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.
The Company's management, including the CEO and CFO, does not expect that its disclosure controls and procedures or internal controls and procedures will prevent all error and all fraud. A control system, 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, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been 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 management override of the control. The design of any system 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; over time, control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
NOTICES PURSUANT TO REGULATION BTR
The Company was not required by Rule 104 of Regulation BTR to send any notices to any of its directors or executive officers during the fiscal year ended December 31, 2021.
AUDIT COMMITTEE FINANCIAL EXPERT
The Company's board of directors (the “Board”) has determined that it has at least one audit committee financial expert serving on its audit committee. The Board has determined that Mr. Richard Graff is an audit committee financial expert and is independent, as that term is defined by the Exchange Act and the New York Stock Exchange's corporate governance standards applicable to the Company.
The Commission has indicated that the designation of a person as an audit committee financial expert does not make such person an “expert” for any purpose, impose on such person any duties, obligations or liability that are greater than those imposed on such person as a member of the audit committee and the Board in the absence of such designation and does not affect the duties, obligations or liability of any other member of the audit committee or Board.
CODE OF ETHICS
The Board has adopted a written code of ethics entitled, “Code of Conduct” (as amended from time to time, the “Code”), by which it and all officers and employees of the Company, including the Company's principal executive officer, principal financial officer and principal accounting officer or controller, abide. There were no waivers granted in respect of the Code during the fiscal year ended December 31, 2021. The Code is posted on the Company's website at www.yamana.com. A copy of the Code may also be obtained by contacting the Corporate Secretary of the Company at the address or telephone number indicated on the cover page of this annual report on Form 40-F. If there is an amendment to the Code, or if a waiver of the Code is granted to any of Company's principal executive officer, principal financial officer, principal accounting officer or controller, the Company intends to disclose any such amendment or waiver by posting such information on the Company's website. Unless and to the extent specifically referred to herein, the information on the Company's website shall not be deemed to be incorporated by reference in
this annual report on Form 40-F.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
Deloitte LLP acted as the Company's independent registered public accounting firm for the fiscal year ended December 31, 2021. See page [110] of the Company's Annual Information Form, which is attached hereto as Exhibit 99.1, for the total amount billed to the Company by Deloitte LLP for services performed in the last two fiscal years by category of service (for audit fees, audit-related fees, tax fees and all other fees) in Canadian dollars.
AUDIT COMMITTEE PRE-APPROVAL POLICIES AND PROCEDURES
See page [109] of the Company's Annual Information Form, which is attached hereto as Exhibit 99.1. No audit-related fees, tax fees or other non-audit fees were approved by the Audit Committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
OFF-BALANCE SHEET ARRANGEMENTS
The Company was not a party to any off-balance-sheet arrangements that have, or are reasonably likely to have, a material current or future effect on the financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, cash requirements or capital resources of the Company.
TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS
The disclosure provided under Section 8, “Financial Condition and Liquidity - Contractual Obligations and Commitments”, on page 60 of Exhibit 99.2, “Management's Discussion and Analysis”, is incorporated by reference herein.
IDENTIFICATION OF THE AUDIT COMMITTEE
The Company's Board of Directors has a separately designated standing Audit Committee established in accordance with section 3(a)(58)(A) of the Exchange Act and satisfies the requirements of Exchange Act Rule 10A-3. The Company's Audit Committee is comprised of Richard Graff, John Begeman and Jane Sadowsky, all of whom, in the opinion of the Company's Board of Directors, are independent (as determined under Rule 10A-3 of the Exchange Act and the New York Stock Exchange Listed Company Manual) and are financially literate.
CORPORATE GOVERNANCE PRACTICES
There are certain differences between the corporate governance practices applicable to the Company and those applicable to U.S. companies under NYSE listing standards. A summary of the significant differences can be found on the Company's website at www.yamana.com.
INCORPORATION BY REFERENCE
The Company's annual report on Form 40-F for the Year Ended December 31, 2021 is incorporated by reference into the Registration Statements on Form S-8 (Commission File No. 333-159047, File No. 333-148048 and File No. 333-145300), Form F-3D (Commission File No. 333-217016) and on Form F-10 (Commission File No. 333-237728) of the Company.
UNDERTAKING AND CONSENT TO
SERVICE OF PROCESS
A. Undertaking
Yamana Gold Inc. undertakes to make available, in person or by telephone, representatives to respond to inquiries made by the Commission staff, and to furnish promptly, when requested to do so by the Commission staff, information relating to: the securities in relation to which the obligation to file an annual report on Form 40-F arises; or transactions in said securities.
B. Consent to Service of Process
The Company has filed an Appointment of Agent for Service of Process and Undertaking on Form F-X with respect to the class of securities in relation to which the obligation to file this Form 40-F arises.
SIGNATURES
Pursuant to the requirements of the Exchange Act, Yamana Gold Inc. certifies that it meets all of the requirements for filing on Form 40-F and has duly caused this annual report to be signed on its behalf by the undersigned, thereto duly authorized.
Date: March 28, 2022
| | | | | |
| |
| | |
| | YAMANA GOLD INC. |
| By: | /s/ Daniel Racine |
| | Name: Daniel Racine |
| | Title: President and Chief Executive Officer |
EXHIBIT INDEX | | | | | |
| Exhibit No. | Description |
| | |
| Annual Information Form for the year ended December 31, 2021 |
| Management’s Discussion and Analysis for the year ended December 31, 2021 |
| Audited annual financial statements for the fiscal year ended December 31, 2021 |
| Certificate of Daniel Racine required by Rule 13a-14(a) or Rule 15d-14(a), pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
| Certificate of Jason LeBlanc required by Rule 13a-14(a) or Rule 15d-14(a), pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
| Certificate of Daniel Racine pursuant to 18 U.S.C. Section 1350, as enacted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
| Certificate of Jason LeBlanc pursuant to 18 U.S.C. Section 1350, as enacted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
| Consent of Deloitte LLP, Independent Registered Public Accounting Firm |
| Consent of Eduardo de Souza Soares, MAusIMM CP (Min), |
| Consent of Renan Garcia Lopes, MAusIMM CP (Geo) |
| Consent of Henry Marsden, P.Geo. |
| Consent of Carlos Iturralde, P.Eng. |
| Consent of Luis Vasquez, P.Eng. |
| Consent of Sébastien Bernier, P.Geo, |
| Consent of Sergio Castro, Registered Member, Chilean Mining Commission |
| Consent of Marco Velásquez Corrales, Registered Member, Chilean Mining Commission |
| Consent of Pascal Lehouiller, P.Geo. |
| Consent of Guy Gagnon, Eng. |
| Consent of Sylvie Lampron, Eng. |
| Consent of Nicole Houle, P.Geo |
| Consent of François Bouchard, P.Geo. |
| Consent of Jimmy Avendaño Gonzalez, Registered Member of the Chilean Mining Commission |
| Luiz Carlos Damasceno dos Santos, MAusIMM CP (Geo) |
| 101 | Interactive Data File (formatted as Inline XBRL). |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
YAMANA GOLD INC.
ANNUAL INFORMATION FORM
FOR THE FINANCIAL YEAR ENDED DECEMBER 31, 2021
March 28, 2022
200 Bay Street, Suite 2200
Royal Bank Plaza, North Tower
Toronto, Ontario M5J 2J3
| | | | | | | | |
| | Page |
| YAMANA GOLD INC. | |
| ITEM 1 | INTRODUCTORY NOTES | 3 |
| ITEM 2 | CORPORATE STRUCTURE | 5 |
| ITEM 3 | GENERAL DEVELOPMENT OF THE BUSINESS | 6 |
| Overview of Business | 6 |
| History | 6 |
| ITEM 4 | DESCRIPTION OF THE BUSINESS | 10 |
| Principal Products | 11 |
| Competitive Conditions | 11 |
| Employees | 11 |
| Domestic and Foreign Operations | 11 |
| Approach to Health, Safety, Environment and Community Excellence | 11 |
| Other Disclosure Relating to Ontario Securities Commission Requirements for Companies Operating in Emerging Markets | 18 |
| Risks of the Business | 20 |
| Technical Information | 37 |
| Mineral Projects | 40 |
| Summary of Mineral Reserve and Mineral Resource Estimates | 40 |
| Material Producing Mines | 46 |
| Jacobina Mining Complex | 46 |
| El Peñón Mine | 55 |
| Canadian Malartic Mine | 65 |
| Other Producing Mines | 77 |
| Cerro Moro Mine | 77 |
| Minera Florida Mine | 87 |
| Development Projects | 90 |
| Wasamac | 90 |
| MARA Project | 92 |
| Suyai Project | 94 |
| Monument Bay | 95 |
| ITEM 5 | DIVIDENDS | 95 |
| ITEM 6 | DESCRIPTION OF CAPITAL STRUCTURE | 96 |
| ITEM 7 | MARKET FOR SECURITIES | 96 |
| ITEM 8 | ESCROWED SECURITIES AND SECURITIES SUBJECT TO CONTRACTUAL RESTRICTION ON TRANSFER | 97 |
| ITEM 9 | DIRECTORS AND OFFICERS | 97 |
| ITEM 10 | PROMOTER | 103 |
| ITEM 11 | LEGAL PROCEEDINGS AND REGULATORY ACTIONS | 103 |
| ITEM 12 | INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS | 103 |
| ITEM 13 | TRANSFER AGENTS AND REGISTRAR | 104 |
| ITEM 14 | MATERIAL CONTRACTS | 104 |
| ITEM 15 | AUDIT COMMITTEE | 104 |
| ITEM 16 | INTERESTS OF EXPERTS | 106 |
| ITEM 17 | ADDITIONAL INFORMATION | 107 |
| SCHEDULE “A” CHARTER OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS | 108 |
ITEM 1
INTRODUCTORY NOTES
Cautionary Note Regarding Forward-Looking Statements
This annual information form contains “forward-looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995 and “forward-looking information” under applicable Canadian and United Kingdom securities legislation. Except for statements of historical fact relating to the Company (as defined herein), information contained herein constitutes forward-looking statements, including, but not limited to, any information as to the Company’s strategy, plans or future financial or operating performance. Forward-looking statements are characterized by words such as “plan”, “expect”, “budget”, “target”, “project”, “intend”, “believe”, “anticipate”, “estimate” and other similar words or negative versions thereof, or statements that certain events or conditions “may”, “will”, “should”, “would” or “could” occur. In particular, forward looking information included in this annual information form includes, without limitation, statements with respect to:
•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 Company’s plans to continue building on its base of significant gold and silver production, development-stage properties, exploration properties and land positions in Canada, Brazil, Chile, and Argentina through 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;
•Yamana’s expectations relating to the performance of its mineral properties;
•the estimation of Mineral Reserves (as defined herein) and Mineral Resources (as defined herein);
•the timing and amount of estimated future production;
•the estimation of the life of mine of Yamana’s projects;
•the timing and amount of estimated future capital and operating costs;
•the costs and timing of exploration and development activities;
•the Company’s expectation regarding the timing of feasibility or pre-feasibility studies, conceptual studies or environmental impact assessments;
•expectations regarding the effects of COVID-19;
•the impact of proposed optimizations at the Company’s projects;
•the effect of government regulations (or changes thereto) with respect to restrictions on production, export controls, income taxes, expropriation of property, repatriation of profits, environmental legislation, land use, water use, land claims of local people, mine safety and receipt of necessary permits;
•the Company’s investments and development of infrastructure improvements to enhance community relations in the locations where it operates and the further development of the Company’s social responsibility programs;
•future purchases of common shares of the Company under its NCIB (as defined herein);
•the payment of any future dividends;
•expectations regarding HSSD (as defined herein) performance; and
•the Company’s goals and targets set out in its climate strategy.
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 impact of general domestic and foreign business, economic and political 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, copper, silver and zinc), currency exchange rates (such as the Brazilian real, the Chilean peso, the Argentine peso, and the Canadian dollar versus the United States dollar), interest rates, possible variations in ore grade or recovery rates, changes in the Company’s hedging program, changes in accounting policies, changes in Mineral Reserves (as defined herein) and Mineral Resources (as defined herein), risks related to acquisitions and/or dispositions, changes in project parameters as plans continue to be refined, changes in project development, construction, production and commissioning time frames, higher prices for fuel, steel, power, labour and other consumables contributing to higher costs, risks associated with infectious diseases, including COVID-19, nature and climatic condition risks, risks related to joint venture operations, the possibility of project cost overruns or unanticipated costs and expenses, potential impairment charges, and general risks of the mining industry, including but not limited to, 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, environmental and 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, 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, vulnerability of information systems including cyber attacks and risks related to global financial conditions, as well as those risk factors discussed or referred to herein and in the Company’s annual management’s discussion and analysis filed with the securities regulatory authorities in all provinces of Canada and available under the Company’s SEDAR profile at www.sedar.com. 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 Note to United States Investors Concerning Estimates of Mineral Reserves and Mineral Resources
This annual information form 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 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 annual information form, the documents attached hereto and the documents incorporated by reference herein, may not be comparable to similar information made public by U.S. companies reporting pursuant to SEC disclosure requirements.
Currency Presentation and Exchange Rate Information
This annual information form contains references to both United States dollars and Canadian dollars. All dollar amounts referenced, unless otherwise indicated, are expressed in United States dollars. Canadian dollars are referred to as “Canadian dollars” or “C$”, Brazilian reais are referred to as “R$”, Chilean pesos are referred to as “CLP” and Argentine pesos are referred to as “AR$”.
The closing, high, low and average exchange rates for the United States dollar in terms of Canadian dollars for the years ended December 31, 2021, December 31, 2020, December 31, 2019 and December 31, 2018 based on the closing rate reported by the Bank of Canada, were as follows:
| | | | | | | | | | | | | | |
| Year-Ended December 31 |
| 2021 | 2020 | 2019 | 2018 |
Closing | C$1.2678 | C$1.2732 | C$1.2988 | C$1.3642 |
High | C$1.2942 | C$1.4496 | C$1.3600 | C$1.3642 |
Low | C$1.2040 | C$1.2718 | C$1.2988 | C$1.2288 |
Average(1) | C$1.2535 | C$1.3415 | C$1.3269 | C$1.2957 |
(1)Calculated as an average of the daily close rates for each period.
On March 25, 2022, the Bank of Canada daily rate of exchange was $1.00 = C$1.2502 or C$1.00 = $0.7999.
ITEM 2
CORPORATE STRUCTURE
Yamana Gold Inc. (the “Company” or “Yamana”) was formed on July 30, 2003 when, pursuant to Articles of Amendment, the name of the Company was changed from Yamana Resources Inc. to its current name and on August 12, 2003, pursuant to a reverse stock split, the issued and outstanding common shares of the Company were consolidated on the basis of one new common share for 27.86 existing common shares. Prior to these corporate actions, and a concurrent reverse takeover of certain assets, the Company was an inactive shell corporation whose previous history was mostly limited to exploration activities. In an effort to streamline its corporate structure, effective January 1, 2020, the Company completed a vertical short-form amalgamation with its wholly-owned subsidiary, Yamana Malartic Canada Inc., pursuant to Articles of Amalgamation and through which the securities of the Company were not affected. The Company is continued under the Canada Business Corporations Act by Articles of Continuance, dated February 7, 1995. On February 7, 2001, pursuant to Articles of Amendment, a maximum of 8,000,000 first preference shares, Series 1 was authorized none of which are outstanding.
The Company’s head office is located at 200 Bay Street, Royal Bank Plaza, North Tower, Suite 2200, Toronto, Ontario M5J 2J3 and its registered office is located at 2100 Scotia Plaza, 40 King Street West, Toronto, Ontario M5H 3C2.
The corporate chart that follows on the next page illustrates the Company’s principal subsidiaries (collectively, the “Subsidiaries”) as of March 28, 2022, together with the jurisdiction of incorporation of each company and the percentage of voting securities beneficially owned, controlled or directed, directly or indirectly, by the Company. As used in this annual information form, except as otherwise required by the context, reference to the “Company” or “Yamana” means Yamana Gold Inc. and the Subsidiaries.
ITEM 3
GENERAL DEVELOPMENT OF THE BUSINESS
Overview of Business
Yamana 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’s portfolio includes five operating gold mines and various advanced and near development-stage projects and exploration properties in Canada, Brazil, Chile, and Argentina. Yamana operates its mines and projects under common corporate oversight. Within this structure Jacobina, El Peñón and Canadian Malartic are the Company’s material producing mines and among the largest contributors to operating cash flow. Set out below is a list of Yamana’s main properties and mines:
Material Producing Mines
•Jacobina Mining Complex (Brazil)
•El Peñón Mine (Chile)
•Canadian Malartic Mine (Canada) – 50% indirect interest
Other Producing Mines
•Cerro Moro Mine (Argentina)
•Minera Florida Mine (Chile)
Additional Projects
•MARA Project (Argentina) – 56.25% indirect interest
•Suyai Project (Argentina)
•Monument Bay Project (Canada)
•Wasamac Project (Canada)
History
Over the three most recently completed financial years, the Company continued to execute against its strategic priorities with a particular focus on upgrading and right-sizing the portfolio of assets and enhancing the Company’s financial flexibility. These remain core values for the Company and of strategic importance. The following events contributed materially to the development of the Company’s business.
Senior Notes
On August 6, 2021, the Company announced that it had completed an offering of $500 million aggregate principal amount of 2.630% Senior Notes due August 15, 2031 (the “Notes”). The Notes are unsecured, senior obligations of Yamana unconditionally guaranteed by certain of Yamana’s subsidiaries that are also guarantors under Yamana’s credit facility. Yamana used the net proceeds from the offering of the Notes, together with cash on hand, to fund the redemptions of its existing notes which included its 4.76% Series C Senior Notes due 2022, its 4.91% Series D Senior Notes due 2024, its 4.78% Series B Senior Notes due 2023 and its 4.950% Senior Notes due 2024 thereby reducing overall outstanding debt, reducing overall interest and carrying charges on the Company’s outstanding debt and extending outstanding debt maturities.
Normal Course Issuer Bid
On July 29, 2021, the Company announced its intention to commence a normal-course issuer bid (“NCIB”) to purchase up to 48,321,676 common shares of the Company, representing up to 5% of the Company’s then-current issued and outstanding common shares, in open market transactions through the facilities of the Toronto Stock Exchange (“TSX”), the New York Stock Exchange (the “NYSE”) and alternative Canadian trading systems. The Company is permitted to make purchases under the NCIB over a period of twelve months commencing on August 4, 2021, and the NCIB will expire on August 3, 2022.
In accordance with TSX rules, any daily purchases under the NCIB on the TSX are limited to a maximum of 654,276 common shares, which represents 25% of the average daily trading volume of the common shares on the TSX for the six months ended June 30, 2021, and, in addition, Yamana will not acquire per day on the NYSE more than 25% of the average daily trading volume for the four calendar weeks preceding the date of purchase, subject, in both cases, to certain exceptions for block purchases. The actual number of common shares that may be purchased and the timing of such purchases will be determined by the Company. Decisions regarding purchases will be based on market conditions, share price, best use of available cash, and other factors. Any common shares that are purchased under the NCIB will be cancelled.
As of March 25, 2022, the Company has repurchased 6,672,628 common shares under the NCIB for approximately C$35.6 million.
Dividend Policy
On July 29, 2021, the Company announced a further 15% increase in its annual dividend to $0.12 per share effective for the third quarter of 2021. This is the sixth dividend increase since the second quarter of 2019 representing a cumulative increase of 500%.
The Company considers dividends an important component of returns on investment for shareholders, and previously indicated that its policy is that as its cash flows and cash balances increase, as its balance sheet continues to improve, and as debt service decreases, the Company would evaluate further increases of its dividend. While the Company has relied over the last several years on maintaining certain levels of cash on hand to secure payment of the dividend independently of changes in gold price, with cash flow improvements, certainty of modest and manageable annual capital expenses for its growth projects and completion of various definitive studies relating to those projects, the Company has concluded that it is able to fund its dividend at current or substantially lower gold prices.
The Company will continue to engage regularly with investors to ensure it is maintaining an optimal balance between the dividend amount payable and dividend sustainability, along with other methods of return of capital to shareholders, such as stock buybacks. Following the Company's initial capital spending and development phase from 2003 to 2006, the Company has consistently paid dividends since 2007, and dividends have aggregated to over $1 billion paid over 14 years. For additional information see “Dividends”.
Acquisition of Wasamac Project
On January 21, 2021, the Company completed its acquisition of the Wasamac project and the Camflo property and mill through the acquisition of all of the outstanding shares of Monarch Gold Corporation (“Monarch”) not previously owned by the Company pursuant to a plan of arrangement. In connection with the plan of arrangement, Monarch completed a spin-out to its shareholders, through a newly-formed company, Monarch Mining Corporation, of its other mineral properties and certain other assets and liabilities of Monarch (collectively, the “Monarch Transaction”).
Under the terms of the Monarch Transaction, Monarch shareholders received the following per Monarch share: 0.0376 of a Yamana common share; C$0.192 in cash from Yamana; and 0.2 of a share of Monarch Mining Corporation. Yamana issued 11,608,195 common shares, 383,764 replacement warrants and paid approximately $46.9 million in cash, for total consideration of approximately $108.6 million. During the second quarter of 2021, the Camflo property was sold to Canadian Malartic GP.
Additionally, on June 21, 2021, the Company entered into a definitive purchase agreement to acquire the Francoeur, Arntfield and Lac Fortune properties from Globex Mining Enterprises Inc (“Globex”). The Francoeur property is located adjacent to Yamana’s Wasamac project and covers the western extension of the Wasa shear zone. This acquisition adds six kilometres of highly prospective strike length for exploration efforts to increase overall resources adjacent to a major asset and to extend the Wasamac mine life.
Subsequently, on July 19, 2021, the Company announced its decision to advance the Wasamac project to production based on the results of several studies which updated the baseline technical and financial aspects of Wasamac. The results from all studies were consistent with the Company’s conclusions in its due diligence reviews relating to the purchase of Wasamac and, in some cases, are better than the conclusions from those reviews. The addition of the Wasamac project to Yamana’s portfolio further solidifies the Company’s long-term growth profile with a top-tier gold project in Quebec’s Abitibi region, a prolific mining district where Yamana has deep operational and
technical expertise and experience. For additional information see “Description of the Business – Mineral Projects – Development Projects – Wasamac Project”.
Positive Construction Decision for Odyssey Underground Project
On February 11, 2021, the Company announced the approval of construction of the Odyssey underground project at Canadian Malartic. The decision reflected the positive technical study results and confirmed the Odyssey project as the next phase in the evolution of mining at Canadian Malartic. The construction decision serves as a milestone in the ongoing evolution of the Canadian Malartic operation and is the culmination of several years of exploration, Mineral Resource development, and technical evaluation which outline the potential for a significant increase in Mineral Resources and a mine life extension to at least 2039. For additional information see “Description of the Business – Mineral Projects – Material Producing Mines – Canadian Malartic Mine”.
Agreement for Integration of Agua Rica and Alumbrera
On March 7, 2019, the Company announced that it had signed an integration agreement with Glencore International AG (“Glencore”) and Newmont Corporation (then Goldcorp Inc.) (“Newmont”) pursuant to which the Agua Rica Project would be developed and operated using the existing infrastructure and facilities of Minera Alumbrera Limited (“Alumbrera”), which owns the Alumbrera Mine. On December 17, 2020, the Company completed the integration of the Agua Rica Project with the Alumbrera Mine and Alumbrera plant and infrastructure (the “MARA Project”).
The integration creates synergies and results in a de-risked project with a smaller environmental footprint and improved efficiencies, creating one of the lowest capital intensity projects in the world as measured by pound of copper produced and in-situ copper mineral reserves, with further potential for optimization and upside.
The Company, Glencore and Newmont have created a new joint venture (the “MARA Joint Venture”) pursuant to which Yamana holds a controlling interest of 56.25%, Glencore holds a 25.00% interest, and Newmont holds an 18.75% interest. The Company has been appointed as the manager of the MARA Joint Venture and will continue to lead the engagement with local, provincial, and national stakeholders, completion of the Feasibility Study and Environmental and Social Impact Assessment (“ESIA”) for the MARA Project, and generally lead the project to development and operation. Among other governance committees, a MARA Joint Venture Technical Committee was formalized, comprised of representatives of the three shareholder companies, to provide oversight and guidance. Since integration, the parties advanced studies to optimize and de-risk the integrated project and now are advancing a Feasibility Study and ESIA, both expected to be completed in 2022. For additional information see “Description of the Business – Mineral Projects – Development Projects – MARA Project”.
London Stock Exchange Listing
On October 13, 2020, the Company completed its listing and began trading on the Main Market of the London Stock Exchange ("LSE") under the ticker symbol “AUY”. The Company considered a number of factors in pursuing the LSE listing. In particular, the Company noted that the LSE currently has a limited number of sizeable pure-play gold producers with annual production of 1 million ounces or more, all of which comes from mines in established mining jurisdictions in the Americas with supportive infrastructure and protocols relating to mining.
Sale of Equinox Gold Shares and Warrants
On April 15, 2020, the Company announced that it had completed a sale transaction with Stifel GMP and Cormark Securities Inc. (collectively, the “Dealers”) pursuant to which the Company sold 12,000,000 units (each, a “Unit”) at a price of C$10.00 per Unit. Each Unit consisted of one common share of Equinox Gold Inc. (“Equinox”) owned by Yamana and one-half of a common share purchase warrant of Yamana, for gross proceeds to Yamana of C$120.0 million. Each warrant entitled the holder thereof to acquire one additional common share of Equinox owned by Yamana at an exercise price of C$13.50 for a term of 9 months from the date of issue. In total, 6,000,000 warrants were issued, of which 405,000 warrants were exercised for total additional proceeds of $4.2 million and the remainder of which expired on January 15, 2021. Subsequently, the Company sold its remaining common shares in Equinox in the second quarter of 2021 for additional proceeds of $47 million.
COVID-19 Developments
In late March 2020, the Company announced that, in response to developments related to COVID-19, the Governments of Quebec and Argentina had imposed temporary restrictions which resulted in limited operations at
the Canadian Malartic Mine, the Cerro Moro Mine and restricted the Company’s efforts at the MARA Project for a brief period. By mid-April, 2020 the Company was able to resume all operations in an orderly and gradual manner with attention to health and safety requirements.
Since the emergence of the global COVID-19 pandemic, the Company’s crisis response team, the members of which are its senior executives and operational leaders, has taken quick and decisive action to respond to the pandemic during a fluid and fast-moving environment. The Company has adjusted and managed its business effectively during this period, mitigating risks and further advancing opportunities, while ensuring the safety of employees, contractors and host communities. Although the Company responded rapidly to the COVID-19 pandemic and has been successful in limiting the spread of COVID-19, there have been confirmed employee cases at site and in the communities surrounding the Company's operations. While the rising case counts due to the Omicron variant at the end of 2021 and continuing into the first three months of 2022 have increased absenteeism across many different industries and required quarantines. Yamana has not been impacted to date and does not expect to be materially impacted, in part due to its successful implementation of prevention, monitoring, testing, quarantine and contact tracing protocols as well as its high level of employee and contractor vaccination rates at its operations. Overall, the number of infected persons is not significant at sites and the Company continues to monitor the recoveries of those infected. For additional information see “Description of the Business – Approach to Health, Safety, Environment and Community Excellence”.
Sale of Royalty Portfolio and Nomad Shares
On May 27, 2020, the Company announced the completion of the sale of its portfolio of royalty interests and the contingent payment to be received upon declaration of commercial production at the Deep Carbonates Project (“DCP”) at the Gualcamayo gold mine (together, the “Royalty Portfolio”) to Nomad Royalty Company Ltd. (formerly, Guerrero Ventures Inc.) (“Nomad”) for total consideration of $64.2 million (the "Nomad Transaction"). The Company announced that it had entered into a definitive agreement with Nomad on February 23, 2020. The Royalty Portfolio sold under the Nomad Transaction consisted of:
•A 1% net smelter return royalty (“NSR”) on gold production and 2% NSR on base metals from the Riacho dos Machados (“RDM”) gold mine operating in Minas Gerais, Brazil;
•A 2% NSR on oxide gold production from the Gualcamayo gold mine operating in San Juan, Argentina, once the operation produces approximately 275,000 ounces from January 1, 2020;
•A 1.5% NSR on production from the DCP at the Gualcamayo gold mine;
•A $30.0 million cash payment receivable upon declaration of commercial production at the DCP; and
•A 2% NSR on production from the Suruca project in Goiás, Brazil.
The fair value of the consideration received by Yamana at closing of the Nomad Transaction was as follows:
•$10.0 million in cash;
•$10.8 million, being the fair value of the $10.0 million deferred cash payment. The deferred cash payment was measured at fair value due to the convertible nature of the financial instrument and can be converted by the holder into shares of Nomad at C$0.90 per share over a period of two years; and
•$43.4 million in Nomad common shares at a price of C$0.90 per share with a lock-up period of six months from the closing date.
Following the completion of the Nomad Transaction, Yamana held approximately 13% of the outstanding shares of Nomad on a non-diluted basis, assuming conversion of the deferred cash payment. On December 11, 2020, Yamana completed the sale of 22,750,000 Nomad shares via a secondary offering for gross proceeds of approximately C$25.0 million. Following the closing of the offering and the 10 for 1 share consolidation completed by Nomad on June 1, 2021, Yamana holds 4,375,000 Nomad shares, representing approximately 7.1% of the issued and outstanding Nomad shares on a non-diluted basis. Yamana is deemed to hold an additional 1,408,333 Nomad shares under the convertible deferred cash payment, which together with the shares owned by Yamana represent 9.2% of the issued and outstanding Nomad shares on a partially diluted basis.
Suyai Option Agreement
On April 28, 2020, the Company announced it had entered into a definitive option agreement pursuant to which it granted Consultores Asset Management S.A. (“CAM”), a privately held portfolio management and capital markets company based in Argentina, owned by Messrs. Eduardo Elsztain and Saul Zang, the right to acquire up to a maximum 40% interest in a joint venture formed to hold the Suyai Project. CAM's portfolio includes the biggest real estate company in the country, NASDAQ-listed international agricultural companies, along with banking and mining investments. CAM has successfully led the development of significant construction projects across the country.
An initial amount of $2.0 million was paid to the Company to secure the option. CAM has agreed to assume responsibility for all ESG matters, including leading the permitting efforts aimed to advance the project through its different stages of development. CAM has the right to earn a maximum 40% interest in the resulting joint venture formed to hold the Suyai Project by fulfilling certain obligations and achieving certain milestones, mostly relating to ESG matters, and by paying $31.6 million in various installments in addition to all of their proportionate expenses, on or before December 31, 2024 for an initial 35% interest, with rights to acquire an additional 5% interest within the five following years. Through certain of its holding companies, Yamana would hold the remaining 60% of the joint venture. The Company believes there is considerable value, far in excess of the cash contributions, in fulfilling the obligations and achieving the milestones relating to ESG matters which would advance the Suyai Project.
In the event the Suyai Project receives approval to proceed, Yamana would oversee its development. Development of the project would occur under the oversight of a board of directors of the holding company that owns the project with CAM nominating two out of five directors. Yamana would nominate the other directors. Each party would have the right to its proportion of gold production from the Suyai Project.
Sale of Chapada Mine
In July 2019, the Company sold the Chapada Mine for a total consideration of approximately $1.0 billion which included a cash payment of $800.0 million, marketable financial instruments, net smelter returns royalties and other consideration. During the third quarter of 2019, the Company received cash proceeds of $65.5 million on the sale of a marketable financial instrument thereby increasing the cash consideration to $865.5 million. As noted above, the Company sold the net smelter returns royalty to Nomad for cash and shares as described under the Nomad Transaction thereby further increasing the cash consideration from the sale. See “– History – Sale of Royalty Portfolio and Nomad Shares”.
Repayment of Revolving Credit Facility and Prepayment of Certain Outstanding Notes
On July 5, 2019, the Company announced it had used the upfront cash consideration from the sale of the Chapada Mine to repay the entire June 30, 2019 outstanding balance under its revolving credit facility of $385.0 million and that it had commenced a tender offer on certain of its outstanding senior notes. The tender offer expired on August 7, 2019, at which point the Company prepaid a total of $415.0 million principal amount of its outstanding senior notes, on a pro rata basis.
Hedge Programs
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.
As at December 31, 2021, the Company had zero-cost collar contracts as follows:
•For the period from January to December 2022, with an average call and put strike price of R$5.25 and R$5.71 per US dollar, respectively, totalling R$192 million evenly split by month; and
•For the period from January to December 2022, with an average call and put strike price of CLP$750.00 and CLP$850.75 per US dollar, respectively, totaling CLP$62.4 billion evenly split by month.
As at December 31, 2021, the Company had forward contracts as follows:
•For the period from January to December 2022, with an average forward rate of R$5.49 per US dollar, totalling R$192 million evenly split by month; and
•For the period from January to December 2022, with an average forward rate of CLP$798.69 per US dollar, totalling CLP$62.4 billion evenly split by month.
During the fourth quarter of 2020, the Company entered into a derivative contract, which mature in November 2022, to mitigate the volatility of its share price on Deferred Share Unit (“DSU”) compensation, effectively locking in the exposure of the Company for 4.2 million DSUs (approximately 88% of outstanding DSUs at the time) at a value of C$7.26 per share.
ITEM 4
DESCRIPTION OF THE BUSINESS
Yamana is a Canadian-based precious metals producer with a particular focus in gold and silver. The Company has a significant portfolio comprised of operating mines, development-stage projects, and exploration and
mineral properties throughout the Americas, mainly in 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.
Principal Products
The Company’s principal product is gold, with gold production forming a significant part of revenues. There is a global gold market into which Yamana can sell its gold and, as a result, the Company is not dependent on a particular purchaser with regard to the sale of the gold that it produces.
The Company produces gold and silver doré bars at its El Peñón Mine, Cerro Moro Mine and Canadian Malartic Mine (50% indirect interest), gold doré bars at its Jacobina Mining Complex, and gold and silver doré bars and zinc concentrate at its Minera Florida Mine. The Company has contracts with a number of smelters, refineries and trading companies to sell gold and silver doré and zinc concentrate.
Competitive Conditions
The precious metal mineral exploration and mining business is a competitive business. The Company competes with numerous other companies and individuals in the search for and the acquisition of attractive precious metal mineral properties. The ability of the Company to acquire precious metal mineral properties in the future will depend not only on its ability to develop its present properties, but also on its ability to select and acquire suitable producing properties or prospects for precious metal development or mineral exploration.
Employees
As at December 31, 2021, the Company had the following employees and contractors at its operations:
| | | | | | | | | | | |
Country | Employees | Contractors | Total |
Canada | 132 | 4 | 136 |
Canada, Canadian Malartic (50% interest) | 897 | 1,441 | 2,338 |
Argentina | 903 | 1,063 | 1,966 |
Argentina, MARA (56.25% interest) | 190 | 202 | 392 |
Brazil | 1,363 | 1,087 | 2,450 |
Chile | 2,372 | 1,664 | 4,036 |
Netherlands | 1 | - | 1 |
United States | 3 | 1 | 4 |
Total | 5,858 | 5,716 | 11,574 |
Domestic and Foreign Operations
The Company’s mine and mineral projects are located in Canada, Brazil, Chile and Argentina. See “General Development of the Business – Overview of Business” for a summary of the Company’s projects. Any changes in regulations or shifts in political attitudes in any of these jurisdictions, or other jurisdictions in which Yamana has projects from time to time, are beyond the control of the Company and may adversely affect its business. Future development and operations may be affected in varying degrees by such factors as government regulations (or changes thereto) with respect to restrictions on production, export controls, income taxes, expropriation of property, repatriation of profits, environmental legislation, land use, water use, land claims of local people, mine safety and receipt of necessary permits. The effect of these factors cannot be accurately predicted. See “– Risks of the Business”.
Approach to Health, Safety, Environment and Community Excellence
Excellence in health and safety, environmental protection, relationships with host communities and respect for human rights is a core part of Yamana’s business. The Company believes that such excellence is an enabler and
condition precedent of a good mining business, and is a signal of the quality of management. High quality management in the mining business enables the corporate and operational culture necessary to achieve growth objectives.
These convictions mean that the Company works hard to identify the aspects of its business that touch on these considerations, the impacts that may exist from its activities, actions necessary to eliminate, reduce or manage such impacts and the systems and processes developed and implemented to ensure aspects and impacts are well-managed.
The Company’s approach to excellence operates at both the corporate and operations levels. The role of the corporate team is two-fold; to provide governance and oversight of the health, safety and sustainable development (“HSSD”) aspects of the business and to co-develop, with operations, the management framework and systems that apply across the organization and which are implemented and actioned on the ground at operations. The corporate HSSD team also assists operations in the implementation of systems. In establishing management frameworks and systems, the corporate HSSD team must have detailed knowledge of the many evolving international best practice (“EIBP”) standards from third parties that address HSSD topics to determine which of these add value to the Company and to incorporate these into systems. In this way, the Company helps ensure that its operations are up-to-date on those management approaches that achieve excellence. Management frameworks and systems must continually evolve to address changes in the business and as new commitments are adopted.
Yamana’s work to achieve excellence at the operations is critical to its success since, by and large, that is where the business takes place and where the aspects exist and impacts may occur. There are two components to the Company’s operational focus: first, working in its mining and processing operations to identify and manage workplace health and safety exposures and reduce environmental impacts and second, engaging with its host communities to explain the Company’s business and understand their concerns. These two areas of focus often go hand-in-hand and overlap.
The Company emphasizes the importance of listening to people in host communities who are affected by its activities, from exploration to development to operations through to closure, to understand their concerns. What they experience is absolutely critical to maintaining and growing our business. This understanding, when coupled with Yamana’s commitment to zero harm, allows the Company to respond to concerns in a timely fashion and develop actions to address concerns and impacts. The Company is guided by commitments to openness, honesty and transparency in such engagement.
All of this is embodied by the Company’s One Team, One Goal: Zero vision that communicates in a simple and effective way our commitment and helps build the desired operational and corporate culture. One Team, One Goal: Zero reflects Yamana’s conviction that everyone at Yamana is responsible for the Company’s HSSD performance and achieving excellence. Yamana’s HSSD performance is described in detail in the Company’s Sustainability Report (the “Material Issues Report”), which is available on its website at www.yamana.com.
A Word about ESG
Interest in environmental, social and governance (“ESG”) aspects of the Company’s business has grown exponentially over the past few years, primarily from the financial and investment communities. This interest is long overdue in Yamana’s view – the recognition that, in the mining sector in particular, ESG performance and excellence go a long way to predict the financial performance and growth trajectory of a company like Yamana. Identifying and managing these issues is not new for Yamana – they have been at the core of the Company’s business since its inception nearly 20 years ago. ESG topics span all departments in the Company – those related to HSSD are managed by Yamana’s HSSD corporate, regional and site teams; the remaining social and governance topics are the shared responsibility of other departments.
Recognition
Yamana’s HSSD management and performance were recognized in the following ways in 2021:
•Yamana was included in Sustainalytics’ Jantzi Social Index for the thirteenth consecutive year. The index partners with the Dow Jones Sustainability Index to screen the 50 top-performing Canadian companies from an environmental, social and governance perspective;
•Yamana was named one of Canada’s Best 50 Corporate Citizens by Corporate Knights Magazine and was the highest-ranked mining company. The award recognizes performance against a broad set of ESG performance criteria; and
•In December the MARA project was recognized at the Silver and Gold Summit in Buenos Aires for its public participation program and efforts to engage and introduce communities to mining.
Governance
The Company believes that establishing the tone from the highest governance levels of Yamana is a fundamental part of achieving excellence.
| | | | | | | | |
The Board of Directors The Company’s board of directors oversees strategy, governance and risk, including risks and opportunities associated with ESG factors, such as climate change. The Executive Chairman drives and facilitates ESG policy development, and the implementation of directives, in consultation with the board of directors and with the support of the CEO and the Senior Vice President, Health, Safety and Sustainable Development. The sustainability committee of the Company’s board of directors oversees all aspects of health, safety and sustainability matters. The sustainability committee reviews policies, compliance issues and incidents, and ensures the Company has been diligent in carrying out its responsibilities and activities. | Corporate Level The corporate HSSD team is led by the Senior Vice President, Health, Safety and Sustainable Development. The team implements strategy, develops and implements management systems, in collaboration with operations, and facilitates dialogue with external stakeholders at the corporate level. It also works with the mine sites, the development project teams and exploration teams to make sure systems are implemented, best practices are shared and performance is enhanced. | Operational Level Each operation has an HSSD team and committee chaired by the site’s general manager. The committees meet at least monthly to discuss HSSD issues, approaches, incidents, corrective actions and other operational practices. The committees monitor the implementation of management systems, the effectiveness and performance of their sustainability programs and report any material issues to the general manager who escalates matters as necessary. |
Management
Yamana revised its HSSD Management Framework in 2021 and introduced a new Responsibility Policy and eight Statements of Commitment for each functional element that comprises HSSD. These changes, along with the upcoming development of HSSD Standards, build on the Company’s pre-existing management framework and will incorporate the elements of EIBP external codes and standards which Yamana has committed to implement. The standards will address the range of topics that apply across the business and will represent a minimum level of performance. The Company expects these changes to take HSSD performance to the next level.
Three key principles support the Company’s approach to HSSD Management – risk management, integration, and external reporting and assessment:
1. Risk management
The basis of Yamana’s management approach is effective risk management. Using the HSSD Management Framework and a variety of specific standards and procedures, each operation effectively maps its HSSD aspects and impacts, and areas for improvement to develop an approach to:
•planning and risk assessment;
•standard operating procedures;
•identifying legal and contractual requirements;
•industry best practices;
•company objectives; and
•the link between outcomes and action plans for key performance metrics, development plans and internal auditing systems.
Significant, inherent business risks, including those associated with tailings storage facilities (“TSF”), waste rock storage facilities or cyanide usage, among others, have enhanced, specific measures to help confirm optimal management of these risks. These include on-going monitoring of each structure and tools to help
monitor specific risks. The Company’s Director, Tailings Management also prepares monthly reports on the TSFs, and ensures regular third-party expert reviews at each facility. See “– Risks of the Business”.
The Canadian Malartic Mine, a jointly-owned operation with Agnico Eagle Mines Limited (“Agnico Eagle”), operates under Agnico Eagle’s HSEC management systems. These systems are based on EIBP and generally align with Yamana’s HSSD Management Framework.
2. Integration
It is the responsibility of each operation, development and exploration project to implement Yamana’s HSSD Management Framework, starting with risk assessment through to implementation and monitoring. Empowering operational and project management with responsibility for integrating HSSD and aligning HSSD performance with compensation improves strategic planning and implementation, ensuring that HSSD is fully integrated into the business and that the outcome is owned by the entire site rather than being seen as the responsibility of a particular operational department.
Operating sites measure their progress against the HSSD Management Framework on an annual basis, which will expand to include the forthcoming HSSD Standards. The outcome of this is combined with annual risk assessments and the results from a range of other key performance indicators to determine each sites’ annual action plans, known as the HSSD Performance Index. The results of the HSSD Performance Index, are incentivized at both the site and executive levels.
3. Commitment to Evolving International Best Practice Standards
An important part of establishing management frameworks and systems and achieving HSSD excellence is evaluating the range of EIBP standards from third-party organizations. The number of such standards has increased at a nearly exponential rate over the past 20 years and the breadth of topics covered by the standards has also increased. It is incumbent on the corporate HSSD team to have visibility of all standards, understand them and assess which deliver value to Yamana. In addition, the Company must understand which standards are expected to be adopted by its stakeholders, especially by investors.
In 2021, Yamana continued its alignment with EIBP standards. The Company successfully completed the second year of a three-year process to implement the Mining Association of Canada’s Towards Sustainable Mining (“TSM”) initiative and the World Gold Council’s Responsible Gold Mining Principles (“RGMPs”). These two external standards focus on improving operational performance across a series of material ESG aspects to improve judgement of our business with host communities and other stakeholders. The Company also formalized its alignment with the Voluntary Principles on Security and Human Rights and advanced implementation at its wholly-owned operations. Yamana’s process to develop its HSSD Standards will involve incorporating these and other aspects, creating a single high standard of performance across the business. The HSSD Standards will also set out the steps the Company intends to take to define leadership positions on important ESG issues, such as water management and climate change.
Yamana also maintains certifications with several external agencies, including:
•International Cyanide Management Code;
•ISO 14001 Environmental Management Systems;
•OHSAS 18001/ISO 45001 Occupational Health and Safety Management Systems; and
•World Gold Council’s Conflict-Free Gold Standard.
4. External reporting and assessment
Yamana’s commitment to openness and transparency is demonstrated by its annual Material Issues Report which describes the Company’s HSSD performance and incorporates reporting against the Global Reporting Initiative and Carbon Disclosure Project. The Company plans to release its first standalone report aligned with the recommendations of the Task Force for Climate Related Financial Disclosures in the second quarter of 2022.
Performance
Yamana regularly reports on a range of aspects, impacts and topics of interest to it and its stakeholders, including:
•governance;
•workplace health and safety;
•community relations and development;
•business ethics and human rights;
•climate change;
•tailings and waste management;
•water management;
•biodiversity and
•mine closure.
Workplace Health and Safety
Yamana continued its commitment to protecting the health and safety of its employees and contractors in 2021. During the year, the Company’s total recordable incident rate (“TRIR”) increased from 0.49 to 0.73 (excluding Canadian Malartic). This performance was in line with our peer-group and the increase was primarily attributed to low-energy incidents.
Yamana’s safety performance reflects the efforts it has made toward reaching its vision of zero injuries. The Company recognizes that there is still significant work to be done and, to that end, has continuous learning and improvement initiatives in place across the organization to help identify ways to make further step changes in safety performance. Yamana’s health and safety team had the following priorities in 2021 which continue into 2022:
•ensure the continued health and safety of employees amid COVID-19;
•increase measurement and reporting of preventative or ‘leading’ indicators;
•increase the focus on high potential incidents and sharing learnings across sites and to upper management and senior executives;
•increase focus on the quality of incident investigations;
•ensure fatal risk protocols are best-in-class and verified in the field; and
•increase capacity on emergency preparedness.
As a result of the COVID-19 pandemic Yamana’s HSSD Protocols were maintained at all sites in 2021 to address the risks presented by the virus and keep employees and communities safe. Since the emergence of the COVID-19 pandemic, Yamana’s crisis response team, the members of which are its senior executives and operational leaders, has taken quick and decisive action to respond to the pandemic during a fluid and fast-moving environment. The Company has adjusted and managed its business effectively during this period, mitigating risks and further safeguarding the health of its employees and their local communities while continuing to operate safely and responsibly. In addition to heightened health screening and social distancing and hygiene measures, Yamana responded to community needs with financial assistance and donations of critical supplies, as well as support for community-led crisis planning and management. Emphasis was also placed on making sure that all employees and contractors were fully vaccinated; by mid-February 2022 more than 99 percent of employees and contractors had received one dose, more than 94 percent were fully vaccinated and more than 54 percent had received a booster dose.
Earning and Maintaining Privilege to Operate with Host Communities
As an international mining company, Yamana builds and maintains relationships with a diverse range of stakeholders. No relationships, however, are more important than those with Yamana’s host communities. In many cases, host communities are the Company’s neighbours, provide workers for its operations and goods and services required for its business. The Company spends considerable effort to build, maintain and enhance these relationships.
As in previous years, Yamana had no significant community conflicts or incidents in 2021. The Company began measuring its social license to operate (“SLO”) at all operations in 2019 through the use of comprehensive community perception surveys referred to as the SLO Index. The SLO Index is one tool the Company uses to achieve excellence in social performance. Yamana has seen relatively stable SLO Index results at each of its three wholly-owned operations since the inception of the SLO Index and received positive feedback from host communities specifically about the Company’s local response to the COVID-19 pandemic.
Yamana’s social performance is also guided by the HSSD Management Framework and the requirements of EIBP standards, including TSM and the RGMPs. Underpinning these standards are a number of management system elements, including Yamana’s Responsibility Policy and eight Statements of Commitment on the different functional aspects that comprise HSSD, including human rights. These are available on the Company’s website at
www.yamana.com. Yamana is committed to acting in accordance with Voluntary Principles on Security and Human Rights and began formal alignment in 2021. The Company requires the same adherence from its service providers and works to confirm that all security personnel have received human rights-specific training. The HSSD Management Framework also provides best practices guidelines for stakeholder engagement, impact and benefit management.
Each operation has a community relations team that regularly engages with the local communities through formal and informal engagement mechanisms. Engagement was impacted significantly by the COVID-19 pandemic as operations transitioned to more digital forms of engagement, including:
•Virtual open houses, via remote platforms;
•Environmental Impact Assessment (“EIA”) consultation processes, utilizing simultaneous mixed media broadcasting (live TV, radio, and remote platforms); and
•Increased social media presence that allowed for two-way engagement between sites and community members.
Yamana makes substantial commitments to host community development priorities and initiatives every year. These typically focus on sustainable income generation, education, health and culture. Contributions are made through direct community investment, donations and sponsorships. The Company’s most important commitments in 2021 continued to focus on COVID-19 prevention assistance to host communities, including:
•Donating face masks, hand sanitizer, medical equipment and other critical supplies, and making site medical teams available to support ambulances and local health officials in the communities in which the Company operates;
•Working with host communities and others to facilitate vaccination programs;
•Transferring beds and supplies from camps to temporary hospitals, and working alongside local NGOs and small businesses to shift production to manufacturing masks for local community members and employees;
•Working with host communities to develop and implement local crisis management plans;
•Building up the capacity of local health clinics to be able to effectively manage community COVID-19 cases, including the purchase of respirators, testing equipment, computers and other critical equipment;
•Donating, and anticipating to donate, hundreds of thousands of dollars in support of communities moving forward; and
•Creating digital platforms for the Company to maintain a dialogue with communities about COVID-19 and other concerns.
Yamana achieved a host-country procurement rate of 91%.
Climate Change
Yamana formally adopted a board- approved climate strategy in early 2021, at the direction of the Executive Chairman, to demonstrate climate change leadership and our commitment to the transition to a low-carbon future. Yamana has advanced work to define its baseline emissions year (2019) and define its business-as-usual emissions projections, based on approved life of mine plans. The Company announced in December 2021 that it has raised its climate ambition to align with a science-based 1.5°C target compared to pre-industrial temperatures, meaning that the Company will require annual greenhouse gas emissions reductions of four to five percent up to 2030. Yamana has identified projects that are expected to allow it to meet the 2030 target with modest expenditure. At the same time, the Company will advance its plans towards meeting its aspirational net-zero 2050 target. The Company’s climate change approach also incorporates adaptation, mitigation and preparedness. This approach primarily focuses on how we could remain resilient to the impacts of climate change on our business and operations.
Tailings and waste management
The management of mine waste, specifically tailings management, consistently remains one of the most material issues for Yamana and the mining industry as a whole. Furthermore, in light of recent tailings-related tragedies, investors and society at large are seeking confirmation that mining companies have the people, systems and performance to assure responsible management of tailings facilities. Tailings management is complex and is subject to many internal technical factors and judgements, as well as external factors over which companies often have limited or no control.
Responsible tailings management is a cornerstone of the Company’s Health, Safety and Sustainable Development program and Yamana is committed to proper and effective management of TSFs. Yamana has developed best-in-class tailings governance and a strong tailings management framework, which seeks to minimize
risks to the environment and the Company’s host communities and ensure long-term stability of Yamana’s TSFs. The Company’s strategy includes incorporating EIBP into its systems and processes, quality designs, clear accountability and responsibility, sound dam safety practices, comprehensive risk management, and effective emergency response and preparedness systems. Amongst the steps the Company takes in regards to such management is working closely with local communities to ensure Yamana keeps people informed, safe and secure.
Yamana’s tailings management framework builds on EIBP and governs all tailings management activities throughout the life cycle of its tailings operations. The Company’s tailings strategy leverages this framework to ensure that all of its TSFs and associated water management facilities conform to the highest standards on dam safety and tailings management. Key aspects of the Company’s tailing management approach include:
•recognizing tailings management as a critical business risk, allowing for adequate and timely resource allocation in all operations;
•developing and implementing a best-in-class tailings governance approach and management system;
•having a designated accountable executive officer, a dedicated Director, Tailings Management and responsible management and staff at the operations for all TSFs;
•regularly completing third-party expert reviews and assessments;
•implementing designs prepared by registered engineers that incorporate best available technologies, including paste, dry stacking, downstream construction methods and liner installation;
•effectively communicating at the corporate level, including completing monthly tailings reports by site and corporate. Both the accountable senior officer and Director, Tailings Management have direct access to the Company’s CEO and the Executive Chairman;
•regularly monitoring and reporting performance indicators; and
•conducting risk assessment and management, including reporting.
In late 2021 Yamana established an Independent Tailings Review Board (“ITRB”) comprised of senior, third-party experts in geotechnical engineering and tailings management to provide an additional, high-level governance element to the Company’s tailings management approach. The ITRB reviews and makes recommendations to the Company to improve its tailings management practices and performance these.
Also of note is the fact that all of Yamana’s wholly-owned TSFs employ downstream or centerline construction methods, which are considered to be inherently safer and more stable configurations than the upstream method. Dam breach and inundation assessments are conducted on all active, operating dams and are updated regularly considering the existing dam height and approved TSF designs. In 2021, the Company committed to the staged implementation of the requirements of the recently-released Global Industry Standard on Tailings Management. Further information on tailings management is available on the Company’s website at www.yamana.com.
Sound environmental management also includes the responsible management of solid and hazardous waste generated at the Company’s operations. Yamana’s programs focus on identification, segregation, transportation, disposal, and overall responsible management and monitoring of hazardous, non-hazardous, and mineral waste. Waste is minimized and segregated to enhance recyclability, reuse and proper disposal. If a material is considered hazardous under local legislation, it is disposed of according to specific regulatory requirements.
There have been no significant spills at Yamana operations since 2016 and all operations remain compliant with the International Cyanide Management Code.
Water management
The Company recognizes that water is a shared resource and is committed to responsibly managing it in collaboration with host communities and stakeholders. Water is an important input to mining and mineral concentration processes. Changes in the availability of, or access to, reliable water sources is a key risk for Yamana, whether it is due to the effects of climate change, regulatory or policy changes or competing priorities for water.
The goal of the Company’s water strategy is to ensure that its operational water management practices are efficient and minimize consumptive use, which means minimizing impacts on local water resources, both in terms of quantity and quality. Each of Yamana’s sites has a unique water context, with unique water risks and challenges that require unique water management strategies.
All operations seek to minimize their freshwater use through reducing total consumption and maximize the use of recycled water, to minimize the impact on the local water resources. In addition, the Company prevents the
discharge of process water to the natural environment. Overall, the Company’s water management strategy comprises four key components: efficiency, quality, climate adaptation and preparedness, and stakeholder engagement.
1.Efficiency- Maximize efficiency and reduce raw water consumption, through tracking water use and management practices to identify water efficiency programs at each site
2.Quality- Minimize effects on human health and aquatic ecosystems through monitoring of water quality and adhering to local regulatory requirements and EIBP
3.Climate Adaption and Preparedness- Identify and understand vulnerabilities, through adjusting management plans to reflect regional weather patterns and continuously updating and testing emergency response personnel.
4.Stakeholder Engagement- Communicate with host communities and stakeholders about key issues at every stage of operations.
Most of the fresh water comes from within the mine site or from precipitation, with a small amount abstracted from groundwater wells, rivers, lakes or streams. In 2018, an assessment of water risks for each operation was conducted which focused on identifying key risks, opportunities, and action plans for managing water at the Company’s operations. The management and implementation of these actions have been integrated into each site’s short-, medium- and long-term objectives.
Mine closure
Mine closure is closely managed by the operations with corporate oversight. Each operation has a comprehensive mine closure plan and cost estimate, and a corresponding Asset Retirement Obligation (corporate closure provision) that is updated annually. Yamana’s total liabilities for reclamation and closure cost obligations as at December 31, 2021 were $377.2 million on a 100% consolidated basis.
Other Disclosure Relating to Ontario Securities Commission Requirements for Companies Operating in Emerging Markets
Due to the risks inherent in mineral production and the desire to organize and structure its affairs in a tax efficient manner, the Company holds each of its material properties in a separate corporate entity (through local subsidiary companies in foreign jurisdictions and other holding companies in various jurisdictions).
The risks of the corporate structure of the Company and its subsidiaries are risks that are typical and inherent for companies who have material assets and property interests held indirectly through foreign subsidiaries and located in foreign jurisdictions. The Company’s business and operations in emerging markets are exposed to various levels of political, economic and other risks and uncertainties associated with operating in a foreign jurisdiction such as differences in laws, business cultures and practices, banking systems and internal control over financial reporting. See below under “– Risks of the Business”.
The Company has implemented a system of corporate governance, internal controls over financial reporting and disclosure controls and procedures that apply at all levels of the Company and its wholly-owned subsidiaries. These systems are overseen by the Company’s board of directors and implemented by the Company’s senior management team. The relevant features of these systems are set out below.
Control over Foreign Subsidiaries
The Company controls its foreign subsidiaries by virtue of its ownership of 100% of the shares issued by such entities (exclusive of non-material subsidiaries and Minera Agua Rica Alumbrera Ltd. which is held at 56.25%). As the sole shareholder of its foreign subsidiaries, the Company has the power to appoint and dismiss any and all of its foreign subsidiaries’ directors at any time. The directors of each foreign subsidiary (appointed by the Company) then have the power to appoint and dismiss any and all such foreign subsidiaries' officers at any time, instruct such officers to pursue business activities, and to require such officers to comply with their fiduciary obligations. As the sole shareholder of its foreign subsidiaries, the Company's approval will be required for any fundamental changes requiring shareholder approval. The Company, as shareholder, can also enforce its rights by way of various shareholder remedies available to it under local laws. As a result, through these relationships, the Company can effectively ensure that the business objectives of the foreign subsidiaries are aligned with its own.
Board and Management Expertise
A majority of the Company’s directors have been directors for a period in excess of five years. Likewise, a majority of the Company’s senior officers have at least five years of experience in senior leadership positions with the Company. As a result of their tenure, these officers and directors have gained extensive experience conducting business in the emerging jurisdictions. See “Directors and Officers” for further information on the senior officers’ and directors’ experience.
In addition, the Company’s board of directors, through its corporate governance practices, regularly receives management and technical updates and progress reports in connection with the foreign subsidiaries, and in so doing, maintains effective oversight of their business and operations. Further, the Company’s directors and senior officers visit the Company’s operations in foreign jurisdictions on a regular basis to ensure effective control and management of the Company’s foreign operations. As a result of the COVID-19 pandemic, such visits have been reduced but other measures, including regular video meetings, have been introduced to compensate for the temporary disruption to regular site visits. During these visits they come into contact with local employees, government officials and business persons; such interactions enhance the visiting directors’ and officers’ knowledge of local culture and business practices. Generally, the Company’s directors visit at least one of the Company’s operations in each calendar year, on a rotating basis. Certain senior and non-senior officers visit the Company’s operations quarterly, or more frequently if circumstances require, on a rotating basis.
Internal Control Over Financial Reporting and Funds
The Company maintains internal control over financial reporting with respect to its operations in emerging jurisdictions by taking various measures. Several of the Company’s Vice Presidents have the relevant language proficiency (Spanish and Brazilian Portuguese), local cultural understanding and relevant work experience in each of the Company’s operating jurisdictions which facilitates better understanding and oversight of the Company’s operations in the foreign jurisdictions in the context of internal controls over financial reporting.
Pursuant to the requirements of National Instrument 52-109 – Certification of Disclosure in Issuers’ Annual and Interim Filings, the Company assesses the design of its internal controls over financial reporting on an annual basis. Furthermore, key controls for the accounts in scope are tested across the Company on an annual basis and the audit files of these tests performed at all the locations are reviewed at the head office level. Please refer to the Company’s annual audited consolidated financial statements for the year ended December 31, 2021, as filed under the Company’s SEDAR profile at www.sedar.com and on the Company’s website.
Differences in banking systems and controls between Canada and the emerging jurisdictions are addressed by having stringent controls over cash in all locations; especially over access to cash, cash disbursements, appropriate authorization levels, performing and reviewing bank reconciliations in the applicable jurisdiction on at least a monthly basis and the segregation of duties.
The difference in cultures and practices between Canada and the emerging jurisdictions is addressed by employing competent staff in Canada and the emerging jurisdictions who are familiar with the local laws, business culture and standard practices, have local language proficiency, are experienced in working in the applicable emerging jurisdiction and in dealing with the respective government authorities; and have experience and knowledge of the local banking systems and treasury requirements.
The foreign subsidiaries also have established practices, protocols and routines in place for the distribution of its excess cash to its foreign owners. Furthermore, the opening and closing of bank accounts in the name of a foreign subsidiary is controlled, overseen and approved by the Company’s Senior Vice President, Finance and Chief Financial Officer and the Treasurer.
The Company ensures the flow of funds between Canada and each emerging jurisdiction functions as intended by:
•appointing common officers of the Company and the foreign subsidiary;
•involving the Company’s Chief Financial Officer, located in Toronto, in hiring key finance personnel in each of the emerging jurisdictions; and
•closely monitoring the finance departments in each of the emerging jurisdictions, and by regular personal visits by the Chief Financial Officer and other key executives to the emerging jurisdictions.
Communication
The Company maintains open communication with each of its operations through many senior and non-senior officers who are fluent in either French, Brazilian Portuguese or Spanish, as applicable. In addition, all management team members in local jurisdictions are fluent in the jurisdiction’s primary language and are proficient in English. The primary language used in management and board meetings is English and material documents relating to the Company that are provided to the board of directors are in English. Although the Company does not currently have a formal communication plan, it has implemented several communications policies, including a disclosure policy and crisis communications protocols. To date, the Company has not experienced any communication-related issues.
Records
All of the minute books and corporate records and documents of the foreign subsidiaries are filed at the relevant entity’s headquarters, and with the relevant governmental or regulatory body in each applicable jurisdiction in which the applicable entity’s headquarters are located. The custodians of such documents report directly to the Company’s head office and senior management team to ensure continued oversight.
Risks of the Business
The operations of the Company are speculative due to the high-risk nature of its business, which is the acquisition, financing, exploration, development and operation of mining properties. These risk factors could materially affect the Company’s future operating results and could cause actual events to differ materially from those described in forward-looking statements relating to the Company. The risks and uncertainties identified by the Company below are not the only risks and uncertainties that the Company faces. These risks may not necessarily occur nor occur as described. In identifying a risk, the Company is not indicating that any particular risk will occur, only that such risk is possible. Additional risks and uncertainties not presently known to the Company or that the Company currently deems immaterial may also impair the Company’s business operations. If any of the adverse consequences described in those risks actually occurs, the Company’s business, results of operations, cash flows and financial position would suffer. See “Cautionary Note Regarding Forward-Looking Statements”.
Gold, Silver and Copper Prices
The Company’s profitability and long-term viability depend, in large part, upon the market prices of metals that may be produced from its properties, primarily gold, silver and copper. Market price fluctuations of these commodities could adversely affect profitability of the Company’s operations and lead to impairments and write downs of mineral properties. Metal prices fluctuate widely and are affected by numerous factors beyond the Company’s control, including:
•global and regional supply and demand for industrial products containing metals generally;
•changes in global or regional investment or consumption patterns;
•increased production due to new mine developments and improved mining and production methods;
•decreased production due to mine closures;
•interest rates and interest rate expectation;
•expectations with respect to the rate of inflation or deflation;
•fluctuations in the value of the United States dollar and other currencies;
•availability and costs of metal substitutes;
•global or regional political or economic conditions; and
•sales by central banks, holders, speculators and other producers of metals in response to any of the above factors.
There can be no assurance that metal prices will remain at current levels or that such prices will improve. A decrease in the market prices could adversely affect the profitability of the Company’s existing mines and projects, as well as its ability to finance the exploration and development of additional properties, which would have a material adverse effect on the Company’s results of operations, cash flows and financial position. A decline in metal prices may require the Company to write-down Mineral Reserve and Mineral Resource estimates by removing ores from Mineral Reserves that would not be economically processed at lower metal prices and revise life-of-mine (“LOM”) plans, which could result in material write-downs of investments in mining properties. Any of these factors could result in a material adverse effect on the Company’s results of operations, cash flows and financial position. Further, if revenue from metal sales declines, the Company may experience liquidity difficulties. Its cash flow from mining operations may be insufficient to meet its operating needs, and as a result the Company could be forced to discontinue production and could lose its interest in, or be forced to sell, some or all of its properties.
In addition to adversely affecting Mineral Reserve and Mineral Resource estimates and the Company’s results of operations, cash flows and financial position, declining metal prices can impact operations by requiring a reassessment of the feasibility of a particular project. Even if a project is ultimately determined to be economically viable, the need to conduct such a reassessment may cause substantial delays and/or may interrupt operations until the reassessment can be completed, which may have a material adverse effect on the Company’s results of operations, cash flows and financial position. In addition, lower metal prices may require the Company to reduce funds available for exploration with the result that the depleted reserves may not be replaced.
Exploration, Development and Operating Risks
Mining operations are inherently dangerous and generally involve a high degree of risk. Yamana’s operations are subject to all the hazards and risks normally encountered in the exploration, development and production of gold, copper and silver, including, without limitation, unusual and unexpected geologic formations, seismic activity, rock bursts, cave-ins, flooding, pit wall failure and other conditions involved in the drilling and removal of material, any of which could result in damage to, or destruction of, mines and other producing facilities, personal injury or loss of life, damage to property and environmental damage, all of which may result in possible legal liability. Although the Company expects that adequate precautions to minimize risk will be taken, mining operations are subject to hazards such as fire, rock falls, geomechanical issues, equipment failure or failure of retaining dams around tailings disposal areas which may result in environmental pollution and consequent liability. The occurrence of any of these events could result in a prolonged interruption of the Company’s operations that would have a material adverse effect on its business, financial condition, results of operations and prospects.
The exploration for and development of mineral deposits involves significant risks, which even a combination of careful evaluation, experience and knowledge may not eliminate. While the discovery of an ore body may result in substantial rewards, few properties that are explored are ultimately developed into producing mines. Major expenses may be required to locate and establish Mineral Reserves, to develop metallurgical processes and to construct mining and processing facilities at a particular site. It is impossible to ensure that the exploration or development programs planned by Yamana will result in a profitable commercial mining operation. Whether a mineral deposit will be commercially viable depends on a number of factors, some of which are: the particular attributes of the deposit, such as size, grade and proximity to infrastructure; metal prices that are highly cyclical; and government regulations, including regulations relating to prices, taxes, royalties, land tenure, land use, importing and exporting of minerals and environmental protection. The exact effect of these factors cannot be accurately predicted, but the combination of these factors may result in Yamana not receiving an adequate return on invested capital.
There is no certainty that the expenditures made by Yamana towards the search and evaluation of mineral deposits will result in discoveries or development of commercial quantities of ore.
Health, Safety and Environmental Risks and Hazards
Mining, like many other extractive natural resource industries, is subject to potential risks and liabilities due to accidents that could result in serious injury or death and/or material damage to the environment and Company assets. The impact of such accidents could affect the profitability of the operations, potentially result in fines, penalties or other prosecutions, cause an interruption to operations, lead to a loss of licenses, affect the reputation of the Company and its ability to obtain further licenses, damage community relations and reduce the perceived appeal of the Company as an employer.
All phases of the Company’s operations are subject to environmental and safety regulations in the various jurisdictions in which it operates. These regulations mandate, among other things, aspects related to worker safety, water quality, water management, land reclamation, waste disposal (including mine waste and the generation, transportation, storage and disposal of hazardous waste), mine development and protection of endangered and other special status species. Failure to comply with applicable health, safety and environmental laws and regulations could result in injunctions, fines, suspension or cancellation of permits and approvals and could include other penalties including negligence claims or criminal prosecution. Health, safety and environmental legislation and regulations are generally becoming more prescriptive and enforcement is escalating with increased fines and penalties for non-compliance, more stringent environmental assessments of proposed projects, increased permitting timelines and a heightened degree of responsibility for companies and their officers, directors and employees. There is no assurance that the Company has been or will at all times be in full compliance with all environmental laws and regulations or hold, and be in full compliance with, all required environmental and health and safety permits. In addition, no assurances can be given that new rules and regulations will not be enacted or that existing rules and regulations will not be applied in a manner which could have an adverse effect on the Company’s financial
position and operations. Failure to comply with applicable laws, regulations and permitting requirements may result in enforcement actions, including orders issued by regulatory or judicial authorities causing operations to cease or be curtailed, and may include corrective measures requiring capital expenditures, installation of additional equipment, or remedial actions. Parties engaged in mining operations, including the Company, may be required to compensate those suffering loss or damage by reason of the mining activities and may have civil or criminal fines or penalties imposed for violations of applicable laws or regulations. The potential costs and delays associated with compliance with such laws, regulations and permits could prevent the Company from proceeding with the development of a project or the operation or further development of a mine, and any non-compliance therewith may adversely affect the Company’s business, financial condition and results of operations.
Government environmental approvals, permits and licenses are currently, or may in the future be, required in connection with the Company’s operations. To the extent such approvals are required and not obtained, the Company may be curtailed or prohibited from proceeding with planned exploration or development of mineral properties.
The Company may also be held financially responsible for remediation of contamination at current or former sites, or at third-party sites. The Company could also be held responsible for exposure to hazardous substances. The costs associated with such instances and liabilities could be significant.
In certain jurisdictions where Yamana operates, the Company may be required to submit, for government approval, a reclamation plan and cost estimate for each of its mining/project sites. The reclamation plan establishes the Company’s obligation to reclaim property after certain mining or exploration activities have been carried out by the Company. In some jurisdictions, bonds or other forms of financial assurances are required as security to ensure performance of the required reclamation activities. The Company may incur significant reclamation costs which may materially exceed the provisions the Company has made for such reclamation. In addition, the potential for additional regulatory requirements relating to reclamation or additional reclamation activities may have a material adverse effect on the Company’s financial condition, liquidity or results of operations. When a previously unrecognized reclamation liability becomes known or a previously estimated cost is increased, the amount of that liability or additional cost may be expensed, which may materially reduce net income in that period.
The extraction process for gold and metals can produce tailings, which are the sand and silt-sized rock particles that remain after the target minerals are extracted. Tailings are stored in engineered facilities which are designed, constructed, operated and closed in conformance with local requirements and best practices. Should a breach of these facilities occur due to present-day limitations on engineering and scientific knowledge related to extreme weather, seismic event, or other incident, the Company could suffer a material financial impact on its operations and financial condition, including the potential for criminal and financial liability.
Production at certain of the Company’s mines involves the use of cyanide which is a toxic material if not handled properly. Should cyanide leak or otherwise be discharged from the containment system, the Company could suffer a material impact on its business, financial condition and results of operations. The Company became a signatory to the International Cyanide Management Code in September 2008 to ensure the safe transport and use of cyanide in the production of gold. Conformance with this code is verified by independent audits, and the Company’s operations are in full compliance with this code.
The Company actively engages with local communities to provide timely information about the operations and participates in a variety of activities to contribute to the wellbeing of local communities. Health, safety, environmental or other incidents, real or perceived, could cause community unrest that manifest into protests, road blockages, or other civil disobedience activities that could materially disrupt the Company’s operations.
The mineral exploration activities of the Company are subject to various laws governing prospecting, development, production, taxes, labour standards and occupational health and safety, hazardous substances, waste management and other matters. Although the Company believes that its exploration activities are currently carried out in accordance with all applicable rules and regulations, new rules and regulations may be enacted or existing rules and regulations may be applied in a manner that could limit or curtail production or development of the Company’s properties. Amendments to current laws and regulations governing the operations and activities of the Company or more stringent implementation thereof could have a material adverse effect on the Company’s business, financial condition and results of operations. See “– Risks of the Business – Foreign Operations and Political Risk”.
Among the other environmental risks that Yamana has identified across all of its operations are water supply, water management and a range of climate-change related risks. For more details regarding Yamana’s management approach to each of these areas see “– Communities, Environmental Protection and Policies”.
Nature and Climatic Condition Risk
The Company and the broader mining industry can face geotechnical challenges, which could adversely impact the Company’s production and profitability. Unanticipated adverse geotechnical and hydrological conditions, such as landslides, droughts, pit wall failures, TSF instability and rock fragility may occur in the future and such events may not be detected in advance. Geotechnical instabilities and adverse climatic conditions can be difficult to predict and are often affected by risks and hazards outside of the Company’s control, such as seismic activity, severe weather and considerable rainfall, which may lead to periodic floods, mudslides and embankment instability, which could potentially result in slippage of material or, under very extreme circumstances, lead to a tailings dam failure.
Geotechnical failures could result in limited or restricted access to mine sites, suspension of operations, government investigations, increased monitoring costs, remediation costs, loss of ore and other impacts including financial liability, which could cause one or more of the Company’s projects to be less profitable than currently anticipated and could result in a material adverse effect on the Company’s results of operations and financial position.
Furthermore, the occurrence of physical climate change events may result in substantial costs to respond and/or recover from an event, and to prevent recurrent damage, through either the modification of, or addition to, existing infrastructure at the Company’s operations. The scientific community has predicted an increase, over time, in the frequency and severity of extraordinary or catastrophic natural phenomena as a result of climate change. The Company can provide no assurance that it will be able to predict, respond to, measure, monitor or manage the risks posed as a result.
In addition, as climate change is increasingly perceived as a broad societal and community concern, stakeholders may increase demands for emissions reductions and call-upon mining companies to better manage their consumption of climate-relevant resources. Physical climate change events, and the trend toward more stringent regulations aimed at reducing the effects of climate change, could impact the Company’s decisions to pursue future opportunities, or maintain existing operations, which could have an adverse effect on its business and future operations. The Company can provide no assurance that efforts to mitigate the risks of climate changes will be effective and that the physical risks of climate change will not have an adverse effect on its operations and profitability.
Counterparty, Credit, Liquidity and Interest Rate Risks and Access to Financing
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 its risk management services (including hedging arrangements); (iv) shipping service providers that move the Company’s material; (v) the Company’s insurance providers; and (vi) 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. For cash, cash equivalents and accounts receivable, credit risk is represented by the carrying amount on the balance sheet. 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 is also exposed to liquidity risks in meeting its operating and capital expenditure requirements in instances where cash positions are unable to be maintained or appropriate financing is unavailable. Under the terms of the Company’s trading agreements, counterparties cannot require the Company to immediately settle outstanding derivatives except upon maintaining adequate lines of credit occurrence of customary events of default. The Company mitigates liquidity risk through the implementation of its capital management policy by spreading the maturity dates of derivatives over time, managing its capital expenditures and operation cash flows, and by maintaining adequate lines of credit. These factors may impact the ability of the Company to obtain loans and other credit facilities and refinance existing facilities in the future and, if obtained, on terms favourable to the Company. Such failures to obtain loans and other credit facilities could require the Company to take measures to conserve cash and could adversely affect its access to the liquidity needed for the business in the longer term.
The exploration and development of the Company’s properties, including continuing exploration and development projects, and the construction of mining facilities and commencement of mining operations may require substantial additional financing. Failure to obtain sufficient financing will result in a delay or indefinite postponement of exploration, development or production on any or all of the Company’s properties or even a loss of a property interest. Additional financing may not be available when needed, or if available, the terms of such financing might not be favorable to the Company. Failure to raise capital when needed would have a material adverse effect on the Company’s business, financial condition and results of operations.
Commodity Prices and Availability
The profitability of the Company’s operations will be dependent upon the cost and availability of commodities which are consumed or otherwise used in connection with the Company’s operations and projects, including, but not limited to, diesel, fuel, natural gas, electricity, steel, concrete and cyanide. Commodity prices fluctuate widely and are affected by numerous factors beyond the control of the Company, including, without limitation, the continuance or escalation of the military conflict between Ukraine and Russia and the economic sanctions imposed on Russia in connection therewith, which have and may continue to result in increased prices for a variety of commodities and which could have other long-term effects on the global economy in addition to the near-term effects on Ukraine and Russia. Further, as many of the Company’s mines are in remote locations and energy is generally a limited resource, the Company faces the risk that there may not be sufficient energy available to carry out mining activities efficiently or that certain sources of energy may not be available.
Increase in Production Costs
Changes in the Company’s production costs could have a major impact on its profitability. Its main production expenses are personnel and contractor costs, materials, and energy. Changes in costs of the Company’s mining and processing operations could occur as a result of unforeseen events, including international and local economic and political events, including, without limitation, the continuance or escalation of the military conflict between Ukraine and Russia and the economic sanctions imposed on Russia in connection therewith, which have and may continue to result in increased prices for a variety of commodities and which could have other long-term effects on the global economy in addition to the near-term effects on Ukraine and Russia, other changes in commodity prices, increased costs (including oil, steel and diesel) and scarcity of labour, and could result in changes in profitability or Mineral Reserve estimates. Many of these factors may be beyond the Company’s control.
The Company relies on third-party suppliers for a number of raw input materials. Any material increase in the cost of raw materials, or the inability by the Company to source third party suppliers for the supply of its raw materials, could have a material adverse effect on the Company’s results of operations or financial condition.
The Company prepares estimates of future cash costs and capital costs for its operations and projects. There is no assurance that actual costs will not exceed such estimates. Exceeding cost estimates could have an adverse impact on the Company’s future results of operations or financial condition.
Foreign Operations and Political Risk
The Company holds mining and exploration properties in Canada, Brazil, Chile and Argentina, exposing it to the socioeconomic conditions, as well as the laws governing the mining industry in those countries. Inherent risks with conducting foreign operations include, but are not limited to: high rates of inflation; military repression; war or civil war; social and labour unrest; organized crime; hostage taking; terrorism; violent crime; extreme fluctuations in currency exchange rates; expropriation and nationalization; renegotiation or nullification of existing concessions, licenses, permits and contracts; illegal mining; changes in taxation policies including carbon taxes; restrictions on foreign exchange and repatriation; and changing political norms, currency controls and governmental regulations that favour or require the Company to award contracts in, employ citizens of, or purchase supplies from, a particular jurisdiction.
Changes, if any, in mining or investment policies or shifts in political attitude in any of the jurisdictions in which the Company operates may adversely affect the Company’s operations or profitability. Operations may be affected in varying degrees by government regulations with respect to, but not limited to, restrictions on production, price controls, export controls, currency remittance, importation of parts and supplies, income, carbon and other taxes, expropriation of property, foreign investment, maintenance of claims, environmental legislation, land use, land claims of local people, water use and mine safety.
Failure to comply strictly with applicable laws, regulations and local practices relating to mineral right applications and tenure could result in loss, reduction or expropriation of entitlements, or the imposition of additional local or foreign parties as joint venture partners with carried or other interests. In addition, changes in government laws and regulations, including taxation, royalties, the repatriation of profits, restrictions on production, export controls, changes in taxation policies, environmental and ecological compliance, expropriation of property and shifts in the political stability of the country, could adversely affect the Company’s exploration, development and production initiatives in these countries.
On December 23, 2019, the Argentine government issued Law No. 27,541, which established a maximum export tax of 8% on mining and extends the date to establish the new rate to December 31, 2021. On December 30, 2020, the Argentine government issued Decree 1060/2020 that establishes a 4.5% rate on silver and gold concentrate. Cerro Moro, owned by Estelar Resources, is entitled to tax stability pursuant to Argentina’s Mining Investments Law No. 24,196. Such tax stability entitles Estelar Resources to recover taxes in excess of their overall tax burden at the time of the filing of the feasibility study in 2012 for Cerro Moro.
On December 29, 2017, the Argentine government enacted a tax reform package. The new law includes a reduction in the corporate tax rate from 35% to 30% for 2018 and 2019 and to 25% thereafter. To offset this reduction, a proposed new dividend withholding tax at a rate of 7% for 2018 and 2019 and a 13% rate going forward was introduced. The dividend withholding tax can be reduced under a bilateral treaty. In addition, the Argentine government implemented a new federal Mining Accord that establishes guidelines applicable to new mining projects in respect of taxation and royalties, and other areas of mining operations including environmental matters and mine closure plans. On December 23, 2019, the Argentine government enacted a law to postpone the reduction to 25% until 2021. On June 16, 2021, the Argentine government enacted legislation that increased the corporate tax rate from 25% to 35% and maintains the dividend withholding tax rate at 7% retroactive to January 1, 2021.
In July, 2021, Chile began drafting a new national constitution, which may modify, among other things, the legal framework of mining rights and water rights. The constitutional convention has a nine-month deadline, which has been extended by an additional three months, to draft a new constitution. Once the text is completed it is then required to be approved in a national referendum which is expected to occur during the third quarter of 2022. In addition, there is currently a bill in Chilean Congress which seeks to impose a new mining royalty of 3% of ad valorem value of all extracted minerals. The bill does not clarify if this new royalty would be in addition or will replace the current taxes specific to mining activities.
In January 2022, Chilean Congress approved a modification on the water rights regime establishing that new water rights can only be granted for a maximum of 30 years, renewable for the same number of years. The water authority can decide not to renew water rights if not being used or if there is an impact on the sustainability of the source and such water rights will be extinguished, partially or totally, if they are not used for a period of five years (consumptive rights) or ten year years (non-consumptive). For consumptive rights currently in force, which is the case for the Company’s operations in Chile, the expiration term is 5 years without having carried out the necessary works to capture the water, which is not the current situation of the Company’s sites. This rule is expected to become effective in 2024 and will be managed accordingly by the Company.
In February 2022, Chilean Congress enacted bill N°21.420 that changed the mining concessions regime by establishing that exploration concessions will last up to four years from the date of its constitution, with no possibility of extension. With the new regime, the former owner of the exploration concession will not be able to acquire a new exploration concession that covers all or part of the exploration concession extinguished and the new owner must be a different person with no relation at all with the former owner. The Company does not expect this to have a significant impact on its exploration activities but it may incur additional fees as a result of the new regime.
The Company continues to monitor developments and policies in all the jurisdictions in which it operates and the potential impact such developments and policies may have on its operations; however, they cannot be accurately predicted and could have an adverse effect on the Company’s operations or profitability.
Infectious Diseases
Emerging infectious diseases or the threat of outbreaks of viruses or other contagions or epidemic diseases, including the COVID-19 outbreak, could have a material adverse effect on the Company by causing operational and supply chain delays and disruptions (including as a result of government regulation and prevention measures), labour shortages and shutdowns, social unrest, breach of material contracts and customer agreements, government or regulatory actions or inactions, increased insurance premiums, decreased demand or the inability to sell and deliver precious metals, declines in the price of precious metals, delays in permitting or approvals,
governmental disruptions, capital markets volatility, or other unknown but potentially significant impacts. In addition, governments may impose strict emergencies measures in response to the threat or existence of an infectious disease. It is unknown whether and how the Company may be affected if a pandemic, such as the COVID-19 outbreak, persists for an extended period of time. The impact of the COVID-19 pandemic has included extreme volatility in financial markets, a slowdown in economic activity and extreme volatility in commodity prices (including precious metals). The international response to COVID-19 led to significant restrictions on travel, temporary business closures, quarantines, global stock market volatility and a general reduction in global consumer activity. In addition, a significant outbreak of contagious diseases in the human population, such as COVID-19, could result in a widespread health crisis that could adversely affect the economies and financial markets of many countries, resulting in an economic downturn that could result in a material adverse effect on commodity prices, demand for metals, investor confidence, and general financial market liquidity, all of which may adversely affect the Company’s business and the market price of the Company’s common shares. Accordingly, any outbreak or threat of an outbreak of an epidemic disease or similar public health emergency, including COVID-19, could have a material adverse effect on the Company’s business, financial condition and results of operations.
Uncertainty in the Estimation of Mineral Reserves and Mineral Resources
To extend the lives of its mines and projects, ensure the continued operation of the business and realize its growth strategy, it is essential that the Company continues to realize its existing identified Mineral Reserves, convert Mineral Resources into Mineral Reserves, increase its Mineral Resource base by adding new Mineral Resources from areas of identified mineralized potential, and/or undertake successful exploration or acquire new Mineral Resources.
No assurance can be given that the anticipated tonnages and grades in respect of Mineral Reserves and Mineral Resources contained in this annual information form will be achieved, that the indicated level of recovery will be realized or that Mineral Reserves will be mined or processed profitably. Actual Mineral Reserves may not conform to geological, metallurgical or other expectations, and the volume and grade of ore recovered may differ from estimated levels. 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 judgments 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. In addition, there can be no assurance that gold recoveries in small scale laboratory tests will be duplicated in larger scale tests under on-site conditions or during production. 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. Mineral Reserve data is not indicative of future results of operations. If the Company’s actual Mineral Reserves and Mineral Resources are less than current estimates or if the Company fails to develop its Mineral Resource base through the realization of identified mineralized potential, its results of operations or financial condition may be materially and adversely affected. Evaluation of Mineral Reserves and Mineral Resources occurs from time to time and they may change depending on further geological interpretation, drilling results and metal prices. The category of Inferred Mineral Resource is often the least reliable Mineral Resource category and is subject to the most variability. The Company regularly evaluates its Mineral Resources and it often determines the merits of increasing the reliability of its overall Mineral Resources.
Replacement of Depleted Mineral Reserves
Given that mines have limited lives based on Proven Mineral Reserves and Probable Mineral Reserves, the Company must continually replace and expand its Mineral Reserves at its mines. The LOM estimates included in this annual information form may not prove to be correct. The Company’s ability to maintain or increase its annual production will be dependent in part on its ability to bring new mines into production and to expand Mineral Reserves at existing mines.
Uncertainty Relating to Mineral Resources
Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability. Due to the uncertainty which may attach to Inferred Mineral Resources, there is no assurance that Inferred Mineral Resources will be upgraded to Proven Mineral Reserves and Probable Mineral Reserves as a result of continued exploration.
Uncertainty Relating to Future Production Estimates
The Company prepares estimates and projections of future production for its existing and future mines. Any such information is forward-looking and no assurance can be given that such estimates will be achieved. These estimates are based on existing mine plans and other assumptions which change from time to time, including: Mineral Reserve and Mineral Resource estimates; the availability, accessibility, sufficiency and quality of ore; the Company’s costs of production; the Company’s ability to sustain and increase production levels; the sufficiency of the Company’s infrastructure; the performance of the Company’s workforce and equipment, the Company’s ability to maintain and obtain mining interests and permits; and the Company’s compliance with existing and future laws and regulations. The Company’s actual production may vary from estimates for a variety of reasons, including: actual ore mined varying from estimates of grade, tonnage, dilution and metallurgical and other characteristics; revisions to mine plans; unusual or unexpected orebody formations; risks and hazards associated with mining; natural phenomena, such as inclement weather conditions, water availability, floods, and seismic activity; and unexpected labour shortages, strikes, local community opposition or blockades. Failure to achieve the estimated forecasts could have an adverse impact on the Company’s profitability, future cash flows, earnings, results of operations and financial condition.
Joint Ventures
Yamana holds an indirect controlling interest of 56.25% in the MARA Project, the other 25% and 18.75% interests being held by Glencore and Newmont, respectively. The Company determined that it controls the MARA Project through its 56.25% voting interest, and therefore the Company is required to consolidate 100% of the MARA Project, and recognize the non-controlling interests. The Company’s interest in the MARA Project is subject to the risks normally associated with the conduct of joint ventures. These risks may include, but are not limited to: disagreement with joint venture partners on how to develop and operate mines efficiently; inability of joint venture partners to meet their obligations to the joint venture or third parties; or disputes arising between joint venture partners regarding joint venture matters such as project financing, development milestones and offtake matters. The existence or occurrence of one or more of the foregoing circumstances and events, for example, could have a material adverse impact on Company’s profitability, future cash flows, earnings, results of operations and financial condition. See “Description of the Business – Mineral Projects – Development Projects – MARA Project”.
Partnership with Agnico Eagle
The Company has formed a 50/50 partnership with Agnico Eagle in connection with the acquisition of the Canadian Malartic Mine (“Canadian Malartic GP”). There are a variety of general risks associated with the Canadian Malartic GP, particularly because Yamana is not the sole operator. These risks include, but are not limited to:
•disagreement with Agnico Eagle about how to develop, operate or finance a project;
•that Agnico Eagle may at any time have economic or business interests or goals that are, or become, inconsistent with the Company’s business interests or goals;
•that Agnico Eagle may not comply with the Canadian Malartic GP’s partnership agreement;
•the possibility that Agnico Eagle may become bankrupt;
•that Agnico Eagle may be in a position to take action contrary to the Company’s instructions, requests, policies, objectives or interests;
•possible litigation with Agnico Eagle about Canadian Malartic GP matters; and
•the possibility that the Company may not be able to sell its interest in the Canadian Malartic GP if the Company desires to exit the Canadian Malartic GP.
These risks could result in legal liability or affect the Company’s ability to develop or operate the Canadian Malartic GP’s projects, either of which could have a material adverse effect on the Company’s future growth, results of operations, cash flows and financial position.
Infrastructure
Mining, processing, development and exploration activities depend, to one degree or another, on adequate infrastructure. Reliable roads, bridges, power sources and water supply are important determinants that affect capital and operating costs. Unusual or infrequent weather phenomena, sabotage, government or other interference in the maintenance or provision of such infrastructure could adversely affect the Company’s operations, financial condition and results of operations.
Permitting
The Company’s operations are subject to receiving and maintaining permits from relevant governmental authorities. There is no assurance that delays will not occur in connection with obtaining all necessary renewals of permits for the Company’s existing operations, additional permits for any possible future changes to operations, or additional permits associated with new legislation. Prior to any development on any of its properties, the Company must receive permits from appropriate governmental authorities. There can be no assurance that the Company will continue to hold all permits necessary to develop or continue operating at any particular property. Any of these factors could have a material adverse effect on the Company’s results of operations and financial position.
Insurance and Uninsured Risks
Yamana’s business is subject to a number of risks and hazards generally, including adverse environmental conditions, industrial accidents, labour disputes, unusual or unexpected geological conditions, ground or slope failures, cave-ins, catastrophic equipment failures, fires or unavailability of materials and equipment, cyber attacks, changes in the regulatory environment and natural phenomena such as inclement weather conditions, floods and earthquakes. Such occurrences could result in damage to mineral properties or production facilities, personal injury or death, environmental damage to the Company’s properties or the properties of others, delays in mining, monetary losses and possible legal liability.
Yamana’s insurance will not cover all the potential risks associated with the Company’s operations. Even if available, Yamana may also be unable to maintain insurance to cover these risks at economically feasible premiums. Insurance coverage may not continue to be available or may not be adequate to cover any resulting liability. Moreover, insurance against risks such as environmental pollution or other hazards as a result of exploration and production (such as limited underground coverage) is not generally available to Yamana or to other companies in the mining industry on acceptable terms. Yamana might also become subject to liability for pollution or other hazards that may not be insured against or that Yamana may elect not to insure against because of premium costs or other reasons. Losses from these events could cause Yamana to incur significant costs that could have a material adverse effect upon its financial performance and results of operations. Should the Company be unable to fully fund the cost of remedying an environmental problem, the Company might be required to suspend operations or enter into interim compliance measures pending completion of the required remedy, which may have a material adverse effect. The Company may suffer a material adverse effect on its business, results of operations, cash flows and financial position if it incurs a material loss related to any significant event that is not covered, or adequately covered, by its insurance policies.
Compliance with Anti-Corruption Laws
Yamana is subject to various anti-corruption and anti-bribery laws and regulations including but not limited to the Canadian Corruption of Foreign Public Officials Act, the U.S. Foreign Corrupt Practices Act, the Extractive Sector Transparency Measure Act (“ESTMA”), as well as similar laws in the countries in which the Company conducts business. In general, these laws prohibit a company and its employees and intermediaries from bribing or making other prohibited payments to foreign officials or other persons to obtain or retain business or gain some other business advantage. ESTMA, which became effective June 1, 2015, requires public disclosure of payments to governments by mining and oil and gas companies engaged in the commercial development of oil, gas and minerals who are either publicly listed in Canada or with business or assets in Canada. Mandatory annual reporting is required for extractive companies with respect to payments made to foreign and domestic governments at all levels, including entities established by two or more governments.
In recent years, there has been a general increase in both the frequency of enforcement and the severity of penalties under such anti-corruption and anti-bribery laws, resulting in greater scrutiny and punishment of companies found in violation of such laws. Failure to comply with the applicable legislation and other similar foreign laws could expose the Company and its senior management to civil and/or criminal penalties, other sanctions and remedial measures, legal expenses and reputational damage, all of which could materially and adversely affect the Company’s business, financial condition and results of operations, as well as have an adverse effect on the market price of the Company’s common shares. The Company has instituted policies designed to facilitate compliance with such requirements that apply to all employees, consultants, contractors, suppliers and other agents, including a code of business conduct and ethics and a whistleblower policy, as anti-bribery and anti-corruption policy, as well as mandatory training. However, there can be no assurance or guarantee that such efforts have been and will be completely effective in ensuring Yamana’s compliance, and the compliance of its employees, consultants, contractors, suppliers and other agents, with all applicable anti-corruption and anti-bribery laws.
Construction and Start-up of New Mines
The success of construction projects and the start-up of new mines by the Company is subject to a number of factors, including the availability and performance of engineering and construction contractors, mining contractors, suppliers and consultants, the receipt of required governmental approvals and permits in connection with the construction of mining facilities and the conduct of mining operations (including environmental permits), the successful completion and operation of ore passes, the adsorption/desorption/recovery plants and conveyors to move ore, among other operational elements. Timelines to permit new mining operations continue to increase and permitting requirements are becoming more stringent. Any delay in the performance of any one or more of the contractors, suppliers, consultants or other persons on which the Company is dependent in connection with its construction activities, a delay in or failure to receive the required governmental approvals and permits in a timely manner or on reasonable terms, or a delay in or failure in connection with the completion and successful operation of the operational elements in connection with new mines could delay or prevent the construction and start-up of new mines as planned. There can be no assurance that current or future construction and start-up plans implemented by the Company will be successful, that the Company will be able to obtain sufficient funds to finance construction and start-up activities, that personnel and equipment will be available in a timely manner or on reasonable terms to successfully complete construction projects, that the Company will be able to obtain all necessary governmental approvals and permits or that the completion of the construction, the start-up costs and the ongoing operating costs associated with the development of new mines will not be significantly higher than anticipated by the Company. Any of the foregoing factors could adversely impact the operations and financial condition of the Company.
Some of the Company’s projects have no operating history upon which to base estimates of future cash flow. The capital expenditures and time required to develop new mines or other projects are considerable and changes in costs or construction schedules can affect project economics. Thus, it is possible that actual costs may change significantly and economic returns may differ materially from the Company’s estimates.
Commercial viability of a new mine or development project is predicated on many factors. Mineral Reserves and Mineral Resources projected by feasibility studies and technical assessments performed on the projects may not be realized, and the level of future metal prices needed to ensure commercial viability may not materialize. Consequently, there is a risk that start-up of new mine and development projects may be subject to write-down and/or closure as they may not be commercially viable.
Land Title
The acquisition and maintenance of title to mineral properties is a very detailed and time-consuming process. Title to, and the area of, mineral concessions may be disputed. Title insurance is generally not available for mineral properties and the Company’s ability to ensure that it has obtained secure mine tenure may be severely constrained. There is no guarantee that title to any of its properties will not be challenged or impaired. Third parties may have valid claims underlying portions of the Company’s interests, including prior unregistered liens, agreements, transfers or claims, including native land claims, and title may be affected by, among other things, undetected defects. If these challenges are successful, this could have an adverse effect on the development of the Company’s properties as well as its results of operations, cash flows and financial position. In addition, the Company may be unable to operate its properties as permitted or to enforce its rights with respect to its properties.
Termination of Mining Concessions
The Company’s mining concessions may be terminated in certain circumstances. Under the laws of the jurisdictions where the Company’s operations, development projects and prospects are located, Mineral Resources belong to the state and governmental concessions are required to explore for, and exploit, Mineral Reserves. The Company holds mining, exploration and other related concessions in each of the jurisdictions where it is operating and where it is carrying on development projects and prospects. The concessions held by the Company in respect of its operations, development projects and prospects may be terminated under certain circumstances, including where minimum production levels are not achieved by the Company (or a corresponding penalty is not paid), if certain fees are not paid or if environmental and safety standards are not met. Termination of any one or more of the Company’s mining, exploration or other concessions could have a material adverse effect on the Company’s financial condition or results of operations.
Competition
The mining industry is intensely competitive in all of its phases and the Company competes with many companies possessing greater financial and technical resources than itself. Competition in the precious metals mining industry is primarily for: mineral rich properties that can be developed and produced economically; the technical expertise to find, develop, and operate such properties; the labour to operate the properties; and the capital for the purpose of funding such properties. Many competitors not only explore for and mine precious metals, but conduct refining and marketing operations on a global basis. Such competition may result in the Company being unable to acquire desired properties, to recruit or retain qualified employees or to acquire the capital necessary to fund its operations and develop its properties. Existing or future competition in the mining industry could materially adversely affect the Company’s prospects for mineral exploration and success in the future.
Indebtedness
The Company’s ability to make scheduled payments on or refinance its debt obligations (if necessary) depends on its financial condition and operating performance, which are subject to prevailing economic and competitive conditions and to certain financial, business, legislative, regulatory and other factors beyond the Company’s control, including the market prices of gold, silver and copper. The Company may be unable to maintain a level of cash flow from operating activities sufficient to permit it to pay the principal, premium, if any, and interest on the Company’s indebtedness, or maintain its debt covenants.
If the Company’s cash flows and capital resources are insufficient to fund its debt service obligations, or there is a contravention of its debt covenants, the Company could face substantial liquidity problems and could be forced to reduce or delay investments and capital expenditures or to dispose of material assets or operations, seek additional debt or equity capital or restructure or refinance its indebtedness. The Company may not be able to effect any such alternative measures, if necessary, on commercially reasonable terms or at all and, even if successful, those alternative actions may not allow it to meet its scheduled debt service obligations.
In addition, the Company conducts a substantial portion of its operations through its subsidiaries, certain of which in the future may not be guarantors of its indebtedness. Accordingly, repayment of its indebtedness is dependent on the generation of cash flow by its subsidiaries and their ability to make such cash available to the Company, by dividend, debt repayment or otherwise. Unless they are guarantors of the Company’s indebtedness, its subsidiaries do not have any obligation to pay amounts due on its indebtedness or to make funds available for that purpose. The Company’s subsidiaries may not be able to, or may not be permitted to, make distributions to enable the Company to make payments in respect of its indebtedness.
Each subsidiary is a distinct legal entity, and, under certain circumstances, legal and contractual restrictions may limit the Company’s ability to obtain cash from the Company’s subsidiaries. While the indenture governing the Company’s outstanding Notes limits the ability of the Company’s subsidiaries to incur consensual restrictions on their ability to pay dividends or make other intercompany payments to the Company, these limitations are subject to qualifications and exceptions. In the event that the Company does not receive distributions from its subsidiaries, it may be unable to make required principal and interest payments on its indebtedness.
The Company’s inability to generate sufficient cash flows to satisfy its debt obligations, or to refinance its indebtedness on commercially reasonable terms or at all, would materially and adversely affect its financial position and results of operations and its ability to satisfy its obligations.
Additional Capital
The exploration and development of the Company’s properties, including continuing exploration and development projects, and the construction or expansion of mining facilities and commencement or expansion of mining operations, may require substantial additional financing. Failure to obtain sufficient financing will result in a delay or indefinite postponement of exploration, development or production on any or all of the Company’s properties or even a loss of a property interest. Additional financing may not be available when needed or if available, the terms of such financing might not be favourable to the Company and might involve substantial dilution to existing shareholders. Failure to raise capital when needed could have a material adverse effect on the Company’s business, financial condition and results of operations.
Currency Fluctuations
Currency fluctuations may affect the Company’s capital costs and the costs that the Company incurs at its operations. The revenue generated from the sale of gold and silver from the Company’s operations is in United States dollars, but a portion of the Company’s operating and capital expenses are incurred in Brazilian reais, Argentine pesos, Chilean pesos, Canadian dollars and, to a lesser extent, the Euro. The appreciation of foreign currencies, particularly the Brazilian real, Chilean peso and Canadian dollar, against the United States dollar would increase the costs of gold production at such mining operations, which could materially and adversely affect the Company’s earnings and financial condition. The Company has hedged only a portion of its Brazilian real, Chilean peso and Canadian dollar risks, and none of the other currencies in which it functions, and is therefore exposed to currency fluctuation risks. See “General Development of the Business – History – Hedge Programs”.
Additionally, certain exploration and assets, including the Monument Bay Project and the Wasamac Project, are located in Canada and the costs associated with such assets are primarily denominated in Canadian dollars. Any appreciation of the Canadian dollar against the United States dollar could have a material adverse effect on the Company’s business, financial condition and results of operations.
Write‑downs and Impairments
Mineral interests are the most significant assets of the Company and represent capitalized expenditures related to the development and construction of mining properties and related property, plant and equipment and the value assigned to exploration potential on acquisition. The costs associated with mining properties are separately allocated to exploration potential, Mineral Reserves and Mineral Resources and include acquired interests in production, development and exploration-stage properties representing the fair value at the time they were acquired. The values of such mineral properties are primarily driven by the nature and amount of material interests believed to be contained or potentially contained in properties to which they relate.
The Company reviews and evaluates its mining interests and any associated or allocated goodwill for impairment at least annually or when events or changes in circumstances indicate that the related carrying amounts may not be recoverable. An impairment is considered to exist if the recoverable value of the asset is less than the carrying amount of the asset. An impairment loss is measured and recorded to the net recoverable value of the asset. The recoverable value of the asset is the higher of: (i) value in use (being the net present value of total expected future cash flows); and (ii) fair value less costs of disposal.
The Company also assesses at the end of each reporting period whether there is any indication that an impairment loss recognized in prior periods for an asset other than goodwill may no longer exist or may have decreased. If any such indication exists, the Company estimates the recoverable amount and considers the reversal of the impairment loss recognized in prior periods for all assets other than goodwill. An impairment loss recognized for goodwill is not reversed in a subsequent period.
Fair value is the value obtained from an active market or binding sale agreement. Where neither exists, fair value is based on the best information available to reflect the amount the Company could receive for the asset in an arm’s length transaction. This is often estimated using discounted cash flow techniques. For value in use, recent cost levels are considered, together with expected changes in costs that are compatible with the current condition of the business and which meet the requirements of International Accounting Standard 36 in a discounted cash flow model. Where a recoverable amount is assessed using discounted cash flow techniques, the resulting estimates are based on detailed mine and/or production plans. Assumptions underlying fair value estimates are subject to significant risks and uncertainties. Where third-party pricing services are used, the valuation techniques and assumptions used by the pricing services are reviewed by the Company to ensure compliance with the accounting policies and internal control over financial reporting of the Company. Future cash flows are estimated based on expected future production, commodity prices, operating costs and capital costs. There are numerous uncertainties inherent in estimating Mineral Reserves and Mineral Resources. Differences between management’s assumptions and market conditions could have a material effect in the future on the Company’s financial position and results of operation.
The assumptions used in the valuation of work-in-process inventories by the Company may include estimates of metal contained in the ore stacked on leach pads, assumptions of the amount of metal stacked that is expected to be recovered from the leach pads, estimates of metal contained in ore stock-piles, assumptions of the amount of metal that will be crushed for concentrate, estimates of metal-in-circuit, estimated costs of completion to final product to be incurred and an assumption of the gold, silver and copper price expected to be realized when the gold, silver and copper is recovered. The recoverable values of assets are highly dependent on several factors
including metal prices and the prevailing cost environment, and the recoverable values of some properties are more sensitive to metal prices than others. If these estimates or assumptions prove to be inaccurate, the Company could be required to write-down the recorded value of its work-in-process inventories to net realizable value, which would reduce the Company’s earnings and working capital. Net realizable value is determined as the difference between costs to complete production into a saleable form and the estimated future precious metal prices based on prevailing and long-term metal prices. When the circumstances that previously caused inventories to be written down below cost no longer exist or when there is clear evidence of an increase in net realizable value because of changed economic circumstances, the amount of write-down is reversed up to the lower of the new net realizable value or the original cost.
Although management makes its best estimates, it is possible that material changes could occur which may adversely affect management’s estimate of the net cash flows expected to be generated from its properties. Any impairment estimates, which are based on applicable key assumptions and sensitivity analysis, are based on management’s best knowledge of the amounts, events or actions at such time, and the actual future outcomes may differ from any estimates that are provided by the Company. Any impairment charges on the Company’s mineral projects could adversely affect its results of operations.
Shareholder Activism
In recent years, publicly-traded companies have been increasingly subject to demands from activist shareholders advocating for changes to corporate governance practices, such as executive compensation practices, social issues, or for certain corporate actions or reorganizations. There can be no assurances that activist shareholders won’t publicly advocate for the Company to make certain corporate governance changes or engage in certain corporate actions. Responding to challenges from activist shareholders, such as proxy contests, media campaigns or other activities, could be costly and time consuming and could have an adverse effect on the Company reputation and divert the attention and resources of the Company management and the Company’s board of directors, which could have an adverse effect on the Company’s business and results of operations. Even if the Company does undertake such corporate governance changes or corporate actions, activist shareholders may continue to promote or attempt to effect further changes, and may attempt to acquire control of Yamana to implement such changes. If shareholder activists seeking to increase short-term shareholder value are elected to the Company’s board of directors, this could adversely effect Yamana’s business and future operations. Additionally, shareholder activism could create uncertainty about the Company’s future strategic direction, resulting in loss of future business opportunities, which could adversely effect the Company’s business, future operations, profitability and ability to attract and retain qualified personnel.
Litigation Risks
All industries, including the mining industry, are subject to legal claims, with and without merit. The Company is currently involved in litigation and may become involved in legal disputes in the future. Defense and settlement costs can be substantial, even with respect to claims that have no merit. Due to the inherent uncertainty of the litigation process, the resolution of any particular legal proceeding may have a material adverse effect on the Company’s financial position or results of operations. See “Legal Proceedings and Regulatory Actions” for further details on ongoing legal proceedings.
Investment Risk
Investment risk is the risk that a financial instrument’s value will deviate from the expected returns as a result of changes in market conditions, whether those changes are caused by factors specific to the individual investment or factors affecting all investments traded in the market. Although the factors that affect investment risk are outside the Company’s control, the Company mitigates investment risk by limiting its investment exposure in terms of total funds to be invested and by being selective of high-quality investments.
Use of Derivatives
From time to time the Company may use certain derivative products as hedging instruments and to manage the risks associated with changes in gold prices, silver prices, interest rates, foreign currency exchange rates and energy prices. The use of derivative instruments involves certain inherent risks including, among other things: (i) credit risk - the risk of default on amounts owing to the Company by the counterparties with which the Company has entered into transactions; (ii) market liquidity risk - risk that the Company has entered into a derivative position that cannot be closed out quickly, by either liquidating such derivative instrument or by establishing an offsetting position; and (iii) unrealized mark-to-market risk - the risk that, in respect of certain derivative products, an adverse change in
market prices for commodities, currencies or interest rates will result in the Company incurring an unrealized mark-to-market loss in respect of such derivative products.
Acquisitions and Integration
From time to time the Company examines opportunities to acquire additional mining assets and businesses. Any acquisition that the Company may choose to complete may be of a significant size, may change the scale of the Company’s business and operations, and may expose the Company to new geographic, political, operating, financial and geological risks. The Company’s success in its acquisition activities depends on its ability to identify suitable acquisition candidates, negotiate acceptable terms for any such acquisition, and integrate the acquired operations successfully with those of the Company. Any acquisitions would be accompanied by risks. For example, there may be a significant change in commodity prices after the Company has committed to complete the transaction and established the purchase price or exchange ratio; a material ore body may prove to be below expectations; the Company may have difficulty integrating and assimilating the operations and personnel of any acquired companies, realizing anticipated synergies and maximizing the financial and strategic position of the combined enterprise, and maintaining uniform standards, policies and controls across the organization; the integration of the acquired business or assets may disrupt the Company’s ongoing business and its relationships with employees, customers, suppliers and contractors; and the acquired business or assets may have unknown liabilities which may be significant. In the event that the Company chooses to raise debt capital to finance any such acquisition, the Company’s leverage will be increased. If the Company chooses to use equity as consideration for such acquisition, existing shareholders may experience dilution. Alternatively, the Company may choose to finance any such acquisition with its existing resources. There can be no assurance that the Company would be successful in overcoming these risks or any other problems encountered in connection with such acquisitions.
Amendments to Mining Laws and Regulations
The mineral exploration activities of the Company are subject to various laws governing prospecting, development, production, taxes, labour standards and occupational health, mine safety, toxic substances and other matters. Mining and exploration activities are also subject to various laws and regulations relating to the protection of the environment. Although the Company believes that its exploration activities are currently carried out in accordance with all applicable rules and regulations, no assurance can be given that new rules and regulations will not be enacted or that existing rules and regulations will not be applied in a manner that could limit or curtail production or development of the Company’s properties. Amendments to current laws and regulations governing the operations and activities of the Company or more stringent implementation thereof could have a material adverse effect on the Company’s business, financial condition and results of operations.
Community Relations
The Company’s relationships with host communities are critical to ensure the success of its existing operations and the construction and development of new operations. There is an increasing level of public concern relating to the perceived effects of mining activities on the environment and on host communities. The evolving expectations related to human rights, indigenous rights, and environmental protection may result in opposition to the Company’s current and future operations or further development or new development of the Company’s projects and mines. Such opposition may be directed through legal or administrative proceedings or expressed in public opposition such as protests, roadblocks or other forms of expression against the Company’s activities, and may have a negative impact on the Company’s reputation and operations.
Opposition by any of the aforementioned groups to the Company’s operations may require modification of, or preclude the operation or development of, the Company’s projects and mines or may require the Company to enter into agreements with such groups or local governments with respect to the Company’s projects and mines, in some cases, causing increased cost and considerable delays to the advancement of the Company’s projects. Further, publicity adverse to the Company, its operations or extractive industries generally, could have an adverse effect on the Company and may impact relationships with the communities in which Yamana operates and other stakeholders. While the Company is committed to operating in a socially responsible manner, there can be no assurance that its efforts in this respect will mitigate this potential risk.
The Company’s projects, including exploration projects, may also be impacted by relations with various community stakeholders, and the Company’s ability to develop related mining assets may still be affected by unforeseen outcomes from such community relations.
Non-Governmental Organizations
Certain non-governmental organizations (“NGOs”) that oppose globalization and resource development are vocal critics of the mining industry and its practices. Adverse publicity generated by such NGOs or other parties generally related to extractive industries or specifically to the Company’s operations, could have an adverse effect on the Company’s reputation, impact the Company’s relationship with the communities in which it operates and ultimately have a material adverse effect on the Company’s business, financial condition and results of operations.
NGOs may organize protests, install road blockades, apply for injunctions for work stoppage, file lawsuits for damages and intervene and participate in lawsuits seeking to cancel the Company’s rights, permits and licences. NGOs may also lobby governments for changes to laws, regulations and policies pertaining to mining and relevant to the Company’s business activities, which, if made, could have a material adverse effect on the Company’s business, financial condition and results of operations.
Labour and Employment Matters
Production at the Company’s mining operations is dependent upon the efforts of its employees and the Company’s operations would be adversely affected if it fails to maintain satisfactory labour relations. In addition, relations between the Company and its employees may be affected by changes in the scheme of labour relations that may be introduced by the relevant governmental authorities in whose jurisdictions the Company carries on business. For example, at the end of 2021, there was a temporary suspension of operations associated with the strike of one of the Company’s unions, before collective bargaining negotiations were resumed and concluded. Changes in such legislation or in the relationship between the Company and its employees may have a material adverse effect on the Company’s business, results of operations and financial condition.
Foreign Subsidiaries
The Company is a holding company that conducts operations through subsidiaries, including foreign subsidiaries. Accordingly, any limitation on the transfer of cash or other assets between the parent corporation and such entities, or among such entities, could restrict the Company’s ability to fund its operations efficiently. Any such limitations, or the perception that such limitations may exist now or in the future, could have an adverse impact on the Company’s valuation and stock price.
Reliance on Local Advisors and Consultants in Foreign Jurisdictions
The Company holds mining and exploration properties in Brazil, Argentina, and Chile, in addition to Canada. The legal and regulatory requirements in these countries with respect to conducting mineral exploration and mining activities, banking system and controls, as well as local business culture and practices are different from those in Canada and the United States. The officers and directors of the Company must rely, to a great extent, on the Company’s local legal counsel and local consultants retained by the Company in order to keep abreast of material legal, regulatory and governmental developments as they pertain to and affect the Company’s business operations, and to assist the Company with its governmental relations. The Company must rely, to some extent, on those members of management and the Company’s board of directors who have previous experience working and conducting business in these countries to enhance its understanding of and appreciation for the local business culture and practices. The Company also relies on the advice of local experts and professionals in connection with current and new regulations that develop in respect of banking, financing, labour, litigation and tax matters in these countries. Any developments or changes in such legal, regulatory or governmental requirements or in local business practices are beyond the control of the Company. The impact of any such changes may adversely affect the business of the Company.
Market Price of Common Shares
The common shares are listed on the TSX, the NYSE and the LSE. The price of the common shares is likely to be significantly affected by short-term changes in gold, silver or copper prices or in the Company’s financial condition or results of operations as reflected in its quarterly earnings reports. Other factors unrelated to the Company’s performance that may have an effect on the price of the common shares include the following: the extent of analytical coverage available to investors concerning the Company’s business may be limited if investment banks with research capabilities do not continue to follow the Company’s securities; the lessening in trading volume and general market interest in the Company’s securities may affect an investor’s ability to trade significant numbers of common shares; and the size of the Company’s public float may limit the ability of some institutions to invest in the Company’s securities. Global capital markets have continued to display increased volatility in response to global
events, including the COVID-19 virus pandemic and the Russian invasion of Ukraine. The extent to which COVID-19 impacts the market for Company’s securities will depend on future developments, which are highly uncertain and cannot be predicted at this time, and include the duration, severity and scope of the COVID-19 outbreak and the actions taken to contain or treat the COVID-19 outbreak. The continuance or escalation of the military conflict between Ukraine and Russia and the economic sanctions imposed on Russia in connection therewith, have and may continue to result in increased volatility in the market for Company’s securities and could have other long-term effects which are currently unknown.
As a result of any of these factors, the market price of the common shares at any given point in time may not accurately reflect the Company’s long-term value. Securities class-action litigation often has been brought against companies following periods of volatility in the market price of their securities. The Company may, in the future, be the target of similar litigation. Securities litigation could result in substantial costs and damages and divert management’s attention and resources.
Global Financial Conditions
Global financial conditions continue to be characterized as volatile. In recent years, global markets have been adversely impacted by various credit crises and significant fluctuations in fuel and energy costs and metals prices, including as a result of the COVID-19 virus pandemic and due to significant fluctuations in commodity prices as a result of the continuance or escalation of the military conflict between Ukraine and Russia and the economic sanctions imposed on Russia in connection therewith. Many industries, including the mining industry, have been impacted by these market conditions. Global financial conditions remain subject to sudden and rapid destabilizations in response to future events, as government authorities may have limited resources to respond to future crises. A continued or worsened slowdown in the financial markets or other economic conditions, including but not limited to consumer spending, employment rates, business conditions, inflation, fuel and energy costs, consumer debt levels, lack of available credit, the state of the financial markets, interest rates and tax rates, may adversely affect the Company’s growth and profitability. Future crises may be precipitated by any number of causes, including natural disasters, geopolitical instability (such as the Russian invasion of Ukraine), changes to energy prices or sovereign defaults. If increased levels of volatility continue or in the event of a rapid destabilization of global economic conditions, it may result in a material adverse effect on commodity prices, demand for metals, including gold, availability of credit, investor confidence, and general financial market liquidity, all of which may adversely affect the Company’s business and the market price of the Company’s securities.
Credit Rating
There can be no assurance that the credit ratings and outlook assigned to the Company’s debt securities or to Yamana will remain in effect for any given period of time or that any such rating or outlook will not be revised downward or withdrawn entirely by a rating agency. Real or anticipated changes in credit ratings or outlook assigned to the Company’s debt securities will generally affect the market price of its debt securities. In addition, real or anticipated changes in its credit ratings may also affect the cost at which the Company can access the capital markets. If such ratings decline and its cost of accessing capital markets increases, the Company may not be able to fund proposed capital expenditures and other operations in the future.
Dividend Policy
The Company has a dividend policy providing for a dividend yield that is consistent with the yield of comparable companies’ dividend rates and such policy is reviewed on a periodic basis and assessed in relation to the growth of the operating cash flows of the Company. Effective for the third quarter of 2021, the Company increased its annual dividend to $0.12 per share. See “General Development of the Business – History – Dividend Policy” and “Dividends”.
Payment of any future dividends will be at the discretion of the Company’s board of directors after taking into account many factors, including the Company’s operating results, financial condition, comparability of the dividend yield to peer gold companies and current and anticipated cash needs. There can be no assurance that dividends will continue to be paid in the future or on the same terms as are currently paid by the Company.
Dilution to Common Shares
During the life of the Company’s options and other rights granted or assumed by the Company, the holders are given an opportunity to profit from a rise in the market price of the common shares with a resulting dilution in the interest of the other shareholders. The Company’s ability to obtain additional financing during the period such rights
that are outstanding may be adversely affected and the existence of the rights may have an adverse effect on the price of the common shares. The holders of options and other rights of the Company may exercise such securities at a time when the Company would, in all likelihood, be able to obtain any needed capital by a new offering of securities on terms more favourable than those provided by the outstanding rights.
The increase in the number of common shares in the market and the possibility of sales of such shares may have a depressive effect on the price of the common shares. In addition, as a result of the issuance of additional common shares, the voting power of the Company’s existing shareholders will be diluted.
Future Sales of Common Shares by Existing Shareholders
Sales of a large number of common shares in the public markets, or the potential for such sales, could decrease the trading price of the common shares and could impair the Company’s ability to raise capital through future sales of common shares. Substantially all of the common shares not held by affiliates of the Company can be resold without material restriction any of the United States, the United Kingdom or Canada.
Dependence Upon Key Management Personnel and Executives
The Company is dependent upon a number of key management personnel. The loss of the services of one or more of such key management personnel could have a material adverse effect on the Company. The Company’s ability to manage its operating, development, exploration and financing activities will depend in large part on the efforts of these individuals. The Company faces intense competition for qualified personnel, and there can be no assurance that the Company will be able to attract and retain such personnel. The loss of the services of one or more key employees or the failure to and attract and retain new personnel could have a material adverse effect on the Company’s ability to manage and expand the Company’s business. The Company has entered into employment agreements with certain of its key executives.
Possible Conflicts of Interest of Directors and Officers of the Company
Certain of the directors and officers of the Company also serve as directors and/or officers of other companies involved in natural resource exploration and development and, consequently, there exists the possibility for such directors and officers to be in a position of conflict. There can be no assurance that any decision made by any of such directors and officers involving the Company will be made in accordance with their duties and obligations to deal fairly and in good faith with a view to the best interests of the Company and its shareholders. In the event that the Company’s directors and officers are subject to conflicts of interest, there may be a material adverse effect on its business.
Disclosure and Internal Controls
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 International Financial Reporting Standards (“IFRS”). Disclosure controls and procedures are designed to ensure that the information required to be disclosed by the Company in reports filed with securities regulatory agencies is recorded, processed, summarized and reported on a timely basis and is accumulated and communicated to the Company’s management, as appropriate, to allow timely decisions regarding required decisions. The Company has invested resources to document and analyze its system of disclosure controls and its internal control over financial reporting. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance with respect to the reliability of financial reporting and financial statement preparation. The Company’s failure to satisfy the requirements of applicable Canadian securities laws on an ongoing, timely basis could result in the loss of investor confidence in the reliability of its financial statements, which in turn could harm its business and negatively impact the trading price of the common shares. In addition, any failure to implement required new or improved controls, or difficulties encountered in their implementation, could harm the Company’s operating results or cause it to fail to meet its reporting obligations.
Enforcement of Legal Rights
The Company has material subsidiaries organized under the laws of Brazil, Argentina and Chile and certain of the Company’s directors, management and personnel are located in foreign jurisdictions. Given that the majority of the Company’s material assets and certain of its directors, management and personnel are located outside of Canada, investors may have difficulty in effecting service of process within Canada and collecting from or enforcing against the Company, or its directors and officers, any judgments issued by the Canadian courts or Canadian
securities regulatory authorities and predicated on the civil liability provisions of Canadian securities legislation or other laws of Canada. Similarly, in the event a dispute arises in connection with the Company’s foreign operations, the Company may be subject to the exclusive jurisdiction of foreign courts or may not be successful in subjecting foreign persons to the jurisdiction of courts in Canada.
Failures of Information Systems or Information Security Threats
The Company has entered into agreements with third parties for hardware, software, telecommunications and other information technology (“IT”) services in connection with the Company’s operations. The Company’s operations depend, in part, on how well the Company and its suppliers protect networks, equipment, IT systems and software against damage from a number of threats, including, but not limited to, cable cuts, damage to physical plants, natural disasters, terrorism, fire, power loss, hacking, computer viruses, vandalism and theft. The Company’s operations also depend on the timely maintenance, upgrade and replacement of networks, equipment, IT systems and software, as well as pre-emptive expenditures to mitigate the risks of failures. Any of these and other events could result in information system failures, delays and/or increase in capital expenses. The failure of information systems or a component of information systems could, depending on the nature of any such failure, adversely impact the Company’s reputation and results of operations.
Although to date the Company has not experienced any material losses relating to cyber attacks or other information security breaches, there can be no assurance that it will not incur such losses in the future. The Company’s risk and exposure to these matters cannot be fully mitigated because of, among other things, the evolving nature of these threats. As a result, cybersecurity and the continued development and enhancement of controls, processes and practices designed to protect systems, computers, software, data and networks from attack, damage or unauthorized access remain a priority. As cybersecurity threats continue to evolve, the Company may be required to expend additional resources to continue to modify or enhance protective measures or to investigate and remediate any security vulnerabilities. Any of these factors could have a material adverse effect on the Company’s results of operations, cash flows and financial position.
Technical Information
Unless otherwise indicated, the estimated Mineral Reserves and Mineral Resources for the Company’s various mines and mineral projects set forth herein have been estimated in accordance with the 2014 Canadian Institute of Mining, Metallurgy and Petroleum Definition Standards for Mineral Resources and Mineral Reserves (the “CIM Standards”). The following definitions are reproduced from the CIM Standards:
The term “Mineral Resource” means a concentration or occurrence of solid material of economic interest in or on the Earth’s crust in such form, grade or quality and quantity that there are reasonable prospects for eventual economic extraction. The location, quantity, grade or quality, continuity and other geological characteristics of a Mineral Resource are known, estimated or interpreted from specific geological evidence and knowledge, including sampling. Material of economic interest refers to diamonds, natural solid inorganic material, or natural solid fossilized organic material including base and precious metals, coal, and industrial minerals. Mineral Resources are subdivided, in order of increasing geological confidence, into Inferred, Indicated and Measured categories.
The term “Inferred Mineral Resource” means that part of a Mineral Resource for which quantity and grade or quality are estimated on the basis of limited geological evidence and sampling. Geological evidence is sufficient to imply but not verify geological and grade or quality continuity. An Inferred Mineral Resource is based on limited information and sampling gathered through appropriate sampling techniques from locations such as outcrops, trenches, pits, workings and drill holes.
The term “Indicated Mineral Resource” means that part of a Mineral Resource for which quantity, grade or quality, densities, shape and physical characteristics are estimated with sufficient confidence to allow the application of Modifying Factors (as defined herein) in sufficient detail to support mine planning and evaluation of the economic viability of the deposit. Geological evidence is derived from adequately detailed and reliable exploration, sampling and testing and is sufficient to assume geological and grade or quality continuity between points of observation.
The term “Measured Mineral Resource” means that part of a Mineral Resource for which quantity, grade or quality, densities, shape, and physical characteristics are estimated with confidence sufficient to allow the application of Modifying Factors to support detailed mine planning and final evaluation of the economic viability of the deposit. Geological evidence is derived from detailed and reliable exploration, sampling and testing and is sufficient to confirm geological and grade or quality continuity between points of observation.
The term “Mineral Reserve” means the economically mineable part of a Measured and/or Indicated Mineral Resource. It includes diluting materials and allowances for losses, which may occur when the material is mined or extracted and is defined by studies at pre-feasibility or feasibility level as appropriate that include application of Modifying Factors. Such studies demonstrate that, at the time of reporting, extraction could reasonably be justified. Mineral Reserves are subdivided, in order of increasing confidence, into Probable Mineral Reserves (as hereinafter defined) and Proven Mineral Reserves (as hereinafter defined). Mineral Reserves are inclusive of diluting material that will be mined in conjunction with the Mineral Reserves and delivered to the treatment plant or equivalent facility.
The term “Probable Mineral Reserve” means the economically mineable part of an Indicated, and in some circumstances, a Measured Mineral Resource. The confidence in the Modifying Factors applying to a Probable Mineral Reserve is lower than that applying to a Proven Mineral Reserve. Probable Mineral Reserve estimates must be demonstrated to be economic, at the time of reporting, by at least a pre-feasibility study.
The term “Proven Mineral Reserve” means the economically mineable part of a Measured Mineral Resource. A Proven Mineral Reserve implies a high degree of confidence in the Modifying Factors. Proven Mineral Reserve estimates must be demonstrated to be economic, at the time of reporting, by at least a pre-feasibility study.
The term “Modifying Factors” means considerations used to convert Mineral Resources to Mineral Reserves. These include, but are not restricted to, mining, processing, metallurgical, infrastructure, economic, marketing, legal, environmental, social and governmental factors.
Non-GAAP Financial Performance Measures
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 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.
Non-GAAP Financial Performance Measures
In this annual information form, the Company uses non-GAAP financial performance measures and non-GAAP ratios to supplement its financial statements, which are presented in accordance with IFRS, including Cash costs per gold equivalent ounce ("GEO") sold and all-in sustaining costs ("AISC") per GEO sold.
The Company believes that these measures and ratios, 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 performance measures and ratios 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 financial performance measures and other financial 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.
The reconciliations to the above-noted non-GAAP financial performance measures and ratios to the most directly comparable measure reported in the Consolidated Financial Statements can be found in the Company’s MD&A for the year ended December 31, 2021 available under the Company’s profile on SEDAR at www.sedar.com and on the Company’s website.
Cash Costs and All-In Sustaining Costs per GEO Sold
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 performance measure. The terms "cash costs per GEO sold" and "AISC per GEO sold" are non-GAAP ratios and do not have any standardized meaning prescribed under IFRS, and therefore they may not be comparable to similar non-GAAP financial performance measures employed by other companies. Non-GAAP financial performance 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.
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 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 does 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 components to the GEO production and sales activities but net of by-product revenue credits from sales of zinc.
Mineral Projects
Summary of Mineral Reserve and Mineral Resource Estimates
Mineral Reserves (Proven and Probable)
The following table sets forth the Mineral Reserve estimates for the Company’s mineral projects as at December 31, 2021. See “Interests of Experts”.
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Gold | 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 (g/t) | Contained oz. (000's) |
Canadian Malartic & Barnat Open Pit (50%) | 21,466 | 0.84 | 580 | 28,758 | 1.28 | 1,188 | 50,225 | 1.09 | 1,767 |
Canadian Malartic Underground (50%) | 0 | 0.00 | 0 | 0 | 0.00 | 0 | 0 | 0.00 | 0 |
Canadian Malartic Total (50%) | 21,466 | 0.84 | 580 | 28,758 | 1.28 | 1,188 | 50,225 | 1.09 | 1,767 |
Cerro Moro | 365 | 9.27 | 109 | 1,384 | 7.82 | 348 | 1,749 | 8.12 | 457 |
El Peñón Ore | 421 | 6.70 | 91 | 4,996 | 5.09 | 817 | 5,417 | 5.21 | 908 |
El Peñón Stockpiles | 8 | 2.64 | 1 | 607 | 1.24 | 24 | 615 | 1.26 | 25 |
El Peñón Total | 429 | 6.62 | 91 | 5,603 | 4.67 | 841 | 6,032 | 4.81 | 933 |
Jacobina | 28,910 | 2.17 | 2,015 | 13,101 | 2.19 | 923 | 42,011 | 2.18 | 2,938 |
Minera Florida Ore | 662 | 3.08 | 65 | 2,905 | 3.49 | 326 | 3,567 | 3.42 | 392 |
Minera Florida Tailings | 0 | 0.00 | 0 | 1,248 | 0.94 | 38 | 1,248 | 0.94 | 38 |
Minera Florida Total | 662 | 3.08 | 65 | 4,153 | 2.73 | 364 | 4,815 | 2.78 | 430 |
Wasamac | 0 | 0.00 | 0 | 23,168 | 2.56 | 1,910 | 23,168 | 2.56 | 1,910 |
Jeronimo (57%) | 6,350 | 3.91 | 798 | 2,331 | 3.79 | 284 | 8,681 | 3.88 | 1,082 |
MARA (56.25%) | 330,300 | 0.25 | 2,655 | 291,150 | 0.16 | 1,498 | 621,450 | 0.21 | 4,152 |
Total Gold Mineral Reserves | 388,482 | 0.51 | 6,314 | 369,648 | 0.62 | 7,355 | 758,131 | 0.56 | 13,669 |
| | | | | | | | | |
Silver | 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 (g/t) | Contained oz. (000's) |
Cerro Moro | 365 | 593.5 | 6,964 | 1,384 | 342.0 | 15,215 | 1,749 | 394.5 | 22,180 |
El Peñón Ore | 421 | 225.5 | 3,055 | 4,996 | 162.1 | 26,036 | 5,417 | 167.0 | 29,091 |
El Peñón Stockpiles | 8 | 140.0 | 35 | 607 | 13.2 | 257 | 615 | 14.8 | 292 |
El Peñón Total | 429 | 224.0 | 3,090 | 5,603 | 146.0 | 26,293 | 6,032 | 151.5 | 29,383 |
Minera Florida Ore | 662 | 20.2 | 430 | 2,905 | 21.4 | 1,998 | 3,567 | 21.2 | 2,428 |
Minera Florida Tailings | 0 | 0.0 | 0 | 1,248 | 14.6 | 584 | 1,248 | 14.6 | 584 |
Minera Florida Total | 662 | 20.2 | 430 | 4,153 | 19.3 | 2,582 | 4,815 | 19.5 | 3,011 |
MARA (56.25%) | 330,300 | 3.0 | 32,070 | 291,150 | 2.6 | 24,618 | 621,450 | 2.8 | 56,689 |
Total Silver Mineral Reserves | 331,757 | 4.0 | 42,555 | 302,289 | 7.1 | 68,708 | 634,046 | 5.5 | 111,264 |
| | | | | | | | | |
Copper | Proven Mineral Reserves | Probable Mineral Reserves | Total - Proven and Probable |
Tonnes (000's) | Grade (%) | Contained lbs (mm) | Tonnes (000's) | Grade (%) | Contained lbs (mm) | Tonnes (000's) | Grade (%) | Contained lbs (mm) |
MARA (56.25%) | 330,300 | 0.57 | 4,151 | 291,150 | 0.39 | 2,503 | 621,450 | 0.49 | 6,654 |
Total Copper Mineral Reserves | 330,300 | 0.57 | 4,151 | 291,150 | 0.39 | 2,503 | 621,450 | 0.49 | 6,654 |
| | | | | | | | | |
Zinc | Proven Mineral Reserves | Probable Mineral Reserves | Total - Proven and Probable |
Tonnes (000's) | Grade (%) | Contained lbs (mm) | Tonnes (000's) | Grade (%) | Contained lbs (mm) | Tonnes (000's) | Grade (%) | Contained lbs (mm) |
Minera Florida Ore | 662 | 1.44 | 21 | 2,905 | 0.94 | 60 | 3,567 | 1.03 | 81 |
Minera Florida Tailings | 0 | 0.00 | 0 | 1,248 | 0.58 | 16 | 1,248 | 0.58 | 16 |
Minera Florida Total | 662 | 1.44 | 21 | 4,153 | 0.83 | 76 | 4,815 | 0.91 | 97 |
Total Zinc Mineral Reserves | 662 | 1.44 | 21 | 4,153 | 0.83 | 76 | 4,815 | 0.91 | 97 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Molybdenum | Proven Mineral Reserves | Probable Mineral Reserves | Total - Proven and Probable |
Tonnes (000's) | Grade (%) | Contained lbs (mm) | Tonnes (000's) | Grade (%) | Contained lbs (mm) | Tonnes (000's) | Grade (%) | Contained lbs (mm) |
MARA (56.25%) | 330,300 | 0.030 | 218 | 291,150 | 0.030 | 192 | 621,450 | 0.030 | 411 |
Total Molybdenum Mineral Reserves | 330,300 | 0.030 | 218 | 291,150 | 0.030 | 192 | 621,450 | 0.030 | 411 |
Mineral Resources (Measured, Indicated and Inferred)
The following table set forth the Mineral Resource estimates and for the Company’s mineral projects as at December 31, 2021. See “Interests of Experts”.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Gold | Measured Mineral Resources | Indicated Mineral Resources | Total - Measured and Indicated |
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) |
Canadian Malartic, Barnat & other zones (50%) | 130 | 0.72 | 3 | 2,174 | 1.31 | 92 | 2,304 | 1.28 | 95 |
Odyssey Underground (50%) | 0 | 0.00 | 0 | 1,075 | 1.92 | 66 | 1,075 | 1.92 | 66 |
East Malartic Underground (50%) | 0 | 0.00 | 0 | 5,539 | 2.04 | 364 | 5,539 | 2.04 | 364 |
East Gouldie Underground (50%) | 0 | 0.00 | 0 | 5,974 | 3.88 | 745 | 5,974 | 3.88 | 745 |
Canadian Malartic Total (50%) | 130 | 0.72 | 3 | 14,762 | 2.67 | 1,267 | 14,893 | 2.65 | 1,270 |
Cerro Moro Mine | 177 | 5.26 | 30 | 760 | 3.58 | 87 | 937 | 3.89 | 117 |
Cerro Moro Heap Leach | 0 | 0.00 | 0 | 0 | 0.00 | 0 | 0 | 0.00 | 0 |
Cerro Moro Total | 177 | 5.26 | 30 | 760 | 3.58 | 87 | 937 | 3.89 | 117 |
El Peñón Mine | 761 | 5.28 | 129 | 5,651 | 3.20 | 581 | 6,412 | 3.45 | 710 |
El Peñón Tailings | 0 | 0.00 | 0 | 0 | 0.00 | 0 | 0 | 0.00 | 0 |
El Peñón Stockpiles | 0 | 0.00 | 0 | 1,019 | 1.13 | 37 | 1,019 | 1.13 | 37 |
El Peñón Total | 761 | 5.28 | 129 | 6,670 | 2.88 | 618 | 7,430 | 3.13 | 748 |
Jacobina | 30,281 | 2.40 | 2,339 | 19,372 | 2.36 | 1,468 | 49,652 | 2.38 | 3,807 |
Minera Florida | 1,425 | 5.24 | 240 | 6,108 | 4.15 | 816 | 7,533 | 4.36 | 1,056 |
Wasamac | 0 | 0.00 | 0 | 5,769 | 1.76 | 326 | 5,769 | 1.76 | 326 |
Jeronimo (57%) | 772 | 3.77 | 94 | 385 | 3.69 | 46 | 1,157 | 3.74 | 139 |
Agua Rica (56.25%) | 30,150 | 0.13 | 126 | 116,044 | 0.11 | 411 | 146,194 | 0.11 | 537 |
Alumbrera (56.25%) | 65,297 | 0.31 | 660 | 5,154 | 0.29 | 48 | 70,451 | 0.31 | 708 |
MARA Total (56.25%) | 95,447 | 0.26 | 786 | 121,198 | 0.12 | 459 | 216,645 | 0.18 | 1,245 |
Arco Sul | 0 | 0.00 | 0 | 0 | 0.00 | 0 | 0 | 0.00 | 0 |
La Pepa (80%) | 47,053 | 0.61 | 920 | 52,324 | 0.49 | 831 | 99,377 | 0.55 | 1,751 |
Lavra Velha | 0 | 0.00 | 0 | 0 | 0.00 | 0 | 0 | 0.00 | 0 |
Monument Bay | 0 | 0.00 | 0 | 36,581 | 1.52 | 1,787 | 36,581 | 1.52 | 1,787 |
Suyai | 0 | 0.00 | 0 | 4,700 | 15.00 | 2,286 | 4,700 | 15.00 | 2,286 |
Total Gold Mineral Resources | 176,046 | 0.80 | 4,541 | 268,629 | 1.16 | 9,992 | 444,675 | 1.02 | 14,532 |
|
Silver | Measured Mineral Resources | Indicated Mineral Resources | Total - Measured and Indicated |
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) |
Cerro Moro Mine | 177 | 234.0 | 1,328 | 760 | 266.1 | 6,506 | 937 | 260.0 | 7,834 |
Cerro Moro Heap Leach | 0 | 0.0 | 0 | 0 | 0.0 | 0 | 0 | 0.0 | 0 |
Cerro Moro Total | 177 | 234.0 | 1,328 | 760 | 266.1 | 6,506 | 937 | 260.0 | 7,834 |
El Peñón Mine | 761 | 150.9 | 3,691 | 5,651 | 113.5 | 20,625 | 6,412 | 118.0 | 24,316 |
El Peñón Tailings | 0 | 0.0 | 0 | 0 | 0.0 | 0 | 0.00 | 0.0 | 0 |
El Peñón Stockpiles | 0 | 0.0 | | 1,019 | 28.8 | 942 | 1,019 | 28.8 | 942 |
El Peñón Total | 761 | 150.9 | 3,691 | 6,670 | 100.6 | 21,568 | 7,430 | 105.7 | 25,259 |
Minera Florida | 1,425 | 34.0 | 1,557 | 6,108 | 21.8 | 4,287 | 7,533 | 24.1 | 5,844 |
Agua Rica (56.25%) | 30,150 | 1.6 | 1,502 | 116,044 | 1.9 | 6,940 | 146,194 | 1.8 | 8,442 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Alumbrera (56.25%) | 0 | 0.0 | 0 | 0 | 0.0 | 0 | 0 | 0.0 | 0 |
MARA Total (56.25%) | 30,150 | 1.6 | 1,502 | 116,044 | 1.9 | 6,940 | 146,194 | 1.8 | 8,442 |
Suyai | 0 | 0.0 | 0 | 4,700 | 23.0 | 3,523 | 4,700 | 23.0 | 3,523 |
Total Silver Mineral Resources | 32,513 | 7.7 | 8,079 | 134,282 | 9.9 | 42,823 | 166,795 | 9.5 | 50,902 |
|
Copper
| Measured Mineral Resources | Indicated Mineral Resources | Total - Measured and Indicated |
Tonnes
(000's) | Grade
(%) | Contained
lbs (mm) | Tonnes
(000's) | Grade
(%) | Contained
lbs (mm) | Tonnes
(000's) | Grade
(%) | Contained
lbs (mm) |
| Agua Rica (56.25%) | 30,150 | 0.22 | 146 | 116,044 | 0.30 | 767 | 146,194 | 0.28 | 914 |
| Alumbrera (56.25%) | 65,297 | 0.31 | 445 | 5,154 | 0.21 | 24 | 70,451 | 0.30 | 469 |
| MARA Total (56.25%) | 95,447 | 0.28 | 591 | 121,198 | 0.30 | 791 | 216,645 | 0.29 | 1,383 |
| Total Copper Mineral Resources | 95,447 | 0.28 | 591 | 121,198 | 0.30 | 791 | 216,645 | 0.29 | 1,383 |
| | | | | | | | | |
| Zinc | Measured Mineral Resources | Indicated Mineral Resources | Total - Measured and Indicated |
Tonnes
(000's) | Grade
(%) | Contained
lbs (mm) | Tonnes
(000's) | Grade
(%) | Contained
lbs (mm) | Tonnes
(000's) | Grade
(%) | Contained
lbs (mm) |
| Minera Florida | 1,425 | 1.90 | 60 | 6,108 | 1.38 | 185 | 7,533 | 1.48 | 245 |
| Total Zinc Mineral Resources | 1,425 | 1.90 | 60 | 6,108 | 1.38 | 185 | 7,533 | 1.48 | 245 |
| | | | | | | | | |
Molybdenum
| Measured Mineral Resources | Indicated Mineral Resources | Total - Measured and Indicated |
Tonnes
(000's) | Grade
(%) | Contained
lbs (mm) | Tonnes
(000's) | Grade
(%) | Contained
lbs (mm) | Tonnes
(000's) | Grade (%) | Contained
lbs (mm) |
| Agua Rica (56.25%) | 30,150 | 0.020 | 14 | 116,044 | 0.030 | 77 | 146,194 | 0.030 | 90 |
| Alumbrera (56.25%) | 65,297 | 0.012 | 16 | 5,154 | 0.010 | 1 | 70,451 | 0.011 | 17 |
| MARA Total (56.25%) | 95,447 | 0.014 | 30 | 121,198 | 0.029 | 78 | 216,645 | 0.022 | 107 |
| Total Molybdenum Mineral Resources | 95,447 | 0.014 | 30 | 121,198 | 0.029 | 78 | 216,645 | 0.022 | 107 |
| | | | | | | | | | | |
Gold
| Inferred Mineral Resources |
Tonnes (000's) | Grade (g/t) | Contained oz. (000's) |
Canadian Malartic, Barnat & other zones (50%) | 2,790 | 0.80 | 72 |
Odyssey Underground (50%) | 13,382 | 2.07 | 891 |
East Malartic Underground (50%) | 42,635 | 1.92 | 2,639 |
East Gouldie Underground (50%) | 30,825 | 3.07 | 3,046 |
Canadian Malartic Total (50%) | 89,632 | 2.31 | 6,647 |
Cerro Moro Mine | 1,071 | 4.91 | 169 |
Cerro Moro Heap Leach | 416 | 4.28 | 57 |
Cerro Moro Total | 1,488 | 4.73 | 226 |
El Peñón Mine | 5,115 | 3.87 | 636 |
El Peñón Tailings | 13,767 | 0.55 | 245 |
El Peñón Stockpiles | 0 | 0.00 | 0 |
El Peñón Total | 18,882 | 1.45 | 881 |
Jacobina | 25,018 | 2.37 | 1,904 |
Minera Florida | 4,167 | 4.91 | 658 |
Wasamac | 3,984 | 2.01 | 258 |
Jeronimo (57%) | 1,118 | 4.49 | 161 |
| | | | | | | | | | | |
Agua Rica (56.25%) | 417,881 | 0.09 | 1,209 |
Alumbrera (56.25%) | 1,708 | 0.23 | 13 |
MARA Total (56.25%) | 419,590 | 0.09 | 1,222 |
Arco Sul | 6,203 | 3.08 | 615 |
La Pepa (80%) | 20,019 | 0.46 | 293 |
Lavra Velha | 3,934 | 4.29 | 543 |
Monument Bay | 41,946 | 1.32 | 1,781 |
Suyai | 900 | 9.90 | 274 |
Total Gold Mineral Resources | 636,880 | 0.76 | 15,463 |
| | | |
Silver | Inferred Mineral Resources |
Tonnes (000's) | Grade (g/t) | Contained oz. (000's) |
Cerro Moro Mine | 1,071 | 213.4 | 7,351 |
Cerro Moro Heap Leach | 416 | 60.4 | 808 |
Cerro Moro Total | 1,488 | 170.6 | 8,159 |
El Peñón Mine | 5,115 | 125.3 | 20,604 |
El Peñón Tailings | 13,767 | 18.9 | 8,380 |
El Peñón Stockpiles | 0 | 0.0 | 0 |
El Peñón Total | 18,882 | 47.7 | 28,984 |
Minera Florida | 4,167 | 23.4 | 3,138 |
Agua Rica (56.25%) | 417,881 | 1.6 | 21,765 |
Alumbrera (56.25%) | 0 | 0.0 | 0 |
MARA Total (56.25%) | 417,881 | 1.6 | 21,765 |
Suyai | 900 | 21.0 | 575 |
Total Silver Mineral Resources | 443,317 | 4.4 | 62,621 |
| | | |
Copper | Inferred Mineral Resources |
Tonnes (000's) | Grade (%) | Contained lbs (mm) |
Agua Rica (56.25%) | 417,881 | 0.23 | 2,119 |
Alumbrera (56.25%) | 1,708 | 0.17 | 6 |
MARA Total (56.25%) | 419,590 | 0.23 | 2,125 |
Total Copper Mineral Resources | 419,590 | 0.23 | 2,125 |
| | | |
Zinc
| Inferred Mineral Resources |
Tonnes (000's) | Grade (%) | Contained lbs (mm) |
Minera Florida | 4,167 | 1.20 | 111 |
Total Zinc Mineral Resources | 4,167 | 1.20 | 111 |
| | | |
Molybdenum | Inferred Mineral Resources |
Tonnes (000's) | Grade (%) | Contained lbs (mm) |
Agua Rica (56.25%) | 417,881 | 0.030 | 276 |
Alumbrera (56.25%) | 1,708 | 0.008 | 1 |
MARA Total (56.25%) | 419,590 | 0.030 | 277 |
Total Molybdenum Mineral Resources | 419,590 | 0.030 | 277 |
Mineral Reserve and Mineral Resource Reporting Notes
1. Metal Price, Cut-off Grade, Metallurgical Recovery | | | | | | | | | | | |
| Mineral Reserves | Mineral Resources |
Canadian Malartic (50%)
| Price assumption: $1,250/oz gold Open pit cut-off grades range from 0.41 to 0.42 g/t gold Metallurgical recoveries for gold averaging 90.6%
| Price assumption: $1,250/oz gold. Canadian Malartic, Barnat and other zones cut-off grades range from 0.31 to 0.42 g/t gold inside pit, and from 1.15 to 1.20 g/t gold outside or below pit (stope optimized) Underground cut-off grade at Odyssey is 1.15 to 1.30 g/t gold (stope optimized) Underground cut-off grade at East Malartic is 1.15 to 1.40 g/t gold (stope optimized) Underground cut-off grade at East Gouldie is 1.10 to 1.25 g/t gold (stope optimized) |
| | |
Cerro Moro
| Price assumptions: $1,250/oz gold and $18.00/oz silver Underground NSR cut-off at $210.71/t and open pit NSR cut-off at $124.72/t Metallurgical recoveries average 93% for gold and 93% for silver | Price assumptions: $1,250/oz gold and $18.00/oz silver. NSR cut-off values correspond to 75% of Mineral Reserves cut-off Underground NSR cut-off at $158.04/t and open pit NSR cut-off at $93.54/t Heap leach resource reported at NSR cut-off value of $90.5/t (underground) and $26.0/t (open pit) Constrained in optimized stopes and pit shells |
| | |
El Peñón
| Price assumptions: $1,250/oz gold, $18.00/oz silver Open Pit cut-off at $48.27/t Underground cut-off at $129.15/t Low grade stockpiles cut-off 0.86 g/t gold equivalent Metallurgical recoveries for open pit ores are 89.39% for gold and 80.70% for silver Metallurgical recoveries for underground ores range from 84.39% to 96.12% for gold and from 68.76% to 91.03% for silver Metallurgical recoveries for low grade stockpiles are 95.2% for gold and 83.0% for silver | Price assumptions: $1,250/oz gold, $18.00/oz silver Underground cut-off at $96.86/t, which corresponds to 75% of the cut-off value used to estimate the Mineral Reserves 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 84.39% to 96.12% for gold and from 68.76% to 91.03% for silver Metallurgical recoveries for tailings estimated to be 60% for gold and 30% for silver Metallurgical recoveries for stockpiles estimated to be 88.0% for gold and 80.8% for silver |
| | |
Jacobina
| Price assumption: $1,250/oz gold Underground Mineral Reserves are reported at variable cut-off grades by zone ranging from 0.92 g/t gold to 1.01 g/t gold Metallurgical recovery is 96.2% | Price assumption: $1,250/oz gold. Cut-off grades correspond to 75% of the cut-off used to estimate the Mineral Reserves Underground Mineral Resources are reported at variable cut-off grades by zone ranging from 0.69 g/t gold to 0.76 g/t gold Reported within optimized underground mining shapes with minimum mining width of 1.5 metres and considering internal waste and dilution |
| | |
Minera Florida
| Price assumptions: $1,250/oz gold, $18.00/oz silver and $1.25/lb zinc Underground cut-off at $92.07/t Metallurgical recoveries of 91.99% for gold, 62.75% for silver, and 79.89% for zinc | Price assumptions: $1,250/oz gold, $18.00/oz silver and $1.25/lb zinc Underground Mineral Resources are estimated at a cut-off value of $69.05/t, corresponding to 75% of the cut-off used to estimate Mineral Reserves, for the Las Pataguas, PVS, and Cucaracha zones which are constrained to underground mining shapes. The remaining zones are reported unconstrained at a NSR cut-off value of $92.07/t. Metallurgical recoveries of 91.99% for gold, 62.75% for silver, and 79.89% for zinc |
| |
| | | | | | | | | | | |
Wasamac
| Price assumption: $1,250/oz gold Underground cut-off grade from 1.45 to 1.68 g/t gold (stope optimized) The external dilution is estimated to be 11%. The average mining recovery factor was set at 93.6%. | Price assumption: $1,250/oz gold. Cut-off grades correspond to 75% of the cut-off used to estimate the Mineral Reserves Underground cut-off grades range from at 1.10 to 1.30 g/t gold Mineral Resources are below a 32m surface crown pillar and outside a 5 m buffer around historical underground workings Constrained by potentially mineable shapes based on a minimum mining width of 2 m considering internal waste and dilution |
| | |
Jeronimo (57%) | Price assumption: $900/oz gold Cut-off grade at 2.0 g/t gold Metallurgical recovery for gold is 86%. | Cut-off grade at 2.0 g/t gold |
| | |
MARA: Agua Rica (56.25%)
| Mineral Reserves are estimated using a variable metallurgical recovery Average metallurgical recoveries of 86% copper, 35% gold, 43% silver, and 44% molybdenum were considered Open pit Mineral Reserves are reported at a variable cut-off value averaging $8.42/t, based on metal price assumptions of $3.00/lb copper, $1,250/oz gold, $18.00/oz silver, and $11.00/lb molybdenum. 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 estimated using a variable metallurgical recovery LOM average metallurgical recoveries of 86% copper, 35% gold, 43% silver, and 44% molybdenum were considered Mineral Resources are constrained by an optimized pit shell based on metal price assumptions of $4.00/lb copper, $1,600/oz gold, $24/oz silver, and $11.00/lb molybdenum. 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 |
| | |
MARA: Alumbrera (56.25%)
| N/A
| Price assumptions: $1,300/oz gold, $2.83/lb copper. Alumbrera deposit: Whittle pit shell cut-off at 0.22% copper equivalent Bajo El Durazno deposit: 0.2 g/t Au cut-off within pit shell |
| | |
Arco Sul
| N/A
| Price assumption: $1,250/oz gold. Underground cut-off grade at 2.00g/t, which corresponds to 75% of the cut-off that would be used for Mineral Reserves Mineral Resources reported within optimized underground mining shapes |
| | |
La Pepa
| N/A
| Price assumption: $1,650/oz gold Cut-off grade of 0.20 g/t gold for oxides and 0.26 g/t gold for sulphides, inside optimized pit envelope |
| | |
Lavra Velha | N/A | Price assumptions: $1,300/oz gold and $3.50/lb copper Cut-off grade at 0.2 g/t gold and 0.1% copper |
| | | |
Monument Bay
| N/A
| Price Assumption: $1,200/oz gold 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 |
| | |
Suyai | N/A | 5.0 g/t gold cut-off inside mineralized wireframe modeling |
| | |
| | | | | | | | | | | |
2. All Mineral Reserves and Mineral Resources have been estimated in accordance with the standards of the Canadian Institute of Mining, Metallurgy and Petroleum and NI 43-101. |
3. All Mineral Resources are reported exclusive of Mineral Reserves |
4. Mineral Resources which are not Mineral Reserves do not have demonstrated economic viability |
5. Mineral Reserves and Mineral Resources are reported as of December 31, 2021 |
6. For the qualified persons responsible for the Mineral Reserve and Mineral Resource estimates at the Company’s material properties, see the qualified persons list below |
Property | | Qualified Persons for Mineral Reserves | Qualified Persons for Mineral Resources |
Canadian Malartic | Guy Gagnon, Eng., Canadian Malartic GP | Pascal Lehouiller, P. Geo, Canadian Malartic GP |
El Peñón | Jimmy Avendaño Gonzalez, Registered Member of the Chilean Mining Commission, Yamana Gold Inc. | Marco Velásquez Corrales, Registered Member of the Chilean Mining Commission, Yamana Gold Inc. |
Jacobina | Eduardo de Souza Soares, MAusIMM CP (Min), Yamana Gold Inc. | Luiz Carlos Damasceno dos Santos, MAusIMM CP (Geo), Yamana Gold Inc. |
Material Producing Mines
Jacobina Mining Complex
Unless otherwise stated, the information, tables and figures that follow relating to Jacobina are derived, in part, and in some instances are extracts, from the technical report entitled “NI 43-101 Technical Report, Jacobina Gold Mine, Bahia State, Brazil” dated May 29, 2020 (the “Jacobina Report”), prepared by or under the supervision of Eduardo de Souza Soares, MAusIMM CP (Min), Renan Garcia Lopes, MAusIMM CP (Geo), Henry Marsden, P.Geo., Luis Vasquez, P.Eng. and Carlos Iturralde, P. Eng., each of whom is a “qualified person” for the purpose of NI 43-101 (together the “Jacobina Qualified Persons”). The technical information contained in this section of the annual information form, other than the technical information set forth above under the heading “Mineral Projects – Summary of Mineral Reserves and Mineral Resources Estimate”, has been reviewed and approved by Sébastien Bernier, P. Geo. Mr. Bernier is employed by the Company as its Senior Director, Reserves and Resources and is a “qualified person” for the purpose of NI 43-101. See “Interests of Experts”.
Portions of the following information are based on assumptions, qualifications and procedures which are not fully described herein. Reference should be made to the full text of the Jacobina Report, which has been filed with certain Canadian securities regulatory authorities pursuant to NI 43-101 and is available for review under the Company’s SEDAR profile at www.sedar.com.
Property Description, Location and Access
Jacobina Mine is located 10 kilometres from the town of Jacobina, which is accessible by paved secondary highway from Salvador, the state capital of Bahia, located 340 kilometres to the south-southeast of the mine complex. Well-maintained paved roads from the town of Jacobina provide access to the Jacobina property. The mine operates on a year-round basis.
Jacobina forms a long rectangle measuring 155 kilometres in a north-south direction, and 5 to 25 kilometres in an east-west direction. The shape of the claim package reflects the underlying geology as the stratigraphy favourable for hosting gold mineralization trends north-south. The Jacobina mineral rights consist of approximately 5,954 hectares of mining concessions, 71,045 hectares of exploration permits, and one 650 hectare mining claim; all of which are held by Yamana through its wholly-owned subsidiary, Jacobina Mineração e Comércio Ltda. (“JMC”). The exploration concessions are renewable on a three-year basis. JMC holds all of the surface rights required for the development of its activities.
JMC does not pay royalties, however, it does pay taxes to the federal mineral sector agency. These taxes, called Compensação Financeira pela Exploração de Recursos Minerais and also known as the Brazilian mining royalty, are set at a rate of 1.5% of revenue. JMC does not have any obligations in respect to back-in rights, payments, or other agreements or encumbrances.
JMC has all required permits to continue carrying out the proposed mining operations for Jacobina. Yamana is not aware of any other significant factors and risks that may affect access, title, or the right or ability to perform mining and exploration work on the property.
History
The Serra de Jacobina Mountains have been mined for gold since the late 17th century. Numerous historic workings from artisanal miners (garimpeiros) can be seen along a 15 kilometre strike length, following the ridges of the mountain chain. The modern history of the Jacobina mining camp began in the early 1970s with extensive geological studies and exploration carried out by Anglo American Corporation. Mine development at Itapicurú (Morro do Vento area) commenced in October 1980 and the processing plant was commissioned in November 1982.
The first gold bar was poured at the João Belo Mine in March 2005 and commercial production was declared effective July 1, 2005. Yamana has owned a 100% interest in Jacobina since April 2006. Total production for Jacobina since mining commenced in 1983 to the end of 2021 is shown in the table below.
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Historical Gold Production to December 31, 2021 |
Year | Tonnes Processed | Au Feed Grade (g/t) | Metallurgical Recovery (%Au) | Gold Produced (oz Au) |
1983 | 241,703 | 5.73 | 85.46 | 38,054 |
1984 | 301,946 | 5.18 | 92.48 | 46,529 |
1985 | 282,878 | 4.56 | 92.50 | 38,345 |
1986 | 311,174 | 3.60 | 92.50 | 33,312 |
1987 | 247,838 | 5.10 | 96.00 | 38,991 |
1988 | 244,628 | 5.33 | 96.00 | 40,238 |
1989 | 257,247 | 3.02 | 96.00 | 23,979 |
1990 | 681,955 | 2.01 | 96.00 | 42,202 |
1991 | 775,839 | 2.70 | 90.30 | 60,847 |
1992 | 594,181 | 2.57 | 89.90 | 44,184 |
1993 | 518,889 | 2.32 | 93.20 | 36,039 |
1994 | 551,141 | 2.54 | 90.00 | 40,582 |
1995 | 579,913 | 2.57 | 95.60 | 45,813 |
1996 | 591,107 | 2.36 | 94.60 | 42,390 |
1997 | 865,681 | 2.13 | 92.20 | 54,778 |
1998 | 741,089 | 1.91 | 93.00 | 42,386 |
1999-2004 | 0 | 0 | 0 | 0 |
2005 | 906,759 | 1.90 | 96.00 | 53,170 |
2006 | 1,418,508 | 1.86 | 96.00 | 81,272 |
2007 | 1,040,174 | 1.70 | 95.00 | 54,068 |
2008 | 1,388,087 | 1.83 | 89.86 | 73,241 |
2009 | 1,996,989 | 1.88 | 91.77 | 110,514 |
2010 | 2,158,096 | 1.89 | 93.30 | 122,152 |
2011 | 2,148,275 | 1.89 | 93.11 | 121,675 |
2012 | 2,104,683 | 1.84 | 93.73 | 116,862 |
2013 | 1,575,628 | 1.57 | 92.48 | 73,695 |
2014 | 1,419,031 | 1.78 | 92.93 | 75,650 |
2015 | 1,469,095 | 2.17 | 94.43 | 96,715 |
2016 | 1,802,855 | 2.17 | 95.71 | 120,478 |
2017 | 1,978,409 | 2.22 | 96.35 | 135,806 |
2018 | 2,035,457 | 2.30 | 96.21 | 144,695 |
2019 | 2,254,793 | 2.28 | 96.70 | 159,499 |
2020 | 2,425,886 | 2.36 | 96.45 | 177,830 |
2021 | 2,657,590 | 2.26 | 96.44 | 186,206 |
Total | 38,567,524 | 2.20 | 94.28 | 2,572,197 |
Geological Setting, Mineralization and Deposit Types
The Jacobina gold district is defined by a 40-kilometre long belt that extends from Campo Limpo, in the south, to Santa Cruz do Coqueiro, in the north. The gold mineralization found at Jacobina occurs as two styles of mineralization (Texeira et al, 2001): (i) conglomerate-hosted placer gold mineralization (the most important mineralization type in the Jacobina district) and (ii) post-depositional gold-bearing stockwork, shear zones, and associated extensional quartz veins, which are relatively minor and do not contribute to the established Mineral Resources at Jacobina.
The gold mineralization at Jacobina is hosted almost entirely within quartz pebble conglomerates of the Serra do Córrego Formation, the lowermost sequence of the Proterozoic age Jacobina Group. This formation is typically 500 metres thick but locally achieves thicknesses of up to one kilometre. The gold-bearing conglomerate units, known as reefs, range from less than 1.5 metres to 25 metres in width and can be followed along strike for hundreds of metres, and in some cases for kilometres. Some contacts between the reefs and crosscutting mafic and ultramafic intrusive rocks are enriched in gold. Although they are quite homogeneous along their strike and dip extensions, the gold-bearing conglomerates differ from one another in stratigraphic position and pattern of gold distribution. The differences are likely due to variations in the sedimentary source regions, in the erosion and transportation mechanisms, and in the nature of the depositional environments. Not all conglomerates of the Serra do Córrego Formation are gold-bearing.
The Jacobina gold district coincides with most of the Jacobina Range, where quartzite, conglomerate, and schist units of the Paleoproterozoic Jacobina Group form a series of north-south-trending mountain ranges that rise up to 1,200 MASL. The longitudinal north-south valleys as well as the east-west oriented valleys often correspond to recessive ultramafic sills and dykes. The Mairi Complex consists of a group of Archean-aged tonalitic, trondhjemitic, and granodioritic gneiss-dominated basement and related remnants supracrustal rocks of the Gavião Block; it underlies the flatter terrain east of the Jacobina range. East of the Mairi Complex, the fine-grained biotite gneisses of the Archean Saúde Complex also underlie a flat landscape. The transition between the hilly and the flatter topography of the eastern domains corresponds to the exposures of the Archean Mundo Novo Greenstone Belt.
The stratigraphic subdivisions of the Jacobina Group (Griffon, 1967; Mascarenhas et al., 1998) have long been controversial. While the stratigraphy in the Jacobina area is well documented, it is challenging to develop a usable nomenclature to define the upper formations of the Jacobina Group, specifically the Cruz das Almas, Serra do Meio, and the Serra da Paciência Formations.
Different styles of deformation are recognized within the Jacobina Group and surrounding Archean rocks, along and across the northern portion of the 50-kilometre-long, north-trending Contendas–Mirante–Jacobina lineament. Thrust faults, oblique sinistral-reverse faults, and regional tight and open folds were developed in response to the strong westward-verging mass transport event caused by the Paleoproterozoic continent/continent collision. To the west, the Jacobina Group is thrust over the Archean Mairi Complex, the Campo Formoso Mafic–Ultramafic Complex, and the late- to post-tectonic granitic intrusions (Miguel Calmon-Itapicurú, Mirangaba-Carnaíba and Campo Formoso intrusions), along a thrust fault named the Jacobina Fault. This structural setting changes eastwards to a series of steeply east-dipping blocks, bounded by east-dipping subparallel reverse faults.
The mineralization at Jacobina consists of conglomerate-hosted gold deposits generally interpreted to represent paleoplacer gold deposits, with some post-depositional modification by structural and hydrothermal events. This type of deposit is similar to the Witwatersrand and Tarkwa deposits in South and West Africa.
Exploration
Since 2006, Yamana has carried out a program of regional exploration with the goal of identifying additional occurrences of mineralized conglomerates at surface along the strike length of the Jacobina belt. Between 2010 and 2020, a total of 13,269 chip or grab samples, mainly of conglomerates, ranging from one kilogram to three kilograms in weight, were collected on the Jacobina property. An additional 890 samples were collected in 2021, largely from the Jacobina Norte area. All samples were processed according to Yamana’s quality assurance/quality control (“QA/QC”) protocols.
In 2018, a structural mapping program was carried out on surface in the immediate vicinity of the mines. The program focused specifically on the Serra do Córrego, Canavieiras North, Canavieiras Central, and Canavieiras South mine areas, in addition to the Lagartixa and Morro da Viúva target areas. The results were used to reinterpret the structural setting and genesis of the Jacobina style of mineralization. This improved understanding informed the drilling programs completed in 2018 through 2020.
Exploration from 2018 to 2020 focussed on the higher-grade deposits within the mine complex and led to the discovery of significant extensions to mineralization at Moro do Vento, Moro do Cuscuz and Canavieiras. Drilling in 2019 extended Canavieiras Sul both down dip and along strike and expanded the Canavieiras Central zone with excellent intercepts in the LU, MU, and LVLPC reefs. In 2020, the Jacobina exploration team continued to expand and extend higher-grade (>3.0g/t gold) mineralization both down-dip and along strike at multiple zones close to current mine infrastructure, including at Canavieiras Sul and Canavieiras Norte, the south extension of João Belo and at Moro do Vento mine. In 2021 further Mineral Reserves were delineated at Moro do Vento, João Belo and significant new Mineral Resources were added to a new sector of the mine João Belo Sul.
In terms of the regional exploration potential, the favourable Serra do Córrego Formation stratigraphy that hosts the gold mineralization at Jacobina has been traced along a strike length of approximately 150 kilometres within Yamana’s approximately 78,000-hectare land package. Exploration programs have discovered many gold occurrences along this favourable stratigraphy, including the Serra Branca and Barrocão zones at Jacobina Norte project where gold mineralization in conglomerate has been discovered along a 15 kilometres long trend. Initial exploratory drilling at Jacobina Norte began in late 2020 and is ongoing.
Drilling
From 1970 to the end of December 2021, approximately 871,000 metres of surface and underground drilling has been completed in the Jacobina area. Surface drilling is done using NQ-diameter (47.6 mm) sized core; underground drilling uses LTK48-diameter core (35.3 mm) and BQ-diameter core (36.5 mm). The drill contractors used for surface drilling on the property were Geoserv Pesquisa Geologicas S.A., WFS Sondagem Ltda., Geocontrole, and Geologia e Sondagens Ltda. (“Geosol”). Underground core drilling was completed by Jacobina personnel. Any unsampled core is stored on site at the core storage facility.
Jacobina geologists follow a series of Standard Operating Procedures (“SOPs”) for the planning and execution of surface-based and underground-based core drilling programs. In brief, the procedures currently used during the core drilling programs are as follows:
1.The collar locations of all drill holes are marked by Jacobina survey crews prior to drilling and the collars are surveyed using a differential base-station GPS after the completion of the drilling.
2.A Reflex Gyro survey instrument is used to provide control information on the directional deviation (both azimuth and inclination) at three-metre intervals in each hole.
3.Core is placed in labelled boxes at the drill site and the boxes are transported by the drill contractor to the logging facility.
4.All core is photographed.
5.Yamana geologist conduct lithological logging of drill core and recording of geotechnical observation, describing all downhole data including assay intervals. All information is recorded on paper forms and then entered in digital format. The following features are recorded: core diameter, rock quality designation measurements, core recovery record, downhole inclination, lithological contacts, description of geology, recording of heavy mineral and sulphide content, type and intensity of various alterations, structural features, such as fractures and fault zones, core angles, sampling intervals.
Drilling activities at Jacobina have been successful at expanding the extent of known gold mineralization and in defining the plunge of the higher-grade portions of mineralized zones.
A total of 102 infill drill holes with a total length of 32,044 metres were completed at Canavieiras, Moro do Vento and João Belo in 2021. Drilling in these areas targeted down-dip and along-strike extensions of mineralized reefs, including the LVL, MU and LU reefs at Canavieiras Sul, Canavieiras Central, extension of the Main reef and Basal reef at the Moro do Vento mine and MPC reef at João Belo. Exploratory drilling totalling 8,377 metres was completed in 2021 in 26 drill holes at Moro do Vento Main reef down dip, Moro do Cuscuz Leste, Joao Belo Leste and in the Lagartixa, Moro da Viuva areas.
Yamana is of the opinion that the logging and recording procedures are consistent with industry standards and there are no known drilling, sampling or recovery factors that could materially affect the accuracy and reliability of the results.
Sampling, Analysis and Data Verification
Yamana employs a comprehensive QA/QC program for monitoring the assay results of exploration drilling programs, in-fill drilling programs, and grade control channel samples. Samples from the exploration drilling programs are assayed using ALS Chemex (“ALS”) and the Jacobina laboratory as the primary laboratories and SGS
Geosol Lab Ltda (“SGS Geosol”) as the secondary laboratory. Samples from the in-fill drilling programs and from the grade control channel samples are assayed using the Jacobina laboratory as the primary laboratory and using SGS Geosol located in Vespasiano, Brazil, as the secondary laboratory. The Jacobina laboratory is owned and operated by Yamana and is not accredited. The ALS and SGS Geosol laboratories are independent of Yamana and are accredited under ISO/IEC 17025. The results from the QA/QC program are reviewed and monitored by a dedicated Quality Control Team who present the results by means of detailed reports on a regular basis. Sample preparation and analysis at the Jacobina laboratory is carried out according to a series of SOPs. The current methodology of sampling drill core and underground workings at Jacobina is described below.
Sampling of drill core is carried out as follows:
•Sampling/assay intervals are generally 0.5 metres in length in the conglomerates and 1.0 metre in the boundary quartzites, but can be shorter to respect geological boundaries. Four 0.5 metre boundary samples are taken from the waste quartzites on each side of a conglomerate intersection.
•Sample numbers are assigned to the intervals. Certified standards and blanks are inserted into the sample stream.
•Core samples from the surface drilling (HQ and NQ core diameter, 63.5 millimetres and 47.6 millimetres, respectively) are cut in half by saw; one half is sent for assay and the remainder is stored on site. Underground drill core (BQ and LTK48 core diameter, 36.5 millimetres and 35.3 millimetres, respectively) is sampled in its entirety.
•Exploration drill core samples are placed in bags and are sent to the ALS laboratory in Vespasiano, Brazil, for preparation and analysis.
•Infill drill core samples are placed in bags and are sent to the mine laboratory at Jacobina for preparation and analysis.
Underground sampling is carried out as follows:
•Underground faces are washed and the contacts of the mineralization are marked.
•Channel samples are taken at right angles to the dip across the face in both ore and waste, respecting the geological contacts. The normal sample length is 0.5 metres.
•Samples are bagged and sent to the Jacobina laboratory for preparation and assaying. Certified standards and blanks are inserted into the sample stream.
The following procedures, including the insertion rate of the QA/QC samples, are used by the Jacobina laboratory and the ALS laboratory for sample preparation and analysis:
•A submittal form is filled out by a Jacobina geologist or technician and delivered with the samples to the Jacobina laboratory or to ALS.
•Samples are sorted, logged in, opened, and dried at 110ºC.
•The entire sample is crushed in a jaw crusher to better than 90% passing 10 mesh. Crushers are cleaned with compressed air between every sample and with a quartz blank wash every 20th sample. Every second quartz blank wash sample is placed into the analytical sequence. Granulometric checks on the crushed material are done three times per shift.
•A 500 g subsample is taken by a rotary splitter or by Jones riffle splitter. The split is pulverized using a steel ring mill to better than 95% passing 150 mesh. Pulverizers are cleaned with compressed air after each sample and with a quartz wash after every 20th sample. Every second quartz wash sample is placed into the analytical sequence. Granulometric checks on the pulverized material are done three times per shift.
•Standard fire assay methods using a 50 g pulp sample are used to determine total gold content. Samples containing visible gold can be assayed using a screened metallic assay protocol. In this procedure, a 500 g or 1 kg split is pulverized to 95% passing 150 mesh; screening this pulp results in a fine and coarse fraction (possibly containing coarse gold) which are assayed separately.
•The sample, fluxes, lead oxide litharge, and silver are mixed and fired at 1,100 to 1,170ºC for 50 to 60 minutes so that precious metals report to the molten lead metal phase. The samples are removed from the furnace and poured into moulds. Next, the slag is removed from the cooled lead button and the button is placed in a cupel and fired at 920ºC to 960ºC for one hour to oxidize all the lead and render a precious metal bead.
•The cupels are removed from the furnace and the beads are separated by acid digestion using nitric and hydrochloric acid to dissolve the precious metals into solution. The sample solutions are analyzed by an atomic absorption spectrophotometer-AAS. For screened metallic assays, the coarse fraction is assayed in total and an aliquot of the fine fraction is analyzed. The gold concentration of the entire sample is determined by weighted average.
•Analytical batches contain 42 client samples, two pulp duplicates, two reagent blanks, and two certified standards.
Yamana is of the opinion that the sample preparation, analytical, and assay procedures of drill core samples used for exploration and delineation are consistent with industry standards and adequate for use in the estimation of Mineral Resources.
Yamana employs a comprehensive QA/QC program for monitoring the assay results of exploration drilling programs, infill drilling programs, and grade control channel samples. Yamana and JMC use certified reference materials (CRM or standards), blanks, field and coarse crush duplicate samples and pulp duplicates to monitor the precision, accuracy, contamination and quality of the laboratories. These standards are purchased from Geostats Pty Ltd. and ORE Pty Ltd., both in Australia. Currently, Yamana has protocols in place for describing the frequency and type of QA/QC submission, the regularity of analysis of QA/QC results, and failure limits. There are also set procedures to be followed in case of failure, or for flagging failures in the QA/QC database. The results from the QA/QC program are reviewed and monitored by a dedicated Quality Control Team who presents the results by means of detailed reports on a regular basis.
Samples are handled only by personnel authorized by JMC. Channel samples from the mining operation are delivered directly to the Jacobina laboratory each day upon completion of underground sampling. All drill core from surface and underground drill holes is taken directly to authorized exploration personnel to a drill logging and sampling area within the secured and guarded mine property. The mineralized core intervals are logged and sampled. Core samples from infill drill holes are subsequently delivered to the Jacobina laboratory and core samples from exploratory drill core samples are loaded onto an outsourced company truck and delivered to ALS laboratory in Vespasiano, Minas Gerais, Brazil.
Yamana is of the opinion that data entry and verification procedures of drill hole and channel samples data at Jacobina are consistent with industry standards and the data is adequate for the purposes of Mineral Resource estimation.
Mineral Processing and Metallurgical Testing
See below under “Processing and Recovery Operations”.
Mineral Resource and Mineral Reserve Estimates
See “– Mineral Projects – Summary of Mineral Reserve and Mineral Resource Estimates”.
The Mineral Resource estimate for Jacobina was prepared in accordance with CIM Standards.
The Jacobina workflow for building resource domains first involves modelling all faults, stratigraphic units, and intrusions independently of grade. These models are built using all available information including drilling data, geology maps, and structural measurements. This step affects the geometry and extent of the gold-bearing reefs and consequently the domains used for resource estimation purposes. Mineral Resource domains are individually modelled for all reefs confined within the conglomerate units using a gold threshold of 0.5 g/t. The grade domains are conformable to their respective conglomerate units and do not mutually crosscut each other. Underground Mineral Resources are estimated within conceptual underground mining shapes at a cut-off grade of 1.00 g/t gold, which corresponds to 75% of the break-even cut-off used to estimate the Mineral Reserves. A minimum mining width of 1.5 metres is used to construct the conceptual mining shapes. Mineral Resources are reported considering internal waste and dilution.
The Mineral Resource classification was done within each grade shell based on the distance from the drill holes. The block models were flagged using a distance buffer from the wireframe solids. The blocks inside a 30 m radius from a minimum of three drill holes composites were classified as Measured Mineral Resources. The blocks inside a 30 to 80 m radius from the minimum of three drill holes composites were classified as indicated Mineral Resources. Finally, the blocks within a distance between 80 and 150 m from a single drill hole composite were classified as Inferred Mineral Resources.
Yamana is not aware of any environmental, permitting, legal, title, taxation, socio-economic, marketing, political, or other relevant factors that could materially affect the Mineral Resource estimate for Jacobina.
The methodology used at Jacobina to convert Mineral Resources to Mineral Reserves is summarized as follows:
•Verify geometries for the block model and resource wireframes;
•Confirm accurate block model depletion with current excavated development and stope solids up to the effective reporting date.
•Discard any resources within 30 metres of the surface topography.
•Create automated stope shapes using MSO in Datamine using variable break-even cut-off grades by zone and stope dimensions of 10 × 10 metres.
•Design stope polygons in Maptek Vulcan based on MSO stope shapes at section spacing of 5 to 10 metres, depending on continuity of mineralization.
•Design the stope shapes in Maptek Vulcan based on the stope polygons and stope design parameters, considering orebody geometry, mine layout, historical information, and geotechnical analysis.
•Design development shapes and cut development shapes from stope shapes.
•Evaluate all shapes against the block model and report ore tonnes and grade by classification. Exclude stope shapes and associated development below the cut-off grades.
•Exclude all stopes that contain mostly Inferred Mineral Resources.
•Design capital and auxiliary development, including ramps, ventilation, materials handling, access, and infrastructure.
•Complete an economic analysis of each stope shape and exclude all stope shapes that are not cash-flow positive when considering associated development and infrastructure.
•Complete a geotechnical analysis of each sector and make adjustments to the design where required.
•List stopes as “approved” or “not approved” based on cut-off grade, economic and geotechnical analyses prior to conversion to Mineral Reserves. Apply the mining extraction factor.
Yamana is not aware of any mining, metallurgical, infrastructure, permitting, or other relevant factors that could materially affect the Mineral Reserve estimate for Jacobina. Please also refer to “Description of the Business – Risks of the Business – Uncertainty in the Estimation of Mineral Reserves and Mineral Resources”.
Jacobina added 324,000 ounces of gold Mineral Reserves in 2021, a 5% increase compared to the prior year above depletion of mining. Gold Mineral Reserves have grown by 55% or more than 1 million ounces over the past four years to 2.94 million ounces. Mineral Resources have increased by 69% over the same period. Mineral Reserves average gold grade is unchanged from the previous year at 2.18 g/t and the Company continues to sequence lower grade stopes later in the mine life. Importantly, the rate of growth in mineral reserves and mineral resources exceeds annual depletion, supporting the Company’s strategy to sustain a multi-decade mine life and facilitating the future Phase 3 expansion to increase production up to 270,000 ounces per year. Highlights from 2021 include the addition of Inferred Mineral Resources at João Belo Sul, which represents a potential new mining sector, and the continued expansion of the Morro do Vento, Canavieiras, and João Belo mines at depth.
Mining Method
Jacobina utilizes the Sublevel Longhole Stoping (“SLS”) method without backfill to achieve an average production rate of approximately 6,500 tonnes per day (“tpd”) from the ramp-accessed underground mines, including João Belo, Canavieiras, Serra do Córrego, Morro do Cuscuz, and Morro do Vento.
The SLS method consists of fan drilling. Production drill holes vary in size from 76 millimetres to 112.5 millimetres and are drilled using three types of fan drills; these include the Solo 5 7F, the Solo DL 420, and the Solo DL 421. For the most part, drill holes are no longer than 25 metres, which helps control deviation. Backfill is not required for the SLS mining method as the stopes are supported by pillars left in place. However, development waste is increasingly being deposited in underground voids.
With its phased expansion strategy and Mineral Reserves and Mineral Resources growth, the Company anticipates Jacobina will be a multi-decade, low-cost operation. The life of mine (“LOM”) plan has been developed based on the Mineral Reserves and Mineral Resources inventory of Jacobina as of December 31, 2021. The Phase 2 expansion is planned for completion in mid-2022 and will increase throughput to 8,500 tpd, raising annual production to 230,000 ounces by 2023. Beyond Phase 2, the Company plans to implement a Phase 3 expansion which, for a modest cost, would increase throughput to 10,000 tpd and raise annual production to 270,000 ounces. While Phase 3 was originally planned for 2027, the Company is considering bringing this forward, given the success of Phase 2 to date and the receipt of the necessary permit. Beyond this growth incorporated in the LOM plan, the Company sees significant opportunities to grow its regional presence and continue to build the world-class Jacobina Complex. To this end, the Company is now considering a Phase 4 expansion on the back of another year of significant Mineral Reserves and Mineral Resource growth. Phase 4 would involve an expansion of the existing processing plant to a throughput of up to 15,000 tpd. The Company believes that the current mine, with the addition of two independent mining sectors (such as Joao Belo Sul) can support the higher throughput rate and has initiated
a study to explore the plant expansion, mine sequencing, haulage optimization, tailings, and permitting amongst other salient items.
Processing and Recovery Operations
The Jacobina mineral processing plant uses conventional gold processing methodologies to treat run-of-mine material from the underground mines. Comminution comprises three stages of crushing followed by wet grinding. Within the grinding circuit, gravity concentration of gold is performed on a bleed stream of classification cyclone underflow. Rejects from the gravity circuit are returned to the grinding circuit. The cyclone overflow is sent to leaching in a conventional cyanide leaching process, and gold extraction from the leach solution is performed by carbon adsorption in the carbon-in-pulp (“CIP”) tanks. Gold is stripped in an elution circuit and final gold recovery is performed in an electrowinning circuit. The sludge and solids from electrowinning are dried and smelted in an induction furnace to produce doré bars. In 2021, the processing plant at Jacobina achieved a record annual throughput of 2,657,590 tonnes, averaging 7,281 tpd, a 10% increase compared to the previous year. The average gold recovery in 2021 was 96.4%.
The Phase 1 optimization project, whose objective was to stabilize throughput at a sustainable 6,500 tpd, was completed in June of 2020. The Company is now advancing the Phase 2 expansion at Jacobina, for an increase in throughput to 8,500 tpd. In 2021, the Company initiated a simplified approach to the Phase 2 expansion to continue incremental debottlenecking and operational improvements, without requiring an expansion of the grinding circuit as originally contemplated. The simplified expansion approach is a continuation of the strategy that has been the basis for the quarter-over-quarter success of Jacobina over the past several years, and is expected to de-risk the project and require significantly lower capital than originally planned in the Phase 2 pre-feasibility study, an amount not expected to exceed $15 million to $20 million.
During the fourth quarter of 2021, Jacobina received the expansion permit, allowing throughput to increase to 10,000 tpd. Receipt of the permit not only marks a significant milestone in the Phase 2 ramp up to 230,000 ounces of gold per year, but also facilitates the future Phase 3 expansion to increase production up to 270,000 ounces per year.
The ramp up to 8,500 tpd will be achieved through a continuation of incremental improvements to de-bottleneck the processing plant. Optimization of the crushing circuit which did not require the installation of new equipment is already complete. During the first half of 2022 several additional initiatives are expected to be completed including optimizing the grinding process with the installation of ultrasonic density meters to optimize ore feed control to the mills and increasing the capacity of the electrowinning circuit. In 2023, further initiatives could be undertaken to support recovery rates at the higher throughput level but depending on performance, some of these initiatives may have the flexibility to be deferred until the Phase 3 expansion.
Beyond, Phase 2, the Company plans to implement a Phase 3 expansion which, for a modest cost, would increase throughput to 10,000 tpd and raise annual production to 270,000 ounces. While Phase 3 was originally planned for 2027, the Company is considering bringing this forward given the success of Phase 2 to date and the receipt of the necessary permit. Additionally, the Company is now considering a Phase 4 expansion which would involve an expansion of the existing processing plant to a throughput of up to 15,000 tpd.
There are no known processing factors or deleterious elements that could have a significant effect on potential economic extraction.
Infrastructure, Permitting and Compliance Activities
Jacobina currently operates five mines and has all required infrastructure necessary for a mining complex. Currently, the major facilities associated with Jacobina include a conventional flotation mill, with leach and CIP tanks, which produces gold doré, mine and mill infrastructure including office buildings, shops, and equipment. A modest amount of additional mining equipment and ventilation and dewatering infrastructure is required and the acquisition of certain infrastructure will be brought forward to support the Phase 2 and Phase 3 expansions.
The tailings produced at the Jacobina mill are presently stored in a fully-lined TSF, TSF B2, located 2.5 km north of the mineral processing plant. TSF B2 has an ultimate capacity of approximately 41.8 M m3 of tailings, including 27.8 M m3 of slurry fine tailings and 14 M m3 of cyclone sand material used for construction of the embankment dam. TSF B2 consists of a cyclone sand dam built following a downstream construction method. TSF B1 is a decommissioned tailings facility that has not been in operation since 2012. TSF B2 will be built in seven construction phases. The final phase, Phase VII, has an ultimate dam elevation of 640 MASL.
The tailings storage strategy is advancing in parallel to align with the accelerated expansion timeline. Construction of the latest phase of the tailings storage facility was recently completed, providing tailings storage capacity at 8,500 tpd until the end of 2023. Further permitted phases of the TSF provide adequate storage capacity to support the LOM plan past year 2030. A comprehensive tailings storage strategy is being advanced to provide additional storage solutions including hydraulic backfill, paste fill, and a dry-stack TSF.
Permits and licences required by various government agencies covering the operation of the mines, mill, and TSF have been obtained. Jacobina has the operational licences required for operation according to the national legislation. During the fourth quarter of 2021, Jacobina received the expansion permit, allowing throughput to increase to 10,000 tpd.
Yamana has implemented an integrated management system covering health, safety, environment, and community through internationally accredited systems. JMC has many active programs to cover all aspects of the environment in and around the mine complex, including an Environmental Complex Project, an Environmental Control and Monitoring Plan, a Water Balance and Use program, a Recovery Plan for Degraded Areas, and a Solid Residue Management Program. JMC also carries out several environmental initiatives such as environmental education, environmental emergency brigade, and maintenance of certifications such as ISO 14001.
An environmental monitoring program is in place at Jacobina for weather, surface water quality, groundwater quality, air quality and emissions, and ambient noise. Monitoring of flora and fauna was initiated in the first quarter of 2020. No environmental issues have been identified that could materially impact the ability to extract the Mineral Resources and Mineral Reserves.
No social issues have been identified. At present, Yamana’s operations at Jacobina are a positive contribution to sustainability and community well-being. Jacobina has demonstrated a commitment to employee health, safety, and well-being; community programs; and ongoing outreach and data collection to support issues management and mitigation. Yamana has established and continues to implement its various policies, procedures, and practices in a manner aligned with EIBP standards.
Capital and Operating Cost Estimates
The current total LOM capital costs estimate is approximately US$614 million and is assumed to support sustaining capital requirements for the mining and processing of Mineral Reserves over Jacobina’s 20-year LOM as set out in the following table:
| | | | | |
| Total LOM ($000s) |
Sustaining Capital Costs | 440,762 |
Mine Development | 246,346 |
Infrastructure | 69,954 |
Vehicles & Machinery | 93,432 |
Tailings Dam | 25,320 |
Hardware & Software | 5,710 |
Other Sustaining CAPEX | - |
Expansionary Capital Costs | 172,925 |
Phase 2 Expansion | 20,500 |
Other Expansionary LOM Capex | 152,425 |
Total LOM Capital Costs | 613,687 |
Capital costs do not include project financing and interest charges, working capital, sunk costs, capitalized exploration or closure costs. Operating costs are forecasted to average US$32.68 per tonne over the LOM, as set out in the following table:
| | | | | |
| Total LOM (US$/t processed) |
Mining | 18.22 |
Process | 10.23 |
G&A | 4.22 |
Total | 32.68 |
Exploration, Development and Production
Jacobina has increased annual gold production for the past eight consecutive years. The ongoing Phase 2 Expansion project to increase the processing plant capacity to 8,500 tpd is expected to continue this increasing trend up to 230,000 ounces per year from 2023. The Phase 3 expansion, which would increase throughput to 10,000 tpd, is expected to further increase gold production to 270,000 ounces per year with modest capital requirements. The Company is now considering a Phase 4 expansion on the back of another year of significant Mineral Reserve and Mineral Resource growth. Phase 4 would involve an expansion of the existing processing plant to a throughput of up to 15,000 tpd.
El Peñón Mine
Unless otherwise stated, the information, tables and figures that follow relating to El Peñón are derived, in part, and in some instances are extracts, from the technical report entitled “NI 43-101 Technical Report, El Peñón Gold-Silver Mine, Antofagasta Region, Chile” dated March 25, 2021 (the “El Peñón Report”), prepared by or under the supervision of Sergio Castro, Registered Member Chilean Mining Commission, Marco Velásquez Corrales, Registered Member Chilean Mining Commission, Henry Marsden, P.Geo. and Carlos Iturralde, P. Eng., each of whom is a “qualified person” for the purpose of NI 43-101 (together the “El Peñón Qualified Persons”), and each of whom is a full time employee of Yamana. The technical information contained in this section of the annual information form, other than the technical information set forth above under the heading “Mineral Projects – Summary of Mineral Reserves and Mineral Resources Estimate”, has been reviewed and approved by Sébastien Bernier, P. Geo. Mr. Bernier is employed by the Company as its Senior Director, Reserves and Resources and is a “qualified person” for the purpose of NI 43-101. See “Interests of Experts”.
Portions of the following information are based on assumptions, qualifications and procedures which are not fully described herein. Reference should be made to the full text of the El Peñón Report, which has been filed with certain Canadian securities regulatory authorities pursuant to NI 43-101 and is available for review under the Company’s SEDAR profile at www.sedar.com.
Property Description, Location and Access
El Peñón is located approximately 165 kilometres southeast of the city of Antofagasta. The mine site, situated approximately midway between the Pacific Coast and the border with Argentina, is in the Atacama Desert, a desert plateau with one of the driest climates on earth. The mine has been in operation since 1999 and it operates on a year-round basis. There are no communities close to El Peñón.
The El Peñón Mine is owned by Yamana through its wholly-owned subsidiary Minera Meridian Limitada (“Minera Meridian”). Yamana has owned the property since late 2007. The mineral rights consist of 443 individual mining exploitation claims that comprise an area measuring 92,387 hectares that covers the El Peñón core mine area, the Fortuna area, the Laguna area, the Pampa Augusta Vitoria area, and the surrounding exploration lands.
Minera Meridian is subject to a royalty tax between 5% and 14% based on the mining gross profit margin and currently pays approximately a 5% to 7% royalty tax on taxable mining income. In addition, El Peñón is also subject to First Category Tax (income tax) in Chile at a rate of 27%. A 2% NSR royalty is payable to Maverix Metals Inc. as agreed as part of the purchase of the Nado claims covering the Fortuna area and a further 2% NSR is payable to Soquimich Comercial SA for claims Providencia 1, 2, 3, 4, and 5 and claims Dominador 1, 2, and 4. These claims are also located in the Fortuna area.
Yamana is not aware of any material, unidentified environmental liabilities on the property or other significant factors and risks that may affect access, title, or the right or ability to perform mining and exploration work on the property.
History
The discovery of the El Peñón gold-silver deposit was the result of successful grassroots exploration carried out throughout the early 1990s. Regional exploration focused on Early to Mid-Eocene volcanic belts in northern Chile and led to the acquisition of the El Peñón property in 1993. Trenching carried out that year was followed by a 13-hole drilling program which led to the discovery of significant gold-silver mineralization. The next year, the first hole of a follow-up program intersected 100 metre grading 10.9 g/t Au and 123.4 g/t Ag in what eventually became the Quebrada Orito deposit. In July 1998, the property was advanced into production, and construction on a 2,000
tpd mine and mill facility commenced later that year. Production began in September 1999, ramping up to full capacity by January 2000 and has continued un-interrupted to the present day.
Since September 1999, the operation has run continually at design and increased capacity, treating both open-pit and underground ore. As of December 31, 2021, the mine had processed approximately 25.0 Mt of ore grading 7.31 g/t gold and 197.4 g/t silver, producing 5.5 million ounces (“Moz”) of gold and 137.6 Moz of silver, as shown in the table below. The mine’s current production rate, the result of the right-sizing of the operation initiated in late 2016, increased free cash flow generation and reduced capital expenditures while ensuring the long-term sustainability of the mine, matching production rate with Mineral Reserves and Mineral Resources replacement.
| | | | | | | | | | | | | | | | | | | | | | | |
| Historical Gold Production to December 31, 2021 |
| Year | Processed Tonnes | Au Feed Grade (g/t) | Ag Feed Grade (g/t) | Au Recovery (%) | Ag Recovery (%) | Au Production (oz) | Ag Production (oz) |
| 2000 | 739,450 | 13.18 | 194.4 | 93.6 | 89.1 | 282,718 | 4,018,397 |
| 2001 | 715,413 | 14.87 | 234.4 | 94.5 | 89.0 | 318,012 | 4,751,758 |
| 2002 | 688,876 | 15.33 | 249.5 | 95.3 | 90.8 | 328,061 | 5,077,188 |
| 2003 | 703,775 | 14.62 | 204.5 | 96.6 | 92.4 | 320,998 | 4,283,436 |
| 2004 | 837,111 | 11.96 | 192.7 | 96.5 | 92.2 | 314,080 | 4,812,152 |
| 2005 | 880,229 | 11.13 | 211.1 | 96.4 | 92.8 | 303,508 | 5,537,589 |
| 2006 | 935,105 | 8.10 | 234.6 | 95.5 | 92.8 | 230,145 | 6,428,905 |
| 2007 | 998,252 | 7.64 | 274.6 | 94.2 | 91.8 | 234,598 | 8,186,718 |
| 2008 | 1,124,567 | 6.73 | 305.4 | 92.0 | 89.2 | 224,990 | 9,864,275 |
| 2009 | 1,271,596 | 5.79 | 276.3 | 91.2 | 86.9 | 215,846 | 9,820,474 |
| 2010 | 1,522,366 | 5.74 | 228.5 | 91.1 | 84.1 | 256,530 | 9,427,207 |
| 2011 | 1,452,090 | 7.05 | 215.9 | 93.0 | 84.0 | 306,184 | 8,470,112 |
| 2012 | 1,415,292 | 7.47 | 199.2 | 93.4 | 80.0 | 317,508 | 7,249,430 |
| 2013 | 1,422,055 | 7.94 | 187.2 | 93.0 | 75.6 | 338,231 | 6,464,623 |
| 2014 | 1,475,857 | 6.36 | 212.0 | 93.3 | 83.9 | 282,617 | 8,475,133 |
| 2015 | 1,418,132 | 5.32 | 194.0 | 93.6 | 86.9 | 227,228 | 7,692,811 |
| 2016 | 1,421,243 | 5.11 | 153.9 | 94.3 | 85.7 | 220,209 | 6,020,758 |
| 2017 | 1,041,199 | 5.05 | 148.3 | 95.1 | 86.4 | 160,510 | 4,282,339 |
| 2018 | 1,103,835 | 4.53 | 131.3 | 94.1 | 83.6 | 151,893 | 3,903,961 |
| 2019 | 1,290,239 | 4.09 | 120.6 | 94.0 | 86.2 | 159,515 | 4,317,292 |
| 2020 | 1,266,829 | 4.22 | 138.9 | 93.7 | 86.7 | 160,824 | 4,917,101 |
| 2021 | 1,304,807 | 4.49 | 100.6 | 94.3 | 86.7 | 176,439 | 3,587,092 |
| Total | 25,028,318 | 7.30 | 196.8 | 94.1 | 86.9 | 5,530,644 | 137,588,751 |
Geological Setting, Mineralization and Deposit Types
El Peñón is located in the Central Depression (also known as the Central or Longitudinal Valley), that extends for 650 kilometers from the Chile-Peru border in the north to south-central Chile in the south. In the Atacama Desert, this valley corresponds in part to a Late Cretaceous to Paleogene volcanic belt that separates the Mesozoic magmatic arc, exposed in the Coast Mountains located to the west, from the Paleozoic and Triassic volcanic and sedimentary assemblages of the Domeyko Cordillera to the east. The Late Cretaceous to Eocene volcanic and intrusive rocks within the Central Depression consist of an alkali-enriched calk-alkaline bimodal suite. Rocks consist of basaltic andesite to rhyolitic lavas and tuffs, subvolcanic porphyritic intrusions, and granitoid stocks. This belt is host to many epithermal deposits and subvolcanic porphyry systems.
The local area is underlain by a fault-bounded north-south trending panel of Paleocene to Eocene volcanic rocks. This panel is bounded to the east and west by rocks of Permian to Cretaceous age. Formation names and ages as reported below have been updated by extensive recent work by the Servicio Nacional de Geología y Minería, which resulted in significant changes from stratigraphic divisions reported in earlier reports. The
Cretaceous sequence (95-90 Ma) dominates and consists of volcanic and minor sedimentary rocks of the Paradero del Desierto Strata Formation and continental sedimentary and volcanic rocks Quebrada Mala Formation. The Paradero del Desierto Strata outcrops northwest of the deposit area. The Upper Cretaceous Quebrada Mala Formation is present to the west, north, and northeast of El Peñón; it consists of volcanic rocks varying in composition from basaltic andesite to high-silica rhyolite; textures vary from flows to ignimbrites (Astudillo et al, 2017; Ferrando et al., 2013). Ignimbrites and other rock types formerly assigned to the Augusta Vitoria Formation are now included in the Quebrada Mala Formation. Away from the deposit, these rocks are intruded by large granitic to dioritic stocks dated at between 40 and 50 Ma.
Surface exposures at El Peñón are not common, and much of the mapping for the area is based on float. The property is mostly underlain by Late Cretaceous to Early Eocene pyroclastic flows and lavas, volcaniclastic breccias, and tuffs of basaltic to rhyolitic composition. Several thin Early Cretaceous rhyolite tuff and dacite to andesite flow layers occur in the northern part of the property. These rocks are intruded by Late Cretaceous diorite and monzodiorite stocks and dacite domes. The rocks hosting gold-silver mineralization at El Peñón are near-horizontal to gently-dipping Paleocene to Eocene basaltic to rhyolitic volcanic rocks. The stratigraphy consists of a lower sequence of volcanic breccias and andesitic to basaltic flows overlain by rhyolitic to dacitic pyroclastic rocks, dacitic to andesitic flows, and volcanic breccias. Rhyolitic intrusions, domes, and associated flows are intercalated with earlier volcanic units.
The gold-silver mineralization at El Peñón is hosted in near-horizontal to gently dipping Paleocene to Eocene basaltic to rhyolitic volcanic rocks. The El Peñón deposit comprises many individual tabular and steeply dipping zones that are amenable to mining by both underground and surface methods. Vein thickness ranges from decimetre-scale to more than 20 metres. The strike length of individual mineralized zones ranges from less than 1 kilometre to 4 kilometres and the down-dip extent reaches up to 350 metres. The veins strike predominantly north-south and dip steeply to the east and west. Vein textures often display crustiform textures, although the highest-grade gold and silver mineralization are associated with massive banded quartz-adularia. Gangue minerals occur as open space filling as well as replacements of primary host rock mineral phases.
Gold and silver mineralization occur as disseminated electrum, acanthite, native gold, native silver, silver sulphosalts, and silver halides; these minerals are hosted in a gangue dominated by quartz, adularia, carbonate, and clay. Precious metals occur mainly as micron- to millimetre-size subrounded and irregular grains of electrum. Two phases of electrum are present: a primary phase, which contains approximately 55 to 65% gold, and a secondary phase where the gold content is usually greater than 95%, due to the supergene remobilization of silver.
Sulphide minerals are relatively rare, except at the northeastern portion of the El Peñón mine area. This paucity of sulphides may be due to oxidation, or to an initial overall low abundance of sulphides as would be expected in a low-sulphidation environment. Iron- and manganese-oxyhydroxides are common, with only trace occurrences of relict sulphides. In order of abundance, trace amounts of pyrite, galena, sphalerite, chalcocite and covellite occur locally.
Age-dating of adularia from the veins at El Peñón suggests that mineralization took place at around 52 Ma to 53 Ma (Early Eocene). Two mineralization and alteration events have been defined from fluid inclusion studies. The principal mineralization event resulted from circulation of neutral reduced fluids that replaced host-rock phenocrysts and groundmass by quartz, adularia, albite, carbonate, clays, calcite, and chlorite. It also produced quartz-adularia flooding and breccia-filling in the vicinity of the veins. Another, more widespread, alteration process was derived from acidic oxidized hydrothermal solutions. This event resulted in the formation of lithocaps of quartz-alunite alteration, quartz-alunite breccia-filling, with minor copper and silver and little or no gold.
El Peñón is classified as a low- to intermediate-sulphidation epithermal gold-silver deposit associated with steeply dipping fault-controlled veins emplaced following rhyolite dome emplacement. Gold and silver mineralization consists of disseminations of electrum, native gold and silver, acanthite, silver sulphosalts, halides, and accessory pyrite occurring with quartz, adularia, carbonates, and clay minerals. Epithermal deposits represent shallow parts of larger, mainly subaerial, hydrothermal systems formed at temperatures as high as about 300°C and at depths from about 50 to as much as 1,500 m below the water table. Analogous epithermal gold-silver deposits set in an extensional-transtensional, continental-margin arc are the Comstock Lode in Nevada, Martha Hill in New Zealand, Peñasquito in Mexico, and Hishikari in Japan.
Exploration
Yamana has continually expanded the footprint of mineralization by geological mapping, geochemical characterization, geophysics, and abundant surface and underground drilling within the northeast trend, first starting
at the El Peñón area, with Quebrada Orito in the southwest and extending to Angosta in the northeast. Exploration has also been successful at the Fortuna and Pampa Augusta Vitoria areas located to the southwest and to the north of El Peñón, respectively. Geophysical anomalies and positive drill intersections remain to be followed up in all areas. GoldSpot Discoveries Corp. was contracted in 2019 to apply machine learning to target unknown mineralization. Exploration work completed to date has defined 40 main mineralized zones and subsidiary veins, within ten geological trends.
Exploration conducted between 2018 to 2020 can be divided into three categories: infill, expansion, and district.
•Infill drilling is designed to replace production by upgrading and extending known Mineral Resources with a combination of reverse circulation (“RC”) and core drilling methodology (ratio of approximately 70% RC to 30% core drilling).
•Expansion (or step-out) exploration drilling aims to upgrade Inferred Mineral Resources to measured or indicated categories, or to transform zones of geological potential into Inferred Mineral Resources.
•District exploration is meant to test the extension of little-known areas of mineralization or to discover new primary structures by testing targets identified in mapping, geochemistry, geophysics, or machine learning programs.
A total of 384,000 metres of drilling has been planned for 2021 though 2023 at a budgeted cost of US$54 million. The amount of proposed drilling is based on the past success rate of adding resources at El Peñón. Infill targets in 2021 included Pampa Campamento, Paloma, Sorpresa Este and Esmeralda Sur. Expansion targets tested in 2021 included Colorada Sur, Sorpresa, Orito, Bermuda, Dorada and Abundancia amongst other targets. District targets tested in 2021 included several targets along the Dominador Fault area and deeper targets located south of El Peñón, following the main host rhyolite down dip to the south.
Exploration results at El Peñón continue to highlight the expansion potential of the mine and Yamana’s ability to replenish Mineral Reserves and Mineral Resources so as to extend the life of mine past its current Mineral Reserve base.
Drilling
Systematic testing of the gold-silver-bearing zones was started by Meridian Gold in 1993 and continued until 2007. Yamana has drilled continuously on the property since 2007 to expand the mineral resources and replace depletion of Mineral Reserves. To the end of December 2021, over three million metres have been drilled at El Peñón in the Fortuna, El Peñón, and Pampa Augusta Vitoria areas. This includes 131,280 metres completed in 2021 (70,366 metres exploration and 47,703 metres infill drilling and 13,210 metres of district exploration drilling).
Surface drilling is mostly collared with RC and converted to core drilling prior to intersecting the mineralized zone. At least one hole per 30 metre section is drilled as a core drill hole. Core size is HQ (63.5 millimetre core diameter), sometimes reduced to NQ (47.6 millimetre core diameter). RC holes are drilled with 146 millimetre-diameter equipment, which produces a hole approximately 152 millimetres in diameter. Drilling on the mine property from 2018 to 2021 was performed by AK Drilling International. The procedures used during drilling programs are as follows:
•The collar locations of all drill holes are surveyed and marked by El Peñón crews.
•Directional deviation (for both azimuth and inclination) is surveyed in each drill hole using a REFLEX multi-shot survey instrument by IMDEX Ltd for underground drill holes and using a gyroscope survey instrument by Axis Mining Technology for drill holes drilled from the surface.
•Lithological logging is done on drill core and RC chips. Geotechnical observations are made by company geologists and technicians. All information is recorded on digital tablets using commercial software and depicts all downhole data. This includes recording the following items as appropriate for the drilling method:
◦Drill type
◦Collar coordinates
◦Core diameter
◦Downhole inclination
◦Percent core recovery record
◦Rock Quality Designation (“RQD”) measurements
◦Lithologic contacts
◦Descriptive geology
◦Core angles
◦Intensity of various alteration types
◦Structural features, such as foliation, fractures, and brecciated zones
◦Recording of mineralization, such as quartz type, sulphide type and content
◦A photographic record of the core taken with a digital camera
Drill core recoveries are generally good (>95%) but are moderately lower at the Quebrada Orito and El Valle veins (>85%). The lower core recovery in those veins, however, does not have significant impact on the quality of the samples.
Collars of surface drill holes are preserved by a PVC casing. A wooden stake is placed close to each collar; it is affixed with metal plates, on which the code, azimuth, dip, and other relevant drill hole information is recorded.
Yamana is of the opinion that the logging and recording procedures are consistent with industry standards and there are no known drilling, sampling or recovery factors that could materially affect the accuracy and reliability of the results.
Sampling, Analysis and Data Verification
Analytical samples include both drill core and channel samples. The drill core samples are generated from exploration and infill drilling programs that are conducted on surface and underground; they are used for target generation and estimation of Mineral Resources and Mineral Reserves. The channel samples come from underground grade-control channels in development drifts; analytical results are used for short-term forecasting and grade control as well as for estimation of Mineral Resources and Mineral Reserves.
For sampling of drill core, the drill core is received in the logging area by technicians who first verify depth markers and reassemble the core so that pieces connect with each other; they then apply depth marks to the core verifying with the wooden block markers placed by the drillers. Before geological logging, all drill holes are logged for geotechnical parameters; these include core recovery, RQD, number of fractures, and if core intervals include major structures such as faults. Drill holes are not oriented. The geological description is then made by an on-site geologist who enters the data directly into the geological data management system. In this step, lithology, alteration, structures, mineralization and percentage of quartz vein/veinlets are recorded. The limits of each sample interval are marked with an indelible marker on the core and on the box by the logging geologist. The core boxes are photographed with a digital camera prior to sampling.
For exploration drill holes, the complete length of the drill hole is sampled and sent for analysis. The sample lengths are determined by the presence or absence of quartz veins or veinlets. In mineralized zones of Hydrothermal Breccia (unit “HyB”) or Massive Quartz Vein (“MQV”) with abundant sulphides, the minimum sample length is 0.35 metres and the maximum samples length is 0.5 metres. For drill core without veins or sulphides and in exploration areas, the maximum sample length is 2 m. The exploration drill cores are cut in half along the longitudinal axis, using a hydraulic core splitter. Half of the core is placed in previously labelled plastic bags; the other half is left in the core box as a reference. For infill drill holes, the minimum and maximum sample lengths in mineralized zones are 0.2 metres and 0.5 metres, respectively. For each interval, the full drill core is sampled; it is broken with a hammer and placed in a previously labelled plastic bag. The bagged samples are placed in plastic bins to be sent to the primary laboratory along with the submittal form.
The sampling of underground faces is carried out systematically by production geologists and technicians in the advance galleries after each advance. After the face is washed and secured, the sample is taken from left to right along a line of constant elevation, generally 1.5 metres above the floor. The sample location is determined by measuring the distance and azimuth from the nearest bolt left by the surveying team. Geological contacts (lithology, alteration, mineralization, structures, etc.) are identified and sampling intervals respect these contacts. Once the limit of the samples has been defined, they are marked with red spray paint. The area to be sampled is then delimited by a rectangle. In mineralized zones mapped as MQV or HyB, the maximum sample length is 1 metre, whereas in host rocks the maximum sample length is 2.0 metres. Sampling is done with a rock hammer or with a mallet and wedge. The rock fragments that are detached from the wall are collected in a bag on the ground and then placed in plastic bags properly identified with correlative numbering tags. The samples are then transported to El Peñón laboratory for preparation and assaying. The results of the underground channel samples are used for short-term forecasting and grade control as well as in the grade estimation process for Mineral Resource models.
As of January 2018, the Geoassay Group Ltda. (“Geoassay”) laboratory in Antofagasta, Chile, was the primary laboratory for exploration and infill drilling samples, but only for one final month as the contract terminated at the end of January 2018. Geossay is independent of Yamana and was not certified at the time. Starting in February 2018, samples from exploration and infill drilling were prepared and analyzed at SGS Minerals S.A. (“SGS”) laboratories in Antofagasta and Santiago, Chile. The SGS laboratories are independent of Yamana and
hold ISO/IEC 17025 certification. SGS moved its headquarters from Antofagasta to Santiago in September 2019 and transferring the El Peñón samples from Antofagasta to Santiago created significant delays and problems with accuracy. The samples from exploration drilling were processed at SGS in Antofagasta from February 2018 to September 2019, after which they were processed at the Santiago laboratory until March 2020. Samples from infill drilling were processed at SGS in Antofagasta from February 2018 to September 2019, after which they were processed in the Santiago laboratory until May 2020. For a short period in late 2018, Intertek Caleb Brett Chile S.A. (“Intertek”) laboratory in Copiapo was also used as a primary laboratory, in parallel with SGS, to help provide analytical results in time for year-end reporting. Intertek is independent of Yamana and was certified to ISO9001:2015 standards by ABS Quality Evaluations. The primary laboratory for exploration samples was changed to Geoassay in Antofagasta starting in March 2020. In May 2020, Geoassay became the primary laboratory for both exploration and infill drilling program samples. Geossay is a local laboratory independent of Yamana and is in the process of being certified to ISO/IEC 17025 standards.
Umpire laboratory check assays were carried out at Intertek laboratory in Copiapo, Chile, until February 2019 and at Geoassay’s laboratory in Antofagasta, Chile, until May 2020, when it became the primary laboratory. Intertek is independent of Yamana and was certified to ISO9001:2015 standards by ABS Quality Evaluations during the time it was used as Yamana’s umpire laboratory, but not to ISO/IEC 17025 standards. The Geoassay laboratory is a local laboratory independent of Yamana and is in the process of being certified to ISO/IEC 17025 standards. The selection process for a new umpire laboratory is ongoing. Samples from underground channels are assayed at the in-house El Peñón laboratory. This laboratory is owned and operated by Yamana and is certified to ISO/IEC 17025 standards.
The following procedures are used for sample preparation and analysis at the SGS, Geoassay, Intertek, and El Peñón laboratories:
1.A submittal form is filled out by an El Peñón geologist or technician and is delivered with the samples to the El Peñón or SGS/Geoassay/Intertek laboratories.
2.Samples are sorted, logged in the laboratory database (“LIMS”), weighed and dried into a furnace at 105°C.
3.The complete sample is crushed to 85% less than # 10 mesh (passing 2 mm), and riffle split to obtain 1 kg of material.
4.A 1 kg sample is pulverized at 95% through # 140 mesh (passing 0.105 mm).
5.The laboratories clean the crushing and grinding instruments with compressed air between samples, insert sterile quartz every 10 samples, and perform a granulometric control of crushing and pulverization on at least 3% of the samples.
6.Two pulp packages of 250 g each (labelled A and B) are prepared at the SGS, Geoassay, or Intertek laboratories. The master pulp (pulp A) is used for the analysis. Remaining material from pulp A is combined with pulp B, which is returned to site for storage. At the El Peñón laboratory, only a single package of 250 g pulp is prepared and used for analysis.
7.To determine the gold content, the samples are analyzed by fire assay on 30 g samples (prior to February 2018, the fire assays used a 50 g sample). Fluxes, lead oxide litharge, and silver are mixed and fired at 1,100°C to 1,170°C for 50 to 60 minutes to separate the precious metals as a molten lead metallic phase. The samples are removed from the oven and poured into moulds. Next, the slag is removed from the cooled lead button and the button is placed in a cupel and fired at 920°C to 960°C for an hour to oxidize all the lead and make a precious metal bead.
a.The cupels are removed from the furnace and the beads are separated by acid digestion using nitric and hydrochloric acid to dissolve the precious metals into solution.
b.At the SGS, Geoassay, and Intertek laboratories the sample solutions are analyzed by atomic absorption spectrometry (“AAS”) and samples containing more than 5 g/t gold are finished by gravimetry. At the El Peñón laboratory, the analysis is finished by gravimetry.
8.The silver determination is done by AAS at the SGS, Geoassay, and Intertek laboratories and by fire assay at the internal El Peñón laboratory.
a.At the SGS, Geoassay, and Intertek laboratories, a 2 g sample is first digested in a solution of four acids (nitric, hydrochloric, perchloric, and hydrofluoric). The digested solution is brought to volume with hydrochloric acid for the quantification of the analytes through AAS. If the sample contains more than 220 g/t silver, the silver content is quantified by gravimetry.
b.At the El Peñón laboratory, the silver is determined in a manner similar to gold, using fire assay and finished by gravimetry.
9.For screened metallic assays, the totality of the coarse fraction is assayed and an aliquot of the fine fraction is analyzed. The gold concentration of the entire sample is determined by weighted average.
Samples are handled only by personnel authorized by Yamana. Channel samples from the mining operation are delivered directly to the El Peñón laboratory each day upon completion of underground sampling. All drill core
from surface and underground drill holes is taken directly to authorized exploration personnel to a drill logging and sampling area within the secured and guarded mine property. The mineralized core intervals are logged, sampled, placed in plastic bags properly labelled for identification. Core samples are subsequently delivered to the primary laboratory in Antofagasta by truck in secured plastic bins along with dispatch forms. The pulps and rejects that are returned by the laboratory are transported inside the plastic bins, by the same truck that collects the samples to the mine.
Each sample is assigned a unique sample number that allows it to be traced through the sampling, database, and analytical procedure workflow, and is validated against the original sample site. For exploration drill holes, the remaining half of the split core is stored on-site as a control sample, available for review and resampling if required. The photographic record of all drill holes is kept as reference.
Yamana employs a comprehensive QA/QC program for the El Peñón exploration drilling programs, infill drilling programs, and grade control channel samples. The program applies the following steps to monitor the accuracy and bias of the gold and silver:
•Insertion of CRMs or standards.
•Monitoring of contamination in preparation and analysis by inserting blanks in the preparation and analytical sampling streams.
•Control of the precision by taking duplicates during preparation and analysis.
•Sending pulp samples for umpire check assaying at secondary laboratories.
The results from the QA/QC program are reviewed and monitored by a geologist who presents the results in monthly reports.
Yamana is of the opinion that the sample preparation, sample security, and analytical procedures at El Peñón are adequate and consistent with industry standards.
Mineral Processing and Metallurgical Testing
See below under “Processing and Recovery Operations”.
Mineral Resource and Mineral Reserve Estimates
See “– Mineral Projects – Summary of Mineral Reserve and Mineral Resource Estimates”.
The Mineral Resource estimate for El Peñón was prepared in accordance with CIM Standards.
Interpreted geological wireframes were constructed in Vulcan, based on geology sections, assay results, lithological information and structural data. Assays were composited to one-metre lengths, then interpolated using capping and a high yield restriction for anomalously high grades. Gold and silver grades were interpolated into a sub-blocked model with minimum block size of 0.5 × 0.5 × 0.5 metres and a parent block size of 20 × 20 ×20 metres. Estimated grades were interpolated into blocks using Inverse Distance Cubed and checked using Nearest Neighbor methods. Block estimates were validated using industry standard validation techniques. Classification of blocks was completed following distance-based criteria. Mineral Resources are reported exclusive of Mineral Reserves. Mineral Resources are not Mineral Reserves and have no demonstrated economic viability. Underground Mineral Resources are estimated within conceptual underground mining shapes at a cut-off value of US$95.31 per tonne, which corresponds to 75% of the break-even cut-off value used to estimate the Mineral Reserves. A minimum mining width of 0.60 metres as well as 0.30 metres of hanging-wall and 0.30 metres of footwall overbreak dilution are used to construct the conceptual mining shapes. Mineral resources are reported fully diluted.
Mineral Resource classification was completed using an in-house algorithm which works according to the following workflow:
•Blocks located in areas supported by underground channel samples are classified as Measured Mineral Resources.
•Blocks located in areas supported by drill hole information and that are within a 10 m-radius from underground channel samples are classified as Indicated Mineral Resources.
•Blocks supported only by drillholes are classified as Indicated Mineral Resources if they meet both following criteria: Blocks are contained within a 26.25 m-search square from a single informing intercept AND the informing intercept is contained within a 52.5 metres search square that includes at least one additional informing intercept. Distances defining both search squares are measured in the plane of the
vein plane (in the strike and dip directions) and from the center (intercept position) to the edge of the search square.
•The remainder of the blocks estimated within the interpreted vein wireframes are classified as Inferred Mineral Resources.
•Blocks located outside the vein wireframes are not classified and are considered dilution for Mineral Resources reporting.
•Finally, the Mineral Resource classification results are smoothed, using an in-house algorithm based on local classification proportions, to remove geometrical artifacts. The local proportions are calculated in a 10 × 10 metres moving window.
Yamana is not aware of any environmental, permitting, legal, title, taxation, socio-economic, marketing, political or other relevant factors that could materially affect the Mineral Resource estimate.
The methodology used at El Peñón to convert Mineral Resources to Mineral Reserves is summarized as follows:
•Drift and bench (stope) selective mining units (“SMUs”) are designed using Vulcan Stope Optimiser.
•Metal prices, processing recoveries, and operating costs are used to determine an economic score for each SMU. SMUs with positive scores are selected for further classification. Only Measured and Indicated Mineral Resources are considered for conversion to Mineral Reserves.
•SMUs with positive scores are analyzed for inclusion into the Mineral Reserve inventory. This is done by analyzing development costs, considering the capital and auxiliary development required to enable mining of the designed SMUs, such as the cost of ramps, ventilation, materials handling, and development of access and infrastructure.
•Before including SMUs with positive scores in the Mineral Reserves inventory, geomechanical considerations are revised, especially in areas with known poor ground conditions or were pillars between the new stopes and previously backfilled areas are thin. Design is adjusted when required.
•Finally, where a small amount of supplementary lower-grade drift segment must be developed to enable mining of the higher-grade Mineral Reserves, it is also included in the Mineral Reserves inventory since this improves the cashflow generation profile. This material represents approximately 1% of the Mineral Reserves inventory.
•SMUs containing a majority portion of measured or indicated blocks are converted to Proven or Probable Mineral Reserves, respectively.
Yamana is not aware of any mining, metallurgical, infrastructure, permitting, or other relevant factors that could materially affect the Mineral Reserve estimate for El Peñón.
Successful drilling at El Peñón resulted in the operation achieving a fourth consecutive year of adding new Mineral Reserves in excess of mining depletion, with Mineral Reserves growing 23% to 1.3 million GEO over that period. Drilling continues to expand the Mineral Resource envelopes to depths below several producing sectors, most notably Paloma, Pampa Campamento and Sorpresa. New Mineral Reserves added in 2021 are typically higher than average grade, resulting in the average gold and silver Mineral Reserve grades increasing by 3%. The significance of the result is the continued extension of the El Peñón mine life at a production rate of 220,000 to 230,000 GEO per year, while replacement of Mineral Resources provides an inventory for future Mineral Reserves development. The year-end Mineral Reserve and Mineral Resource estimates do not include results from deep exploratory drilling intercepts targeting extensions of the major producing vein systems at depth and to the south of the mine. Initial drill results show significant potential for discovery of blind continuations of the main vein systems which will be followed up with drilling in 2022 to support planned production increases at El Peñón.
Please also refer to “Description of the Business – Risks of the Business – Uncertainty in the Estimation of Mineral Reserves and Mineral Resources”.
Mining Method
Ore from underground mines have recently been - and will continue to be - the main source of feed for the El Peñón mill.
The various underground mining zones are accessed by ramps; this type of access is suitable for this mine in light of its shallow depth. The underground workings of the core mine extend approximately ten kilometers along strike and span a vertical extent of approximately 500 m, measured from the highest portal collar elevation to the bottom-most mine workings. The ramps provide flexibility for rapid adjustments for changes in direction and elevation and allow access to the veins at appropriate elevations.
The main mining method utilized at El Peñón is the bench-and-fill method, which is a narrow longhole-stoping method that uses a combination of rockfill and cemented rockfill. The method involves ore development at regular level intervals, which, at El Peñón, range generally between 10 and 20 metres. Due to the narrow vein widths, a “split-blasting” technique is used in many areas of the mine to reduce dilution in secondary development of ore zones. The minimum mining width of a split blast is of 0.6 metres, plus 0.5 metres of total overbreak, generating a minimum blast void of 1.1 metres width. Once the split-blast ore is mucked out, the remaining waste is slashed out and used for rockfill purposes. The split-blasting technique has been refined and improved at El Peñón since 2016, reducing the achievable ore mining width from 2.1 m to 1.1 m, minimizing dilution and ore loss, and improving productivities for faster face cycle times. The result is increased gold and silver mining grades. In some cases, development rounds that would have previously been mined as waste if blasted to the full drift dimensions are now mined selectively as separate ore and waste rounds, resulting in increased mineral reserves.
All underground mining operations are carried out by Yamana, while the open pit mining operations, representing only a very small proportion of the production over the LOM, are carried out by a contractor.
The Company has confidence that it will continue to replace Mineral Reserves through new discoveries and infill drilling on several major veins, thereby maintaining mine life visibility for at least another ten years. The LOM plan assumes a processing rate between 3,500 tpd to 3,700 tpd with annual production of between 220,000 GEO and 230,000 GEO. The plant however has a processing capacity of up to 4,200 tpd and reaching that capacity would not require any additional capital spending. This higher plant capacity processing rate could support an annual production platform of between 250,000 GEO to 270,000 GEO which is not currently considered in the Company's ten-year outlook. The LOM plan remains fully supported by Mineral Reserves and Mineral Resources. Mineral Resources are comprised of multiple veins at different grades. District-scale exploration work completed during the year yielded positive results, and opens up a new, large area of high exploration potential, suggesting a significant expansion of the highly productive El Peñón vein system south of the existing mine. Such expansion of the vein system could in turn meet the objective of increasing production at a site that has significant excess plant capacity. Notably, the new South Deeps discovery appears to have similar geology to the wide veins El Peñón was mining when GEO production was materially higher.
Processing and Recovery Operations
The El Peñón mineral processing plant and associated facilities process run-of-mine as well as stockpiled ore. Comminution comprises a single stage of crushing followed by wet grinding in a semi-autogenous grinding (“SAG”) mill operating in series with a ball mill; these feed a battery of hydrocylcones. Leaching starts at the SAG mill, where sodium cyanide is added as a leaching agent. The hydrocyclones overflow is subsequently clarified and leached in reactors with mechanical agitators. The leached pulp is finally transported by gravity to a CCD thickener circuit to wash the pulp and recover the pregnant solution for gold and silver by zinc precipitation and refining to doré.
The El Peñón processing plant has a nominal production capacity of approximately 1.533 Mtpa, or 4,200 tpd. The processing plant averaged 3,575 tpd during 2021. Since 2017, the plant throughput has been lower than design, ranging from 1 Mtpa to 1.3 Mtpa, in line with the mine plan. The lower throughput is beneficial in terms of leach residence time and results in a marginal increase of both gold and silver recovery. Stockpiled ore can be fed to the plant feed system to supplement feed if required.
Significant metallurgical testwork has been carried out on a continual basis at El Peñón since 2014. Results from metallurgical tests inform the geometallurgical block model utilized for operational and mine planning purposes. The geometallurgical model includes variables for gold and silver recoveries, cyanide consumption, and sedimentation and filtration rates.
Infrastructure, Permitting and Compliance Activities
El Peñón consists of historical open pits, underground mining operations, a process plant, and other support infrastructure, including waste dumps and a filtered tailings facility with a total storage capacity of 49.8 Mt. The approved plant capacity is 4,800 tpd. The major assets and facilities associated with El Peñón are: the mining and processing infrastructure, which include office buildings, shops, and equipment; a processing plant which produces gold doré by crushing, grinding, leaching, counter-current decantation concentrate solution recovery, zinc precipitation and refining; concrete and cemented backfill plants, and a filtered tailings stack storage facility.
El Peñón is connected to the National Electric Grid through a 66 kV transmission line connected to the Palestina substation.
Minera Meridian has all required permits to continue carrying out mining and processing operations on the El Peñón property. The El Peñón operation submitted its first EIA in 1997 to the Chilean Environmental Impact Assessment System. The Environmental Commission of the Region of Antofagasta approved the application with Exempt Resolution Nr. 043 in 1998. The El Peñón operation has undergone a series of modifications since its original EIA submission. Required Environmental Qualification Resolutions (“RCAs”) were granted through a series of Declaration of Environmental Impacts (“DIAs”).
El Peñón has developed a closure plan covering all current and approved facilities; this plan is in accordance with applicable legal requirements and updated regularly as the life of mine is extended. The approved 2019 mine closure plan addresses progressive and final closure actions, post-closure inspections, and monitoring. A new DIA was submitted in February 2021 considering an extended LOM plan as a result of mineral reserves increases over the past three years. Other sectoral licences and permits have been obtained and applications for renewals have been filed. The operation has not been subject to sanctioning for environmental compliance by any of the regulatory agencies.
Yamana has implemented an integrated management system covering health, safety, environment, and community through internationally accredited systems that include the ISO 14001 Environment Management System and the OSHAS 18001 Occupational Health and Safety Management System. A risk assessment matrix has been developed for El Peñón operation that integrates risk matrices for ISO 14001:2015 and OHSAS 18001:2007. Beginning in 2020, El Peñón also began the implementation of the Mining Association of Canada’s Towards Sustainable Mining framework as well as the World Gold Council’s Responsible Gold Mining Principles, each of which included internal assessments and will require external audits within a three-year timeframe. Activities for 2021 include the process of certification for ISO 45001 (replacing OSHAS 18001) and recertification of the ISO 14001 Environment Management System. In addition, Yamana is signatory to the International Cyanide Management Code. A standard for operational processes has been developed for the management of other hazardous and non-hazardous solid waste (Certified NCh-ISO 17025 INN – Instituto de Normalizacion Chilena).
Water conservation is a primary focus at El Peñón. The water management system at El Peñón has been designed as a closed circuit. Process water from the mill is recovered in the tailings filter plant and recirculated back to the processing plant.
Even though no communities are located near El Peñón, Yamana has made a number of commitments to the well-being, health, and safety of the communities in the area. As such, the social and community activities conducted by Yamana are concentrated in the Taltal District and are of philanthropic orientation.
Capital and Operating Cost Estimates
The total LOM capital cost estimate is approximately US$260 million and is assumed to support sustaining capital requirements for the mining and processing of Mineral Reserves over the project’s nine-year LOM as well as a small amount of expansionary underground mine development. A summary of the LOM capital costs for the project is set out in the table below:
| | | | | |
| Total LOM ($000s) |
Sustaining Capital Costs | 257,545 |
Mine Development | 226,578 |
Building and Infrastructure | 4,109 |
Hardware & Software Machinery and Equipment | 678.8 |
Vehicles | 26,179 |
Expansionary Capital Costs | 2,339 |
Total LOM Capital Costs | 259,884 |
Capitalized development consists of 86,145 metres, or an average of 10,679 metres per year, over the first four years and subsequently declining towards the end of the mine life. The expected run rate for sustaining capital, including infrastructure, equipment, and mine development is averaged at US$35 million per year for the next five years, with spending decreasing in the last year of the mine life. Capital costs do not include project financing and interest charges, working capital and sunk costs.
Operating costs are defined as the direct operating costs and include mining, processing as well as general and administrative costs. Mining operating costs are forecasted to average US$82.76 per tonne mined over the LOM, or US$70.67 per tonne processed. Total operating costs are forecasted to average US$117.19 per tonne processed over the LOM period as set out in the following table:
| | | | | |
| Total LOM (US$/t processed) |
Mining | 70.67 |
Process | 30.47 |
G&A | 16.05 |
Total | 117.19 |
Exploration, Development and Production
Over the past 20 years, El Peñón has established an exploration strategy to continually replace depletion of Mineral Reserves and extend mine life. The strategy involves maintaining a pipeline of Mineral Resources and exploration potential to maintain a rolling mine life visibility of at least 10 years. To continue this trend, drilling programs should continue to be carried out with the following objectives:
•Infill drilling to replace production by upgrading and extending known Mineral Resources;
•Expansion exploration drilling to upgrade Inferred Mineral Resources to Measured or Indicated Mineral Resource categories, or to transform zones of geological potential into Inferred Mineral Resources; and
•District exploration to test the extension of little-known areas of mineralization or to discover new primary structures by testing targets identified in mapping, geochemistry, geophysics, or machine learning programs.
Ongoing exploration success could also unlock the opportunity to leverage the available processing capacity which could increase annual gold and silver production and reduce unit costs.
Canadian Malartic Mine
Unless otherwise stated, the information, tables and figures that follow relating to the Canadian Malartic Mine are derived, in part, and in some instances are extracts, from the technical report entitled “NI 43-101 Technical Report, Canadian Malartic Mine, Quebec, Canada” dated March 25, 2021 (the “Canadian Malartic Report”), prepared by or under the supervision of Pascal Lehouiller, P. Geo, Sylvie Lampron, Eng., Guy Gagnon, Eng., Nicole Houle, P.Geo. and François Bouchard, P.Geo., each of whom is a “qualified person” for the purpose of NI 43-101 (together the “Canadian Malartic Qualified Persons”), and each of whom is a full time employee of Canadian Malartic GP. The technical information contained in this section of the annual information form, other than the technical information set forth above under the heading “Mineral Projects – Summary of Mineral Reserves and Mineral Resources Estimate”, has been reviewed and approved by Sébastien Bernier, P. Geo. Mr. Bernier is employed by the Company as its Senior Director, Reserves and Resources and is a “qualified person” for the purpose of NI 43-101. See “Interests of Experts”.
Portions of the following information are based on assumptions, qualifications and procedures which are not fully described herein. Reference should be made to the full text of the Canadian Malartic Report, which has been filed with certain Canadian securities regulatory authorities pursuant to NI 43-101 and is available for review under the Company’s SEDAR profile at www.sedar.com.
Property Description, Location and Access
The Canadian Malartic property, including the Canadian Malartic Mine, is located within the Municipality of Malartic, approximately 25 kilometres west of Val-d’Or and 80 kilometres east of Rouyn-Noranda in the Province of Quebec, Canada, and extends into the Municipality of Rivière Héva and the City of Val-d’Or. The northern part of the Canadian Malartic property is accessible via Highway 117 in Quebec. The southern part is accessible via a secondary paved road that runs south from Highway 117 towards Mourier Lake and cuts through the central area of the Canadian Malartic Mine. The Canadian Malartic property is also accessible by a series of gravel logging roads and trails. The operations are year-round with the exception for prospecting (soil and outcrop sampling, outcrops mapping, etc.) which usually take place between May and October.
The Canadian Malartic property consists of the Malartic CHL Prospect, the Canadian Malartic Mine and the East Amphi, Fournière, Midway, Piché-Harvey and Rand properties and consists of a contiguous block comprising
one mining concession, five mining leases, and 293 claims for a total of 12,568.43 hectares. Expiration dates for the mining leases on the Canadian Malartic Mine range from November 24, 2029, to July 27, 2037, and each lease is automatically renewable for three further 10-year terms upon payment of a small fee.
The Company acquired its 50% interest in the Canadian Malartic property on June 16, 2014 through its joint acquisition of Osisko Mining Corporation (“Osisko”) with Agnico Eagle and operates through the Canadian Malartic GP. The claims, mining leases and mining concession are all held, completely or partially, by Canadian Malartic GP, a general partnership that is directly and indirectly held by Agnico Eagle and Yamana. Each of these Canadian corporations controls 50% of the Canadian Malartic GP. A portion of the East Amphi property, called the Radium-Nord property, is held by Abitibi Royalties Inc. (“Abitibi Royalties”) (15%) and Canadian Malartic Corporation (85%), the latter being an affiliate of Canadian Malartic GP, jointly controlled by Agnico Eagle and Yamana. All mining titles of the Canadian Malartic property on the Government of Quebec’s online claim management system are registered to Canadian Malartic GP, except those of the Radium-Nord Property, which are registered to Canadian Malartic Corporation (85%) and Abitibi Royalties (15%).
The mining titles constituting the current Canadian Malartic property were acquired by Osisko, mostly in stages, between 2004 and 2014. Many of the mining titles for the Canadian Malartic property were map-staked by Osisko or its appointed intermediaries and are not subject to any encumbrances. Others were purchased outright from independent parties, without royalties or other obligations.
Most of the mining titles are subject to a 5% NSR royalty payable to Osisko Gold Royalties Ltd. (“OGR”). The claims comprising the Malartic CHL prospect are subject to 3% NSR royalties payable to both OGR and Abitibi Royalties. In addition, 172 of the claims are also subject to other NSR royalties that vary between 1% and 2%, payable under varying circumstances. In 2019, Canadian Malartic GP paid C$75.3 million in aggregate payments with respect to these royalties and paid approximately C$82.4 million related to 2020 (100% basis).
Canadian Malartic GP has all required permits to continue carrying out the current mining operations on the property. Yamana is not aware of any other significant factors and risks that may affect access, title, or the right or ability to perform mining and exploration work on the Canadian Malartic Mine.
History
The mining history of the Canadian Malartic property stretches over a 100-year period, from the 1920s to the present day. The current limits of the Canadian Malartic property cover and overlap many historical mining and exploration properties. The boundaries and names of those properties have changed over time following ownership and/or option changes, abandoned and/or added claims, and status changes from exploration claim to mining lease.
The Canadian Malartic Mine hosts six historical underground mines: Canadian Malartic, Barnat, Sladen, East Malartic, Malartic Goldfields and East Amphi. It is currently in a new production phase since 2011 with the Canadian Malartic Mine open pit operations and expansion project. As of the end of 2021, the historical and recent gold production from the Canadian Malartic Mine amounts to 273,149,919 tonnes at 1.64 g/t gold, for 14,427,311 ounces of gold.
The historical production data for the Canadian Malartic property is summarized in the table below:
| | | | | | | | | | | | | | | | | |
Historical Group of Properties | Owners and/or Property Area | Years | Tonnes Milled | Gold Grade (After Recovery) (g/t Au) | Ounces of Gold |
Canadian Malartic Mine and Malartic CHL Prospect | Canadian Malartic Mine | 1935-1965 | 9,929,000 | 3.77 | 1,203,477 |
Barnat-Sladen Mine (including East Malartic) | 1938-1970 | 8,452,000 | 4.73 | 1,285,321 |
East Malartic Mine | 1938-1983 | 18,316,000 | 5.19 | 3,056,251 |
Canadian Malartic (Canadian Malartic GP + Osisko) | 2011-2021 | 209,798,966 | | 0.97 | 6,539,708 |
Gouldie (Canadian Malartic GP) | 2014-2015 | 2,210,549 | 0.74 | 52,435 |
Jeffrey (Canadian Malartic GP) | 2019-2021 | 2,868,252 | | 0.87 | 80,240 |
South Barnat (Canadian Malartic GP) | 2019-2021 | 12,108,202 | | 1.16 | 450,303 |
| | | | | | | | | | | | | | | | | |
East Amphi | East Amphi OP (McWatters) | 1998-1999 | 120,427 | 5.66 | 21,914 |
East Amphi UG (Richmont) | 2004-2007 | 347,964 | 3.37 | 37,700 |
Rand | UG exploration program / no production | 1988-1989 | 31,115 | n/a | n/a |
Midway Property Group (Fournière, Midway, Piché-Harvey) | Malartic Goldfields | 1945-1965 | 8,956,886 | 5.90 | 1,699,025 |
NSM (Midway) | 2009-2010 | 10,558 | 2.76 | 937 |
| Total | 1935-2021 | 273,149,919 | | 1.64 | 14,427,311 |
Geological Setting, Mineralization and Deposit Types
The Canadian Malartic property straddles the southern margin of the eastern portion of the Abitibi Subprovince, an Archean greenstone belt situated in the southeastern part of the Superior Province of the Canadian Shield. The Abitibi Subprovince comprises an older northern volcanic zone and a younger southern volcanic zone, separated by the regional Porcupine-Destor Fault Zone. The Abitibi Subprovince is limited to the north by gneisses and plutons of the Opatica Subprovince and to the south by metasedimentary and intrusive rocks of the Pontiac Subprovince. The contact between the Pontiac Subprovince and the rocks of the Abitibi greenstone belt is characterized by a major fault corridor, the east-west trending Larder Lake–Cadillac Fault Zone (“LLCFZ”). This structure runs from Larder Lake, Ontario, through Rouyn-Noranda, Cadillac, Malartic, Val-d’Or and Louvicourt, Quebec, at which point it is truncated by the Grenville Front.
The regional stratigraphy of the southeastern Abitibi area is divided into groups of alternating volcanic and sedimentary rocks, generally oriented N280°–N330° and separated by fault zones. The main lithostratigraphic divisions in this region are, from south to north, the Pontiac Group of the Pontiac Subprovince, and the Piché, Cadillac, Blake River, Kewagama and Malartic groups of the Abitibi Subprovince. The various stratigraphic units listed above are folded into a regional synclinal structure known as either the Malartic or Cadillac Syncline. The fold axis trends west-northwest and plunges steeply to the north, with the axial trace located within the Cadillac Group sedimentary rocks. The various lithological groups within the Abitibi Subprovince are metamorphosed to greenschist facies.
Most of the Canadian Malartic property is underlain by sedimentary units of the Pontiac Group, immediately south of the LLCFZ, in the mine and property reports. The north-central portion of the Canadian Malartic property covers an approximately 16 kilometre segment of the LLCFZ corridor and is underlain by mafic-ultramafic volcanic rocks of the Piché Group cut by porphyritic and dioritic intrusions. The Cadillac Group underlies the northern part of the Canadian Malartic Mine (north of the LLCFZ). It consists of greywacke interbedded with lenses of conglomerate.
Mineralization in the Canadian Malartic deposit occurs as a continuous shell of 1 to 5% disseminated pyrite associated with fine native gold and traces of chalcopyrite, sphalerite and tellurides The gold resource is mostly hosted by altered clastic sedimentary rocks of the Pontiac Group (70%) overlying an epizonal dioritic porphyry intrusion. A portion of the deposit also occurs in the upper portions of the porphyry body (30%).
Surface drilling by Lac Minerals Ltd. in the 1980s defined several near-surface mineralized zones now included in the Canadian Malartic deposit (the F, P, A, Wolfe and Gilbert zones), all expressions of a larger, continuous mineralized system located at depth around the old underground workings of the Canadian Malartic and Sladen mines. In addition to these, the Gouldie mineralized zone occurs approximately 0.5 kilometres southeast of the main Canadian Malartic deposit, although the relationship between these zones and the main deposit is presently unknown. The recently discovered East Gouldie deposit is located 2 kilometres east of the Gouldie mineralized zone.
The South Barnat deposit is located to the north and south of the old South Barnat and East Malartic mine workings, largely along the southern edge of the LLCFZ. The portion of this deposit that is originally modelled for surface mining evaluation extends on a 1.7 kilometre strike and a width of 900 metres (perpendicular to the strike) and from surface to -480 metres below surface.
The East Malartic deposit (as modelled for the underground mining model) has been previously mined by the East Malartic, Barnat and Sladen mines mainly along the contact between the LLCFZ and the Pontiac Group sedimentary rocks. This deposit includes the deeper portion of the South Barnat deposit (below actual pit design). The portion of this deposit that is modelled for the underground mining evaluation extends on a 3 kilometres strike
and a width of 1.1 kilometres (perpendicular to the strike) and from the bottom of the South Barnat actual pit design to –1,800 metres below surface.
The Odyssey deposit is also located at the contact between the LLCFZ and the Pontiac Group sedimentary rocks east of the East Malartic deposit. It extends on a 2 kilometres strike and a width of 500 metres (perpendicular to the strike) and from surface to –1,500 metres below surface. It is characterized by the presence of a massive porphyritic unit known as the #12 Porphyry. While the whole porphyritic intrusion is anomalous in gold, continuous zones of higher-grade (>1 g/t Au) gold mineralization occur along the south-dipping sheared margins of the intrusion (in contact with the Pontiac Group to the south and the Piché Group to the north). Gold mineralization within the Odyssey and Jeffrey deposits is broadly similar to the style of mineralization associated with porphyry dikes at the South Barnat and East Malartic deposits, which is typically associated with pyrite enrichment and silica-calcite and potassic alteration.
Several other mineralized zones have been documented within the LLCFZ, namely Buckshot, East Amphi, Western Porphyry, Fourax, all of which are generally spatially associated with stockworks and disseminations within or in the vicinity of dioritic or felsic porphyritic intrusions.
The East Gouldie deposit is located south of the Odyssey deposit and east of the Gouldie deposit. As currently defined by drilling, the deposit has a strike length of at least 1.2 kilometres and extends from approximately 500 metres below surface to 2 kilometres depth. It is generally constrained in a west-trending high-strain corridor (40 to 100 metres true width) that dips approximately 60° north. The main high grade (>1 g/t Au) auriferous zone is typically 15 m wide (true width) and reaches up to 80 metres. The average intercepts grades vary between 2 and 10 g/t gold.
The origin of gold deposits in the Malartic area is still a subject of controversy. Recently, De Souza et al. (2019) describe the Canadian Malartic deposit as a mesozonal stockwork-disseminated replacement-type deposit formed within an orogenic setting where the variable geometry, rheology and composition of the various intrusive and sedimentary rocks have provided strain heterogeneities and chemical gradients for the formation of structural and chemical traps that host the gold. This study suggests that the mineralized intrusions of the Canadian Malartic Mine area have played an essentially passive role in the mineralization processes.
Exploration
Exploration work by Canadian Malartic GP since 2014 has focused mainly on exploration drilling. In December 2019, a high-resolution heliborne magnetic susceptibility survey was flown by GeoData Solutions GDS Inc. over the eastern part of the Canadian Malartic property. The survey covered 251 line-kilometre with a 50 metres spacing between the lines. The results were merged with historical geophysical data from the area; a portion of the Fugro airborne survey (2006) and a compilation of ground survey data from the Midway Property Group. The purpose of the survey was to provide consistent magnetic coverage over the area of interest with enough resolution to support the geological and structural interpretation of this segment of the LLCFZ.
Drilling
Since the beginning of the partnership in 2014, the Canadian Malartic GP’s drilling programs have mainly focused to the east of its mining operation on three main targets: the Odyssey, East Malartic and East Gouldie deposits. The drilling programs on the Odyssey target were supervised by the Regional Exploration Department (“Regional Exploration”) while the drill programs on the East Malartic and East Gouldie targets were supervised by the Mine Exploration Department (“Mine Exploration”). The Regional Exploration also conducted drilling programs on the Rand, the East Amphi, the Radium-Nord Properties and on the Midway Property Group.
Since 2014, core drilling has been performed with NQ size (47.6 millimetre core diameter) using conventional surface drill rigs. The drilling programs have been run by several drilling contractors, with the main contractors being:
•Spektra Drilling (Val-d’Or) for Regional Exploration 2014 and 2015 programs;
•Nordik Drilling (Val-d’Or) and several subcontractors for Regional Exploration 2015 to 2021 programs and for Mine Exploration 2018 to 2021 programs; and
•Orbit-Garant Drilling (Val-d’Or) and sub-contractors for Mine Exploration 2017 program.
From 2014 to the end of 2021, 869,736 metres have been drilled with 394,833 metres by the Regional Exploration and 474,903 metres by the Mine Exploration. The average core recovery rates were higher than 95%. The Mine Exploration drilling programs from 2017 to 2021 mainly focused on East Malartic and East Gouldie
deposits. The Regional Exploration drilling program from 2014 to 2020 mainly focused on the Odyssey deposit while drilling was also completed on the Rand, East Amphi, Radium-Nord Properties and the Midway Property Group.
Sampling, Analysis and Data Verification
Mine Exploration’s procedures for sample preparation, analysis, and security protocols for the Canadian Malartic GP’s diamond drilling programs were established in 2017 based on Regional Exploration’s procedures, and both departments have followed roughly the same procedures since then.
The drill core is placed into wooden core boxes at the drill site. At the end of each drill run, a wooden block is inserted with the depth of the hole written on it. Each box is labelled with the hole/box number and closed with metal strapping. The drilling crew trucks them daily to the Canadian Malartic GP’s secure core storage and logging facility (core shack) on the property.
At the core shack, the boxes are opened and inspected by the Canadian Malartic GP staff to ensure the box numbers and meterage are correctly identified. The geologist looks for anomalies in the core box (misplaced core, ground rock, footage block error) that could affect the meterage of the hole, and it is corrected in case of an error.
Once the meterage work is complete, the geologist provides a thorough description of the core. Following existing QA/QC protocols, the geologist inserts the corresponding sample labels at the correct meterage (the “from” distance of the sample) as well as the QA/QC identification tags, before photographing the wet core. Each label is divided into two identical number tags, one placed inside the sample bag and the second stapled to the core box. All samples are assigned a unique sample number. Samples are typically between 0.8 metres and 1.5 metres, although shorter sample lengths between 0.5 metres and 0.8 metres have been allowed since 2018.
Canadian Malartic GP’s staff then bring the core boxes to the splitting room. The saw operator saws the core in half according to the limits marked by the geologist and to the labels in the boxes. One half of the sawed core sample is placed in a numbered bag, and the other half stays in the box for future reference and is stored outside in the core racks. An inventory list is updated daily to ensure the core boxes are easily accessible.
QA/QC samples are inserted as directed by the geologist using the tags in the boxes. A list is made by the geologist showing the meterage, the number of samples and the QA/QC sample meterage and type. To prevent mistakes, the technician provides the supervisor with a daily report that shows the number of samples and QA/QC types ready to ship to the external laboratory. The supervisor reviews the list and validates its conformity by comparing it to the geologist’s sampling list.
The samples are packed in batches of 10 into a jute bag that is secured by a plastic padlock with a registered serial number. A detailed list is emailed to the laboratory. The laboratory checks that the number of samples received matches the list, as well as the barcode. If discrepancies are observed by the laboratory, the Canadian Malartic GP is immediately contacted before the batch is assayed. The rejects and pulps from the samples are returned to the Regional Exploration office after the QA/QC has been reviewed by Canadian Malartic GP staff. This material is stored in a locked facility for future reference.
All the samples of the 2014 to 2021 programs were submitted to ALS Geochemistry (“ALS”) in Val-d’Or, Québec, which acted as the primary laboratory for all assaying. ALS occasionally used other ALS laboratories belonging to the ALS Global Group. ALS has ISO 9001 certification and ISO/IEC 17025 accreditation through the Standards Council of Canada.
Over the years, three different laboratories were used for external check assays on pulps, as summarized in the table below. All secondary laboratories used since 2014 are commercial laboratories independent of Canadian Malartic GP.
| | | | | | | | |
Laboratory | Location | Accreditation |
SGS Canada | Burnaby, British Columbia | ISO/IEC 17025 |
TSL Laboratories | Saskatoon, Saskatchewan | ISO/IEC 17025 |
Technilab S.G.B. Abitibi Inc. | Ste-Germaine-Boulé, Québec | ISO/IEC 17025 |
Sample preparation and gold assays are carried out according to the following procedures:
•Samples are received, sorted, and logged (LOG-21) into the ALS LIMS program.
•Samples are dried (DRY-21, if necessary) and weighed (WEI-21).
•Samples are crushed (CRU-31), +70% passing a 2 mm screen.
•Crushed samples are split (SPL-21) to 250 g using a riffle splitter.
•Samples are pulverized (PUL-31) to +85% passing a 75 µm screen (Tyler 200 mesh).
•A 50 g pulp aliquot is analyzed by fire assay and AAS (Au-AA24).
•For samples returning results higher than 10 g/t Au, a second 50-g pulp sample is assayed by FA with a gravimetric finish (Au-GRA22). The Au-GRA22 value is considered the official result in the database.
•Samples containing visible gold (or returning results higher than 10 g/t Au from 2017 to mid-2018 for Regional Exploration samples) are analyzed by metallic sieve (SCR24). Sample pulps (up to 1 kg) are passed through a 100 µm (Tyler 150 mesh) stainless steel screen. The material remaining on the screen (+100 µm) is retained and analyzed in its entirety by FA with gravimetric finish and reported as the Au (+) fraction. The material passing through the screen (100 µm) is homogenized, and two subsamples (50 g) are analyzed by FA with AAS finish (Au AA26 and Au AA26D). The average of the two AAS results is taken and reported as the Au (-) fraction. All three values are used to calculate the combined gold content of the plus and minus fractions.
The Canadian Malartic GP’s QA/QC program includes a routine insertion of CRMs or standards, blanks and duplicates, as well as an external duplicate assay check (“check assay”). One standard is included every 20 samples, and one blank and one coarse duplicate every 50 samples (since 2016). In 2014 and 2015, the coarse duplicated insertion rate was one duplicate every 25 samples. Additional blanks and coarse duplicates are typically inserted in the mineralized zones. The QA/QC program does not include a systematic field duplicate control. From 2014 to 2021, 536,170 samples were sent for analysis.
Standards are used to detect any problem with specific sample batches and/or any possible long-term biases in the overall dataset. The CRMs were purchased from CDN Resource Laboratories Ltd, except in 2020 when certified custom standards were used in addition to the purchased CRMs.
Canadian Malartic GP used coarse duplicates to address the representativeness of the results. At every 25 or 50 samples, the laboratory takes two different 250-gram fractions from the crushed samples and follows the same process for the pulverization and assaying. Since 2018, Regional Exploration coarse duplicate samples were requested only for the infill drilling of the Odyssey South Zone. For Mine Exploration, the coarse duplicate assaying (as described above) is a standard procedure.
To assess the assay accuracy of the primary laboratory, pulp samples from the mineralized sections are routinely collected and sent to a secondary laboratory every quarter.
Several database validations, verifications and audits were completed prior to the Canadian Malartic GP’s acquisition of the Canadian Malartic property. Once these processes were completed, the historical databases were locked to prevent any changes. As part of the validation for the December 31, 2021 Mineral Resource estimate for Canadian Malartic, Canadian Malartic GP performed a basic cross-check routine to ensure the usage of the validated and locked databases for data prior to 2014. Canadian Malartic GP did not find any discrepancies with the current database. All historical drill holes used in the open pit databases were completed before Canadian Malartic GP acquired the Canadian Malartic property.
Since 2014, Canadian Malartic GP’s data verification has occurred simultaneously with drilling. The Canadian Malartic Qualified Persons had full access to the data, and their verification included, but was not limited to, the following:
•Drill rig site visit
•Core review (description and photos)
•QA/QC review
•Spatial validation of the models
•Statistic validations and comparisons
•Checks on values in the data tables (import errors, special values)
Yamana is of the opinion that the sample preparation, sample security, and analytical procedures at the Canadian Malartic property are adequate and consistent with industry standards.
Mineral Processing and Metallurgical Testing
See below under “Processing and Recovery Operations”.
Mineral Resource and Mineral Reserve Estimates
See “– Mineral Projects – Summary of Mineral Reserve and Mineral Resource Estimates”.
The Mineral Resource estimate for the Canadian Malartic property was prepared in accordance with CIM Standards. The Mineral Resource estimate for the Canadian Malartic property consists of 11 block models (“BMs”) (two for open pit mining, nine for underground mining) covering the following deposits:
•Canadian Malartic, South Barnat and Gouldie deposits (1 BM, open pit; 2 BMs, underground)
•Jeffrey deposit (2 BMs, underground)
•Western Porphyry deposit (1 BM, open pit)
•East Malartic deposit (1 BM, underground)
•Odyssey deposit (1 BM, underground)
•East Gouldie deposit (1 BM, underground)
Canadian Malartic, South Barnat, Gouldie, Jeffrey and Western Porphyry were initially modelled and estimated for the purpose of open pit mining and the report refers to these deposits as “open pit projects”. As mineralization extends below the pit shells, some of these projects also include underground mineral resources for which underground BM’s (using subblocks) were generated for the Mineral Resource estimate. These provide optimal models for stope optimization. For the Jeffrey and Gouldie deposits, only the portion below the mined-out pits remain as underground Mineral Resources. The East Malartic, Odyssey and East Gouldie deposits were modelled and estimated for the purpose of underground mining and the report refers to these deposits as “underground projects”.
The Mineral Resource estimate models for the Canadian Malartic property were prepared and updated using LeapFrog GEO, GEOVIA GEMS and STUDIO RM. The broad geological model for the Canadian Malartic deposits was created using drill logs as well as production hole data, when available. The most prominent component of the geological model is a major, east-west lithological contact between the sedimentary rocks of the Pontiac Group to the south and the volcanic rocks of the Piché Group to the north. This contact corresponds to the southern limit of the LLCFZ and it is modelled as a surface. Individual models were also prepared and updated for each deposit, and they encompass information on porphyry, sedimentary and volcanic units; geological contacts; mineralized zones; and topographic and overburden surfaces.
The main steps in the Mineral resource estimation methodology were as follows:
•Compile and validate the diamond drill hole databases.
•Update the geological model, the mineralized zones interpretation and the voids model.
•Generate the drill hole intercepts and composites for each mineralized zone.
•Perform basic statistics (capping).
•Perform geostatistical analysis and variography.
•Interpolate grade within the block models.
•Validate the block models.
•Establish mineral resource classification criteria.
•Assess the mineral resources with the “reasonable prospects for eventual economic extraction” and select appropriate cut-off grades.
•As required, model depletion and pillar exclusion.
•Generate a mineral resource statement.
Mineral resource classification for the Canadian Malartic property is based on the robustness of the various available data and model characteristics, including but not limited to the following:
•Quality and reliability of drilling and sampling data;
•Presence of RC and/or production drilling;
•Drill hole density;
•Confidence in the geological interpretation;
•Geological and grades continuity of the structures;
•Variogram models and search ellipse criteria; and
•Interpolation parameters.
The Mineral Reserve estimate for the Canadian Malartic property includes open pit and stockpile Mineral Reserves. The Mineral Reserves are reported according to CIM Standards.
The design for the Canadian Malartic and Barnat pits was prepared from Canadian Malartic GP’s resource block model updated on December 31, 2021. From this resource block model, a reserve block model was developed to integrate additional parameters such as mill recovery, dilution, mining zones and royalties.
Open pit optimization was conducted to determine the optimal economic shape of the open pit in 3D. This task was undertaken using Whittle software, which is based on the Lerchs-Grossmann algorithm. The method works on a block model of the orebody and progressively constructs lists of related blocks that should or should not be mined. The method uses the values of the blocks to define a pit outline that has the highest possible total economic value, subject to the required pit slopes defined as structure arcs in the software. The results of the Whittle optimization served as the basis for the final pit design. The optimization considered the space needed for ramps and the constraints related to the presence of old excavations. GEMS Pit Design software was used to design ramps with 10% grades and widths of 35 metres.
The ore outlines include a 1 metre dilution envelope around economic ore blocks and enclose marginal material surrounded by economic mineralization. The dilution envelope and enclosed waste in most cases are mineralized and have been assigned a dilution grade. From this envelope a percentage of dilution is assigned to each block. The ore tonnage and grades include dilution tonnage and grades, as estimated from the detailed mining shapes. As Canadian Malartic GP is backfilling all open underground stopes and mining their pillars, the Mineral Reserve estimate does not consider mining loss.
Open pit gold Mineral Reserves of 1.77 million ounces, on a 50% basis, reflects depletion with 2021 production and an adjustment of approximately 48,000 ounces due to a slight increase in cut-off grade, which will be added to the marginal stockpile, and a localized adjustment in a lower bench of the Canadian Malartic pit. For the Barnat pit, drill hole datasets from the former East Malartic and Sladen underground mines were incorporated into the resource model, increasing confidence in the Barnat grade estimation without significant changes to Mineral Reserves or Mineral Resources. Underground Mineral Resources for the Odyssey project continue to grow as a result of ongoing exploration drilling, with a total of 2.35 million ounces of Indicated Mineral Resources and 13.15 million ounces of Inferred Mineral Resources reported at year-end, on a 100% basis. At East Gouldie, 82 new drill pierce points were added in the mineralized zones, confirming estimated grades and widths and resulting in the first gold Indicated Mineral Resources for the deposit of 1.49 million ounces, on a 100% basis. The ongoing infill drilling program continues to increase the inventory of Indicated Mineral Resources to support the planned conversion of Mineral Resources to Mineral Reserves. Expansion of the Mineral Resource envelope on the east side added new Inferred Mineral Resources with a high potential for future conversion in the mine plan, while step out drilling extended the mineralized zone 1,260 metres beyond the reported East Gouldie Mineral Resource and identified a new subparallel zone, located 400 metres in the footwall of the East Gouldie zone. These exploration holes are still widely spaced and therefore not yet considered in the Mineral Resource Statement.
Yamana is not aware of any metallurgical, environmental, permitting, legal, title, taxation, socio-economic, marketing, political, and other relevant issues that could impact the Mineral Resource estimate or the Mineral Reserve estimate for the Canadian Malartic property. Please also refer to “Description of the Business – Risks of the Business – Uncertainty in the Estimation of Mineral Reserves and Mineral Resources”.
Mining Method
The mining method selected to mine the Mineral Reserves is by open pit using conventional trucks and shovels. The mining method is optimized in legacy underground mining areas by using remote controlled shovels, drills and dozers. The highest-grade ore is sent directly to the crusher. When ore extraction exceeds milling capacity, the ore is directed to a dedicated stock pile depending on grade (high or low). Waste rock is stockpiled on a dedicated rock pile. Ground reinforcement is used in selected areas following tight scaling procedure and geotechnical inspections. Cablebolts are typically used. Some mesh draping, energy absorption support and high capacity anchors are also installed but to a lesser extent.
Mining constraints in the Canadian Malartic North sector due to the town’s proximity and old underground openings make it impractical to divide the pit into phases. Instead, the design considers two pits, Canadian Malartic and Barnat, according to the permits obtained.
The optimal pit shells produced with the Lerchs-Grossmann algorithm were used as a guideline for the pit design. The pit design process consisted of designing ramp accesses to the bottom of the pit using the geotechnical recommendations guiding bench geometry. The shell selection process involved analyzing a series of graphs, tables and figures generated in Whittle and GEMS. The net present value graphs generated in Whittle have distinct characteristics showing major changes to the pit economics. The selected Whittle shells were further analyzed in GEMS to address the mining practicalities of the selected shells, such as the distances from underground openings.
The drill pattern design is dictated by the need to control blast-induced vibrations and air overpressures (airblasts) in the neighbouring town of Malartic.
Waste material is stored north of the TSF. An estimated total tonnage of 450 Mt of waste will be placed on the waste rock pile. An in-situ compacted density of 1.96 t/m3 was used to estimate the storage volume of 230 Mm3.
The ramps and haul roads are designed to accommodate the largest equipment, which is currently the Caterpillar 793F haul truck. For double-lane traffic, provincial regulations are followed. Double lane roads are designed for all accesses. Optimization to complete mining at the bottoms of pits is planned to be single lane. The travelling surface is at least triple the width of the largest vehicle. Ramp gradients are designed at 10%.
The open pit mine life is planned to extend to 2029, with mining continuing to transition from the Canadian Malartic pit to the Barnat pit. Production will transition from the open pit to the underground between 2023 to 2029. Annual gold production attributable to Yamana is expected to be approximately 320,000 ounces in 2022, 330,000 ounces in 2023, and 340,000 ounces in 2024. The Odyssey underground project supports a mine life to at least 2039 with annual gold production of 500,000 to 600,000 ounces when fully ramped up on a 100% basis. Only 7.3 million ounces, or approximately 47% of underground Mineral Resources as of December 31, 2021, are included in the Canadian Malartic Report mine plan. Opportunities exist for supplemental production sources to increase throughput beyond the 20,000 tpd as outlined in the Technical Study (as defined herein) and utilize the excess process capacity of the 60,000 tpd Canadian Malartic plant. Exploration drilling of the East Gouldie Extension and parallel structures, while widely spaced, indicate that a corridor of mineralization extends at least 1.3 kilometres to the east of East Gouldie. Although at the very early stages, these results suggest the potential for a second production shaft that could increase throughput over the longer term. Open pit and underground exploration targets within the Canadian Malartic land package present additional potential ore sources. For more information about the Odyssey project, refer to “Odyssey underground project internal Technical Study”.
Processing and Recovery Operations
Since its commissioning in 2011, Canadian Malartic Mine has improved its throughput as a result of several additions to the process flowsheet. First, a secondary crushing line and a second pebble crusher in closed loop with the SAG mill were added in 2012. In 2016, modifications were made to the tailing thickener to reach higher underflow densities and the cyanide destruction process was changed to Caro’s acid. An auxiliary line of pre-crushed material was added to the grinding circuit in 2017. The Zadra process at the elution circuit was upgraded to a Split-Zadra for better performance and an Advanced Control System was implemented at the grinding circuit in 2018. Throughout the years of operation, the mill’s operational team has completed several continuous improvement projects and audits with external experts to improve the overall efficiency of the plant. This methodology of continuous improvement remains a key management practice at the current operations.
The Barnat deposit is located 1.2 km northeast of the centre of the Canadian Malartic deposit and has similar ore mineralogy. With Barnat ore planned to be processed in the same circuit as Canadian Malartic ore, the purpose of the metallurgical testwork was to validate that Barnat ore will behave similarly to Canadian Malartic ore during processing. No equipment selection or circuit design modification are expected, and it is expected that Barnat ore will be processed from the pit or stockpiles with a majority of Canadian Malartic ore.
The Canadian Malartic ore was subjected to a full drop weight test program in 2011 to study hardness. The conclusion of the testwork is that the material’s Axb values range from 17 to 45 with an average of 26.8, which justifies the need for extra crushing capacity, installed after initial start-up, due to the very competent nature of the ore. It is the characteristic of the ore that limits the process plant throughput.
Review of the ore composition of the Barnat deposit shows it has many similarities to ore from the Canadian Malartic deposit. However, ultramafic rock at Barnat which is mainly low grade and waste material will be new to the existing milling process at the Canadian Malartic operation. Testwork representing grinding, leaching, gravimetric and settling was completed to evaluate the differences.
Approximately 75% of the ore from Barnat will behave as Canadian Malartic ore, which is hard rock with gold and silver telluride finely disseminated in pyrite. The ultramafic ore from Barnat is softer ore and its settling rate is lower than Canadian Malartic ore but it should not impact the milling process outside of its limits when it is blended with more than 80% of the hard rock. The ultramafic ore is diluted with porphyry when fed to the mill. Reagent consumption is adjusted to take into account this new rock type.
Composite leach testwork confirmed that the actual circuit is adapted to this project and a small composite was used to define the recovery area. All the models are dependent only on zone and grade. The Pontiac zone of the Barnat deposit is the extension of the south Canadian Malartic deposit and they have the same model. The Piché-Barnat zone shows better recovery in porphyry. The gold recovery from ultramafic rock is better than from the
rest of the deposit but it has been included in the Piché recovery model since proportion and grade is not representative of the ore that will feed the mill. The same conclusion is applicable for gravimetric techniques which show good potential of gold recovery but on a small proportion of the deposit — however, leaching alone provides good recovery.
A tails diagnostic leaching study indicated that refractory gold is locked. Fine grinding is still the sole technique to increase its liberation. No deleterious elements were identified in the samples tested.
Considering the existing processing circuit and similarity between the Canadian Malartic and Barnat deposits, Yamana is of the opinion that the metallurgical testwork that has been completed is appropriate to support the Mineral Resource estimates. No modifications to the processing equipment are required.
Infrastructure, Permitting and Compliance Activities
The main infrastructure of the Canadian Malartic Mine includes the multi-service building (administration / warehouse / mine office / truck shop), the process plant, the crushing plant, the guardhouse, several pumping stations, the construction office and many MegaDome buildings.
The electrical power is supplied by the existing Hydro-Québec 120 kV Cadillac main substation, which was connected to the mine site with the construction of a 19-km-long 120 kV electrical transmission line. The power demand for the entire project is about 85 MW, including all ancillary facilities for the mill and mine.
A water treatment plant has been built to treat water pumped from the Southeast Pond before discharging it into the polishing pond for a capacity of 1,000 m3/hour. The effluent treatment plant (“ETP”) is used mainly for cyanide destruction, dissolved metal ions and total suspended solids removal. It is a common oxidation process (hydrogen peroxide and copper sulphate) followed by the addition of a metal precipitant, addition of iron sulphate as a coagulant and the addition of a flocculant. The discharge of the ETP is then filtered by geotubes located at the polishing pond prior to final discharge to the environment. Treatment occurs mainly in the spring when ice melting raises the pond’s levels or during the summer.
Since 2014, sustained efforts have significantly reduced the Canadian Malartic Mine’s impact on the environment, resulting in a considerable decrease in the number of notices of non-compliance. Challenges are always present for the air overpressures and NOx emissions from the blasts. In 2019, the Canadian Malartic GP received two notices of non-compliance for air overpressure and two notices of non-compliance for NOx emissions. All notifications are investigated, an action plan is produced, and corrective actions are put in place. The action plan is transmitted to the regulator. The last notices of non-compliance for air quality and noise date back to events in May 2015 and October 2016, respectively.
On August 2, 2016, Canadian Malartic GP was served with a class-action lawsuit and injunction request with respect to allegations involving the Canadian Malartic Mine. The complaint was in respect of "neighbourhood annoyances" arising from dust, noise, vibrations and blasts at the mine. 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. As no appeal was filed, the judgement approving the settlement is definitive, and the plaintiffs consequently withdrew from the injunction and the judicial review proceedings on January 20, 2020.
In its Sustainable Development Policy adopted in 2014, Canadian Malartic GP commits to contributing socially and economically to the sustainable development of the communities where it operates and to maintaining fair and respectful relationships with its employees and host communities. The Canadian Malartic GP has incorporated social and economic impact management into its practices to build a strong organization with a business strategy that offers employees a workplace of choice, contributes to host communities’ well-being and social development, and creates value for shareholders and its partners.
As part of ongoing stakeholder engagement, in June 2020, the Canadian Malartic GP entered into a Collaboration Agreement with four Anishinabeg First Nation communities (Abitibiwinni, Lac Simon, Long Point and Kitcisakik). The Collaboration Agreement sets out measures to increase the participation of the four communities in Canadian Malartic GP’s activities in regard to training, job and business opportunities, and environmental protection until 2027. The communities will also receive annual financial contributions to promote their sustainable development and to establish community-building projects.
All identified environmental impacts and risks arising from Canadian Malartic GP’s activities are monitored and mitigated. Numerous solutions to reduce the impact and risks of its operations have been implemented. The
environmental monitoring program ensures Canadian Malartic GP’s activities comply with its permits and the applicable laws and regulations for the mining industry in Quebec. The program includes components for vibrations and air overpressure, noise, air quality, atmospheric emissions, effluent quality, groundwater level and quality, solid and hazardous waste management, mine waste management, accidental spills and greenhouse gas emissions.
The primary environmental considerations and potential liabilities for the Canadian Malartic property are related to the operations of the TSFs. Canadian Malartic GP prioritizes the management of tailings and is in the process of aligning the tailings management system with best practices proposed by the Mining Association of Canada guidelines.
Tailings management practices at the Canadian Malartic property incorporate evolving international best practices for design and management, as represented by the Canadian Dam Association and the Mining Association of Canada.
The water management infrastructure is designed to minimize the impact on the environment, ensure an uninterrupted long-term mining sequence and preserve the geotechnical stability of the surrounding mining infrastructure. The site-wide water balance is updated on an annual basis, and water quality modelling is conducted as needed to update the predictive water management models.
The current closure plan for the Canadian Malartic Mine was approved by the Ministry of Energy and Natural Resources of Québec (“MERN”) in 2017. The costs of the current approved 2015 reclamation plan are estimated at C$163.3 million. The closure costs include the additional reclamation costs related to the Malartic Extension Project, which mainly consists of the mining of the Barnat pit, the expansion of the waste rock pile, and the expansion of the TSF. A new revision of the reclamation plan was submitted to the MERN in December 2020 and is currently under review. The 2020 closure plan includes new project components and associated new reclamation costs and it is expected that that reclamation and closure costs will rise once approved based on an increase in the affected area, more refined final cover method and increasing unit costs, indirect costs, and contingency.
The Canadian Malartic GP has submitted the total amount of the reclamation bond to the MERN in the form of irrevocable letters of credit according to MERN’s payment terms.
Capital and Operating Cost Estimates
The capital and operating costs presented below are for the Canadian Malartic open pit operation only and do not include costs related to the construction of the Odyssey underground project that was approved by the Partnership in February 2021. For information about Odyssey project costs, refer to “Odyssey underground project internal Preliminary Economic Assessment Technical Study”.
The estimated capital costs of the Canadian Malartic Mine correspond to the sustaining capital for mine and pit development costs, including deferred stripping costs. For the mining operations, there are no near-term capital costs for the purchase of new equipment in 2022. For the processing plant, near-term capital costs include an estimate of approximately $5 million for improvement costs in 2022. A summary of the three-year capital cost forecast for the Canadian Malartic Mine is set out in the table below:
| | | | | | | | | | | |
Capital Cost (C$M) | 2022 | 2023 | 2024 |
Sustaining cost | 90.4 | 61.7 | 41.1 |
Development cost | 27.7 | 24.9 | 26.3 |
Deferred stripping | 74.5 | 20.6 | 34.3 |
Total Capital Cost | 192.7 | 107.3 | 101.7 |
Operating costs consist of annual expenditures incurred at the mine to extract ore and waste rock and to process the ore. The mining consumables are based on the costs and contracts. The costs for future operation consumables, such as mill reagents, grinding media, etc., are based on recent supplier quotations, general and administrative (“G&A”) costs, and transport and refining costs. The increase in mining cost per tonne in 2022 and 2023 is primarily a result of the recognition of deferred costs associated with the drawdown of the ore stockpiles as open pit mining activities progressively decline. A summary of the three-year operating expenditures forecast for the Canadian Malartic Mine is set out in the table below:
| | | | | | | | | | | |
| Operating Forecast | 2022 | 2023 | 2024 |
| Projected processed tonnes | 19,043,729 | 17,972,725 | 19,826,412 |
| Projected gold ounces recovered | 644,201 | 625,023 | 614,034 |
| Mining cost (C$M) | 244.62 | 307.00 | 330.63 |
| Processing cost (C$M) | 214.79 | 200.55 | 226.45 |
| G&A (C$M) | 86.17 | 80.30 | 70.91 |
| Transport and refining (C$M) | 1.75 | 1.64 | 1.70 |
| Total Operating Costs (C$M) | 547.33 | 589.50 | 629.69 |
Total Operating Costs Per Tonne(1) | 28.74 | 32.80 | 31.76 |
(1) Excluding royalties
Exploration, Development and Production
In 2021, the Canadian Malartic GP drilled 161,724 metres (100% basis) with 129,544 metres dedicated to definition drilling at East Gouldie and Odyssey focused on increasing the known mineralization and conversion to Mineral Resources at the Odyssey project. An additional 32,180 metres was drilled for exploration at East Amphi, Midway and on Rand with an emphasis on expanding the East Gouldie mineralization to the east.
Odyssey underground project internal Technical Study
The Odyssey underground project internal Preliminary Economic Assessment level technical study (the “Technical Study”) was completed in February 2021. The Technical Study is preliminary in nature and includes Inferred Mineral Resources that are too speculative geologically to have economic considerations applied to them that would enable them to be categorized as Mineral Reserves and there is no certainty that the forecast production amounts will be realized.
The Odyssey underground mining project is located east of the current Canadian Malartic open pit operation and is comprised of the Odyssey, East Gouldie, and East Malartic deposits. As of December 31, 2021, the Odyssey project contains 2.35 Moz gold Indicated Mineral Resources and 13.15 Moz gold Inferred Mineral Resources on a 100% basis. There are no Mineral Reserves at Odyssey. Canadian Malartic GP approved the construction of the project after completion of the Technical Study in February 2021.
The Technical Study outlines an underground project ramping up to a production rate of approximately 19,000 tpd. Mineralized material from the underground mine will be processed through the existing Canadian Malartic processing plant with first gold production scheduled for 2023. At full production, the Odyssey project is expected to produce an average of approximately 545,400 ounces of gold per year.
The Odyssey project will utilize a transverse long-hole stoping mining method with primary and secondary stopes and paste backfill to fill the voids. This is a proven mining method in the region. In some areas of the East Malartic zone, where access to the mineralization is restricted by historical mine openings, mining will be undertaken using a longitudinal stoping method. Stope height varies from 30m to 50m depending on depth and rock quality differing in mining zones. As the mine ramps-up to full production more active mining fronts from each deposit will be created to sustain steady state production.
The mine plan presented in the Technical Study is based on a mining inventory estimated using the Mineral Resource models as of December 31, 2020 and includes Indicated and Inferred Mineral Resources. For the purposes of the Technical Study, only the Mineral Resources above mining cut-off grades ranging from 1.4 to 1.9 g/t at a gold price assumption of C$1,625 per ounce (USD$1,250 per ounce at an exchange rate of 1.3 CAD/USD) were included in the mineable inventory. Additionally, the Mineral Resources included in the Technical Study include full dilution and mining recovery. Overall, the Odyssey project mine plan is based on 82 million tonnes at an average grade of 2.76 g/t for a total of 7.3 million ounces contained gold. The East Gouldie mining zone accounts for more than 72% of the contained gold, while the Odyssey South, Odyssey North, and East Malartic mining zones contribute 5%, 11%, and 12% of the contained gold respectively.
In total, the mine plan supports 7.3 million mineable ounces (100% basis). Lower grade Mineral Resources, that fall below cut-off grade when fully diluted and using a gold price assumption of 1,250 US$/oz, are excluded from the mine plan. Additional Mineral Resources are excluded with the application of a mining recovery factor. Mineral Resources from the Odyssey internal zones are not currently included in the mine plan due to the increased
geological complexity of the zones. Infill drilling of these zones from underground is planned to increase geological understanding, which could present opportunities for additional production during the underground ramp-up period. East Malartic Mineral Resources at depth represents another opportunity for future inclusion in the mine plan, which could extend the life of the underground project.
Production via the ramp is expected to begin at Odyssey South in 2023, increasing up to 3,500 tpd in 2024. Collaring of the shaft and installation of the headframe commenced in 2021, with shaft sinking activities expected to begin in late 2022. The first loading station is expected to be commissioned in 2027 with modest production from East Gouldie. East Malartic and Odyssey North are scheduled to enter into production in 2028 and 2030 respectively. The operations at the Odyssey project should reach full production of approximately 19,000 tpd by 2031. Life of mine is estimated at 17 years and average annual payable production is approximately 545,400 ounces of gold from 2029 to 2039. The operation will progressively shift from open pit to underground mining between 2023 and 2028.
The Canadian Malartic Mine mill will be modified to decrease its capacity from 57,000 tpd to 19,000 tpd on a calendar day basis. These modifications will occur in three phases. A gravity circuit will be installed in the ball mill area, while two ball mills will be put in care-and-maintenance. Construction of the gravity circuit can be achieved during standard quarterly plant shutdowns and is not expected to impact on production.
Tailings will be stored in two different facilities over the years of operation of the Odyssey project. Until the end of 2023, tailings will continue to be stored in the current Canadian Malartic Mine TSF. Designs to expand the current TSF past 2022 are under progress. Towards the end of 2023, the mined out open pit at Canadian Malartic will be ready to store tailings. The in-pit tailings storage capacity is approximately 125 Mt, sufficient for the 109 Mt required over the current life of the combined open pit and underground operation, considering that 41 Mt of tailings will be deposited in the underground voids as paste backfill.
A provincial decree was granted in 2018 providing for underground mining of Odyssey South and Odyssey North through ramp and shaft. A request for decree amendment, adding the East Gouldie and East Malartic mining zones was submitted to the Ministère de l’environnement et de lutte aux Changements climatiques du Québec in February 2021. Permits were obtained allowing the first phase of the project, (decline, fresh air raise development, potable water withdrawal, wastewater treatment, temporary access to Highway 117). An application for a Certificate of Authorization for shaft sinking and related surface infrastructure was submitted and is pending.
The Odyssey project has modest capital requirements in any given year which are manageable and fully funded using Canadian Malartic GP's cash on hand and free cash flow generation, with no external funding required. In the Technical Study, gold production during the construction period is expected at 932,000 ounces (100% basis), with net proceeds from the sale of these ounces significantly reducing the capital requirements for construction of the Odyssey project. Assuming a gold price of $1,550 per ounce, the projected initial expansionary capital of $1.14 billion over this eight-year period would be reduced in half. Operating costs are estimated to total C$5.2 billion over the life of the underground project, averaging 62.92 C$/t of ore processed and considering synergies between the Odyssey project and the Canadian Malartic open pit operation.
Other Producing Mines
Cerro Moro Mine
Property Description, Location and Access
Cerro Moro is a gold-silver mine located in the Santa Cruz province in southern Argentina. It is located approximately 70 kilometres (90 kilometres by road) southwest of the port city of Puerto Deseado. Access to Cerro Moro is via 20 kilometres of paved road (Provincial Highway 281) from Puerto Deseado to the locality of Tellier, followed by 70 km of all-weather gravel road (Provincial Route 47) to the project turnoff. Cerro Moro is accessed and operates on a year-round basis. Puerto Deseado is the closest community to the mine.
Cerro Moro is comprised of ten grouped mining concessions consisting of a combination of 70 mining minas and 12 exploration cateos, totalling 304,167 hectares. Estelar Resources S.A. (“Estelar”), an indirect subsidiary of Yamana, holds valid and marketable title to the Cerro Moro group of concessions. The main mine area is within the Cerro Moro group of concessions. The Bahía Laura group of concessions are registered to Fomento Minera de Santa Cruz Sociedad del Estado SE (“Fomicruz SE”), a mining company owned by the province of Santa Cruz. Yamana has an agreement with Fomicruz SE to hold an 80% interest of these concessions. This agreement also gives Fomicruz SE a 5% interest in the Cerro Moro group of concessions. The remaining groups of concessions are
registered to Yamana Argentina Servicios S.A. (“YASSA”) or Suyai del Sur S.A. (“Suyai del Sur”), both wholly-owned subsidiaries of Yamana.
Mining claims do not expire as long as payment of fees (canons) to the province are paid. Canons payable for each claim are calculated based on the type of mining claim and the number of claims.
On December 30, 2003, Cerro Vanguardia Sociedad Anonima (“CVSA”) and Exeter Resource Corporation (“Exeter”) signed an agreement, granting Exeter the right to undertake exploration and prospecting work on 39 CVSA properties. The agreement provided Exeter with the exclusive right to acquire a 100% interest in the properties contained in four projects by incurring exploration expenditures of US$3 million over five years. CVSA would retain a 2% NSR on the Cerro Moro group of concessions. Franco Nevada acquired the 2% NSR from CVSA. The transaction closed on April 24, 2014.
On October 27, 2015, Yamana entered into a silver purchase agreement with Sandstorm Gold Inc. (“Sandstorm”). In consideration of an advanced payment and an additional payment of 30% of the spot price of silver at the time each ounce of silver is delivered, Yamana agreed to deliver silver related to Cerro Moro to Sandstorm equal to 20% of the silver produced, up to a maximum of 1.2 million ounces of silver annually. When 7.0 million ounces of silver have been delivered to Sandstorm, the silver stream will reduce to 9.0% of the silver produced for the life of the mine.
On June 15, 2016, Samco Gold Limited and a subsidiary of Yamana, signed an NSR agreement granting the right to undertake exploration and prospecting work on three properties grouped as the Corina concessions in exchange for a 2% NSR.
On April 25, 2017, Minas Argentinas S.A. entered into an option agreement with Minera Santa Cruz S.A. (“MSC”) for the purchase of the Mosquito property. The option agreement was subsequently assigned to YASSA on August 30, 2018. The term of the option is for five years and is subject to the investment condition of US$5 million in exploration works by YASSA. As consideration for exercising the option, YASSA has agreed to pay to MSC US$30 for every ounce of gold defined or mined in the Mosquito Property up to a maximum of US$12 million (minus US$1 million advanced by YASSA to MSC at the time of execution of the option). In addition, YASSA has agreed to pay a 2% NSR to MH Argentina S.A. (“MHA”). No NSR royalty will be payable on the first 200,000 ounces of gold produced from the Mosquito Property and the advance payment of US$1 million paid by YASSA to MHA must be credited against the NSR. Estelar. has guaranteed YASSA’s obligations.
Estelar has all required permits to continue carrying out the proposed mining operations on the Cerro Moro property. Yamana is not aware of any significant factors and risks that may affect access, title, or the right or ability to perform mining and exploration work on the property.
History
The Cerro Moro property was discovered in 1993 by Mincorp Explorations S.A. (“Mincorp”). Follow-up exploration programs, consisting of geological mapping, rock chip geochemistry, and drilling, led to the discovery of widespread and variably mineralized quartz vein structures covering an area spanning more than 100 square kilometres. A number of mineralized structures were identified by trenches, surface samples, and by core and RC drill holes by the previous owners. Exploration activities were focused on testing the extension and infill drilling of the identified structures.
Yamana has owned Cerro Moro since August 2012 and construction of the operation was approved in 2015. The Cerro Moro operation began feeding ore to the processing plant in April 2018. Production on the property from April 2018 to December 2021 is listed in the table below.
| | | | | | | | | | | | | | | | | |
| Historical Gold and Silver Production to December 31, 2021 |
| Year | Tonnes Processed | Gold
Feed Grade
(g/t) | Silver
Feed Grade
(g/t) | Gold Production (oz) | Silver Production (oz) |
| 2018 | 199,602 | 15.85 | 724.7 | 92,793 | 4,119,085 |
| 2019 | 367,334 | 10.81 | 568.6 | 120,802 | 6,322,864 |
| 2020 | 320,701 | 6.91 | 565.1 | 66,995 | 5,448,561 |
| 2021 | 376,557 | 7.19 | 505.1 | 79,988 | 5,582,197 |
| Total | 1,264,194 | 9.50 | 569.6 | 360,578 | 21,472,707 |
Geological Setting, Mineralization and Deposit Types
Cerro Moro is located within the Deseado Massif, a tectonic block in the central portion of the Santa Cruz Province that covers an area of approximately 60,000 square kilometres. The Deseado Massif is host to several producing and past-producing gold and silver mines, all of the low-sulphidation gold-silver-quartz vein deposit type. This deposit type is characterized by quartz veins, stockworks, and breccias that contain gold, silver, electrum, argentite, and pyrite with lesser and variable amounts of sphalerite, chalcopyrite, galena, rare tetrahedrite and sulphosalt minerals that form in high-level (epizonal) to near-surface environments.
The Cerro Moro property is underlain by Tertiary marine sediments, Quaternary gravels and volcanic rocks of Jurassic age assigned to the Bahía Laura Group by Panza et al. (1994).
The current distribution of rock units is strongly controlled by faulting. Stratified rocks generally dip gently to the south but are displaced along numerous faults. Actual displacement vectors on faults are poorly defined and structural observations of veins and fault surfaces show a complex history, with reactivation of fault surfaces showing different displacement vectors during different periods of deformation and resultant mineralization.
Gold-silver mineralization at Cerro Moro is associated with epithermal veins. Geological mapping and Ar-Ar age dating on vein adularia have defined at least three episodes of veining, spread over 9 million years from 180 to 171 Ma. The different ages of veining tend to have different orientations and structural controls on high-grade shoots. The earlier pulses of veining (Michelle vein at 180 Ma, Esperanza at 175 Ma, and Gabriela at 178 Ma) are characterized by banded crystalline quartz veins with local adularia and low sulphide content. These veins are generally poorly mineralized although they locally contain significant ore shoots. Grades are lower than in the younger pulse of mineralization and ore shoots terminate at shallow depths, suggesting significant erosion of the vein systems has taken place.
A second later pulse (171 Ma) consisting of black silica, is rich in base metal and silver sulphides and hosts high-grade gold mineralization, mainly in the Escondida-Zoe vein system. These high-grade veins and stockworks consist of banded veins with white quartz, fine-grained black silica, and coarse sulphides including pyrite, pale-coloured sphalerite, galena, and acanthite as well as local electrum. The black silica is also characterized by anomalously high molybdenum content.
Veining at Cerro Moro is complex and widespread. Veining varies from simple single veins to complex vein systems. Veins are typically steeply dipping to sub-vertical. Outcropping veins locally reach widths up to 4 m, whilst associated zones of quartz stringers and stockwork may reach widths in the order of 10 to 15 m. The strike length of individual veins is variable and ranges generally between 200 metres and 1 kilometre. Alteration has been identified by Terraspec using spectrometry and is typical of the low-sulphidation model, with broad haloes of white mica and less common kaolinite alteration around the mineralized veins.
Structural controls on veining at Cerro Moro vary with the age of the veins. The oldest veins at Cerro Moro trend north to northeast and mineralization is preferentially hosted in northeast-trending segments, especially in areas close to intersections with northwest or east-west structures, suggesting possible reactivation with emplacement of younger mineralization. A second episode of white quartz-adularia veining was emplaced along northwest-trending structures. These veins are widespread in the main mine area and host lower-grade but significant mineralization in the Gabriela and Esperanza-Nini areas. The mineralization in these veins extends to relatively shallow depths below the current surface and probably represent the roots of deeply eroded veins. The third high-grade episode of sulphide-rich mineralization is also hosted along northwest-trending faults. The main Escondida fault is a large displacement south side-down fault. Mineralization is localized around east-west trending segments as well as in small east-west splays off the main structure. These observations, along with the stratigraphic displacement observed above, suggest a strong sinistral-normal oblique movement vector that controls this part of the mineralization.
Exploration
Prior to 2017, exploration activities led by Yamana were primarily focused on infill drilling programs with the intent to upgrade the classification of Inferred Mineral Resources on several mineralized structures that include Escondida-Zoe, Martina, Carla, Carlita, Gabriela, Michelle, Loma Escondida, Nini, and Deborah.
Beginning in 2017, exploration activities expanded considerably with an on-going aggressive program aimed at delineating new mineralized areas, not only in the main mine area (covering ~6000 hectares) but also over
the entire consolidated property of near 300,000 hectares (some of them under third-party agreements, such as the Bahía Laura and El Mosquito projects).
The exploration team has utilized a wide range of exploration techniques, including geological mapping, soil sampling, whole rock sampling, spectrometry on rock and soil samples, rock-chip sampling, RC and diamond drilling, interpretation of satellite imagery, and remote sensing. Multiple geophysical techniques were used including Controlled Source Audio Magnetotelluric, and both ground and airborne magnetic surveys. Exploration is conducted by trained geologists and technicians using established standard operating procedures.
Surface sampling by Yamana includes soil and rock sampling as well as Terraspec spectrometry surveys of these samples. The current database of surface samples consists of 35,938 rock chips samples, 36,510 soil samples, with spectrometry analysis completed on approximately one third of these samples.
Recent exploration efforts have delineated multiple district-scale fault structures on the property that show significant displacements and strike lengths, with both northwest and northeast trends. These structures are similar in orientation and character to structures hosting known high-grade mineralization on the Cerro Moro property; these structures continue to be the main focus of current exploration.
The Cerro Moro exploration program in 2021 consisted of 19,480 metres of infill drilling delineation drilling to convert Inferred Mineral Resources in the Zoe-Escondida corridor and at Naty and Gabriela. An additional 25,050 metres of exploration drilling testing targets at depth and adjacent known resources in the Zoe and Escondida areas was dedicated to new Inferred Mineral Resources, largely at Escondida, Veronica and Martina. Scout exploration drilling of 20,442 metres was completed to test regional exploration targets and initiate definition of a heap leach resource Drilling at Cassius and along the northeast striking Naty structure identified promising new targets Ongoing property-scale mapping, geophysics, soil and outcrop sampling continued through 2021 to identify future drill targets.
The strategy for Cerro Moro remains to improve the long-term production profile through a more aggressive exploration program with the objective of increasing Mineral Reserves in the short-term. In 2022, the exploration drilling program includes four objectives: (i) delineation of underground resources to support operations; (ii) infill drilling to upgrade classification of Inferred Mineral Resources; (iii) to define new Inferred Mineral Resources, by following up and expanding on 2019-2020 exploration discoveries and extensions of known structures; (iv) to generate and develop new discoveries by scout drilling of deep targets on the Escondida-Zoe trend and by following up on gold anomalous zones defined by surface samples and geochemical mapping on the Bahia Laura and Mosquito properties.
Drilling
As of the end of December 2021, 5,648 drill holes have been drilled in the Cerro Moro project area, for a total of 651,355 metres. Of this, 340,866 metres has been drilled since Yamana became the operator. Additionally, 1,740 underground channels and 855 trenches contribute to the sample database.
The majority of core drill holes have been drilled in HQ3 size (61.1 millimeter diameter) and utilizing a triple tube core barrel system. About 40% of the core drilling at Cerro Moro is oriented core. All downhole surveys have been performed during the drilling operations. Geologists and technicians at Cerro Moro follow a series of standard operating procedures for the planning and execution of both diamond and RC drilling programs. The core logging procedures used by all operators have been consistent with industry standards.
Sampling, Analysis and Data Verification
Diamond drilling is used for exploration, infill and underground grade control. Drilling pattern is variable and range from 15 × 15 m in underground grade control to 60 × 60 m in exploratory and expansionary drilling. Drilling size is HQ and NQ for surface and underground drilling respectively. The cores are received by the exploration technicians, who first regularize them by marking the depths and controlling with the wooden blocks placed by the drillers. After the technicians performed the geotechnical logging, the geologists perform the geological logging and determine the sampling intervals. Subsequently the drill core is photographed in a dry and wet state and transferred to the sampling area. The recovery and the RQD are measured by technicians. The core recovery in Cerro Moro is close to 98%.
After geotechnical logging, the geological description is captured including lithology (stratigraphic unit, lithology, pervasive structure, and oxidation), alteration, local structures, mineralization, and vein intervals. The
intervals of each sample are marked with an indelible marker on the core and on the box. The complete drill hole is sampled and sent for analysis. The sample lengths are determined by the lithological contacts and by the mineralization of the drill hole. The sample length for HQ core varies between 0.3 metres and 2 metres in length. For NQ drill holes, the minimum sample lengths are 0.4 metres and up to 2 metres. The drill cores are cut in half using a circular diamond saw.
RC drilling is used for exploratory drill holes and for open-pit grade control (short-term planning) on 10 × 10 m grids using an Atlas Copco L8 rig. The RC chip samples are collected by using a rig mounted automatic sampling splitter designed by Metzke. Samples are taken at regular intervals of 1 m and are split at 12.5%, obtaining samples weighing approximately 4 to 6 kg for a drilling size of 5.5”. Individual samples are logged in the rig platform by a Company technician and the information is recorded in the geological database. A small portion of cuttings for each sample is stored in a box for detailed logging.
The sampling of underground faces is carried out systematically by production geologists and technicians in the advance galleries after each advance. Channel sampling is performed over the development face approximately every 3.5 m. After washing the face, geological mapping is performed to characterise the lithology, mineralization, structures, and alteration of the rocks. The sample length is determined according to geological criteria. If the mineralized structure has defined contacts with the wall rock and is homogeneous, the vein is sampled in even intervals, with sample length ranging between 0.3 and 1.0 m. If the vein has heterogeneous geological characteristics, sample limits respect these variations, with a minimum sample length of 0.3 m and a maximum of 1 m. Sampling is executed horizontally from left to right at a height of approximately 1.5 m. Channel size is 10 cm height and 5 cm depth giving average samples weight from 3.5 to 10 kg.
The specific gravity measurements are determined using Archimedes’ principle, which states that an object totally or partially immersed in a fluid is buoyed by a force equal to the weight of the fluid that is displaced. Core samples between 10 and 20 cm in length are selected, dried at 100° C in an electric furnace, coated with a waterproofing sealant and weighed. The sealed sample is then submerged and weighed in water. A total of 1,497 samples were measured for density determination with all lithologies represented in the sampling.
Yamana employs a comprehensive QA/QC program for monitoring the assay results for samples generated from the exploration drilling programs, in-fill drilling programs, and grade control channel samples. The QA/QC program implemented by Yamana from 2012 to the present, includes the monitoring of accuracy and bias by inserting Certified Reference Materials (“CRM”), precision control through the processing of duplicate samples (duplicates of preparation and analysis, both controls taken in the laboratory, and field duplicates) and control of contamination by geochemical fine blanks and sterile (coarse blanks) material. In 2012, pulp verification was implemented in a secondary laboratory to determine the existence of bias between the primary and secondary laboratories. The results from the QA/QC program are reviewed and monitored by a dedicated Quality Control Team who present the results by means of detailed reports on a regular basis.
From February 2011 to December 2015, Acme Analytical Laboratories (“Acme”) were the primary laboratory for exploration samples. Acme established a dedicated on-site sample preparation laboratory at the Cerro Moro project in 2011. Samples were prepared by experienced personnel and a pulp split was sent to the company’s ISO9001 certified analytical laboratory located in Santiago, Chile for analysis. The sample preparation facility had a capacity of 150 to 300 samples per day. Activities carried out by the on-site sample preparation facility were as follows: drying (60°C), crushing (70% < 10 mesh), splitting, and pulverizing of the split fraction. Starting in January 2013, some samples were also prepared at the Acme facility located in Mendoza, Argentina. The pulps, in both cases, were sent for analysis to the primary laboratory in Santiago, Chile.
From April 2016 to July 2019, the primary laboratory changed to ALS Patagonia S.A. (“ALS”). The samples are sent to Mendoza, Argentina, for preparation and then the pulps are transported to Lima, Peru, for analysis. As of July 2019, the primary laboratory is Bureau Veritas in Lima, Peru, with sample preparation in Perito Moreno, Argentina. Bureau Veritas is accredited ISO17025:2005 for the analytical used for gold and silver.
Before 2013, samples were initially assayed for gold by fire assay with 50 g aliquot and atomic absorption spectroscopy (“AAS”) analysis. Samples over 10 g/t were re-analyzed by gravimetric finish methods. In 2013, the analysis changed to a 30 g aliquot, fire assay, AAS finish, and the limit to be reanalyzed by gravimetric finish method was changed from 10 g/t to 5 g/t gold.
For silver, before October 2012, samples were analyzed by multi-element multi-acid digestion with inductively coupled plasma atomic emission spectroscopy (“ICP-AES”). Samples with silver between 100 g/t and 1,000 g/t were re-analyzed by multi-acid digestion and AAS finish. If silver was greater than 1,000g/t, the sample
were re-analyzed by gravimetric method. From October 18, 2012 to July, 2013, samples were analyzed by aqua regia digestion with ICP-AES with samples over 100 g/t silver re-analyzed with gravimetric method. From August 2013 to the present, all samples are analyzed by multi-elements four acid digestion with ICP-AES finish. Samples with silver between 100 g/t and 1,000g/t are reanalyzed by multi-acid digestion and AAS finish, Fire Assay 30 g aliquot with gravimetric method for samples with silver above 1,000 g/t.
Starting in May 2018, samples collected during underground channel sampling are prepared and analysed at the internal mine site laboratory operated by Yamana. The Cerro Moro laboratory is not accredited. The results of the underground samples are used for short term forecasting and grade control as well as in the grade estimation process for resource models. Each sample is weighed, put into the furnace at 120°C +/-5°C, crushed to 85% less than # 10 mesh (passing -2millimetres), riffle split to obtain 200g +/-50g of material, and that 200 g of sample is pulverized at 90% through # 200 mesh. The analysis of gold for underground channel samples uses fire assay with a 30 g charge and an AAS finish. If the sample contains more than 10 g/t of gold, the sample is reanalysed with a gravimetric finish. Silver is determined by fire assays on a 30 g charge and a gravimetric finish.
Due to a backlog in ALS and Bureau Veritas, during May to June 2019, samples from the RC exploration drill holes were sent to Alex Stewart International Argentina (ASI) in Mendoza, Argentina for processing and analysis. From September 2019, due to continued backlog, infill drilling samples are sent for analysis to the internal Cerro Moro laboratory. Other than these samples sent to the internal laboratory, all primary laboratories used for drilling and exploration samples are independent of Yamana.
Samples are handled only by personnel authorized by Yamana. Samples from the mining operation are delivered directly to the Cerro Moro laboratory each day upon completion of underground sampling. All drill core from surface and underground drill holes is taken directly to a drill logging and sampling area within the secured and guarded mine property by authorized mine or exploration personnel. The mineralized core intervals are logged and sampled, samples are subsequently delivered to the primary laboratory.
Mineral Processing and Metallurgical Testing
See below under “Processing and Recovery Operations”.
Mineral Resource and Mineral Reserve Estimates
See “– Mineral Projects – Summary of Mineral Reserve and Mineral Resource Estimates”.
Cerro Moro Mineral Resources have been estimated in conformity with generally accepted CIM Estimation of Mineral Resources and Mineral Reserves Best Practice Guidelines (November 2019) and are reported in accordance with the Canadian Securities Administrators’ National Instrument 43-101, Standards of Disclosure for Mineral Projects (NI 43-101).
The Mineral Resources have been estimated using a geostatistical block modelling approach informed by gold and silver assay data collected from core drill holes, RC drill holes, trenches, and underground channel samples. The evaluation of the Mineral Resources involved the following procedures:
•Database compilation and verification;
•Creation of three-dimensional solids for faults and stratigraphic units
•Creation of three-dimensional veins/resource domains;
•Data conditioning (compositing and capping), statistical analysis, and variography;
•Selection of estimation strategy and estimation parameters;
•Block modelling, grade estimation, and validation;
•Classification and tabulation; and
•Preparation of the Mineral Resource statement.
Faults and stratigraphy contacts were identified and used to build the lithology model regardless of the gold and silver endowment. Breccia units, dikes, intrusions and overburden were modelled. Mineralized faults were created as volumes using the rock type codes logged. The final Mineral Resource domains were built as sub-domains based on the black-silica content and/or the occurrence of gold and silver mineralization within the fault.
Ordinary kriging estimation was used for 14 models corresponding to the 2020 and 2021 update. Correlograms were generated for individual veins, since correlograms are more stable in the presence of outliers than traditional semi-variograms. Experimental correlograms were calculated in the strike, dip, and pole directions of each vein. A total of 23 models have been estimated using inverse distance square (ID2, 2020-2021) or inverse
distance cube (ID3, 2017-2018-2021). Inverse distance cube was chosen to estimate Mineral Resources in new potential areas where limited information was available. Models created before 2020 included a process of “unfolding” to counteract the effect of gentle undulations and post-mineralization brittle faults affecting mineralization.
Underground Mineral Reserves were estimated using Maptek Vulcan software and open pit Mineral Reserves were estimated using Whittle software for pit optimization and subsequently Vulcan for pit design and evaluation. To account for gold and silver revenue, a NSR value was calculated for each block in the block models, and a cut-off value on this parameter was used for mineral reserve estimates.
The methodology used for converting Mineral Resources to underground Mineral Reserves is as follows:
•Verify geometries for the block model and resource wireframes.
•Confirm accurate block model depletion with excavated development and stope solids up to the effective reporting date.
•Create stope and ore drift shapes using Vulcan Stope Optimizer (“VSO”) using the cut-off values and design parameters applicable to the selected mining method.
•Refine the VSO output shapes, considering orebody geometry, mine layout, historical information, and geotechnical analysis. Drift selective mining units (“SMU’s”) are optimized considering a split blasting scenario; however, Mineral Reserve estimates are completed considering full face blasting. Additional waste tonnes are manually added to the drift SMUs.
•Exclude all drift and stope SMUs containing a majority portion of Inferred Mineral Resources.
•Design capital and auxiliary development, including ramps, ventilation, materials handling, access, and infrastructure.
•Complete an economic analysis of each stope shape and exclude all stope shapes that are not cash flow positive when considering associated development and infrastructure.
•Complete a geotechnical analysis of each zone and make adjustments to the design where required.
•SMUs that meet the previous criteria containing a majority portion of Measured or Indicated Mineral Resources are converted to Proven or Probable Mineral Reserves respectively.
The methodology used for converting Mineral Resources to open pit Mineral Reserves is as follows:
•Pit optimization is undertaken on each block model using open pit NSR cut-off values and 52.5-degree overall slope angles. Only Measured and Indicated Mineral Resources are considered in the pit optimization.
•Pit designs are then completed in Vulcan based on the output pit optimization shells using 5 metre bench heights and recommended geotechnical design parameters.
•Mining dilution and ore loss are applied through the creation of SMUs using VSO with a minimum mining width of 1.50 metres.
•Economic evaluations are conducted for each pit. If the evaluation is positive, SMUs contained in the pit volumes are reclassified to the majority resource category contained within each SMU. SMUs containing a majority portion of Measured or Indicated Mineral Resources are converted to Proven or Probable Mineral Reserves, respectively.
In 2021, Cerro Moro successfully replaced depletion of GEO Mineral Reserves and Mineral Resources, largely as a result of expansion of high grade veins at the main ore bodies of Zoe, Martina, and Naty, which remain open at depth. The significance of the result is that it establishes what the Company expects to be an ongoing trend of year-over-year Mineral Reserve and Mineral Resource growth, similar to the reserves replacement cycle established at the Company’s more mature operations, extending the mine life at a production rate of 150,000 to 165,000 GEO per year. Cerro Moro is a high-grade operation with an average Mineral Reserves grade of 13.6 g/t gold equivalent. New Mineral Reserves added in 2021 at a higher average gold to silver ratio and higher silver grade targets will be followed up with drilling in 2022. A high level of geological understanding incorporated into the resource models is resulting in excellent reconciliation and confidence in mine plans, as reflected in improved operational performance. Additionally, Cerro Moro has a significant inventory of lower-grade veins that are not fully reflected in the current Mineral Reserves and Mineral Resource statements, which could potentially be processed with an expansion of the processing plant of through a parallel heap leach operation. The Company has initiated an infill drilling program to expand and define the most promising lower grade targets.
Please also refer to “Description of the Business – Risks of the Business – Uncertainty in the Estimation of Mineral Reserves and Mineral Resources”.
Mining Operations - Mining Method
Cerro Moro consists of several open pit and underground mines which feed a single processing plant with a throughput capacity of approximately 1,150 tpd. production from mines located close to the Run of mine (“ROM”) pad is hauled directly from the mine. For mines located at greater distances, ore is hauled to a stockpile located close to the portal or pit and then hauled to the ROM pad in hauling campaigns.
Open pit operations are currently carried out by a contractor. The average production during 2021 was of approximately 400 tpd of ore moving also 10,400 tpd of waste. Production from the open pits has gradually reduced in recent years as Cerro Moro transitioned to increased production from the underground mines. There are typically two to four pits in operation at any one time. The open pit mining sequence consists of first pre-splitting both sides of the vein with holes spaced every 1 meter apart. Then, from the ramp access, waste polygons on the hangingwall side of the vein are mined to create a free face for the vein. Once the vein is fully exposed, the vein is blasted and mined separately to minimize dilution. Once the vein is completely extracted, the remaining waste polygons on the footwall are extracted.
Underground mining at Cerro Moro is carried out using longitudinal long-hole stoping methods. Two variations of long-hole stoping are employed; bench-and-fill, and uphole retreat. Both methods involve ore development at regular level intervals. Stopes are formed by drilling blast holes between levels. After blasting, the broken ore is extracted from the lower level using conventional and remotely operated load-haul-dumpers.
Bench-and-fill is a bottom-up method, in which mining takes place on top of and adjacent to previously mined and filled stope voids. Once the maximum allowed stope span is reached, and after completion of ore extraction from the blasted stope, stopes are filled with loose rockfill with selective use of cemented rock fill. Uphole retreat is a top-down method, where the stope voids are left open and rock pillars are left between stopes to provide ground support.
The LOM consists in an integrated operation from open pits and underground mines. The LOM indicates mining for a total period of five years, with lower production in the last year. Positive exploration results achieved throughout 2021 successfully replaced depletion of Mineral Reserves for the first time, as reflected in increased Mineral Reserves and Mineral Resources at year-end, turning the corner for the operation. Significantly, the expansion of higher-grade veins, both within the core mine at Zoe and Martina, and outside the core mine at Naty, extends the Cerro Moro mine life at the current gold equivalent feed grade and existing throughput rate of approximately 1,150 tonnes per day. Additional high-grade targets identified in 2021 provide a pipeline of opportunities for continued Mineral Reserves replacement going forward which supports the plant expansion opportunity. Lastly, at a higher level of throughput, the Company may be able to create a greater inventory of Mineral Resources, focused on a balance between high grade and more Mineral Resources, rather than grade alone.
Additionally, the mine has a significant inventory of lower-grade veins that are not fully reflected in the current Mineral Reserves and Mineral Resource statements, many of which are wider than the veins currently being mined. Drilling of these lower grade veins was not typically followed up with infill drilling in the past as the mineralization is below the current cut-off grade. Cerro Moro was developed as a high grade, low tonnage operation but, from the beginning, the Company has considered alternative processing options to allow for economic extraction of lower grade mineralization, including:
•a scalable plant, where the front-end of the plant anticipates higher 2,000 tpd tonnage, with the expectation of modest capital requirement to achieve this objective.
•heap leaching near surface, lower-grade material, to supplement other production.
The objective at Cerro Moro is to create a sustainable ten-years of production of at least 160,000 GEO per year, and up to 200,000 GEO per year. If the Company successfully develops both the plant expansion and heap leach projects, which represent significant upside opportunities, along with conversion of the exploration targets to mineral resources, Cerro Moro could produce at least 200,000 GEO per year.
Processing and Recovery Operations
The processing plant at Cerro Moro is currently designed for a throughput of 1,000 tpd or 365,000 tpy on an operating basis of 92 percent availability. The design metal recoveries are 95% for gold and 93% for silver.
The principle processing stages are: crushing, milling, flash flotation, conventional flotation, leaching by agitation, countercurrent decant system to wash the pulp (“CCD”), precipitation with metallic zinc (“Merrill-Crowe
process”), detoxification of the pulp to destroy the cyanide, refining, and tailings disposal. Ancillary processes are reagent preparation, water supply treated through a reverse osmosis plant, and reclaim water from the tailings dam.
The grinding circuit consists of a single-stage overflow ball mill operated in closed circuit with hydro-cyclones, and a flash flotation cell (on cyclone underflow) to produce a cyclone overflow product with a grind of 80% passing 75 μm. A portion of the mill discharge stream is treated in a gravity circuit for removal of free gold and electrum, with the concentrate going to the refinery for further concentrating and smelting and the tails going back to the cyclones. The gravity circuit consists of a single high-capacity continuous centrifugal concentrator and a concentrating table.
There is a bulk rougher flotation with a single stage of cleaning. Concentrate thickening of combined flash flotation and conventional cleaner concentrate and regrinding produce a concentrate leach feed with P80 of 30 μm. The re-ground product of the concentrated thickener is sent to an intensive leach tank to liberate the high-grade gold and silver. The scavenger tails are sent to a tails flotation thickener and the underflow is then sent to agitation tanks in a conventional leaching process.
Intensive cyanide leaching of concentrate is done in a single agitation leach tank. The underflow of the tailing flotation thickener is combined with the concentrate from the intensive leach and are agitated in conventional leach tanks (five tanks). The normal residence time is 48 hours. Solid and liquids are separated using a six-stage countercurrent decantation (CCD, six thickeners) circuit. Overall washing efficiency in the circuit is greater than 95% for gold. In addition, the overflow from CCD 1 is pumped to the Merrill-Crowe pregnant solution clarifier to remove remaining solids from the solution. The solution from the clarifier is treated using pressure-leaf clarifier filters to lower the solids content of the solution to less than 10 ppm. The pregnant clarified solution is treated in a deaeration tower to lower the dissolved oxygen content to less than 0.4 ppm prior to the addition of zinc. The Merrill-Crowe process (zinc precipitation) is used to precipitate the gold, silver, and mercury contained in the deaerated pregnant solution. The solution containing the precipitate is filtered in plate- and frame-filter presses.
The detoxification of cyanide in the final tailings uses exclusively hydrogen peroxide. Detoxified slurry is sent to a conventional TSF. Solution from the tailings pond is recycled for reuse in the process.
During 2021, Yamana advanced the plant expansion study with a trade-off of various comminution circuit configurations to optimize the expansion processing flow sheet. Similar to the approach that has proven successful at Jacobina, the Company is considering a low-risk, phased expansion for Cerro Moro with quick payback from the initial phase used to fund subsequent phases.
As such, the Company is considering using fine screens instead of cyclones for classification to improve the efficiency of the existing ball mill. Combined with a slightly coarser grind size, this initial phase is expected to increase throughput to at least 1,500 tpd, a 40% to 50% increase in capacity, without impacting gold and silver recoveries. The incremental capacity could be used for processing of lower grade mineralization, which is expected to increase annual gold and silver production and reduce unit processing and G&A operating costs. Preliminary analysis based on current operating data indicates that the existing crushing and flotation circuits are adequate for the higher throughput rate and reconfiguration of the leaching circuit could achieve the target throughput without requiring additional leach tanks. Upgrades to the concentrate thickener, clarifying filters, flocculant make-up system, and pumping would likely be required. The capital cost of this initial phase is estimated at a modest $15 million to $20 million dollars. Many of the upgrades in phase 1 expansion would be sufficient for a second expansion phase to increase plant throughput to approximately 2,200 tpd, double the existing capacity, further increasing production and reducing operating unit costs. The Company is currently evaluating two options for phase 2 expansion, the addition of a high pressure grinding rolls ("HPGR") unit before the existing ball mill or the addition of a regrind unit. An expansion of the flotation circuit would also be required. The selected option will depend on the results of testwork that is currently underway and expected to be completed by the end of the first quarter of 2022, after which cost estimates and economic evaluation will be completed. The Company will advance the selected phase 1 and phase 2 expansion options to a pre-feasibility study level, expected for completion in early 2023.
In parallel, a technical study on the potential heap leach project is underway following promising results from metallurgical testing conducted in 2021. A four-month cyanide column leach test program was conducted on eight samples with gold grades of 0.71 to 3.22 g/t. and at three different sizes of feed materials, -25 mm, -19 mm and -9.5 mm. The results indicate good potential for leaching of both oxidized near-surface vein material, zones with hypogene oxides (hematite) and some low sulphide gold-bearing veins, with extractions from column leaching varying from 32.5% to 96.9%, averaging 68.6%. Gold recoveries at the Domos La Union and Michelle zones were particularly impressive, averaging 85.6% from the four samples. As a result, exploration is focusing on these zones, with an objective of defining a heap leachable inventory of 5 million tonnes. Conceptual engineering for a 5,000 tpd
heap leach operation commenced in the fourth quarter. A conventional heap leach configuration is envisaged with three stages of crushing to a crushed size P80 of 12.5 mm, followed by agglomeration and retreat conveyor stacking in a multiple lift, single use pad with a design capacity of approximately 14 million tonnes. The leach pad, solution storage ponds, and Merrill-Crowe plant are conceptually planned to be located approximately 2 kilometres east of the current tailings storage facility. Average feed grade is estimated at approximately 1.0 to 1.4 g/t of gold, adding 45,000 to 65,000 ounces of gold production per year in addition to gold and silver production from the existing processing plant. Conceptual capital and operating cost estimation is expected to be completed in the second quarter, and an initial mineral inventory estimate, based on results from 2021 drilling, is planned for mid-2022.
Infrastructure, Permitting and Compliance Activities
The major facilities at Cerro Moro include a ball mill with conventional and flash flotation, intensive and conventional leach with Merrill-Crowe process and precipitate filters, a TSF, an osmosis plant, a six-unit diesel power station operating with diesel generator sets, office buildings, and mine infrastructure.
The TSF embankment is a downstream-configured design and Phase 2 is currently in operation. Land for the TSF was cleared by removing the overburden and stockpiling it next to the dam; this will be used for remediation at the end of the dam’s useful life. The total TSF footprint of 564,000 m2 and features a 1.5 mm thick linear low-density polyethylene membrane liner.
The Phase 2 dam construction was completed in 2022 to a designed dam elevation of 63 metres. The tailings dam will have a final capacity of 2.2 million m3 of tailings, sufficient for storage of the present Cerro Moro Mineral Reserves. A conceptual trade-off study will be initiated in 2022 to assess opportunities for increasing the current tailings storage capacity considering Phase 1 and Phase mine expansions.
Tailings are detoxified before going through the thickener to achieve a 55%-thickened-solids prior to disposal into the TSF. There is no discharge from Cerro Moro’s TSF. To date, there have been no external audits to review the existing system. All construction was carried out following the design parameters, and the responsibility for quality control of the applied engineering was assumed by Knight Piesold as the external engineering consultant.
Power at Cerro Moro is provided by six diesel generator sets with an installed capacity of approximately 1,650 to 2,000 kW of electricity. As Cerro Moro’s mineral inventory increases, the Company will evaluate its options for alternative sources of power, which include a connection to the grid and wind power. Both options are expected to improve costs and further reduce GHG emissions, thereby accelerating the achievement of the Company’s carbon emissions reduction goal. This area of southern Argentina is one of the most prospective areas in the world for wind-based energy generation; the Company’s third-party process to evaluate wind power indicates there should be a sufficient and sustainable supply of power. The results of the alternative power analysis will be considered in the plant expansion pre-feasibility and heap leach studies to explore synergies between the projects. Based on preliminary analysis, the Company believes that the conversion of approximately twenty-five per cent of Cerro Moro's power sources to wind would significantly contribute to the carbon reduction goals of the Company to achieve net zero emissions.
Permits required by various government agencies covering the operation have been obtained. The most important licence for the project is the Environmental Impact Statement (“EIS”) which was obtained from the approval of the IIA, and is updated every two years. Currently, the third update of the EIS has been submitted and is under evaluation by the Ministry of Mining. The EIS has undergone two rounds of observations which were answered in a timely manner. This permit is authorized at the national level before the Ministry of Environment and Control of Sustainable Development.
All water in the reservoir, which supplies the camp as well as the process plant, comes from groundwater wells and water collected in the TSF area and nearby catchment areas. Water treatment is completed to the water used for human consumption and some sectors of the process. The water goes through a reverse osmosis treatment and ultrafiltration process. The site is certified ISO 14001 and is in the process of certification to International Cyanide Code. Acid rock drainage (“ARD”) has not been an issue to date at Cerro Moro. Some studies have demonstrated a potential for future ARD generation and the site continues to monitor waste dumps for runoff and infiltration. In addition, the site monitors the underground mine water quality.
A detailed closure plan for Cerro Moro was submitted to the provincial government in 2021.
Despite the relatively long distance between the mine and the nearest community (~100 kilometres), Cerro Moro maintains an active community relations program. Focusing on strong engagement with the local community,
Cerro Moro invests in a wide range of cultural, social, and economic programs. For the past year, Cerro Moro has been quantitatively measuring its SLO with the support of the SLO Index, a tool developed by the Commonwealth Scientific and Industrial Research Organization of Australia (CSIRO). The SLO Index provides direct performance feedback on the quality and quantity of engagement, perception of impacts versus benefits, and an indication of how communities perceive Yamana’s management of jobs, local procurement, operational impacts, and environmental concerns.
Exploration, Development and Production
The Company expects production at Cerro Moro will maintain a sustainable level of 160,000 GEO for the next ten-years. If the Company successfully developed both the plant expansion and heap leach projects, which represent significant upside opportunities, along with conversion of the exploration targets to mineral resources, Cerro Moro could produce at least 200,000 GEO per year. This upside would be beyond the current ten-year outlook, which is expected to be sustainable from Mineral Reserves mine life, ongoing exploration successes and Mineral Reserve replacement.
Minera Florida Mine
Property Description, Location and Access
The Minera Florida Mine is an underground gold-silver-zinc mine located in the Metropolitan Region of Chile, approximately 75 km in a straight line southwest of the capital city of Santiago. The mine site is situated in the mountains of the Chilean Coastal Range, between the Pacific Coast and the Central Valley, approximately 8 and 1.5 km by road from the nearby towns of Alhué and El Asiento, respectively. The mine operates on a year-round basis.
Yamana holds a 100% indirect interest in the property through its wholly-owned subsidiary, Minera Florida Ltda. The property consists of 200 individual mining exploitation claims covering 18,598 ha including the Minera Florida core mine area and the area used for mineral processing and tailings management. Exploitation claims do not expire as long as canons are paid annually to maintain the active claim status. Minera Florida has been in continuous operation since 1986 and the existing surface rights are deemed sufficient for mining and processing operations.
Minera Florida has sufficient water, power, and labour supplies and sufficient areas for tailings and waste disposal. The access to the property is by paved road. The total driving distance from Santiago is approximately 150 kilometres. The mine sites are located in an area of narrow valleys and high hills at elevations ranging between 500 masl and 1,200 masl. Electric power is available from the Chilean grid and mining services and suppliers are available locally and in the region.
Geological Setting, Mineralization and Deposit Types
The geology of the property area is characterized by a fault-bounded block of pyroclastic and volcanic rocks of the Lower Cretaceous Las Chilcas Formation that is in contact with various coeval or younger Cretaceous intrusions. Two important N-S faults define this block: the Agua Fria Fault to the west and the El Roble Fault to the east. Mineralization at Minera Florida is hosted by the Lower Cretaceous (Aptian-Albian) Las Chilcas Formation, here represented by an approximately 1000 m thick sequence of continental volcanic rocks and minor sedimentary rocks. This sequence is dominated by rhyolitic pyroclastic and volcaniclastic units that include welded crystal-lithic and lithic tuff units, coarse volcanic breccias, and highly welded and partly rheomorphic pumiceous ignimbrites. The intrusive rocks comprise mainly granodiorites and monzodiorites.
The gold-silver-zinc mineralization at Minera Florida presents characteristics common to several deposit models but they do not fit any unique model. The complex structural setting of the Minera Florida property is key to understanding the mineral deposit. The southern and central parts of the core mine area are characterized by a series of WNW-trending mineralized structural corridors (e.g. Las Pataguas, Pedro Valencia, and Peumo), whereas further north their orientation changes to ENE-trending (e.g. Tribuna). North-trending faults prominently occur in the mine area with some being important hosts to mineralization (e.g. Maqui). Mineralized zones develop along primary and secondary structures as hydrothermal breccias and zones of stockwork and veinlets. The mineralization is always multi-episodic with re-brecciation of previous pulses and multiple cross-cutting relationships of veinlets; it can also be reworked in cataclastic zones. The mineralization is multi-episodic and polymetallic. It consists of pyrite-sphalerite-galena-chalcopyrite; it contains precious metals in the form of native gold and silver, electrum, silver sulphosalts, and acanthite and is associated with quartz-epidote-chlorite-amphibole-calcic garnet-magnetite-(rhodonite). Gangue minerals such as amphibole, rhodonite, scapolite, albite, and tourmaline are important vectors
to mineralization. Mineralized zones have highly variable widths of less than one metre to twenty metres and have horizontal and vertical continuities of up to 300 m. Fluid flow from the hydrothermal system produced strong hydrothermal alteration in the rocks located at high stratigraphic levels above the mineralization. The multiple zones comprising the Minera Florida Mine are hosted in a variety of host rock and span significant vertical and lateral distances as well as time. Variations in alteration and ore mineralogy can be expected.
Exploration and Drilling
Systematic sampling of the gold bearing structures has been ongoing since 1986 and includes diamond drillholes and underground channel sampling. Drill core samples are used for target generation and estimation of Mineral Resources and Mineral Reserves. Channel samples are used for grade control monitoring in development drifts as well as in estimation of Mineral Resources. The sampling protocols for drilling and underground channel sampling are documented in standard operating procedures. For exploration drill core, sample length is determined by the structures logged as well as the presence or absence of quartz veining. Sample lengths in mineralized zones range from 0.2 m to 1.0 m, while sample lengths in unmineralized areas can be up to 3.0 m. For infill drill core, the minimum and maximum sample lengths in mineralized zones are 0.2 and 0.5 m, respectively. For underground channel sampling, samples are taken horizontally across the face with the lengths determined by the mapped geological contacts, to a minimum sample length of 0.2 m and a maximum of 1.0 m.
Sampling, Analysis and Data Verification
Samples from underground channels are assayed at the in-house Minera Florida mine laboratory. This laboratory is owned and operated by Yamana and is certified to ISO/IEC 17025 standards. The primary external laboratories for exploration and infill drilling samples are Bureau Veritas in Santiago, Chile from 2011 to April 2016, and ALS Patagonia S.A., also in Santiago, Chile, from April 1, 2016, to December 31, 2021. Bureau Veritas and ALS Patagonia are independent of Yamana and accredited to ISO / IEC 17025 standards.
Yamana employs a comprehensive QA/QC protocol for monitoring of precision, accuracy, contamination and bias for Au, Ag and Zn. This includes inserting CRMs for precision control, duplicate samples (duplicates of preparation, analysis and field duplicates), control of contamination by geochemical fine blanks and sterile (coarse blanks) material, and sending pulp samples to a secondary umpire laboratory for check assaying.
Mineral Processing and Metallurgical Testing
See below under “Processing and Recovery Operations”.
Mineral Resource and Mineral Reserve Estimates
See “– Mineral Projects – Summary of Mineral Reserve and Mineral Resource Estimates”.
Minera Florida Mineral Resources have been estimated in conformity with generally accepted CIM Estimation of Mineral Resources and Mineral Reserves Best Practice Guidelines (November 2019) and are reported in accordance with the Canadian Securities Administrators’ National Instrument 43-101, Standards of Disclosure for Mineral Projects (NI 43-101).
The Mineral Resources have been estimated using a geostatistical block modelling approach informed by gold, silver, and zinc assay data collected from core drill holes and underground channel samples. The evaluation of the Mineral Resources involved the following procedures:
•Database compilation and verification
•Creation of three-dimensional solids for the different zones
•Data conditioning (compositing and capping), statistical analysis, and variography
•Selection of estimation strategy and estimation parameters
•Block modelling, grade estimation, and validation
•Classification and tabulation
•Preparation of the Mineral Resource statement
Interpreted geological wireframes were constructed based on geology sections, assay results, lithological information and structural data. Assays were composited to total width, then capped for anomalously high grades. Gold, silver and zinc grades were interpolated into a parent block size of 5 × 5 × 5 m. Estimated grades were interpolated into blocks using Inverse Distance (ID2) in secondary veins and ordinary kriging in the principal veins.
Block estimates were validated using industry standard validation techniques. Classification of blocks was completed following distance-based criteria.
The methodology used for converting Mineral Resources to underground Mineral Reserves is as follows:
•Drift and stope SMUs are designed using Vulcan Stope Optimiser.
•The metal prices, processing recoveries, and operating used to determine an economic score for each SMU
•SMUs with positive scores are analyzed for inclusion into the Mineral Reserve inventory. This is done by analyzing development costs, considering the capital and auxiliary development required to enable mining of the designed SMUs, such as the cost of ramps, ventilation, materials handling, and development of access and infrastructure.
•Before including SMUs with positive scores in the Mineral Reserves inventory, geomechanical considerations are revised, especially in areas with known poor ground conditions or where thin pillars separate the new stopes from previously mined areas, which may or may not be filled with rockfill. Design is adjusted when required and appropriate mining recoveries applied.
•SMUs containing a majority portion of Measured or Indicated Mineral Resources blocks are converted to Proven or Probable Mineral Reserves, respectively.
Mining Operations - Mining Method
The Minera Florida operation consists of several underground mines that are accessed via six adits. Ore is sent to a mill where it is processed at an approximate rate of 2,450 tpd. Mining at Minera Florida is conducted using various underground variations on SLS, either traditional SLS or longitudinal retreat. The different mining zones are accessed via ramps that provide flexibility and access to the ore at different elevations. Traditional SLS is used for veins thicker than 3.5 m. This method considers an upper level for production drilling, which is carried out in a descending pattern for benching or in an ascending one when undercutting the back. For veins thinner than 3.5 m, a longitudinal retreat method is applied. This method considers the development of a single lower gallery which is used for uphole drilling and subsequent (after the ore is blasted) ore extraction using remotely operated equipment to access the stope. In both cases, pillars are left in place to control dilution and to provide ground support. Where required, stopes that have been completely mined can be backfilled with development waste to reduce waste haulage distances and save on waste dump capacity.
Underground operations are carried out by Minera Florida Ltda with the support of contractors that are responsible for hauling ore from the mine to the processing plant, transportation of materials and personnel. Underground mining operations are mechanized, utilizing: articulated haul trucks; electronic hydraulic development and production jumbos; load-haul dumpers; and a number of ground support and service equipment.
Processing and Recovery Operations
The Minera Florida processing plant has a nominal production capacity of approximately 900 ktpa or 75,000 tpm on an operating basis of 95% availability, for stockpiled and mined ore. The processing plant at Minera Florida comprises two main precious metal extraction circuits which were joined in 2017 to form a unified plant for improved performance and recovery: the concentrate leaching plant, named PLC (planta de lixiviación concentrado), and the tailings treatment plant, named PTR (planta de tratamiento de relaves). The main processes are: reception and classification of ore, crushing, grinding, gold bulk flotation, concentrate leaching plant (PLC), electrowinning of rich solution, doré metal melting, Zinc-Lead flotation plant, tailings treatment plant (PTR), and tailings thickening and disposal.
Infrastructure, Permitting and Compliance Activities
The major facilities at Minera Florida are the processing plant and refinery, the TSF, as well as all the required infrastructure associated to an underground mining complex such as access, power, ventilation compressed air ventilation, industrial water supply, and dewatering infrastructure.
There are three TSFs located at Minera Florida. Tailings produced at Minera Florida’s processing plant are stored at the Pastas Tailings Storage Facility (Pastas TSF). The other two TSFs located at site are no longer in operation, including the Adosado TSF and the Unificado TSF. The Pastas TSF is located approximately 1 km to the southwest of the mineral processing plant and covers an area of 87 ha. The TSF area is confined by an L-shaped embankment dam constructed using compacted borrow fill material and non-acid-generating waste rock. The latest TSF designs propose a 21 metre-high dam with an ultimate storage capacity for 17.4 Mt of tailings, assuming an average dry density of 1.53 t/m3 for the tailings deposited the TSF reservoir. The current dam is 16 m high with upstream and downstream slopes of 1.8H:1V.
Minera Florida’s Environmental Management Systems are ISO 14001-2015 certified. An external audit was carried out in September 2020 and the mine was certified for 3 years. Current Minera Florida environmental approvals consist of 585 commitments issued in 13 Environmental Qualification Resolutions (RCAs). At the present, the mine has an open investigation process with the environmental authority concerning the mine closure commitments. The site expects this process to be closed in 2022 in a satisfactory manner as closure actions are successfully executed as required by the regulators. Minera Florida holds additional permits granted by various other government agencies, including the General Water Directorate (DGA), the National Geology and Mining Service (SERNAGEOMIN), the Health Ministry (SEREMI), and the National Forestry Corporation (CONAF).
Exploration, Development and Production
In 2021, production at the Minera Florida Mine totaled 84,768 ounces of gold, down from 89,843 ounces of gold in 2020. Production was partially affected in December by a strike which ended in January when the Company entered into a long term collective bargaining agreement with its unions. During 2021, Minera Florida has seen improved operational efficiency and reduced haulage distances as a result of re-establishing ore passes. Widening of the final ore pass at Fantasma/Polvorin was completed during October, which will further reduce haulage distances and possibly allow for optimizing the hauling fleet. Internalization of mining activities, ongoing optimization of the haulage infrastructure, and increasing disposal storage of development waste into underground voids will further improve mine productivity going forward. A review of the processing plant in the first quarter identified several opportunities to increase recovery. Management is prioritizing these opportunities, focusing on the initiatives that can be implemented quickly with minimal investment.
The plant de-bottlenecking study is advancing on schedule, with the objective to increase throughput from 74,500 to 100,000 tonnes per month, thereby increasing annual gold production to approximately 120,000 ounces. The Company submitted the ESIA for the expansion during the fourth quarter, with the timeline expected to be approximately 18 months for approval, with another 12 months to receive sectoral permits. With the expected permitting timelines, the mine could begin operating at a planned 100,000 tonnes per month level in 2025. Preliminary studies indicate that the capacity of the processing plant can be increased to approximately 90,000 tonnes per month with incremental adjustments. An upgrade of the crushing circuit would be required to achieve 100,000 tonnes per month.
While COVID-19 related restrictions affected some field activities in 2021, exploration drilling was achieved as planned. Exploration activity in 2021 at Minera Florida included property-scale surface exploration using trenching, mapping soil and rock sampling, as well as exploration and infill drilling targeting near-mine opportunities. Exploration drilling had positive results translating to new production areas and resource growth at the mine, most notably in the Las Pataguas and Don Leopoldo sectors. Exploration drilling in 2021 totalled 42,890 metres of drilling. Infill drilling was completed in 118 drill holes totalling 18,996 metres to convert Inferred Mineral Resources, largely in the Patagua, Don Leopoldo, Fantasma, Maqui, Central Norte and Satelite zones. Exploration drilling totalling 23,894 metres in 44 drill holes was completed on many targets including Don Leopoldo, Maqui, Flor, Maqui Mila, Quemazon and VCN.
Development Projects
Wasamac
The wholly-owned Wasamac underground gold project is located 15 kilometres west of Rouyn-Noranda in the Abitibi-Témiscamingue Region of Quebec adjacent to the Trans-Canada highway and Ontario Northland rail line, and just 100 kilometres west of Yamana’s 50%-owned Canadian Malartic mine. Yamana acquired the project in January 2021, further expanding its footprint in Quebec and significantly enhancing the Company’s long-term growth prospects.
On July 19, 2021, the Company announced the results of several studies on Wasamac, intended to corroborate diligence reviews conducted by the Company in connection with its purchase of Wasamac in early 2021 and update a historical feasibility study. These studies updated the baseline technical and financial aspects of Wasamac that now underpin the decision to advance the project to production. The results from all studies were consistent with the Company’s conclusions in its diligence reviews relating to the purchase of Wasamac and, in some cases, are better than the conclusions from those reviews.
Wasamac is designed as a modern underground operation with a small footprint and almost all surface infrastructure located on the north of Route 117 highway, away from the neighbouring community. Use of an underground conveyor, electric mining equipment and high-efficiency ventilation fans to minimize energy use and carbon emissions, with further electrification planned as new technology becomes commercially available between
now and project execution. Ore will be processed through a new processing plant at a planned average throughput of 7,000 tpd and tailings will be deposited underground as paste fill and in a filtered dry-stack tailings storage facility.
Following a rapid production ramp-up in first year, Wasamac is expected to sustain gold production of approximately 200,000 ounces per year for at least the following four years. Including the ramp-up phase, average annual production for the first five years of operation is expected to be 184,000 ounces.
Yamana expects to receive all permits and certificates of authorization required for project construction by the third quarter of 2024. Construction time to processing plant commissioning is estimated at two and a half years, with the underground crusher and conveyor system scheduled for commissioning six months later. First gold production is scheduled for the fourth quarter of 2026, with commercial production planned for the fourth quarter of 2027; however, the Company has already identified potential opportunities to accelerate the production ramp-up and decrease the processing plant construction period, which would improve timing significantly over the feasibility study's base case production profile.
As previously disclosed, the initial capital cost is expected to be relatively modest for a 7,000 tpd underground operation, at approximately $416 million. The Company undertook extensive due diligence relating to the acquisition of Wasamac and identified several opportunities for optimizations and improvements; the updated studies confirmed the opportunities. The Company plans to fully fund development with available cash and cash flows. The Company anticipates building significant cash balances over the upcoming years, which will be allocated to the project in time for its formal development, once the required permits are received.
Total LOM sustaining capital is estimated at $318 million primarily for underground mine development and mobile equipment. LOM cash costs1 and AISC1 of $640 per ounce and $828 per ounce, respectively, remaining well below the Company’s average, reflecting the application of more conservative cost assumptions to de-risk the project and align with benchmark costs from Yamana’s other operations.
Robust project economics with an after-tax IRR of 16.1% at $1,550 per ounce of gold and an after-tax IRR of 24% at $1,850 per ounce of gold, based on Mineral Reserves and excluding future upside potential from encouraging exploration prospects. There is potential for an increase in NPV and after-tax IRR with an increase in mineral inventory and increase in mine life. An increase in mine from the presently contemplated 10 years to 15 years doubles the NPV of the project.
Yamana’s average annual gold production in Quebec, including production from Wasamac and the Odyssey underground at Canadian Malartic, has the potential to increase to approximately 500,000 ounces by 2028, and continue at this level through at least 2041.
Exploration activities continued in 2021, with a focus on infill drilling on the Wasamac Mineral Resource, with 19,466 metres in 19 drill holes completed. Total infill drilling completed in 2021 was 21,649 metres in 31 drill holes. Three drill rigs are currently operating to advance the infill drilling program, and a fourth rig is planned to be added in the first quarter of 2022. Drilling completed in the fourth quarter also included 2,293 metres of geotechnical drilling in 28 drill holes in the ramp area, bringing total geotechnical drilling completed in 2021 to 6,463 metres in 36 drill holes. No additional exploration drilling was completed in the fourth quarter, as pending results are forthcoming. Exploration drilling completed in 2021 totaled 7,291 metres in 22 holes, divided between the West Wasa Shear offset, Wildcat, Wildcat South and West 117 Wasa targets.
Exploration drilling results received during the fourth quarter included a high-grade intercept over underground mining widths at the newly defined Wildcat South target, located approximately 300 metres south of Wildcat. Wildcat South is a magnetic anomaly generated from a recently completed, property wide high-resolution (25 metre) helicopter-borne magnetic survey covering 2,992 line-kilometres. As previously reported, drill hole WS-21-524 intercepted two new mineralized zones, including an upper mineralized interval that returned 7.31 g/t of gold over an estimated true width of 3.37 metres at a downhole depth of 402.93 metres. This high-grade zone was followed further down hole by two mineralized intervals within a 30-metre-wide chlorite-sericite-pyrite altered shear zone returning assays of 2.3 g/t of gold over a core length of 0.60 metres and 1.3 g/t of gold over a core length of 0.30 metres. Results from Wildcat South will be integrated into exploration models and followed up as exploration drilling is restarted in early 2022. Drilling completed at West 117 Wasa intersected mostly narrow, rhyolite-hosted shear zones. Assay results are pending for these drill holes. Additional results from exploration drilling are expected in the first quarter 2022.
1 A cautionary note regarding non-GAAP financial performance measures can be found in the Non-GAAP Financial Performance Measures section of this AIF
Additional ongoing exploration work completed during the fourth quarter of 2021 included integration of the merged high-resolution magnetic survey data over the Wasamac and Francoeur properties with project wide data compilation and targeting. A two-year schedule and long-term exploration strategy for the combined properties is being developed. Positions of senior project geologist, project geologist and surface exploration geologist have been filled. Additional, ongoing work included continued sampling of select, previously unassayed, historic drill hole intervals hosting stockwork style mineralization, to assess for their potential to contribute to the Mineral Resource base.
The Wasamac property was also expanded with the acquisition in June 2021 of the adjoining Francoeur, Arntfield and Lac Fortune properties, located to the west and along strike of the Wasamac property, as well as additional claims in the Beauchastel township to the east of Wasamac, from Globex. Project consolidation and integration of exploration data from Wasamac and the acquired properties continued during the fourth quarter. The acquisition of the Globex claims will significantly add to the exploration upside of the Wasamac project, and it is consistent with Yamana’s strategy to expand its presence in the Abitibi-Témiscamingue Region of Quebec. Historical drilling, previous production from the Francoeur and Arntfield properties, both former operating mines, and recent trenching and exploration work by Globex has defined a six-kilometre western continuation of the Wasa shear - located immediately north of the prolific Cadillac Break - with mineralization similar to that at Wasamac. Exploration drilling is expected to begin during the first quarter of 2022, following completion of data compilation and integration and target definition, with the objective of adding Mineral Resources that could extend mine life or enhance production scenarios at the proposed Wasamac mine.
MARA Project
On December 17, 2020, the Company completed the integration with Glencore and Newmont and a new joint venture, the MARA Joint Venture, was formed to manage, develop and operate the project. Under the integration, Yamana, the former 100% holder of Agua Rica and the former partners of Alumbrera have created the MARA Joint Venture pursuant to which Yamana holds a controlling ownership interest in the MARA Project at 56.25%. Glencore holds a 25.00% interest and Newmont holds an 18.75% interest in the MARA Project. Yamana has been appointed manager of the MARA Joint Venture and will continue to lead the engagement with local, provincial, and national stakeholders, and completion of the feasibility study and Environmental and Social Impact Assessment (“ESIA”) for the MARA Project. Among other governance committees, a MARA Joint Venture Technical Committee was formalized, comprised of representatives of the three shareholder companies, to provide oversight and guidance to the advancement of the feasibility study. See “General Development of the Business – History – Agreement for Integration of Agua Rica and Alumbrera”.
The integration creates significant synergies by combining existing substantive infrastructure which was formerly used to process ore from the Alumbrera mine during its mine life, including processing facilities, a fully permitted TSF, pipeline, logistical installations, ancillary buildings, and other infrastructure, with the future open pit Agua Rica mine. The result is a de-risked project with a smaller environmental footprint and improved efficiencies, creating one of the lowest capital intensity projects in the world as measured by pound of copper produced and in-situ copper mineral reserves, and creating significant benefits for the host communities, the province of Catamarca and Argentina.
The MARA Project, has Mineral Reserves and Mineral Resources in the Agua Rica and the Alumbrera orebodies. Agua Rica is a large-scale copper, gold, silver and molybdenum deposit and it 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 259.9 million 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 742.9 million tonnes represent significant upside potential to further define an increase Mineral Reserves and life of mine. The MARA Project also has Mineral Resources in the Alumbrera deposit which consists of 125.2 million tonnes of Measured and Indicated Mineral Resources containing more than 800 million pounds of copper and 1.2 million ounces of gold on a 100% basis.
On July 19, 2019, the Company announced the positive results of a pre-feasibility study (A) ("PFS(A)"), underscoring the MARA Project as being long life and low-cost 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 MARA Joint Venture Technical Committee advanced optimization studies in late 2019 and early 2020, the results of which were compiled as pre-feasibility study (B) ("PFS(B)"), and is now advancing a full feasibility study on the MARA Project, with updated Mineral Reserves, production and project cost estimates
The pre-feasibility studies for the MARA Project consider the Agua Rica deposit will be 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 42 million tonnes per year and average life of mine strip ratio of 1.66.
Ore extracted from the Agua Rica 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 will extend 35 kilometres to the Alumbrera processing 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 at the Alumbrera plant. The copper and by-products concentrates will be transported by the existing pipeline to Tucuman and then by rail 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 are being studied as part of the current design phase.
The previously completed studies provide the framework for the preparation and submission of a new ESIA to the authorities of the Catamarca Province and for the continued engagement with local stakeholders and communities. The shareholders of the MARA Joint Venture began the ESIA process in 2019, given the level of significant detail in the PFS(A).
The PFS(B) highlights include:
•Annual ore feed increased to 42 million tonnes per year.
•Annual production for the first 10 full years increased to 556 million pounds of copper equivalent(i) production. 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.
•Cash costs2 of $1.32 per pound and AISC2 of $1.44 per pound for the first 10 years of production.
•Initial capital of $2.78 billion. Initial capital reduced to $2.39 billion if first year of owner mine fleet purchases are reclassified as sustaining capital, as was assumed for PFS(A). Total LOM capital spending the same under both PFS(A) and PFS(B).
•NPV of $1.906 billion and an increased IRR of 21.2% 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. PFS(B) reflects the inclusion of a progressive Argentina export tax with a long-term assumption of 4.3%.
Work during 2021 focused on advancing the feasibility study engineering, mine design and planning, metallurgical and geotechnical drilling campaigns and field work at site. MARA has also been advancing baseline social and environmental studies, as well as permitting and working with local stakeholders. During 2021, field work progressed well with the ongoing drilling campaign completing more than 50% of the drill holes planned, totaling 6,190 m. All the geometallurgical and geotechnical drill holes in the pit area have been completed, as well as extensive field surveys and technical assessments from different engineering disciplines. Preliminary results are positive and aligned with the expected parameters, confirming grade distribution on existing models. The field work plan continues, with the drilling campaign now covering the Agua Rica infrastructure, and is expected to be completed by mid-2022.
The Company is also planning to perform deep drill holes in 2022 to check the extension of high-grade chalcopyrite mineralization that could potentially unlock a pit expansion of Agua Rica, as well as to test for deep extensions of mineralization in the hypogene area of the porphyry, given the deposit is open at depth and relatively unexplored beyond the supergene zone. The metallurgical field drilling program has been completed and all metallurgical drill core samples have been shipped for metallurgical test work in Canada. Assaying of all samples has been completed with the metallurgical test program now underway. The initial test work results received are well aligned with previous results and expectations. The current bench-scale work will be followed by pilot plant investigations that will also generate samples of final concentrate and process plant tailings required for third party testing and equipment sizing by the various major equipment vendors. The program is planned to be completed in the second quarter of 2022.
2 A cautionary note regarding non-GAAP financial performance measures can be found in the Non-GAAP Financial Performance Measures section of this AIF
The most recent technical studies indicate that the processing facility at Alumbrera is capable of processing up to 44.0 million tonnes per year, with minor additional capital expenditures, which represents a significant upside to the pre-feasibility study results. Further tests and studies are being advanced for the feasibility study stage to confirm and optimize these results. Mine engineering work completed to date includes mine design and mine sequencing optimizations, and an updated preliminary production plan at the higher throughput rate. Efforts on the mining area during 2022 will be focused on updates of the resource model with the new field information and subsequent updates to the mine plan, as well as to continue advancing the engineering of the mine infrastructure.
Project engineering work has advanced on many fronts to a full feasibility study-level of definition. These include the mining area interface, primary crushing and overland conveying system to the existing Alumbrera plant. Mechanical layouts and process and instrumentation diagrams have been completed and detailed earthworks, foundation and structural steel designs are underway. Supplemental geotechnical drilling for the ore transportation tunnel access started recently and the detailed tunnel design will be advanced upon availability of updated field information.
Parallel to the exploration program, MARA is conducting field campaigns to complement the ESIA baseline data. Preliminary results and advancement of the project are being shared with the Intergovernmental Commission of Catamarca, prior to filing the full ESIA. The Company plans to complete the ESIA for the MARA Project in the second half of 2022.
The estimated remaining expenses for the Company to advance the project through the feasibility study and ESIA are approximately $13.0 million (Yamana's 56.25% interest), representing a manageable and modest investment in relation to the value creation of advancing the MARA Project to the next phases of development.
The MARA Project represents both a significant strategic value opportunity and a solid development and growth project, which the Company intends to continue to advance through the development and permitting processes via Yamana’s controlling interest, while considering strategic alternatives that could unlock significant value along the way. The project design minimizes the environmental footprint of the project, incorporating the input of local stakeholders. The MARA Project is planned to be a multi-decade, low cost copper gold operation with annual production in the first ten years of 556 million pounds of copper equivalent and a life of mine annual production of 469 million pounds of copper equivalent on a 100% basis. The MARA Project will be among the top 25 copper producers in the world when in production, and will be one of the lowest capital intensity projects globally.
During the last year, several proposals were presented to the Company for its interest in the MARA Project and, after consideration, the board determined that any strategic initiatives will be considered closer to the completion of the feasibility study and application for permitting later this year as the certainty of the project from these events is expected to create more value for the project.
Suyai Project
The Suyai Project is a near development-stage gold project comprising 36,702.30 hectares of land located in the Cordon de Esquel, Chubut Province, in southern Argentina. The various properties comprising the Suyai Project are classified as either “permits”, “claims” or “mines” and are either owned outright by Suyai del Sur S.A. (“Suyai del Sur”) or through option contracts between Suyai del Sur and the direct owners.
On April 28, 2020, the Company announced it entered into a definitive option agreement pursuant to which it granted CAM, a privately held portfolio management and capital markets company based in Argentina, owned by Messrs. Eduardo Elsztain and Saul Zang, the right to acquire up to a maximum 40% interest in a joint venture formed to hold the Suyai Project. CAM's portfolio includes the largest real estate company in the country, NASDAQ-listed international agricultural companies, along with banking and mining investments. CAM has successfully led the development of significant construction projects across the country.
An initial amount of $2.0 million was received by the Company to secure the option. CAM will assume responsibility for all ESG matters, including leading the permitting efforts aimed to advance the Suyai Project through its different stages of development. As noted, CAM has the right to earn a maximum 40% interest in the resulting joint venture which may be formed to hold the Suyai Project by fulfilling certain obligations and achieving certain milestones, mostly relating to ESG matters, and by paying $31.6 million in various installments in addition to their proportionate expenses, on or before December 31, 2024. The Company believes there is considerable value, far in excess of cash value, in fulfilling the obligations and achieving the milestones relating to ESG matters which would advance the Suyai Project. Through certain of its holding companies, Yamana would hold the remaining 60% of the joint venture.
In the event the project receives approval to proceed, Yamana would oversee its development, applying best industry mining and HSSD/ESG practices and its experience in project development and operations in southern Argentina. Development of the Suyai Project would occur under the oversight of a board of directors of the holding company that owns the Suyai Project with CAM nominating two out of five directors. Yamana would nominate the other directors. The joint venture would entitle each party to its proportion of gold production from the Suyai Project.
The Company previously completed studies that in addition to redesigning the Suyai Project as a small scale high-grade underground project, evaluated different options for ore processing, which provided favourable project economics.
The preferred option calls for the construction of a processing facility for on-site production of gold and silver contained in a high-grade flotation concentrate, which would be transported by land and by sea to one or more gold smelters world-wide. As only a flotation concentrate would be produced at the Suyai Project, no cyanide or other deleterious chemicals would be used at site. Gold production is expected to reach up to 250,000 ounces annually for an initial eight years.
Monument Bay
In June 2015, as part of the acquisition of Mega Precious Metals Inc., the Company acquired the Monument Bay property, which is located in Manitoba, approximately 570 kilometres northeast of Winnipeg, and consists of 136 contiguous claims totalling 31,250 hectares. The Monument Bay deposit is hosted in the Stull Lake Greenstone Belt, comprising 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.
On September 13, 2018, the Company signed an Exploration Agreement with Red Sucker Lake First Nation in relation to the Monument Bay exploration site in Northern Manitoba. This is an important step allowing the Company to solidify a strategic collaboration with this community, as it continues to advance the project.
The focus of the current exploration program has been the advancement of the Twin Lakes resource. Beyond the Twin Lakes target, the large Monument Bay land package is under-explored and hosts potential for additional discovery. A smaller but important component of recent exploration at Monument Bay has been the continued evaluation and advancement of secondary targets on the property.
Most recent exploration at Monument Bay has been to advance the evaluation and definition of high-grade ore shoots at depth at the Twin Lakes resource as part of assessing the project as an underground mine. Approaching the Twin Lakes target as a potential underground project is an economically attractive alternative to the open pit scenario with lower capital (due to the higher investment required to develop a large tonnage, low grade, open pit mine), reduced environmental footprint, and clear upside exploration potential. The recently completed winter 2021 drill program provided an initial test of the depth extent and potential of several well-defined high-grade steeply plunging mineralized shoots along a four kilometre strike length of the deposit. Shallow diamond drilling during the first half of 2020 confirmed the continuation and orientation of higher-grade mineralization and provided targets for follow up drilling at depth. Highlights from the winter 2021 program included the following core length intercepts: 6.52 g/t of gold over 2.14 m (TL-21-732) and 4.20 g/t of gold over 6.28 m, including 2.58 m grading 7.48 g/t of gold (TL-21-727B). These and other results are being evaluated as next steps are being determined.
ITEM 5
DIVIDENDS
The Company has a dividend policy providing for a dividend yield that is consistent with the yield of comparable companies’ dividend rates and such policy is reviewed on a periodic basis and assessed in relation to the current and expected future operating cash flows of the Company and the conservation and reinvestment of capital. The Company increased its annual dividend to $0.12 per share, effective for the third quarter of 2021, the Company’s sixth dividend increase since the second quarter of 2019, representing a cumulative increase of 500%. See “General Development of the Business – History – Dividend Policy”.
The following table sets forth the quarterly dividends paid by Yamana on its common shares during each of the three most recently completed financial years:
| | | | | | | | | | | |
2022 | 2021 | 2020 | 2019 |
Q1 – $0.03 | Q1 - $0.02625 | Q1 - $0.0125 | Q1 - $0.005 |
| Q2 - $0.02625 | Q2 - $0.015625 | Q2 - $0.005 |
| Q3 - $0.03 | Q3 - $0.0175 | Q3 - $0.01 |
| Q4 - $0.03 | Q4 - $0.02625 | Q4 - $0.01 |
Payment of any future dividends will be at the discretion of the Company’s board of directors after taking into account many factors, including the Company’s operating results, financial condition, comparability of the dividend yield to peer gold companies and current and anticipated cash needs.
ITEM 6
DESCRIPTION OF CAPITAL STRUCTURE
Authorized Capital
The Company is authorized to issue an unlimited number of common shares and 8,000,000 first preference shares, Series 1 (the “Preference Shares”) of which there were 961,010,492 common shares and no Preference Shares issued and outstanding as of March 25, 2022.
Common Shares
Holders of common shares are entitled to receive notice of any meetings of shareholders of the Company, to attend and to cast one vote per common share at all such meetings. Holders of common shares do not have cumulative voting rights with respect to the election of directors and, accordingly, holders of a majority of the common shares entitled to vote in any election of directors may elect all directors standing for election. Holders of common shares are entitled to receive on a pro-rata basis such dividends, if any, as and when declared by the Company’s board of directors at its discretion from funds legally available therefor and upon the liquidation, dissolution or winding up of the Company are entitled to receive on a pro-rata basis the net assets of the Company after payment of debts and other liabilities, in each case subject to the rights, privileges, restrictions and conditions attaching to any other series or class of shares ranking senior in priority to or on a pro-rata basis with the holders of common shares with respect to dividends or liquidation. The common shares do not carry any pre-emptive, subscription, redemption or conversion rights, nor do they contain any sinking or purchase fund provisions.
Preference Shares
Upon a consolidation, merger, or amalgamation of the Company with or into any other corporation, holders of Preference Shares who have not exercised their right of conversion at the date of the consolidation, merger, or amalgamation are entitled to receive upon the exercise of their conversion right, after the effective date of the consolidation, merger, or amalgamation, the aggregate number of shares or securities or property of the Company resulting from the consolidation, merger, or amalgamation, the holder would have been entitled to receive if they had at the effective date of the consolidation, been the registered holder of such number of common shares. Holders of Preference Shares are also entitled to receive, in the event of liquidation, dissolution or winding up of the Company, an amount equal to $0.125 in respect of each of Preference Share held and all unpaid cumulative dividends before any distribution of the assets of the Company among holders of the common shares or any other class of shares. Holders of Preference Shares are not entitled to receive notice of or to attend meetings of the shareholders of the Company nor do they have any voting rights for the election of directors or for any other purpose (except where the holders of a specified class are entitled to vote separately as a class).
ITEM 7
MARKET FOR SECURITIES
Price Range and Trading Volume
The common shares are listed and posted for trading on the TSX under the symbol “YRI”, the NYSE under the symbol “AUY” and the LSE under the symbol “AUY”. The following table sets forth information relating to the monthly trading of the common shares on the TSX for the financial year ended December 31, 2021. | | | | | | | | | | | |
Period | High (C$) | Low (C$) | Volume |
January 2021 | 7.85 | 5.77 | 61,965,375 |
| | | | | | | | | | | |
February 2021 | 6.42 | 5.06 | 68,548,348 |
March 2021 | 5.88 | 5.07 | 59,772,328 |
April 2021 | 6.2 | 5.51 | 44,090,272 |
May 2021 | 6.535 | 5.73 | 46,279,111 |
June 2021 | 6.54 | 5.12 | 46,482,875 |
July 2021 | 5.675 | 5.055 | 40,508,120 |
August 2021 | 5.93 | 5.18 | 46,333,155 |
September 2021 | 5.62 | 4.87 | 53,613,461 |
October 2021 | 5.48 | 4.82 | 49,252,147 |
November 2021 | 5.81 | 4.83 | 147,581,304 |
December 2021 | 5.39 | 4.78 | 66,236,630 |
ITEM 8
ESCROWED SECURITIES AND SECURITIES SUBJECT TO
CONTRACTUAL RESTRICTION ON TRANSFER
To the Company’s knowledge, there are no securities of the Company which are subject to escrow or to contractual restriction on transfer as of March 28, 2022.
ITEM 9
DIRECTORS AND OFFICERS
The following table sets forth the name, province or state and country of residence, position held with the Company and period(s) during which each director of the Company has served as a director, the principal occupation of each director and executive officer of the Company, as of the date hereof. All directors of the Company hold office until the next annual meeting of shareholders of the Company or until their successors are elected or appointed.
| | | | | | | | |
Name and Residence | Position with the Company and Period(s) Served as a Director | Principal Occupation |
John Begeman(1)(3) South Dakota, United States | Director since May 2, 2007 | Company Director |
Christiane Bergevin(2)(4) Québec, Canada | Director since September 1, 2014 | President of Bergevin Capital |
Alexander J. Davidson(3) Ontario, Canada | Director since August 31, 2009 | Company Director |
Richard Graff(1)(2) Colorado, United States | Director since October 16, 2007, Lead Director since September 30, 2017 | Company Director |
Kimberly Keating(2)(3) Newfoundland, Canada | Director since February 15, 2017
| Company Director |
Jane Sadowsky(1)(4) New York, United States | Director since September 1, 2014 | Managing Partner of Gardener Advisory LLC |
Dino Titaro(2)(3)(4) Ontario, Canada | Director since August 5, 2005 | Company Director |
Peter Marrone Ontario, Canada | Executive Chairman and a Director (director since July 31, 2003) | Executive Chairman of the Company |
Daniel Racine Ontario, Canada | President and Chief Executive Officer and a Director (director since April 29, 2021) | President and Chief Executive Officer of the Company |
Jason LeBlanc Ontario, Canada | Senior Vice President, Finance and Chief Financial Officer | Senior Vice President, Finance, and Chief Financial Officer of the Company |
Yohann Bouchard Ontario, Canada | Senior Vice President and Chief Operating Officer | Senior Vice President and Chief Operating Officer of the Company |
| | | | | | | | |
Richard C. Campbell Ontario, Canada | Senior Vice President, Human Resources | Senior Vice President, Human Resources of the Company |
Gerardo Fernandez Ontario, Canada | Senior Vice President, Corporate Development | Senior Vice President, Corporate Development of the Company |
Craig Ford Ontario, Canada | Senior Vice President, Health, Safety and Sustainable Development | Senior Vice President, Health, Safety and Sustainable Development of the Company |
Henry Marsden Ontario, Canada | Senior Vice President, Exploration | Senior Vice President, Exploration of the Company |
Sofia Tsakos Ontario, Canada | Senior Vice President, General Counsel and Corporate Secretary | Senior Vice President, General Counsel and Corporate Secretary of the Company |
1. Member of the Audit Committee. 3. Member of the Sustainability Committee.
2. Member of the Compensation Committee. 4. Member of the Corporate Governance and Nominating Committee.
The principal occupations, businesses or employments of each of the Company’s directors and executive officers within the past five years are disclosed in the brief biographies set out below.
John Begeman – Director. John Begeman is a Professional Mining Engineer with over 40 years of mining experience. His extensive experience in the mining industry, combined with his background in precious metals operations, executive and project development management, provide valuable industry insight and perspective to both the board and management. He currently sits on the board of directors of i-80 Gold Corp.
Mr. Begeman previously served as the Executive Chairman of the board of Premier Gold Mines Limited, a director of Aberdeen International Inc., the President and Chief Executive Officer of Avion Gold Corporation, the Chief Operating Officer of Zinifex Canada Inc. and Vice President, Western Operations of Goldcorp Inc. Prior to his employment at Goldcorp, Mr. Begeman held various and progressive engineering and management positions with Morrison Knudsen Company's mining operations group throughout the western United States. His experience in executive leadership in international mining operations, permitting and community involvement assists the board and management with its ongoing business endeavours. His past environmental and social license analysis along with project risk assessment also form a broad base the board and management can draw on.
Mr. Begeman holds a B.S. in Mining Engineering, an M.S. in Engineering Management and an MBA. He has completed the Rotman-ICD Directors Education program, and is a member of the Institute of Corporate Directors with the ICD.D designation. He is also a member of the National Association of Corporate Directors (“NACD”) and is NACD Directorship Certified.
Christiane Bergevin – Director. Christiane Bergevin is the President of Bergevin Capital, advising infrastructure and energy sector clients. She concurrently serves as Sr. Advisor Power/Utility and Sustainability within the North American practice of Roland Berger, an international management consultancy. As a former senior managing executive in the engineering and financial services sectors, she brings extensive domestic and worldwide experience in strategy, project and risk structuring, M&A in regulated and commercial environments and project financing of resource, transport and infrastructure projects. She is highly skilled in sustainability and community engagement aspects from an operational and governance standpoint, and served on the health, safety and corporate social responsibility committee of the board of an international oil and gas producer. As Executive Vice-President, Desjardins Group, the largest cooperative financial group in Canada, between 2009 and 2015, she led mergers and acquisitions, strategic partnerships and business development. She was also a member of Desjardins Group's finance and risk management committee.
For the 19 years prior to that, Ms. Bergevin held executive positions with SNC-Lavalin Group, a global engineering and construction firm, including as managing head and subsequently President of SNC-Lavalin Capital Inc., its project finance advisory arm. She was involved in several transport and mining developments, and also served as Senior Vice-President and General Manager, Corporate Projects. Ms. Bergevin serves on the supervisory board of RATP Dev, an international public transport operator, and on the advisory committee of AGF Group, a Canadian-based reinforcing steel supplier. She is also a director and chairs the audit committee of CareRx, a Canadian provider of pharmacy services to seniors. Ms. Bergevin is a former Chair and serves as Governor of the Canadian Chamber of Commerce.
Ms. Bergevin holds a Bachelor of Commerce (with Distinction) from McGill University and graduated from the Wharton School's Business Advanced Management Program. In 2013, she was awarded the ICD.D designation and has served as a volunteer examiner for the Institute of Corporate Directors.
Alexander J. Davidson – Director. Alexander Davidson was Barrick Gold Corporation’s Executive Vice President, Exploration and Corporate Development with responsibility for international exploration programs and corporate development activities. Mr. Davidson was instrumental in Barrick’s acquisition of Lac Minerals, Sutton Resources, Arequipa Resources, Pangea Goldfields, Homestake Mining and Placer Dome Inc. Mr. Davidson joined Barrick in October 1993 as Vice President, Exploration with responsibility for the company's expanding exploration program. He initiated Barrick’s expansion out of North America and into Latin America and beyond.
Prior to joining Barrick, Mr. Davidson was Vice President, Exploration for Metall Mining Corporation. Mr. Davidson has over 40 years of experience in designing, implementing and managing gold and base metal exploration and acquisition programs throughout the world. In April 2005, Mr. Davidson was presented the 2005 A.O. Dufresne Award by the Canadian Institute of Mining, Metallurgy and Petroleum to recognize exceptional achievement and distinguished contributions to mining exploration in Canada. In 2003, Mr. Davidson was named the Prospector of the Year by the Prospectors & Developers Association of Canada in recognition of his team's discovery of the Lagunas Norte Project in the Alto Chicama District, Peru.
In February 2019, Mr. Davidson was awarded the Charles F. Rand Gold Medal by the American Institute of Mining Engineers in recognition of his key role in numerous acquisitions and discoveries and his leadership in developing Barrick’s unparalleled exploration programs, both of which have resulted in remarkable achievements that distinguish his remarkable career and legacy at Barrick.
Mr. Davidson received his B.Sc. and M.Sc. in Economic Geology from McGill University. His extensive experience in the mining industry and his background in precious metal exploration and corporate development allow him to provide valuable industry insight and perspective to the board and management. Mr. Davidson also has extensive board level experience and has sat on or has chaired a number of health, safety & environment, technical, sustainability, audit and compensation committees. He currently sits on the board of directors of Americas Gold and Silver Corporation, NuLegacy Gold Corporation and Capital Limited.
Richard Graff – Director. Richard Graff has served on numerous public boards in the mining and oil and gas industries and has served as a board chairman, chairman of audit committees, governance and nominating committees, and special committees, as well as having compensation committee experience. His extensive experience in the metals and mining industry includes accounting and financial reporting, internal control, governance and compliance initiatives, and mergers. Mr. Graff has been an advisor to the mining industry and was a member of a Financial Accounting Standards Board task force, which resulted in the issuance of accounting and financial reporting guidance in the mining industry for US GAAP. He represents a consortium of international mining companies, and has met with and provided recommendations to the International Accounting Standards Board (“IASB”) on financial reporting issues in the mining industry. The IASB incorporated input from these meetings into its published rules. Mr. Graff has organized periodic meetings in London between global mining companies and the IASB to discuss financial reporting issues affecting the industry and shares that information with the management, boards and audit committees on which he serves. He also has had discussions with and provided input to the U.S. Securities and Exchange Commission on financial reporting issues in the industry.
Mr. Graff has been a speaker at industry conferences and directors’ education programs on the topics of financial reporting in the mining industry, audit committee trends, board succession, investor engagement and enterprise risk management. Mr. Graff has moderated the Canadian Public Accountability Board Mining Industry Forum in Toronto. He also serves as chairman of the audit committee and is a member of the risk committee of DMC Global Inc. He served as the chairman of the audit committee for many years and was the lead director and a member of the compensation committee of Alacer Gold Corp. Mr. Graff’s extensive international experience in the mining industry, coupled with his expertise summarized above, brings insight to the board and management as to best practices with respect to accounting, corporate governance and other issues for an international public company in the mining industry.
Mr. Graff is a retired partner from PricewaterhouseCoopers LLP where he served as the audit leader in the United States for the mining industry. He received his undergraduate degree in Economics from Boston College and his post-graduate degree in Accounting from Northeastern University.
Kimberly Keating – Director. Kimberly Keating is a Professional Engineer with 25 years of broad international experience in the oil and gas, nuclear, hydropower, and mining sectors. Most recently, Ms. Keating was
the Chief Operating Officer of the Cahill Group, one of Canada’s largest multi-disciplinary construction companies with operations across the country. Prior to joining the Cahill Group in 2013, Ms. Keating held a variety of progressive leadership roles from engineering design through to construction, commissioning, production operations and offshore field development with Petro-Canada (now Suncor Energy Inc.). Throughout her career, Ms. Keating has made significant leadership contributions to major projects in the Canadian, Norwegian and UK energy sectors, bringing a wealth of strategy, operational execution, and technical expertise to the Yamana board. She is currently a board director of Major Drilling Group International Inc. and the Drax Group plc. Ms. Keating is also a founding member of Makwa-Cahill Limited Partnership, a fully nuclear qualified indigenous fabrication company. Ms. Keating graduated from the Rotman-Institute of Corporate Directors Education Program and was awarded her ICD.D designation.
Ms. Keating has also held numerous volunteer leadership roles, including serving as Co-Chair of the 2025 Canada Games, Vice Chair of Memorial University’s Board of Regents, Vice Chair of the Fisheries and Marine Institute Advisory Committee, board director with the Dr. H. Bliss Murphy Cancer Care Foundation, Chair of the Rhodes Scholarship selection committee and Chair of the St. John’s Board of Trade. She holds a Bachelor of Civil (Structural) Engineering degree, a Master of Business Administration, is a registered member of the Professional Engineering & Geoscientists NL (PEGNL) and holds the Canadian Registered Safety Professional (CRSP) designation. In June 2016, she was named a Fellow of the Canadian Academy of Engineers, a national institution through which Canada’s most distinguished and experienced engineers provide strategic advice on matters of critical importance to Canada.
In 2022, Ms. Keating received the Atlantic Canada’s 25 Most Powerful Women in Business Award and in 2018, received the Memorial University Faculty of Engineering Distinguished Alumni Award, the Professional Engineers and Geoscientists of Newfoundland and Labrador Community Leadership Award, as well as the St. John’s Board of Trade Community Builder of the Year Award.
Jane Sadowsky – Director. Jane Sadowsky retired from Evercore Partners as a Senior Managing Director and Head of the Power & Utility Group in 2011, after more than 22 years as an investment banker. Prior to Evercore Partners, she was a Managing Director and Group Head at Citigroup’s Investment Bank and began her investment banking career at Donaldson, Lufkin & Jenrette.
In addition to a broad and diverse range of finance and deal-related expertise, Ms. Sadowsky has sector expertise in power and utilities and the related fields of commodities, renewables, power technology, infrastructure and energy. She brings depth of knowledge and experience in mergers and acquisitions, public and private debt and equity, corporate restructurings and cross-border transactions. While at Evercore and Citigroup, she was responsible for strategy and resultant P&L, for managing people and for internal and external collaboration. She participated in or led global committees including compensation, fairness and valuation, diversity, mentoring and recruiting. Ms. Sadowsky has provided expert testimony in numerous US jurisdictions and the World Court.
Since retiring, Ms. Sadowsky has served as the Managing Partner for Gardener Advisory LLC, which provides consulting and advisory services, and as a Senior Advisor on diversity and inclusion at Moelis & Company, a global investment bank. Ms. Sadowsky presents and teaches at the NACD as well as other governance forums. Ms. Sadowsky earned her MBA from the Wharton School and her BA in Political Science and International Relations from the University of Pennsylvania. Ms. Sadowsky is an NACD Board Leadership Fellow and currently sits on the board, audit committee and compensation, nominating and governance committee of Nexa Resources S.A.
Dino Titaro – Director. Dino Titaro has over 30 years of international experience having been involved in project management, feasibility studies, reserve estimation, due diligence studies, valuation studies, social and environmental permitting processes for mine construction and development and related risk management, as well as operational experience in the gold sector. He is the founder of Carpathian Gold Inc., a public mineral exploration company listed on the TSX, and was the President and Chief Executive Officer from January 2003 to January 2014 and a director from January 2003 to August 2014.
From 1986 to 2003, Mr. Titaro was the principal owner and President and Chief Executive Officer of A.C.A. Howe International Limited, a geological and mining consulting firm. From 1980 to 1986, Mr. Titaro was employed by Getty Mines Limited, in various supervisory roles as a geologist, working on base and precious metal projects as well as uranium, principally in resource definition stages.
Mr. Titaro previously served as the President and is currently Chairman, director and member of the governance and nominating committee of Avidian Gold Corp. He is also a director of Galane Gold Ltd., Chair of the governance and nominating committee, and member of the audit and compensation committee. Mr. Titaro has been
a director and officer of several publicly traded companies in the mining, industrial and health care technology fields. Mr. Titaro holds a Master of Science degree in Geology from the University of Western Ontario. He is also a qualified person as defined by National Instrument 43-101 and is a registered P.Geo in Ontario.
Peter Marrone – Executive Chairman and Director. Peter Marrone is Executive Chairman of Yamana Gold Inc., which he founded in 2003. He has more than 35 years of mining, business and capital markets experience. He has been on the boards of a number of public companies and has advised companies with a strong South American and North American presence. Mr. Marrone currently sits on the board of directors of Aris Gold Corporation. Prior to Yamana, Mr. Marrone was the head of investment banking at a major Canadian investment bank and before that practised law in Toronto with a strong focus on corporate law, securities law and international transactions.
Daniel Racine – President and Chief Executive Officer. Mr. Racine joined Yamana in May 2014 and in August 2018 he was appointed President and Chief Executive Officer. From August 2012 until March 2014, Mr. Racine was President and Chief Operating Officer of Brigus Gold Corp. Prior to joining Brigus, Mr. Racine was Senior Vice President, Mining of Agnico-Eagle Mines Limited where he was responsible for Agnico-Eagle's global mining operations. Mr. Racine joined Agnico-Eagle as a junior mining engineer in 1987 taking on progressively senior roles throughout his tenure, including LaRonde Mine Manager, Vice-President Operations Manager, and Senior Vice President Operations.
Mr. Racine holds a Bachelor of Mining Engineering degree from Laval University. He is a registered engineer with L'Ordre des Ingenieurs du Quebec, a professional engineer with Professional Engineers Ontario and a member of the Ontario Society of Professional Engineers.
Jason LeBlanc – Senior Vice President, Finance, and Chief Financial Officer. Mr. LeBlanc joined the Company in January 2006 and has over 20 years of research-based and financial experience in the mining industry. During his time at Yamana, Mr. LeBlanc has held increasingly senior positions including most recently the position of Vice President, Finance since 2009. He was appointed Chief Financial Officer in February 2017. Mr. LeBlanc has a Master of Finance from the University of Toronto, a Bachelor of Commerce from the University of Windsor and holds a Chartered Financial Analyst designation.
Yohann Bouchard, Senior Vice President and Chief Operating Officer. Mr. Bouchard joined Yamana in October 2014. Mr. Bouchard has a progressive technical and operating experience with a solid background of more than 20 years of mining in underground and open pit operations. Prior to joining Yamana, Mr. Bouchard occupied key operating and technical positions with Primero Mining Corporation, IAMGOLD Corporation, Breakwater Resources Ltd. and Cambior Inc. Mr. Bouchard oversaw precious and base metal operations in both the Americas and in Africa. Mr. Bouchard holds a Bachelor of Mining Engineering degree from École Polytechnique of Montréal. He is registered as a professional engineer with Professional Engineers Ontario.
Richard C. Campbell – Senior Vice President, Human Resources. Mr. Campbell joined Yamana as Senior Vice President, Human Resources in May 2011. Prior to joining Yamana, Mr. Campbell enjoyed progressively senior roles during his 21 years at TD Bank Financial Group (“TD”). During his tenure at TD, Mr. Campbell worked in executive roles in the business as well as Human Resources, encompassing retail, wealth management, and wholesale/corporate banking. From April 1998 to February 2002, Richard completed international secondments in Hong Kong and London, UK with TD Waterhouse. In his role as SVP Human Resources, TD Canada Trust, Richard led a multi-functional team of HR professionals to develop, implement and execute all aspects of HR services supporting a 36,000 employee workforce across Canada. More recently, Richard’s experience as SVP Human Resources with the Ontario Lottery Group has provided him with valuable and practical executive experience in the public service sector. Mr. Campbell holds an Honours Bachelor of Arts in Geography and Economics, and a Master of Arts in Economic Geography from Wilfrid Laurier University.
Gerardo Fernandez – Senior Vice President, Corporate Development. Mr. Fernandez has been with the Company since 2000, having worked in several leadership positions in operations, strategic planning and project development. Most recently, Mr. Fernandez held the positions of Senior Vice President, Operations and Senior Vice President, Projects & Technical Services. Mr. Fernandez holds a Masters of Business Administration (Nevada, USA) and degrees in Civil Mining Engineering and BSc. Engineering from the University of Chile
Craig Ford – Senior Vice President, Health, Safety and Sustainable Development. Dr. Ford joined Yamana as Senior Vice President, Health, Safety and Sustainable Development in January 2021. Dr. Ford has more than 40 years of experience in the mining industry and more than 25 years of experience in corporate and operational management of health, safety, security, environment, community relations and development, and human
rights in the Americas, Europe and Asia. Dr. Ford was President of Corporate Responsibility Solutions Inc., a sustainability-focused advisory firm from 2013 to 2020. As part of this role, Dr. Ford was a member of the Independent Expert Advisory Panel of the International Council on Mining and Metals from 2015 to 2020. From 2000 to 2013, Dr. Ford was the senior-most corporate responsibility executive at Inmet Mining Corporation. Dr. Ford holds a Bachelor of Science (Honors Geology) and Master of Science (Geology) from Western University, a Ph.D. (Geology and Geochemistry) from the Colorado School of Mines and an ICD.D designation from the Institute of Corporate Directors.
Henry Marsden – Senior Vice President, Exploration Mr. Marsden joined Yamana in September 2016. Mr. Marsden has over 30 years of exploration experience, including over 20 years as a consulting geologist working with a variety of clients and focusing on field exploration work. He also played a key role in the discovery and advancement of several deposits including Rio Blanco and Pico Machay in Peru, and the Timmins West gold deposit in Timmins, Ontario where he was responsible for the first Mineral Resource estimate which ultimately lead to mine construction. Mr. Marsden holds a Master of Science in Earth Sciences from Carleton University, a Bachelor of Science in Geology from the University of British Columbia, and is a Professional Geoscientist.
Sofia Tsakos – Senior Vice President, General Counsel and Corporate Secretary. Ms. Tsakos joined Yamana as Vice President, Corporate Counsel in December 2007, was appointed Corporate Secretary in November 2009 and Senior Vice President, General Counsel in June 2010. Prior to joining Yamana, Ms. Tsakos was a partner practicing securities law at Cassels Brock & Blackwell LLP. From 2001 to 2006, Ms. Tsakos was an associate at Goodman and Carr LLP. Ms. Tsakos holds an Honours Bachelor of Arts in Economics and Political Science from the University of Toronto, a Master in Business Administration with a focus in Finance from the University of Windsor and a Bachelor of Laws also from the University of Windsor.
Based on the disclosure available on the System for Electronic Disclosure by Insiders, as of March 25, 2022, the directors and executive officers of the Company, as a group, beneficially owned, directly or indirectly, or exercised control or direction over approximately 4,835,542 common shares, representing approximately 0.5% of the total number of common shares outstanding. Additionally, directors and officers of the Company, as a group, hold deferred share units and restricted share units totalling 7,044,615 units. This represents a total of 11,880,157 common shares, deferred share units and restricted share units of the Company.
Corporate Cease Trade Orders, Bankruptcies, Penalties or Sanctions
Except as described below, no director or executive officer of the Company is, as at the date hereof, or has been, within the 10 years before the date hereof, a director, chief executive officer or chief financial officer of any company (including Yamana) that:
(a) was subject to a cease trade or similar order, or an order that denied the company access to any exemption under securities legislation, that was in effect for a period of more than 30 consecutive days and issued while the director or executive officer was acting in the capacity as director, chief executive officer or chief financial officer; or
(b) was subject to a cease trade or similar order, or an order that denied the company access to any exemption under securities legislation, that was in effect for a period of more than 30 consecutive days and was issued after the director or executive officer ceased to be a director, chief executive officer or chief financial officer but which resulted from an event that occurred while that person was acting in the capacity as a director, chief executive officer or chief financial officer,
Mr. Titaro was a director of Carpathian Gold Inc. (“Carpathian”) when, on April 16, 2014, the Ontario Securities Commission (the “OSC”) issued a management cease trade order against the Interim Chief Executive Officer and the Chief Financial Officer of Carpathian in connection with Carpathian’s failure to file its audited annual financial statements (and related management’s discussion and analysis and certifications) for the period ended December 31, 2013. The management cease trade order was lifted on June 19, 2014 following the filing by Carpathian of the required documents. Mr. Titaro did not stand for re-election and was no longer a director on August 12, 2014 but was a director of Carpathian during the period of the management cease trade order. In addition, Mr. Titaro resigned as director of Royal Coal Corp. (“Royal Coal”) on May 9, 2012. On May 17, 2012, Royal Coal announced that it received notice from the TSX Venture Exchange that trading in Royal Coal’s securities was suspended as a result of a cease trade order by the OSC for the failure to file financial statements. Subsequently, similar cease trade orders were also issued by the Manitoba Securities Commission, Alberta Securities Commission and British Columbia Securities Commission. The cease trade orders were revoked on July 27, 2020.
No director or executive officer of the Company, or a shareholder holding a sufficient number of securities of the Company to affect materially control of the Company, is as of the date hereof, or has been within the 10 years before the date hereof, a director or executive officer of any company (including Yamana) that, while that person
was acting in that capacity, or within a year of that person ceasing to act in that capacity, became bankrupt, made a proposal under any legislation relating to the bankruptcy or insolvency, or became subject to or instituted any proceedings, arrangement or compromise with creditors, or had a receiver, receiver manager or trustee appointed to hold the assets of the director, executive officer or shareholder.
No director or executive officer of the Company, or a shareholder holding a sufficient number of securities of the Company to affect materially the control of the Company, has been subject to:
(a) any penalties or sanctions imposed by a court relating to securities legislation or by a securities regulatory authority or has entered into a settlement agreement with a securities regulatory authority; or
(b) any other penalties or sanctions imposed by a court or regulatory body that would likely be considered important to a reasonable investor in making an investment decision.
Conflicts of Interest
To the best of the Company’s knowledge, and other than as disclosed herein, there are no known existing or potential material conflicts of interest between the Company or a subsidiary of the Company and any directors or officers of the Company or of a subsidiary of the Company, except that certain of the directors and officers serve as directors, officers, promoters and members of management of other public or private companies and therefore it is possible that a conflict may arise between their duties as a director or officer of the Company and their duties as a director, officer, promoter or member of management of such other companies.
The directors and officers of the Company are aware of the existence of laws governing accountability of directors and officers for corporate opportunity and requiring disclosures by directors of conflicts of interest and the Company will rely upon such laws in respect of any directors’ and officers’ conflicts of interest or in respect of any breaches of duty by any of its directors or officers. All such conflicts will be disclosed by such directors or officers in accordance with the Canada Business Corporations Act and they will govern themselves in respect thereof to the best of their ability in accordance with the obligations imposed upon them by law.
ITEM 10
PROMOTER
No person or company has within the two most recently completed financial years, or is during the current financial year, been a promoter of Yamana or a subsidiary thereof.
ITEM 11
LEGAL PROCEEDINGS AND REGULATORY ACTIONS
Legal Proceedings
Neither the Company nor any of its property is currently, and was not during financial year 2021, a party to or the subject of any legal proceedings, nor are any such proceedings known to be contemplated, that involve a material claim for damages within the meaning of applicable securities legislation.
Regulatory Actions
There have been no penalties or sanctions imposed against the Company by a court relating to securities legislation or by a securities regulatory authority during the 2021 financial year, or any other time that would likely be considered important to a reasonable investor making an investment decision in the Company, and the Company has not entered into any settlement agreements with a court relating to securities legislation or with a securities regulatory authority during the 2021 financial year.
ITEM 12
INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS
Other than as described elsewhere herein, none of the directors, executive officers or persons or companies who beneficially own, or control or direct, directly or indirectly, more than 10 percent of any class of outstanding voting securities of the Company, nor any associate or affiliate of the foregoing persons, has or has had any material interest, direct or indirect, in any transaction within the past three financial years or during the current financial year, that has materially affected or is reasonably expected to materially affect the Company.
ITEM 13
TRANSFER AGENTS AND REGISTRAR
The transfer agent and registrar for the common shares of the Company is Computershare Trust Company of Canada, at its principal offices in Toronto, Ontario, and the co-transfer agent for the common shares in the United States is Computershare Trust Company, N.A., at its principal offices in Louisville, Kentucky.
ITEM 14
MATERIAL CONTRACTS
The Company has not entered into any material contracts outside of the ordinary course of business during the most recently completed financial year, and has not entered into any material contract before the most recently completed financial year that is still in effect, other than share and loan purchase agreement dated as of April 15, 2019 (the “Purchase Agreement”) among Yamana, as guarantor and as vendor; Yamana International Holdings Coöperatie U.A., as vendor; Lundin, as buyer guarantor; an affiliate of Lundin as buyer of the Netherlands target company shares; and an affiliate of Lundin as buyer of certain intercompany loans. See “General Development of the Business – History – Sale of Chapada Mine” for further details. A copy of the Purchase Agreement is available under the Company’s SEDAR profile at www.sedar.com and may be inspected at the head office of the Company at Royal Bank Plaza, North Tower, 200 Bay Street, Suite 2200, Toronto, Ontario, M5J 2J3 during normal business hours.
ITEM 15
AUDIT COMMITTEE
The Audit Committee is responsible for monitoring the Company’s systems and procedures for financial reporting and internal control, reviewing certain public disclosure documents and monitoring the performance and independence of the Company’s external auditors. The committee is also responsible for reviewing the Company’s annual audited financial statements, unaudited quarterly financial statements and management’s discussion and analysis of financial results of operations for both annual and interim financial statements and review of related operations prior to their approval by the full board of directors of the Company.
The Audit Committee’s charter sets out its responsibilities and duties, qualifications for membership, procedures for committee member removal and appointment and reporting to the board of directors of the Company. A copy of the charter is attached hereto as Schedule “A”.
During the year ended December 31, 2021, the Audit Committee was comprised of three directors, all of whom were independent directors. As of the date hereof, the current members of the Audit Committee are Richard Graff (Chair), John Begeman and Jane Sadowsky. In addition to being independent directors as described above, all members of the Company’s Audit Committee must meet an additional “independence” test under National Instrument 52-110 Audit Committees (“NI 52-110”) in that their directors’ fees are the only compensation they, or their firms, receive from the Company and that they are not affiliated with the Company. Each member of the Audit Committee is financially literate within the meaning of NI 52-110.
The Audit Committee met four times during the most recently completed financial year and all members of the committee were in attendance at all such meetings.
Relevant Educational Experience
Set out below is a description of the education and experience of each of the Company’s three current audit committee members, which is relevant to the performance of his responsibilities as an audit committee member.
Richard Graff – Richard Graff is a retired partner from PricewaterhouseCoopers LLP where he served as the audit leader in the United States for the mining industry. Since his retirement, Mr. Graff has been an advisor to the mining industry and was a member of a Financial Accounting Standards Board task force for establishing accounting and financial reporting guidance in the mining industry. He represents a consortium of international mining companies and has provided recommendations to the International Accounting Standards Board on mining industry issues and to regulators on industry disclosure requirements of securities legislation. He received his undergraduate degree in Economics from Boston College and his post-graduate degree in Accounting from Northeastern University. He serves as chairman of the audit committee and is a member of the risk committee of
DMC Global Inc. He also served as the chairman of the audit committee for many years and was the lead director and a member of the compensation committee of Alacer Gold Corp.
John Begeman – John Begeman currently sits on the boards of directors of i-80 Gold Corp. and previously served as the Executive Chairman of the board of Premier Gold Mines Limited, a director of Aberdeen International Inc., the President and Chief Executive Officer of Avion Gold Corporation, the Chief Operating Officer of Zinifex Canada Inc. and Vice President, Western Operations of Goldcorp Inc. Prior to his employment at Goldcorp Inc., Mr. Begeman held various and progressive engineering and management positions with Morrison Knudsen Company's mining operations group throughout the western United States. Mr. Begeman holds a B.S. in Mining Engineering, an M.S. in Engineering Management and an MBA. He has completed the Rotman-ICD Directors Education program, and is a member of the Institute of Corporate Directors with the ICD.D designation. He is also a member of the NACD and has achieved the status of “Directorship Certification” by the NACD.
Jane Sadowsky – Jane Sadowsky retired from Evercore Partners as a Senior Managing Director and Head of the Power & Utility Group in 2011, after more than 22 years as an investment banker. Prior to Evercore Partners, she was a Managing Director and Group Head at Citigroup’s Investment Bank and began her investment banking career at Donaldson, Lufkin & Jenrette. Since retiring, Ms. Sadowsky has served as the Managing Partner for Gardener Advisory LLC, which provides consulting and advisory services predominantly in the electricity power sector to public and private sector clients in the United States and abroad. Ms. Sadowsky presents and teaches at the National Association of Corporate Directors as well as other governance forums. Ms. Sadowsky earned her MBA from the Wharton School and currently sits on the board, audit committee and compensation, nominating and governance committee of Nexa Resources S.A.
Pre-Approval Policies and Procedures
The Audit Committee’s charter sets out responsibilities regarding the provision of non-audit services by the Company’s external auditors. This policy encourages consideration of whether the provision of services other than audit services is compatible with maintaining the auditor’s independence and requires Audit Committee pre-approval of permitted audit and audit-related services.
External Auditor Service Fees
Audit Fees
The aggregate audit fees billed by the Company’s external auditors for the year ended December 31, 2021 were C$3,869,225 (December 31, 2020 – C$4,023,000). The audit fees relate to the audit of the annual consolidated financial statements, quarterly reviews, statutory/regulatory filings, and associated translation work.
Audit-Related Fees
The aggregate audit-related fees billed by the Company’s external auditors for the year ended December 31, 2021 were C$71,775 (December 31, 2020 – C$146,000). This included services related to certain statutory audits outside of Canada. In 2020, the figure also included services related to the Nomad Transaction and related prospectus.
Tax Fees
The aggregate tax fees billed by the Company’s external auditors for the year ended December 31, 2021 were C$225,000 (December 31, 2020 – C$300,000). This included professional services for tax compliance, tax advice and tax planning.
All Other Fees
The other fees billed by the Company’s external auditors for the year ended December 31, 2021 were C$22,000 (December 31, 2020 – C$22,000), which related primarily to assurance on the Company’s Conflict-Free Gold Report.
ITEM 16
INTERESTS OF EXPERTS
The following are the technical reports prepared in accordance with NI 43-101 from which certain scientific and technical information relating to the Company’s material mineral projects contained in this annual information form has been derived, and in some instances extracted, as well as certain qualified persons involved in preparing such reports, and details of certain technical information relating to the Company’s material mineral projects contained in this annual information form which have been reviewed and approved by qualified persons.
Jacobina Mining Complex – “NI 43-101 Technical Report, Jacobina Gold Mine, Bahia State, Brazil” dated May 29, 2020, prepared by or under the supervision of Eduardo de Souza Soares, MAusIMM CP (Min), Henry Marsden, P.Geo. and Carlos Iturralde, P. Eng. of Yamana, Renan Garcia Lopes, MAusIMM CP (Geo) formerly of Yamana, and Luis Vasquez, P.Eng. of SLR Consulting (Canada) Ltd. all of whom are qualified persons pursuant to NI 43-101. The technical information set forth under the heading “Description of the Business – Material Producing Mines – Jacobina Mining Complex”, other than the technical information under the heading “Mineral Projects – Summary of Mineral Reserve and Mineral Resource Estimates”, has been reviewed and approved by Sébastien Bernier, P. Geo. Mr. Bernier is employed by the Company as its Senior Director, Reserves and Resources and is a “qualified person” for the purpose of NI 43-101.
El Peñón Mine – “NI 43-101 Technical Report, El Peñón Gold-Silver Mine, Antofagasta Region, Chile” dated March 25, 2021 prepared by or under the supervision of Sergio Castro, Registered Member Chilean Mining Commission, Marco Velásquez Corrales, Registered Member Chilean Mining Commission, Henry Marsden, P.Geo and Carlos Iturralde, P.Eng, all of whom are employees of Yamana and are qualified persons pursuant to NI 43-101. The technical information set forth under the heading “Description of the Business – Material Producing Mines – El Peñón Mine”, other than the technical information under the heading “Mineral Projects – Summary of Mineral Reserve and Mineral Resource Estimates”, has been reviewed and approved by Sébastien Bernier, P. Geo. Mr. Bernier is employed by the Company as its Senior Director, Reserves and Resources and is a “qualified person” for the purpose of NI 43-101.
Canadian Malartic Mine — “NI 43-101 Technical Report, Canadian Malartic Mine, Quebec, Canada” dated March 25, 2021 prepared by or under the supervision of Pascal Lehouiller, P. Geo, Sylvie Lampron, Eng., Guy Gagnon, Eng., Nicole Houle, P.Geo. and François Bouchard, P.Geo., all of whom are employees of Canadian Malartic GP and are qualified persons pursuant to NI 43-101. The technical information set forth under the heading “Description of the Business – Material Producing Mines – Canadian Malartic Mine”, other than the technical information under the heading “Mineral Projects – Summary of Mineral Reserve and Mineral Resource Estimates”, has been reviewed and approved by Sébastien Bernier, P. Geo. Mr. Bernier is employed by the Company as its Senior Director, Reserves and Resources and is a “qualified person” for the purpose of NI 43-101.
Each of the technical reports noted above are available under the Company’s SEDAR profile at www.sedar.com, and a summary of each report is contained in this annual information form under “Description of the Business – Mineral Projects – Material Producing Mines”.
The following are the qualified persons responsible for the Mineral Resource and Mineral Reserve estimates for each of the Company’s material mineral projects set out in this annual information form under “Description of the Business – Mineral Projects – Summary of Mineral Reserve and Mineral Resource Estimates”.
| | | | | | | | |
Property | Qualified Persons for Mineral Reserves | Qualified Persons for Mineral Resources |
Canadian Malartic | Guy Gagnon, Eng., Canadian Malartic GP | Pascal Lehouiller, P. Geo, Canadian Malartic GP |
El Peñón | Jimmy Avendaño Gonzalez, Registered Member of the Chilean Mining Commission, Yamana Gold Inc. | Marco Velásquez Corrales, Registered Member of the Chilean Mining Commission, Yamana Gold Inc. |
Jacobina | Eduardo de Souza Soares, MAusIMM CP (Min), Yamana Gold Inc | Luiz Carlos Damasceno dos Santos, MAusIMM CP (Geo), Yamana Gold Inc |
The aforementioned firms or persons held either less than one percent or no securities of the Company or of any associate or affiliate of the Company when they prepared the reports or the Mineral Reserve estimates or the
Mineral Resource estimates referred to, or following the preparation of such reports or data, and either did not receive any or received less than a one percent direct or indirect interest in any securities of the Company or of any associate or affiliate of the Company in connection with the preparation of such reports or data.
None of the aforementioned firms or persons, nor any directors, officers or employees of such firms, are currently, or are expected to be elected, appointed or employed as, a director, officer or employee of the Company or of any associate or affiliate of the Company other than Marco Velásquez Corrales, Eduardo de Souza Soares, Jimmy Avendaño Gonzalez and Luiz Carlos Damasceno dos Santos, who are employed by Yamana, and Guy Gagnon and Pascal Lehouiller, who are employed by Canadian Malartic GP.
Deloitte LLP is the auditor of Yamana and is independent with respect to Yamana within the meaning of the U.S. Securities Act of 1933 and the applicable rules and regulations thereunder adopted by the SEC and the Public Company Accounting Oversight Board (United States) and within the meaning of the rules of professional conduct of the Chartered Professional Accountants of Ontario.
ITEM 17
ADDITIONAL INFORMATION
Additional information, including directors’ and officers’ remuneration and indebtedness, principal holders of the Company’s securities and securities authorized for issuance under equity compensation plans, as applicable, will be contained in the Company’s management information circular to be filed in connection with its annual shareholders’ meeting for 2022. Additional financial information is provided in the Company’s financial statements and managements’ discussion and analysis for the financial year ended December 31, 2021. Additional financial information relating to the Company may also be found under the Company’s SEDAR profile at www.sedar.com.
SCHEDULE “A”
CHARTER OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
Dated as of February 15, 2022
1.Purpose
The Audit Committee is a committee of the Board of Directors (the “Board”) of Yamana Gold Inc. (the “Company”) and operates within the governance structure of the Company and its subsidiaries (the “Group”). The purpose of the Audit Committee is to:
a.assist the Board in discharging its responsibility to exercise due care, diligence an skills in its oversight responsibilities with respect to: (i) the integrity of the Company’s financial statements; (ii) the Company’s compliance with legal and regulatory requirements; (iii) the external auditors’ qualifications and independence; and (iv) the performance of the Company’s internal and external audit functions;
b.serve as an independent and objective party to monitor the Company’s financial reporting processes and internal control systems, including business policies and practices;
c.review and appraise the audit activities of the Company’s external auditors; and
d.prepare Audit Committee report(s) as required by applicable regulators.
The Audit Committee shall have the authority to delegate to one or more of its members, responsibility for developing recommendations for consideration by the Audit Committee with respect to any of the matters referred to in this Charter. Ultimate responsibility for the integrity of the company’s financial reporting rests with the full Board.
2.Composition and Meetings
The Audit Committee shall be comprised of three or more directors as determined by the Board, each of whom shall be an “independent director” in accordance with applicable legal requirements, including the requirements of National Instrument 52-110 Audit Committees (“NI 52-110”) and the Corporate Governance Rules of the New York Stock Exchange, as such rules are revised, updated or replaced from time to time, subject to any waivers or exceptions granted by such stock exchange.
All members shall, to the satisfaction of the Board, be "financially literate", and at least one member shall have accounting or related financial management expertise to qualify as a "financial expert" in accordance with applicable legal requirements, including the requirements of NI 52-110 and the rules adopted by the United States Securities and Exchange Commission (the ‘SEC”), as revised, updated or replaced from time to time.
The members of the Audit Committee and its chair shall be elected by the Board at the annual organizational meeting of the Board, and shall serve until: the next annual meeting of shareholders; they resign; their successors are duly appointed; or such member is removed from the Audit Committee by the Board. If the Board fails to designate one member as the chair of the Audit Committee (the “Chair”), the members of the Audit Committee shall appoint the Chair from among its members.
The Audit Committee shall meet as frequently as the Audit Committee considers necessary, but not less than once each quarter, to review the financial results of the Company. Meetings shall be in person or by audio or video conference or such other electronic facility as provides electronic means of attendance and participation in the meeting. The Audit Committee shall have the resources and authority appropriate to discharge its duties and responsibilities, including the authority to select, retain, terminate, and approve the fees and other retention terms of special or independent counsel, accountants or other experts or advisors, as it deems necessary or appropriate, without seeking approval of the Board or management.
The Audit Committee shall have the authority to meet with the Executive Chairman or the Chief Executive Officer as delegate of the Executive Chairman and the Chief Financial Officer, along with internal auditors and the external auditor, and have such other direct and independent interaction with such persons from time to time as the members of the Audit Committee deem appropriate. The Audit Committee may request the Executive Chairman or the CEO as delegate of the Executive Chairman to have such officers or employees of the Company or the Company’s outside counsel or external auditor to attend a meeting of the Audit Committee or to meet with any members of, or consultants to, the Audit Committee.
The external auditors will have direct access and report directly to the Audit Committee at their own initiative.
Quorum for the transaction of business at any meeting of the Audit Committee shall be a majority of the number of members of the Audit Committee or such greater number as the Audit Committee shall by resolution determine. A duly convened meeting of the Audit Committee at which a quorum is present shall be competent to exercise all or any of the authorities, powers and discretions vested in or exercisable by the Audit Committee.
Meetings of the Audit Committee shall be held from time to time as the Audit Committee or the Chair shall determine upon notice to each of its members in compliance with the Company’s by-laws. The notice period may be waived by a quorum of the Audit Committee.
3.Responsibilities and Powers
Responsibilities and powers of the Audit Committee include:
General
1.review and assess the adequacy of this Charter at least annually and, where necessary or desirable, recommend changes to the Board provided that this Charter may be amended and restated from time to time without the approval of the Board to ensure that the composition of the Audit Committee and the responsibilities and powers of the Audit Committee comply with applicable laws, regulations and stock exchanges;
2.oversight of the Group as a whole and, unless required otherwise by regulation, carry out the duties below for the parent company, major subsidiary undertakings and the Group as a whole;
3.evaluate the functioning, effectiveness and performance of the Audit Committee and its members on an annual basis;
Documents/Reports Review
4.prior to the recommendation to the Board for approval of release of the annual and quarterly financial statements, monitor the integrity of, review and discuss with management and the independent public accountants, upon completion of their audit or review, the financial results for the year or quarter and the results of the audit or review, including (i) the Company's annual or quarterly financial statements and related footnotes; (ii) interrogation and challenge of management’s discussion and analysis of the financial condition and results of operations; (iii) annual and quarterly earnings press releases; (iv) the results of the audit or review, including the nature and amount of unrecorded adjustments resulting from the audit or review; (v) review with the independent public accountants and management the Company's policies and procedures relative to the adequacy of internal accounting and financial reporting controls (including any significant deficiencies and significant changes in internal control over financial reporting), including controls over quarterly and annual financial reporting, computerized information systems and information security (vi) the independent public accountants’ management recommendations; (vii) any significant transactions which occurred during the year or quarter; (viii) any significant adjustments; critical accounting policies and practices (ix) management judgments and accounting estimates; (x) new accounting policies; (xi) all alternative treatments of financial information within generally accepted accounting principles, ramifications of the use of alternative disclosures and treatments, and the treatment preferred by the independent public accountants; and (xii) any disagreements between management and the independent public accountants;
5.ensure that adequate procedures are in place for the review of the issuer's disclosure of financial information extracted or derived from the issuer's financial statements and periodically assess the adequacy of such procedures;
6.review the effects of regulatory and accounting initiatives, as well as off-balance sheet structures, on the financial statements of the Company;
7.at least annually, (i) inquire of management and the independent public accountant about the significant business, political, regulatory and internal control issues or exposures to financial risk; (ii) oversee and monitor management’s documentation of the significant financial risks that the Company faces and update as events change and risks shift; and (iii) assess the steps that management has taken to control identified financial and internal control risks to the Company;
Responsibilities of the Audit Committee Chair
8.the fundamental responsibility of the Audit Committee Chair is to be responsible for the management and effective performance of the Audit Committee and provide leadership to the Audit Committee in fulfilling its mandate and any other matters delegated to it by the Board. To that end, the Audit Committee Chair’s responsibilities shall include:
a.working with the Executive Chairman or the Chief Executive Officer as delegate of the Executive Chairman and the Corporate Secretary to establish the frequency of Audit Committee meetings and the agendas for meetings;
b.providing leadership to the Audit Committee and presiding over Audit Committee meetings;
c.facilitating the flow of information to and from the Audit Committee and fostering an environment in which Audit Committee members may ask questions and express their viewpoints;
d.reporting to the Board with respect to the significant activities of the Audit Committee and any recommendations of the Audit Committee; and
e.leading the Audit Committee in annually reviewing and assessing the adequacy of its mandate and evaluating its effectiveness in fulfilling its mandate; and taking such other steps as are reasonably required to ensure that the Audit Committee carries out its mandate;
External Auditors
9.recommend external auditors nominations to the Board to be put before the shareholders for appointment or re-appointment and, as necessary, the removal of any external auditor in office from time to time;
10.approve the fees (for both audit and non-audit services) and other compensation to be paid to the external auditors and the funding for payment of the external auditors’ compensation and any advisors retained by the Audit Committee;
11.pre-approve all audit services, internal control related services and any permissible non-audit engagements of the external auditors, in accordance with applicable legislation;
12.meet with external auditors and financial management of the Company to review the scope of the proposed audit of the current year, and the audit procedures to be used;
13.approve terms of engagement of external auditor, including any engagement letter issued at the start of each audit and the scope of the audit;
14.meet quarterly with external auditors “in camera” to discuss reasonableness of the financial reporting processes, systems of internal control and risk management, significant comments and recommendations, and management performance;
15.advise the external auditors of their ultimate accountability to the Board and the Audit Committee;
16.oversee the work of the external auditors engaged for the purpose of preparing an audit report or performing other audit, review and attest services for the issuer;
17.evaluate the qualifications, performance and independence of the external auditors, in accordance with relevant ethical and professional guidance, which are to report directly to the Audit Committee, including: (i) reviewing and evaluating the lead partner on the external auditors' engagement with the Company, (ii) considering whether the auditors' quality controls are adequate and the provision of permitted non-audit services is compatible with maintaining the auditors' independence, (iii) determine the rotation of the lead audit partner and the audit firm, and (iv) take into account the opinions of management and the internal audit function in assessing the external auditors’ qualifications, independence and performance;
18.present the Audit Committee’s conclusions with respect to its evaluation of external auditors to the Board and take such additional action to satisfy itself of the qualifications, performance and independence of external auditors and make further recommendations to the Board as it considers necessary;
19.obtain and review a report from the external auditors at least annually regarding: (i) the external auditors' internal quality-control procedures; (ii) material issues raised by the most recent internal quality-control review, or peer review, of the firm, or by any inquiry or investigation by governmental or professional authorities within the preceding five years respecting one or more external audits carried out by the firm; (iii)
any steps taken to deal with any such issues; and (iv) all relationships between the external auditors and the Company;
20.discuss with the external auditors any relationships that might affect the external auditors’ objectivity and independence;
21.recommend to the Board any action required to ensure the independence of the external auditors;
22.review and approve policies for the Company's hiring of employees or former employees of the present and former external auditors and compliance with regulatory requirements;
Internal Audit
23.receive reports from the Company's Chief Financial Officer on the scope and material results of its internal SOX audit activities and review and monitor management’s responsiveness to the internal auditor’s findings and recommendations;
24.review and discuss the Corporation’s Code of Conduct and Corporate Governance Policies and the actions taken to monitor and enforce compliance;
25.establish procedures for: (i) the receipt, retention and treatment of complaints regarding accounting, internal controls or auditing matters; and (ii) the confidential, anonymous submission of concerns regarding questionable accounting, internal control and auditing matters;
26.the Audit Committee will ensure that the internal audit function is adequately funded and resourced to enable it to fulfil its mandate and is equipped to perform in accordance with appropriate professional standards for internal auditors;
27.monitor and review the effectiveness of the Company’s internal audit function in the context of the Company’s overall risk management system;
Financial Reporting Process
28.periodically discuss the integrity, completeness and accuracy of the Company’s internal controls and the financial statements with the external auditors in the absence of the Company's management;
29.in consultation with the external auditors, review the integrity of the Company's financial internal and external reporting processes;
30.consider the external auditors' assessment of the appropriateness of the Company's auditing standards and accounting principles as applied in its financial reporting;
31.review and discuss with management and the external auditors at least annually and approve, if appropriate, any material changes to the Company's internal auditing and accounting principles and practices suggested by the external auditors or management;
32.review disclosures made by the Executive Chairman or the CEO as delegate of the Executive Chairman and CFO during their certification process for the annual and interim filings with applicable securities regulatory authorities about any significant deficiencies in the design or operation of internal controls which could adversely affect the Company's ability to record, process, summarize and report financial data or any material weaknesses in the internal controls, and any fraud involving management or other employees who have a significant role in the Company's internal controls;
33.establish regular and separate systems of reporting to the Audit Committee by management and the external auditors of any significant decision made in management's preparation of the financial statements, including the reporting of the view of management and the external auditors as to the appropriateness of such decisions;
34.discuss during the annual audit, and review separately with each of management and the external auditors, any significant matters arising from the course of any audit, including any restrictions on the scope of work or access to required information; whether raised by management or the external auditors;
35.resolve any disagreements between management and the external auditors regarding financial reporting;
36.review with the external auditors and management the extent to which changes or improvements in financial or accounting practices, as approved by the Audit Committee, have been implemented at an appropriate time subsequent to the implementation of such changes or improvements;
37.retain and determine the compensation of any independent counsel, accountants or other advisors to assist in its oversight responsibilities (the Audit Committee shall not be required to obtain the approval of the Board for such purposes);
38.discuss any management or internal control letters or proposals to be issued by the external auditors of the Company;
Legal Compliance
39.review with the Company's legal counsel any legal matter that the Audit Committee understands could have a significant impact on the Company's financial statements;
40.conduct or authorize investigations into matters within the Audit Committee's scope of responsibilities;
41.perform any other activities, in accordance with the Charter, the Company's by-laws and governing laws, that the Audit Committee or the Board deems necessary or appropriate;
Reporting and Powers
42.record minutes of its meetings and report periodically to the Board on all matters and recommendations made by the Audit Committee and at such other times as the Board may consider appropriate; and
43.exercise such other powers and perform such other duties and responsibilities as are incidental to the purposes, duties and responsibilities specified herein and as may from time to time be delegated to the Audit Committee by the Board.
4.Limitation of Responsibility
While the Audit Committee has the responsibilities and powers provided by this Charter, it is not the duty of the Audit Committee to plan or conduct audits or to determine that the Company's financial statements are complete and accurate and are in accordance with applicable accounting principles and standards. This is the responsibility of management (with respect to whom the Audit Committee performs an oversight function) and the external auditors.
EXHIBIT 99.2
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
OPERATIONS AND FINANCIAL CONDITION
FOR THE YEAR ENDED DECEMBER 31, 2021
CONTENTS | | | | | | | | |
| Page |
1: | Highlights and Relevant Updates | |
2: | Core Business, Strategy and Outlook | |
3: | Review of Financial Results | |
4: | Operating Segments Performance | |
5: | Construction, Development and Other Initiatives | |
6: | Mineral Reserve and Mineral Resource Estimates | |
7: | Exploration | |
8: | Financial Condition and Liquidity | |
9: | Economic Trends, Business Risks and Uncertainties | |
10: | Contingencies | |
11: | Critical Accounting Policies and Estimates | |
12: | Non-GAAP Financial Performance Measures | |
13: | Disclosure Controls and Procedures | |
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, 2021, ("Consolidated Financial Statements"). 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 performance 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 performance measures do not have any standardized meaning prescribed under IFRS, and therefore they may not be comparable to similar non-GAAP financial performance 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 performance measures included in this MD&A include:
•Cash costs per gold equivalent ounce ("GEO") sold;
•All-in sustaining costs ("AISC") per GEO sold;
•Net free cash flow; and
•Average realized price per ounce of gold/silver sold
Reconciliations and descriptions associated with the above financial performance measures can be found in Section 12: Non-GAAP Financial Performance Measures in this MD&A. In addition, each non-GAAP financial performance measure in this MD&A has been annotated with a reference to endnote (1).
Cautionary statements regarding forward-looking information and mineral reserves and mineral resources can be found in Section 13: Disclosure Controls and Procedures in this MD&A.
Endnotes can be found on the final page of this MD&A.
1. HIGHLIGHTS AND RELEVANT UPDATES
For the three months ended December 31, 2021 unless otherwise noted
Operational, Earnings and Cash Flow Highlights:
•Gold production of 240,718 ounces significantly exceeded plan and the prior year comparative quarter, following standout performances from Canadian Malartic with 88,933 ounces, Jacobina with 48,228 ounces, El Peñón with 55,282 ounces and Cerro Moro with 30,028 ounces. As expected, fourth quarter gold production from Yamana mines(4) marks the highest all-time total production, with the record-breaking production a result of the planned sequential quarter-over-quarter increases. Within the quarter, the planned sequential month-over-month increase in production resulted in December being a standout month. Of note, is the milestone on December 27, 2021 of the 6 millionth ounce poured at Canadian Malartic since the initial mill start-up in 2011.
•Silver production of 3,142,781 ounces, with both El Peñón and Cerro Moro recording their highest quarterly silver production totals of the year.
•Record quarterly GEO(2) production from Yamana mines(4) of 281,388 GEO(2) significantly exceeded the planned 270,000 GEO(2) and prior year comparative quarter production of 255,361 GEO(2), on the back of exceptional gold production. As previously guided, the Company's production was weighted at 53% for the second half of the year, with the fourth quarter being the strongest quarter.
•Record annual GEO(2) production from Yamana mines(4) of 1,011,180 GEO(2) exceeded the guided 1,000,000 GEO(2), and prior year's 901,155 GEO(2). The full-year GEO(2) record comprised 884,793 ounces of gold and 9,169,289 ounces of silver.
•Quarterly total cost of sales, cash costs(1) and AISC(1) on a per GEO(2) basis of $1,091, $642, and $962 respectively, which on a consolidated basis were the lowest cost quarter of the year, and lower than the comparative period. Total cost of sales, cash costs(1) and AISC(1) of $1,132, $689 and $1,030 respectively, for the year ended December 31, 2021, were also lower than the comparative period. Full year costs include inflation impacts of approximately $20 per GEO(2) which were not included in original guidance, as previously disclosed.
•Cash flows from operating activities reached an all-time quarterly record of $238.2 million, increasing by 25% compared to the prior quarter and 31% compared to prior year comparative quarter. Cash balances excluding MARA increased by $67.7 million or 28% compared to the prior quarter.
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•As at December 31, 2021, the Company had cash and cash equivalents of $525.0 million, including $217.3 million available for utilization by the MARA Project. Further, the Company has available credit of $750.0 million from its undrawn revolving credit facility.
•Net earnings(3) for the three months ended December 31, 2021 were $109.7 million or $0.11 per share basic and diluted, compared to net earnings(3) of $103.0 million or $0.11 per share basic and diluted for the three months ended December 31, 2020. Adjusting items of $8.2 million(3), that management believes may not be reflective of current and ongoing operations, and which may be used to adjust or reconcile input models in consensus estimates, decreased net earnings(3) for the current period. For a complete list of adjustments attributable to Yamana Gold Inc. equity holders, refer to the Financial highlights section below.
Capital Allocation Highlights:
•The Company has a conservative capital structure that provides for the focus on its capital allocation priorities including: the development, expansion, and exploration of prioritized low capital cost growth projects; and the return of capital to shareholders. The details of those priorities are as follows:
◦Development, expansion and exploration are self-funding with modest and well sequenced growth capital projects including:
▪Wasamac, and the positive development decision announced in mid-2021 for this wholly owned project. Capital costs for Wasamac are not expected to be incurred until 2025, in the meantime the Company will continue to increase cash balances, some of which will be earmarked for project construction, to fully fund the project;
▪Development of the Odyssey underground project at Canadian Malartic, where the cash flow derived from initial gold production during the ramp-up phase will fund development of the lower zones;
▪The Jacobina phased plant expansion, which is expected to have a modest $15 million to $20 million capital requirement;
▪Advancement of the MARA copper/gold project through feasibility and permitting;
▪Determining the merits of the advancement of the Suyai project, in collaboration with our partner, and;
▪The generative exploration portfolio.
◦Strengthening Return of Capital to Shareholders
▪As part of the Company's progressive approach to its dividend policy and returns to shareholders, an increased quarterly dividend of $0.03 per share (annual $0.12 per share) was approved during the second quarter of 2021, representing the sixth dividend increase since the second quarter of 2019, for a cumulative increase of 500%.
▪On July 29, 2021, the Company announced a normal-course issuer bid (“NCIB”) to purchase up to 48,321,676 common shares of the Company, representing up to 5% of the Company’s then current issued and outstanding common shares, in open-market transactions through the facilities of the Toronto Stock Exchange, the New York Stock Exchange and alternative Canadian trading systems. The Company believes that from time to time the market price of its common shares does not represent their full value and growth prospects and views purchases of common shares as an attractive investment comparable to its investments in its portfolio of exploration and development stage assets. Since the commencement of the NCIB in July, the Company has repurchased, and subsequently cancelled, a total of 6,672,628 common shares for approximately C$35.6 million.
▪For further information on the Company's approach to maximizing cash returns to shareholders, refer to Section 2: Core Business, Strategy and Outlook.
◦Strengthening the Company's Financial Position, Improving Financial Resilience and Increasing Financial Flexibility
▪Yamana believes that a strong financial position and financial resilience also requires a manageable debt maturity profile. During the third quarter, the Company took advantage of market conditions to improve the terms of its outstanding notes by extending maturity and reducing carrying costs, by completing an offering of $500 million aggregate principal amount of its 2.630% Senior Notes due August 15, 2031. The Senior 2031 Notes are unsecured, senior obligations of Yamana and are unconditionally guaranteed by certain of Yamana’s subsidiaries that are also guarantors under Yamana’s credit facility.
▪Yamana used the net proceeds from the offering, together with cash on hand, to fund the redemptions of its 4.76% Series C Senior Notes due 2022, its 4.91% Series D Senior Notes due 2024, its 4.78% Series B Senior Notes due 2023 and its 4.950% Senior Notes due 2024.
▪The completion of the offering of the Senior 2031 Notes and the subsequent redemption of the shorter-term maturity notes represents the culmination of significant debt reduction efforts initiated in 2019. Yamana’s outstanding gross debt was reduced by $222.1 million during the year to $772.8 million, which compares to $1.85 billion outstanding in the second quarter of 2019.
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▪Interest on the Senior 2031 Notes is set at 2.630% as compared to a weighted average interest of 4.83% for the existing notes, which reduces the Company’s annual interest carrying charges by approximately $21.6 million per annum compared to the second quarter of 2021, or roughly $60 million per annum lower compared to the second quarter of 2019.
Strategic Developments, Construction Developments and Advanced Stage Projects:
•Positive Development Decision and Positive Study Results on the Wasamac Project, Quebec
◦During the second half of the year the Company made a positive development decision on its wholly owned Wasamac project in the Abitibi-Témiscamingue Region of Quebec, Canada, purchased early in 2021. Wasamac solidifies the Company’s long-term growth profile with a top-tier gold project in a region where Yamana has deep operational and technical expertise and experience. Yamana’s average annual gold production in Quebec, including production from Wasamac and the Odyssey underground at Canadian Malartic, has the potential to increase to approximately 500,000 ounces by 2028, and continue at this level through 2041.
◦Yamana expects to receive all permits and certificates of authorization required for project construction by the third quarter of 2024. Construction time to processing plant commissioning is estimated at two and a half years, with the underground crusher and conveyor system scheduled for commissioning six months later. First gold production is scheduled for the fourth quarter of 2026, with commercial production planned for the fourth quarter of 2027, however, the Company has already identified opportunities to accelerate the production ramp-up and decrease the processing plant construction period, which would improve timing significantly over the feasibility study's base case production profile. As previously disclosed, the initial capital cost is expected to be relatively modest for a 7,000 tpd underground operation, at approximately $416 million.
◦Exploration drilling at Wasamac in the fourth quarter continued to deliver promising results. On December 1, 2021, the Company issued the press release “Yamana Gold Announces the Discovery of New Mineralized Zones at Wasamac and Provides an Update on Its Growth Projects”, which included drill results south of the Wildcat zone which intersected two new mineralized zones, referred to as South Wildcat. These results demonstrate the excellent exploration potential and opportunity to further grow the mineral inventory and are expected to support a production platform of 200,000 ounces per year with AISC(1) below $850 per ounce over a mine life of at least 15 years. An exploration budget of $10.0 million is planned for 2022. This production level would significantly improve the approved development plan of an average of 169,000 ounces per year over a mine life of 10 years, thereby meaningfully increasing overall value.
◦The Company has decided to advance the bulk sample permitting process for Wasamac and expects to obtain the required approvals in the first quarter of 2023. The bulk sample permit would allow construction to commence on the ramp, enabling earlier access to the deposit to increase the level of confidence in metallurgical and geotechnical assumptions and optimize the processing flow sheet and mining sequence. Construction on surface facilities to support the ramp development activity and associated environmental requirements would also advance.
•Canadian Malartic Underground Construction Decision; Drilling Identifies A Potentially Significant Extension To The East Gouldie Zone
◦Technical study results were obtained in early 2021, and the Company and its partner made a positive construction decision of the Odyssey project at Canadian Malartic. A National Instrument ("NI") 43-101 technical report completed in March 2021 included a full summary of the Odyssey underground project and demonstrated robust economics, a significant increase in mineral resources, first production from the Odyssey South deposit expected in 2023, and a mine life extension to at least 2039. As Canadian Malartic transitions from open pit to underground mining, underground production will offset a significant portion of the corresponding decline in open pit production. On a 100% basis, production from open pit mining from 2021 through 2028 is expected to be approximately 3.9 million ounces; the Odyssey underground mine plan supports annual gold production of 500,000 to 600,000 ounces when fully ramped up on a 100% basis. Furthermore, the Odyssey underground mine plan currently only includes about half of the project’s 2.4 million ounces of Indicated Mineral Resources and 13.2 million ounces of Inferred Mineral Resources (on a 100% basis). Further upside from grade improvements and underground mine life extensions are expected to be realized through infill drilling to improve geological confidence, exploration drilling to extend known deposits and make new discoveries and engineering efforts, especially close to historical underground excavations and at depth at East Malartic.
◦The project advanced significantly in 2021, with several milestones achieved in the fourth quarter. The project continues to be on budget, and on schedule. In October, the concrete pour to construct the 93-metre-tall headframe was completed on schedule, in preparation for shaft sinking slated to begin in the fourth quarter of 2022. Structural steel installation inside the headframe and construction of the fresh air intake is ongoing. The
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production shaft will be 6.5 metres in diameter and 1,800 metres deep, with the first of two loading stations at 1,135 metres below surface. The sinking hoist and auxiliary hoist are expected to be delivered mid-2022.
◦In parallel, underground development is advancing according to plan and, as of the end of 2021, the ramp from surface to the upper zones has reached the elevation of the third production level and the base of the first stoping horizon.
◦Underground development rates increased in the fourth quarter of 2021 to approximately 400 metres per month with the opening of additional headings and implementation of automated scoops to operate between shifts, achieving a total of 2,081 linear metres for the year. Development rates are planned to increase further in 2022 with the addition of the Canadian Malartic development crews.
◦The first development jumbo drill is scheduled to be delivered in February and, as an employer of choice in the Abitibi, the Odyssey project is successfully building a highly skilled team. Priority will continue to be placed on the main ramp and also the level 16 exploration drift for infill drilling of the Odyssey South and Internal zones. The first underground ore from Odyssey South is on track to be processed through the existing Canadian Malartic plant in early 2023.
◦Construction of surface infrastructure is advancing on schedule with critical preparation works completed in the fourth quarter to allow construction to continue as planned throughout the winter. Construction of the surface workshop, warehouse and compressor buildings are ongoing and construction of the paste fill plant is scheduled to commence in February. Most long-lead items have been secured.
◦Decree amendment and the mining lease process continue to be on target for the first quarter of 2022 and fourth quarter of 2022 respectively.
•Jacobina Processing Capacity Optimization and Expansion
◦The Company’s expansion strategy at Jacobina is well advanced and the Company anticipates that the mine will be a multi-decade, low-cost operation. The Phase 2 expansion is progressing ahead of schedule and the mine is now expected to achieve the Phase 2 throughput objective approximately one year ahead of schedule, although higher throughput will be supported by stockpiles during the year. During the fourth quarter, Jacobina received the expansion permit, allowing throughput to increase to 10,000 tpd, as announced in the December 6 press release “Yamana Gold Receives Permit at Jacobina, Initiating Ramp Up of Phase 2 Expansion, Expects Fourth Quarter Company Wide Production to Exceed 270,000 GEO With Costs Tracking to Be the Lowest of the Year”. Receipt of the permit not only marks a significant milestone in the Phase 2 ramp up to 230,000 ounces of gold per year, but also facilitates the future Phase 3 expansion to increase production up to 270,000 ounces per year.
◦Engineering for the Phase 3 expansion to 10,000 tpd will advance in parallel with the Phase 2 expansion, and the processing model will continue to be updated to integrate operational data from Phase 2, with a feasibility study for Phase 3 scheduled for completion in 2023.
◦The Company is further evaluating the strategic options and direction related to Jacobina and the significant exploration that is available along the greenstone belt which hosts the mine. Jacobina is being envisioned as a complex of multiple mines, and more emphasis is being placed on regional and generative exploration, to work towards the strategic plan of Jacobina being a 400,000 ounce-plus mining complex.
◦The Jacobina mine is part of the Jacobina district, for which geological evidence and tectonic reconstruction suggest strong affinities with similar gold districts in West and South Africa, which host exceptionally large gold deposits, including those of the prolific Witwatersrand Basin and the Tarkwa mine. Gold mineralization at Jacobina is hosted by the Serra do Corrego Formation, preserved within the Jacobina belt, for a strike length of over ninety kilometers. The mine complex consists of six mining areas exploiting economic mineralization within a nine-kilometer long mineralized belt extending from João Belo in the south to Canavieiras Norte in the north. As at December 31, 2021, past gold production from the mine complex was well over two million ounces, with mineral reserves of 2.94 million ounces of gold and total mineral resources of approximately 5.7 million ounces of gold, indicating the world class size of the current known deposit. Since 2019, the Company has started systematic exploration of its 77,800 hectare land package that covers 155 kilometers of exploration potential along the north-south trending belt. This work has defined a fourteen-kilometer long belt of gold-bearing conglomerate located north of the mine complex and has also extended the known mineralized reefs south of João Belo in a continuous area extending 2,200 metres south of the limits of the João Belo mine. Further areas have been identified both to the north and further south during reconnaissance exploration programs. Work will continue to define mineralized reefs exposed on surface and follow up with widely spaced drill testing targeting
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both extensions of the mine complex and new standalone mine targets. Consequently, the Company sees significant opportunities to grow its regional presence and continue to build the world-class Jacobina Complex.
•Cerro Moro Scalable Plant and Heap Leaching Upside Opportunities
◦During the fourth quarter, Yamana advanced the plant expansion study with a trade-off of various comminution circuit configurations to optimize the expansion processing flow sheet. Similar to the approach that has proven successful at Jacobina, the Company is considering a low-risk, phased expansion for Cerro Moro with quick payback from the initial phase used to fund subsequent phases. As such, the Company is considering using fine screens instead of cyclones for classification to improve the efficiency of the existing ball mill. Combined with a slightly coarser grind size, this initial phase is expected to increase throughput to at least 1,500 tpd, a 40% to 50% increase in capacity, without impacting gold and silver recoveries. The incremental capacity could be used for processing of lower grade mineralization, which is expected to increase annual gold and silver production and reduce unit processing and G&A operating costs. Preliminary analysis based on current operating data indicates that the existing crushing and flotation circuits are adequate for the higher throughput rate and reconfiguration of the leaching circuit could achieve the target throughput without requiring additional leach tanks. Upgrades to the concentrate thickener, clarifying filters, flocculant make-up system, and pumping would likely be required. The capital cost of this initial phase is estimated at a modest $15 million to $20 million dollars. Many of the upgrades in phase 1 expansion would be sufficient for a second expansion phase to increase plant throughput to approximately 2,200 tpd, double the existing capacity, further increasing production and reducing operating unit costs. The Company is currently evaluating two options for phase 2 expansion, the addition of a high pressure grinding rolls ("HPGR") unit before the existing ball mill or the addition of a regrind unit. An expansion of the flotation circuit would also be required. The selected option will depend on the results of testwork that is currently underway and expected to be completed by the end of the first quarter, after which cost estimates and economic evaluation will be completed. The Company will advance the selected phase 1 and phase 2 expansion options to a pre-feasibility study level, expected for completion in early 2023.
◦Positive exploration results achieved throughout 2021 successfully replaced depletion of mineral reserves for the first time, as reflected in increased mineral reserves and mineral resources at year-end, turning the corner for the operation. Significantly, the expansion of higher-grade veins, both within the core mine at Zoe and Martina, and outside the core mine at Naty, extends the Cerro Moro mine life at the current gold equivalent feed grade and existing throughput rate of approximately 1,100 tonnes per day. Additional high-grade targets identified in 2021 provide a pipeline of opportunities for continued mineral reserves replacement going forward which supports the plant expansion opportunity. Lastly, at a higher level of throughput, the Company may be able to create a greater inventory of mineral resources, focused on a balance between high grade and more mineral resources, rather than grade alone.
◦In parallel, a technical study on the potential heap leach project is underway following promising results from metallurgical testing conducted in 2021. A four-month cyanide column leach test program was conducted on eight samples with gold grades of 0.71 to 3.22 g/t. and at three different sizes of feed materials, -25 mm, -19 mm and -9.5 mm. The results indicate good potential for leaching of both oxidized near-surface vein material, zones with hypogene oxides (hematite) and some low sulphide gold-bearing veins, with extractions from column leaching varying from 32.5% to 96.9%, averaging 68.6%. Gold recoveries at the Domos La Union and Michelle zones were particularly impressive, averaging 85.6% from the four samples. As a result, exploration is focusing on these zones, with an objective of defining a heap leachable inventory of 5 million tonnes. Conceptual engineering for a 5,000 tpd heap leach operation commenced in the fourth quarter. A conventional heap leach configuration is envisaged with three stages of crushing to a crushed size P80 of 12.5 mm, followed by agglomeration and retreat conveyor stacking in a multiple lift, single use pad with a design capacity of approximately 14 million tonnes. The leach pad, solution storage ponds, and Merrill-Crowe plant are conceptually planned to be located approximately 2 kilometres east of the current tailings storage facility. Average feed grade is estimated at approximately 1.0 to 1.4 g/t of gold, adding 45,000 to 65,000 ounces of gold production per year in addition to gold and silver production from the existing processing plant. Conceptual capital and operating cost estimation is expected to be completed in the second quarter, and an initial mineral inventory estimate, based on results from 2021 drilling, is planned for mid-2022.
◦As Cerro Moro’s mineral inventory increases, the Company will evaluate its options for alternative sources of power, which include a connection to the grid and wind power. Both options are expected to improve costs and further reduce GHG emissions, thereby accelerating the achievement of the Company’s carbon emissions reduction goal. This area of southern Argentina is one of the most prospective areas in the world for wind-based energy generation; the Company’s third-party process to evaluate wind power indicates there should be a sufficient and sustainable supply of power. The results of the alternative power analysis will be considered in the plant expansion pre-feasibility and heap leach studies to explore synergies between the projects. Based on preliminary analysis, the Company believes that the conversion of approximately twenty-five per cent of Cerro
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Moro's power sources to wind would significantly contribute to the carbon reduction goals of the Company to achieve net zero emissions.
◦The objective at Cerro Moro is to create a sustainable ten-years of production of at least 160,000 GEO(2) per year, and up to 200,000 GEO(2) per year. If the Company successfully develops both the plant expansion and heap leach projects, which represent significant upside opportunities, along with conversion of the exploration targets to mineral resources, Cerro Moro could produce at least 200,000 GEO(2) per year. This upside would be beyond the current ten-year outlook that assumes Cerro Moro as a 150,000 to 165,000 GEO(2) per year operation, which is expected to be sustainable from mineral reserves mine life, ongoing exploration successes and mineral reserve replacement.
•MARA Project Advances
◦The MARA Project represents a significant strategic value opportunity and a solid development and growth project. The Company intends to pursue all available avenues to continue to advance and unlock its value through its controlling interest while also considering strategic alternatives that could unlock significant value along the way. During the last year, several proposals were presented to the Company for its interest in MARA and, after consideration, the board determined that any strategic initiatives will be considered closer to the completion of the feasibility study and application for permitting later this year as the certainty of the project from these events is expected to create more value for the project. The pending feasibility study, which is being overseen by the Technical Committee comprised of members of the three Companies, will provide updated mineral reserves, production and project capital cost estimates. MARA full feasibility study results and completion of the Environmental and Social Impact Assessment ("ESIA") are expected in 2022, however a considerable amount of information in the pre-feasibility study is already at feasibility study level as a result of the Integration.
◦Work during 2021 focused on advancing the feasibility study engineering, mine design and planning, metallurgical and geotechnical drilling campaigns and field work at site. MARA has also been advancing baseline social and environmental studies, as well as permitting and working with local stakeholders. During 2021, field work progressed well with the ongoing drilling campaign completing more than 50% of the drill holes planned, totaling 6,190 meters. All the geometallurgical and geotechnical drill holes in the pit area have been completed, as well as extensive field surveys and technical assessments from different engineering disciplines. Preliminary results are positive and aligned with the expected parameters, confirming grade distribution on existing models. The field work plan continues, with the drilling campaign now covering the Agua Rica infrastructure and is expected to be completed by mid-2022.
◦MARA is the combined project comprised of the Agua Rica site, Alumbrera site as well as the Alumbrera plant and ancillary buildings and facilities, and will rely on processing ore from the Agua Rica mine at the Alumbrera plant. The MARA Joint Venture is held by the Company (56.25%), Glencore International AG (25%) and Newmont Corporation (18.75%). The project design minimizes the environmental footprint of the project incorporating the input of local stakeholders. MARA will be a multi-decade, low cost copper-gold operation with annual production of 556 million pounds of copper equivalent during the first ten years of production, and life-of-mine annual production of 469 million pounds of copper equivalent on a 100% basis. MARA will be among the top 25 copper producers in the world when in production, and one of the lowest capital intensity of the comparable projects globally.
•Minera Florida EISA Submission
◦Consistent with the 10-year outlook, the plant de-bottlenecking study is advancing on schedule, with the objective to increase throughput from 74,500 to 100,000 tonnes per month, thereby increasing annual gold production to approximately 120,000 ounces. The Company submitted the ESIA for the expansion during the fourth quarter, with the timeline expected to be approximately 18 months for approval, with another 12 months to receive sectoral permits. With the expected permitting timelines, the mine could begin operating at a planned 100,000 tonnes per month level in 2025. Preliminary studies indicate that the capacity of the processing plant can be increased to approximately 90,000 tonnes per month with incremental adjustments. An upgrade of the crushing circuit would be required to achieve 100,000 tonnes per month.
For full details on the aforementioned updates, please refer to Section 5: Construction, Development and Other Initiatives.
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Mineral Reserve and Mineral Resource Highlights:
•The Company successfully replaced gold mineral reserves depleted during the year at each of its wholly-owned operations, in addition to increasing mineral resources and identifying new areas of mineralization at all the mines, highlighting the sustainability and longevity of its operations.
•As at December 31, 2021, the Company reports 13.7 million ounces of gold mineral reserves, 111 million ounces of silver mineral reserves, and 6.7 billion pounds of copper mineral reserves, relatively unchanged from the prior year. Further, largely consistent with the prior year, the Company reports measured and indicated mineral resources of 14.5 million ounces of gold, 51 million ounces of silver, and 1.4 billion pounds of copper exclusive of mineral reserves and inferred mineral resources of 15.5 million ounces of gold, 63 million ounces of silver, and 2.13 billion pounds of copper.
For full details on the aforementioned updates, please refer to the February 8, 2022 press release "Yamana Gold Reports Updated Mineral Reserves and Mineral Resources Underpinning Increasing Mine Lives Across Its Portfolio" and to Section 6. Mineral Reserve and Mineral Resource Estimates of this MD&A.
OPERATING
Fourth quarter GEO production of 281,388 ounces significantly exceeded both planned production of 270,000 GEO and prior year fourth quarter production of 255,361 GEO, as anticipated and guided. Standout GEO production performances were delivered by Canadian Malartic, Jacobina, El Peñón, and Cerro Moro, all of which exceeded plan. GEO is calculated as the sum of gold ounces and the gold equivalent of silver ounces using a ratio of 77.28 for the three months ended December 31, 2021, and 76.82 for the three months ended December 31, 2020. GEO calculations are based on an average market gold to silver price ratio for the relevant period.
Fourth quarter total cost of sales, cash costs(1), and AISC(1) on a per GEO basis were $1,091, $642, and $962 respectively, and better than the prior year comparative period costs and third quarter costs per GEO. In particular, the Company recorded standout December performance at several mines with per GEO costs for those mines being the lowest month of the quarter by a considerable margin.
GEO production of 1,011,180 ounces during the year ended December 31, 2021 exceeded the guided 1,000,000 ounces and greatly exceeded prior year production of 901,155 ounces. The standout yearly production was underpinned by strong momentum at Canadian Malartic, Jacobina, El Peñón, and Cerro Moro, all of which exceeded guidance, with Minera Florida in line with the previously guided range. GEO is calculated as the sum of gold ounces and the gold equivalent of silver ounces using a ratio of 72.55 for the year ended December 31, 2021, and 88.86 for the year ended December 31, 2020. GEO calculations are based on an average market gold to silver price ratio for the relevant period.
For the year ended December 31, 2021, total cost of sales, cash costs(1), and AISC(1) on a per GEO basis were $1,132, $689, and $1,030 respectively, which are lower than the comparative period. These costs include inflation impacts of approximately $20 per GEO, which were not included in original guidance, as previously disclosed, and the excluding those the Company was within its guidance range for the year.
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| | | | | | | | | | | | | | |
| For the three months ended December 31, | For the year ended December 31, |
| 2021 | | 2020 | | 2021 | | 2020 | |
GEO(2) | | | | |
Production(5) | 281,388 | 255,361 | 1,011,180 | 901,155 |
Sales(5) | 280,409 | 246,955 | 1,009,262 | 876,520 |
Per GEO sold data | | | | |
Total cost of sales | $ | 1,091 | $ | 1,131 | $ | 1,132 | $ | 1,151 |
Cash costs(1) | $ | 642 | $ | 675 | $ | 689 | $ | 701 |
AISC(1) | $ | 962 | $ | 1,076 | $ | 1,030 | $ | 1,080 |
| Gold | | | | |
Production (ounces)(5) | 240,718 | | 221,659 | 884,793 | | 779,810 | |
Sales (ounces)(5) | 242,486 | | 213,439 | 885,293 | | 754,970 | |
| Revenue per ounce | $ | 1,796 | | $ | 1,875 | | $ | 1,799 | | $ | 1,777 | |
Average realized price per ounce(1) | $ | 1,796 | | $ | 1,875 | | $ | 1,799 | | $ | 1,777 | |
Average market price per ounce* | $ | 1,795 | | $ | 1,873 | | $ | 1,800 | | $ | 1,770 | |
| Silver | | | | |
Production (ounces) | 3,142,781 | | 2,586,662 | | 9,169,289 | | 10,365,662 | |
Sales (ounces)** | 2,937,805 | | 2,563,166 | | 8,976,269 | | 10,382,085 | |
| Revenue per ounce | $ | 23.24 | | $ | 24.02 | | $ | 24.85 | | $ | 21.11 | |
Average realized price per ounce(1) | $ | 23.24 | | $ | 24.02 | | $ | 24.59 | | $ | 20.93 | |
Average market price per ounce* | $ | 23.32 | | $ | 24.39 | | $ | 25.17 | | $ | 20.51 | |
* Source of information: Bloomberg.
** Included in the three months and year ended December 31, 2021 silver sales ounces are 228,553 and 1,024,883 ounces respectively, delivered under the silver streaming arrangement (2020: 268,620 and 1,001,135 ounces, respectively).
HEALTH, SAFETY, AND SUSTAINABLE DEVELOPMENT
Health, safety and sustainable development ("HSSD") approaches are guided by the Company's corporate-level standards and programs; these are integrated into all operations, development projects, and exploration activities. Yamana recognizes the importance of striving to meet and exceed its HSSD responsibilities and objectives, and the role these efforts have in delivering on the overall objective of creating value for all stakeholders. Since early 2020, one of the most important considerations, in addition to the on-going priorities of safeguarding worker health and safety, protecting the environment and building privilege to operate with host communities has been the Company's response to the global COVID-19 pandemic.
Through the Company's active responses to COVID-19, the Company has demonstrated its commitment to environmental, social and governance ("ESG") excellence in action and resilience. Consistent with the mission to mine precious metals profitably and responsibly, the Company is prepared to forego production to safeguard its efforts to promote health, safety and well-being of its workforce and host communities.
Since the emergence of the global COVID-19 pandemic, the Company’s Corporate Crisis Management team, the members of which are its senior executives and operational leaders, has taken quick and decisive action to respond to the pandemic during a fluid and fast-moving environment. The Company has adjusted and managed its business effectively during this period, mitigating risks and further advancing opportunities, while ensuring the health and safety of employees, contractors and host communities.
The Company responded rapidly to the COVID-19 pandemic and has been successful in limiting the spread of COVID-19. There have been confirmed worker cases at sites and in the communities surrounding the Company's operations; with the implementation of prevention, monitoring, testing, quarantine and contact tracing protocols, the Company has been able to isolate incidents of infection and limit their spread. Overall, the number of infected persons is not significant at sites and the Company continues to monitor the recoveries of those infected. In the fourth quarter of 2021 host countries began to experience significant increases in the number of reported COVID-19 cases, caused by the rise of the Omicron variant. There has been a corresponding increase in cases of COVID-19 at our operations; the number of active cases at the end of 2021 was not significant, thanks to on-going prevention and control efforts, coupled with fully-vaccinated rates approaching 100 percent for employees and contractors at the Company’s wholly-owned operations and exploration projects. Confirmed infected people are being isolated successfully with no operational impact. The Company is also seeing an uptick in third vaccine dose administration, particularly in Chile.
The Company continues to actively monitor Omicron-related caseloads and healthcare system capacity in South America, government responses, vaccination availability and to work closely with local and regional governments to ensure prevention procedures are adhered to. The Company is also continuing our offers of healthcare and other assistance which, in some cases,
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includes vaccination assistance to local governments, if required. Staff at offices continue to primarily work remotely and the Company is undergoing a phased re-opening of offices, in line with government mandates, while monitoring COVID-19 caseloads and vaccination rates.
The Company is committed to supporting local health services in vaccination efforts and is working to promote vaccination of employees and host communities where possible. The Company continues working with local governments and healthcare services to build capacity to manage vaccination logistics now that vaccines have become more available in the locations where we operate.
The Company continues to manage our business in a way that respects, and is mindful of, the impact that COVID-19 has had and could have on host communities.
The Company successfully completed the first year of its board-approved climate action strategy by establishing the emissions baseline year (2019) and evaluating of three science-based temperature targets; a 2°C scenario, a well-below 2°C scenario and a 1.5°C scenario compared to pre-industrial levels and the abatement pathways required to reach each scenario by 2030. As a result of the Company's work it increased its climate ambition by committing to a 1.5°C scenario compared to pre-industrial levels; this is the most challenging target assessed and the recognized gold standard to help make sure the objectives of the Paris climate accord are achieved. Preliminary analysis indicates that the Company needs to achieve an additional reduction of 13,000 tonnes CO2 equivalent before 2030 and is well positioned to achieve this reduction of approximately 4% to 5% annually with modest capital investments that will not have significant impacts on costs. In fact, preliminary analysis indicates that one potential emissions reduction project could actually lower costs. The Company's work in 2022 will involve further study of the identified projects to refine schedules and cost estimates. The Company is proud of the work undertaken in 2021 and looks forward to continuing its journey to net zero 2050. The Company is on track to produce approximately 85% of its GEO(2), from its wholly-owned mines, using renewable energy by the end of 2022. Yamana will continue to assess opportunities to further improve GHG abatement efforts, including adoption of evolving technologies for its new mines.
Other recent highlights relating to HSSD are as follows:
•The Company's Total Recordable Injury Rate in 2021 was 0.73* for our wholly-owned operations and exploration projects. The change from the full year 2020 results primarily reflect an increase in low-energy incidents. In response, the Company initiated campaigns across all operations focused on reducing the most common injuries that have occurred in 2021.
•As of February 11, 2022 more than 99%(7) of the Company's employees and contractors at its wholly-owned operations and exploration projects have received at least one dose of a COVID-19 vaccine and more than 94%(7) have received two doses. Approximately 55%(7) of workers have received a third dose booster shot.
•The Company successfully completed the second year of a three-year implementation of the Mining Association of Canada’s Towards Sustainable Mining program and the World Gold Council’s Responsible Gold Mining Principles. The results of self-assessments confirm that significant progress was achieved in 2021 and the Company is well positioned to achieve conformance by Year 3.
•In December the MARA project was recognized at the Silver and Gold Summit in Buenos Aires for their public participation program and efforts to engage and introduce communities to mining.
•With heavy rainfall and flooding affecting certain parts of the Bahia State of Brazil, the Company initiated a community support campaign making various donations to municipalities that have been most impacted.
* Calculated on a 200,000 exposure hours basis including employees and contractors. This rate is exclusive of Canadian Malartic, in which we hold a 50% interest.
FINANCIAL
Net earnings(3) for the three months ended December 31, 2021 were $109.7 million or $0.11 per share basic and diluted, compared to net earnings(3) of $103.0 million or $0.11 per share basic and diluted for the three months ended December 31, 2020. Net earnings(3) for the three months ended December 31, 2021 were positively impacted by $8.2 million of items that management believes may not be reflective of current and ongoing operations attributable to Yamana Gold Inc. equity holders and which may be used to adjust or reconcile input models in consensus estimates.
Net earnings(3) for the year ended December 31, 2021 were $147.5 million or $0.15 per share basic and diluted, compared to net earnings(3) of $203.6 million or $0.21 per share basic and diluted for the year ended December 31, 2020. Net earnings(3) for the year ended December 31, 2021 were negatively impacted by $161.6 million of items that management believes may not be reflective of current and ongoing operations attributable to Yamana Gold Inc. equity holders and which may be used to adjust or reconcile input models in consensus estimates.
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| | | | | | | | | | | | | | |
| For the three months ended December 31, | For the year ended December 31, |
| (In millions of US Dollars; except per share amounts) | 2021 | | 2020 | | 2021 | | 2020 | |
Net foreign exchange (gains) losses(3) | $ | (8.9) | | $ | 21.9 | | $ | (12.2) | | $ | 21.6 | |
| Share-based payments/mark-to-market of deferred share units | 2.2 | | 3.4 | | 3.2 | | 31.5 | |
Mark-to-market losses (gains) on derivative contracts,
investments and other assets and liabilities | 0.2 | | (5.8) | | 0.3 | | (6.9) | |
| Gain on sale of subsidiaries, investments and other assets | — | | (3.0) | | — | | (1.4) | |
| Gain on discontinuation of the equity method of accounting | — | | — | | (10.2) | | (21.3) | |
Temporary suspension, standby and other incremental
COVID-19 costs | 8.7 | | 9.2 | | 37.4 | | 40.5 | |
| Net pre-tax impairment reversal of mining properties | — | | (191.0) | | — | | (191.0) | |
| Early note redemption premium | — | | — | | 53.3 | | — | |
Other provisions, write-downs and adjustments*(3) | (0.1) | | 6.7 | | 9.9 | | 17.9 | |
| Non-cash tax on unrealized foreign exchange losses | 1.7 | | 1.8 | | 1.9 | | 52.8 | |
Income tax effect of adjustments(3) | (1.4) | | (2.4) | | (19.0) | | (19.7) | |
One-time tax adjustments(3) | (10.6) | | 163.9 | | 97.0 | | 183.6 | |
Total adjustments - (decrease)/increase to net earnings(3) | $ | (8.2) | | $ | 4.7 | | $ | 161.6 | | $ | 107.6 | |
Total adjustments - (decrease)/increase to net earnings(3) per share | $ | (0.01) | | $ | — | | $ | 0.17 | | $ | 0.11 | |
* 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.
COVID-19 costs are disclosed as part of mine operating earnings within temporary suspension, standby and other incremental COVID-19 costs. The Company anticipates that temporary suspension and standby costs will continue to be minimized prospectively. With increasing numbers of the population receiving the vaccine, the Company expects to see increasing immunity and corresponding decreasing caseloads. As of February 11, 2022 more than 99%(7) of the Company's employees and contractors at its wholly-owned operations and exploration projects have received at least one dose of a COVID-19 vaccine and more than 94%(7) have received two doses. Approximately 55%(7) of workers have received a third dose booster shot. This will allow for a gradual easing of our COVID-19-related controls and a reduction in associated costs. However, there remains considerable uncertainty relating to COVID-19 which may lead to costs remaining at these levels or increasing rather than decreasing as currently contemplated. The breakdown of the periodic expenditures are as follows:
| | | | | | | | | | | | | | |
| For the three months ended December 31, | For the year ended December 31, |
(In millions of US Dollars; unless otherwise noted) | 2021 | | 2020 | | 2021 | | 2020 | |
| Canadian Malartic | $ | 0.6 | | $ | 0.8 | | $ | 2.5 | | $ | 4.5 | |
| Jacobina | 0.2 | | 0.5 | | 1.2 | | 2.0 | |
| Cerro Moro | 3.2 | | 4.7 | | 20.8 | | 19.2 | |
| El Peñón | 1.0 | | 2.0 | | 4.9 | | 7.0 | |
| Minera Florida* | 3.7 | | 1.2 | | 8.0 | | 7.7 | |
| Other Regional Costs | — | | — | | — | | 0.1 | |
| Total temporary suspension, standby and other incremental COVID-19 costs | $ | 8.7 | | $ | 9.2 | | $ | 37.4 | | $ | 40.5 | |
* This balance includes approximately $3.5 million of costs related temporary suspensions during the three months and year ended December 31, 2021, respectively (2020: $nil), related to a strike that began in December and ended in January, when the Company entered into a long term collective bargaining agreement with its unions.
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Summary of Financial Results | | | | | | | | | | | | | | | | | |
| For the three months ended December 31, | For the year ended December 31, |
(In millions of US Dollars; unless otherwise noted) | 2021 | | 2020 | | 2021 | | 2020 | | 2019 | |
Revenue | $ | 503.8 | | $ | 461.8 | | $ | 1,815.4 | | $ | 1,561.0 | | $ | 1,612.2 | |
Cost of sales excluding DDA | (180.0) | | (166.8) | | (695.0) | | (614.1) | | (782.8) | |
Gross margin excluding DDA | $ | 323.8 | | $ | 295.0 | | $ | 1,120.4 | | $ | 946.9 | | $ | 829.4 | |
Depletion, depreciation and amortization ("DDA") | (125.7) | | (112.5) | | (447.9) | | (395.0) | | (471.7) | |
Net Impairment reversal on mining properties | — | | 191.0 | | — | | 191.0 | | — | |
Temporary suspension, standby and other incremental COVID-19 costs | (8.7) | | (9.2) | | (37.4) | | (40.5) | | — | |
Mine operating earnings | $ | 189.4 | | $ | 364.3 | | $ | 635.1 | | $ | 702.4 | | $ | 357.7 | |
General and administrative | (20.0) | | (23.4) | | (74.8) | | (85.9) | | (79.4) | |
Exploration and evaluation | (6.8) | | (6.0) | | (31.6) | | (15.1) | | (10.3) | |
Share of earnings (loss) of associates | — | | — | | 0.9 | | (1.0) | | (16.3) | |
Other operating expenses, net | (12.1) | | (1.5) | | (37.4) | | (14.6) | | 222.4 | |
| | | | | |
Operating earnings | $ | 150.5 | | $ | 333.4 | | $ | 492.2 | | $ | 585.8 | | $ | 474.1 | |
Finance costs | (15.9) | | (19.3) | | (134.4) | | (77.0) | | (144.2) | |
Other income (costs), net | 14.3 | | (21.6) | | 26.7 | | (18.7) | | (19.6) | |
Earnings before taxes | $ | 148.9 | | $ | 292.5 | | $ | 384.5 | | $ | 490.1 | | $ | 310.3 | |
Income tax expense, net | (44.2) | | (189.5) | | (295.7) | | (286.5) | | (84.7) | |
| Net earnings | $ | 104.7 | | $ | 103.0 | | $ | 88.8 | | $ | 203.6 | | $ | 225.6 | |
| | | | | |
| Attributable to: | | | | | |
| Yamana Gold Inc. equity holders | $ | 109.7 | | $ | 103.0 | | $ | 147.5 | | $ | 203.6 | | $ | 225.6 | |
| Non-controlling Interests | $ | (5.0) | | $ | — | | $ | (58.7) | | $ | — | | $ | — | |
Per share data (Yamana Gold Inc. equity holders) | | | | | |
Net earnings(3) per share - basic and diluted | $ | 0.11 | | $ | 0.11 | | $ | 0.15 | | $ | 0.21 | | $ | 0.24 | |
Dividends declared per share | $ | 0.0300 | | $ | 0.0263 | | $ | 0.1125 | | $ | 0.072 | | $ | 0.030 | |
Dividends paid per share | $ | 0.0300 | | $ | 0.0175 | | $ | 0.1088 | | $ | 0.056 | | $ | 0.025 | |
Weighted average number of common shares outstanding (thousands) | | | | | |
Basic | 961,185 | | 952,435 | | 963,393 | | 951,818 | | 950,266 | |
Diluted | 962,695 | | 954,565 | | 964,932 | | 953,846 | | 951,924 | |
Cash flows | | | | | |
Cash flows from operating activities | $ | 238.2 | | $ | 181.5 | | $ | 742.3 | | $ | 617.8 | | $ | 521.8 | |
Cash flows from operating activities before net change in working capital | $ | 230.8 | | $ | 207.4 | | $ | 784.6 | | $ | 688.7 | | $ | 590.5 | |
Cash flows (used in) from investing activities | $ | (117.5) | | $ | 136.3 | | $ | (399.7) | | $ | 51.4 | | $ | 432.0 | |
Cash flows used in financing activities | $ | (55.7) | | $ | (141.0) | | $ | (467.5) | | $ | (175.9) | | $ | (892.5) | |
Net free cash flow(1) | $ | 188.4 | | $ | 118.9 | | $ | 547.4 | | $ | 455.6 | | $ | 321.5 | |
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Capital Expenditures
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the three months ended December 31, | 2021 | | 2020 | | 2021 | | 2020 | | 2021 | | 2020 | | 2021 | | 2020 | |
| (In millions of US Dollars) | Sustaining | Expansionary | Exploration | Total |
Canadian Malartic(5) | $ | 17.3 | | $ | 18.6 | | $ | 22.7 | | $ | 5.1 | | $ | 4.4 | | $ | 7.0 | | $ | 44.4 | | $ | 30.7 | |
Jacobina | 4.2 | | 5.4 | | 10.5 | | 4.8 | | 1.8 | | 2.0 | | $ | 16.5 | | $ | 12.2 | |
Cerro Moro | 12.4 | | 9.0 | | 0.5 | | 4.4 | | 1.3 | | 3.5 | | $ | 14.2 | | $ | 16.9 | |
El Peñón | 7.1 | | 9.9 | | 1.6 | | 0.5 | | 2.3 | | 4.7 | | $ | 11.0 | | $ | 15.1 | |
Minera Florida | 2.9 | | 4.4 | | 6.3 | | 9.1 | | 3.1 | | 1.8 | | $ | 12.3 | | $ | 15.3 | |
Other | 0.5 | | 0.5 | | 12.4 | | 2.5 | | 6.7 | | 2.0 | | $ | 19.6 | | $ | 5.0 | |
| Total | $ | 44.4 | | $ | 47.8 | | $ | 54.0 | | $ | 26.4 | | $ | 19.6 | | $ | 21.0 | | $ | 118.0 | | $ | 95.2 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the year ended December 31, | 2021 | | 2020 | | 2021 | | 2020 | | 2021 | | 2020 | | 2021 | | 2020 | |
| (In millions of US Dollars) | Sustaining | Expansionary | Exploration | Total |
Canadian Malartic(5) | $ | 69.2 | | $ | 52.5 | | $ | 50.1 | | $ | 12.2 | | $ | 15.7 | | $ | 10.1 | | $ | 135.0 | | $ | 74.8 | |
Jacobina | 14.0 | | 21.6 | | 28.1 | | 15.8 | | 7.2 | | 6.0 | | $ | 49.3 | | $ | 43.4 | |
Cerro Moro | 39.8 | | 29.5 | | 1.2 | | 6.9 | | 5.6 | | 12.5 | | $ | 46.6 | | $ | 48.9 | |
El Peñón | 34.6 | | 31.4 | | 7.8 | | 0.5 | | 15.6 | | 15.9 | | $ | 58.0 | | $ | 47.8 | |
Minera Florida | 15.2 | | 12.6 | | 22.6 | | 19.9 | | 6.5 | | 7.0 | | $ | 44.3 | | $ | 39.5 | |
Other | 0.9 | | 1.7 | | 33.0 | | 11.5 | | 17.5 | | 6.1 | | $ | 51.4 | | $ | 19.3 | |
| Total | $ | 173.7 | | $ | 149.3 | | $ | 142.8 | | $ | 66.8 | | $ | 68.1 | | $ | 57.6 | | $ | 384.6 | | $ | 273.7 | |
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' mining friendly jurisdictions, including Canada, Brazil, Chile and Argentina. The Company is primarily focused on gold, but has exposure to green metals from silver and copper exposure. 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. Yamana has a strong 10-year base case outlook with a sustainable production platform of 1 million GEO(2) per year through 2030, based on proven and probable mineral reserves, high conviction mineral resource and exploration results, and as such, the Company is not reliant on new exploration success to maintain this base case outlook. Production will be underpinned by continued operational success at the Company’s existing operations, which have consistently replaced mineral reserves above depletion.
The Company is listed on the Toronto Stock Exchange (trading symbol "YRI"), the New York Stock Exchange (trading symbol "AUY"), and the London Stock Exchange (trading symbol "AUY").
The Company’s principal mining properties comprise the Jacobina mine in Brazil, the Canadian Malartic mine (50% interest) in Canada, the El Peñón and Minera Florida mines in Chile and the Cerro Moro mine in Argentina. On January 21, 2021 the Company completed the acquisition of the Wasamac property, a high-quality project with a significant mineral reserve and mineral resource base and excellent potential for further expansion, adding to Yamana’s pipeline of organic opportunities, significantly enhancing the Company’s future growth prospects for which a positive development decision has been made during the year. The Company is focused on the regional approach being taken in the Abitibi-Témiscamingue Region of Quebec, Canada, and the similar approach taken in Jacobina, Brazil, to reach a strategic goal of a production platform in the regions of 500,000 and 400,000 ounces, respectively. Additionally, following the finalization of the integration agreement in the fourth quarter of 2020, the Company also owns a 56.25% interest in the MARA Project, a large-scale copper, gold, silver and molybdenum project located in the province of Catamarca, Argentina. For full details on the Wasamac property acquisition and the MARA Project integration agreement, please refer to Section 5: Construction, Development and Other Initiatives.
Over the years, the Company has grown and generated value through strategic acquisitions and portfolio optimizations, and by pursuing organic growth to increase cash flows and unlock value at existing mines and development assets. Looking ahead, the Company’s primary objectives include the following:
•Continued focus and commitment regarding the Company’s high quality operational excellence program, advancing near-term and ongoing optimizations related to production, operating costs, and key performance objectives in health, safety, and sustainable development, generally ESG. Underpinning this performance is our "One Team, One Goal:
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Zero" vision, which reflects the Company's commitment to zero harm to employees, the environment and host communities near its operations.
•Increasing mine life at the Company’s existing operating mines through exploration targeted on the most prospective properties. The Company does not rely exclusively on proven and probable mineral reserves at any point to determine mine life as that would undervalue and misrepresent the potential of its operations. Similarly, the Company does not rely solely on a reserve life index to the exclusion of other measures to determine mine life, as the Company believes there are other considerations that determine mine life; where possible, the Company endeavours to increase mineral reserves early in the mine life, although the Company recognizes that often it is more cost effective and technically efficient to progressively extend mine life as, and when, mine development is advancing. This is particularly true for underground mines and prospects. The Company believes that to rely exclusively at any given point on proven and probable mineral reserves does not give sufficient allowance for discovery of new mineral resources, history of conversion of mineral resources to mineral reserves and exploration potential. For El Peñón and Minera Florida, the Company gives considerable allowance for mine life that is well in excess of mineral reserves, given the aforementioned factors of new discovery of mineral resources, historical conversion of mineral resources to mineral reserves and significant exploration potential.
•Maximizing the overall value of the Company as an enterprise, cash flows and free cash flows, and cash returns on invested capital, first on producing and then non-producing assets. Within the producing portfolio, attention is focused on per share measures related to the growth and quality of mineral reserves and mineral resources for mine life extensions and scope for throughput increases, metal grade and recovery improvements, and cost reductions that are expected to improve margins and cash flows.
•For strategic assets in the portfolio, the focus is to assess the best path to create value for shareholders, including advancing development projects through exploration, technical/financial reviews, studies and optimizations, permitting and community engagement, and/or considering strategic alternatives to realize returns from these strategic assets. This may include developing the assets through a joint venture or other strategic arrangements, or through monetization.
•Disciplined and progressive approach to capital allocation. The Company has a conservative capital structure that provides for the focus on its capital allocation priorities including: the development, expansion, and exploration of prioritized low capital cost growth projects; and the return of capital to shareholders. The details of those priorities are as follows:
◦Development, expansion and exploration self-funding with modest and well sequenced growth capital projects including:
▪Advancement of the Wasamac project, the Odyssey underground project at Canadian Malartic, Jacobina phased expansion, the MARA Project, and along with our partner determining the merits of the advancement of the Suyai Project. Please refer to Section 5: Construction, Development and Other Initiatives for further details on the status and advancement plans for these assets and others.
▪Additionally, advancing the Company’s generative exploration program for the next generation of Yamana mines:
▪Move the Company’s most advanced exploration projects forward;
▪Pursue exploration and drilling programs at highly-prospective, early stage projects in the Company’s existing portfolio;
▪Expand the Company’s exploration portfolio through evaluations and targeted land acquisition.
◦Strengthening Return of Capital to Shareholders:
▪As part of the Company's progressive approach to its dividend policy and returns to shareholders, an increased quarterly dividend of $0.03 per share (annual $0.12 per share) was approved during the second quarter of 2021, representing the sixth dividend increase since the second quarter of 2019, for a cumulative increase of 500%. The Company considers dividends an important component of returns on investment for shareholders, and previously indicated that its policy is that as its cash flows and cash balances increase, as its balance sheet continues to improve, and as debt service decreases, the Company would evaluate further increases of its dividend. While the Company has relied over the last several years on maintaining certain levels of cash on hand to secure payment of the dividend independently of changes in gold price, with cash flow improvements, certainty of modest and manageable annual capital expenses for its growth projects and completion of various definitive studies relating to those projects, the Company has concluded that it is able to fund its dividend at current or substantially lower gold prices. The Company conducts sensitivities on its capital allocations, including ability to fund and pay dividends, at various gold prices as low as $1,350.
▪On July 29, 2021, the Company announced a normal-course issuer bid (“NCIB”) to purchase up to 48,321,676 common shares of the Company, representing up to 5% of the Company’s then current
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issued and outstanding common shares, in open-market transactions through the facilities of the Toronto Stock Exchange, the New York Stock Exchange and alternative Canadian trading systems. The Company believes that from time to time the market price of its common shares does not represent their full value and growth prospects and views purchases of common shares as an attractive investment comparable to its investments in its portfolio of exploration and development stage assets. Since the commencement of the NCIB in July, the Company has repurchased, and subsequently cancelled, a total of 6,672,628 common shares for approximately C$35.6 million.
▪The Company will continue to engage regularly with investors to ensure it is maintaining an optimal balance between the dividend amount payable and dividend sustainability, along with other methods of return of capital to shareholders, such as stock buybacks.
▪Following the Company's initial capital spending and development phase from 2003 to 2006, the Company has consistently paid dividends since 2007, and dividends have aggregated to over $1 billion paid over 14 years.
•Strengthening the Company's Financial Position, Improving Financial Resilience and Increasing Financial Flexibility:
▪Yamana believes that a strong financial position and financial resilience also requires a manageable debt maturity profile. During the third quarter, the Company took advantage of market conditions to improve the terms of its outstanding notes by extending maturity and reducing carrying costs, by completing an offering of $500 million aggregate principal amount of its 2.630% Senior Notes due August 15, 2031. The Senior 2031 Notes are unsecured, senior obligations of Yamana and are unconditionally guaranteed by certain of Yamana’s subsidiaries that are also guarantors under Yamana’s credit facility. Summarized financial information for Yamana Gold Inc. and the guarantor subsidiaries (together, the "Obligor Group") is included in Section 8: Financial Condition and Liquidity.
▪Yamana used the net proceeds from the offering, together with cash on hand, to fund the redemptions of its 4.76% Series C Senior Notes due 2022, its 4.91% Series D Senior Notes due 2024, its 4.78% Series B Senior Notes due 2023 and its 4.950% Senior Notes due 2024.
▪The completion of the offering of the Senior 2031 Notes and the subsequent redemption of the shorter-term maturity notes represents the culmination of significant debt reduction efforts initiated in 2019. Yamana’s outstanding gross debt was reduced by $222.1 million to $772.8 million during the third quarter, which compares to $1.85 billion outstanding in the second quarter of 2019.
Investment and Exploration Strategy
A further primary objective of the Company, although one with an intermediate to longer-term time horizon, is the advancement of its generative exploration program, a key component of Yamana’s overall organic growth strategy, designed to advance the Company’s most prospective properties and lay the foundation for the next generation of Yamana mines. The Company has an extensive exploration portfolio with well-defined exploration prospects and organic growth opportunities in all jurisdictions, with more advanced opportunities in Canada and Brazil, and recently introduced two new projects to the program where ongoing surface exploration has shown promising results: the Falcon project, a Tier 2 project in Santa Cruz, Argentina; and Las Flechas, a Tier 3 project in San Juan, Argentina. The objective of the generative exploration program is to advance at least one project to achieve mineral reserve and mineral resource inventories of at least 1.5 million gold equivalent ounces which the Company considers large enough to support a mine plan with annual gold production of approximately 150,000 ounces for at least eight years.
As noted, the Company is continually reviewing its capital allocation strategy, and exploring options for funding such projects that do not draw on free cash flows. Funding strategies include, but are not limited to, proceeds from the monetization of non-cash producing assets or non-core assets that do not meet the Company's precious metal and scale requirements and, where applicable, flow-through funding arrangements. Funds are allocated to develop promising internal opportunities for organic growth through exploration and provide long term growth.
To assess these opportunities, the Company relies on an experienced local exploration team that operates in its established jurisdictions and other favourable districts in North and South America.
The Company is refocusing its efforts on regional exploration projects, with greater efforts being placed on Jacobina and Lavra Velha, which represent the best opportunities for advancement of the goals of the generative exploration program. Every project in the generative exploration program has had some drilling, with some projects more advanced than others and as an example, Lavra Velha in Brazil. There are a number of significant drill targets on the 55,000-hectare property, and Lavra Velha represents one of the most immediate, shorter-term opportunities to achieve the Company’s stated exploration goals given the mineral resource to date and drilling following the initial mineral resource estimate. Further, Lavra Velha is well-placed to meet the Company’s long-term objectives, as it is a shallow, flat-dipping orebody, making it ideal for open pit mining with a low strip ratio, and oxide mineralization, with potential to be processed as a heap leach operation. Therefore, the project has potential as a low capital cost, low operating cost operation. Additionally, the property hosts higher-grade gold and copper potential, as recently
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demonstrated by positive drilling results at Lavra Velha SW target, and the Company is exploring for Iron Oxide Copper Gold ("IOCG") mineralization. For more details, please refer to Section 7: Exploration.
The Company will also, from time to time, make investments to advance prospective exploration projects and more mature projects where it can provide value-added guidance either from the Company's exploration or technical services groups.
As a complement to the advancement of the internal exploration opportunities, the Company will consider the acquisition of earlier-stage development assets or companies that align with Yamana's objectives for capital allocation and financial results, jurisdiction, geology and operational expertise. Such opportunities will typically be funded through internal resources, meet minimum return levels that far exceed the cost of capital and would meet the Company's minimum requirements to achieve mineral reserve and mineral resource inventories, mine life and per year production rate. Furthermore, preference would be given to geological and operational characteristics where the Company has an identified expertise and excellent opportunities for value enhancement, and where the Company can deploy its corporate knowledge to provide value-added support. As part of its corporate approach, the Company shares information and best practices among its operations. Such opportunities would also extend an existing regional presence or lead to that longer-term objective. Although the Company has an established portfolio of early-to-later-stage organic growth projects, the Company also considers it prudent to consider opportunities to extend regional presences in quality jurisdictions that offer geological and operational synergies and similarities to its current portfolio of assets.
As part of this strategy, on June 21, 2021, the Company acquired the Francoeur, Arntfield and Lac Fortune properties from Globex. This acquisition adds six kilometres of highly prospective strike length for exploration efforts to increase overall resources adjacent to a major asset and to extend the Wasamac mine life.
From time to time, the Company’s strategy includes holding investments in prospective companies. This may be for several reasons such as the disposition of certain assets for shares or in other cases, resulting from an investment for portfolio purposes. The ownership of shares in the Nomad Royalty Company is an example of the former. An investment may also give the Company an opportunity to further evaluate related opportunities. Normally, these investments are held through a cycle; otherwise they are treated as any other portfolio investments. The acquisition by the Company of 24 million shares of Ascot Resources Ltd. ("Ascot") during the second quarter, representing 6.4% of the outstanding shares, for aggregate consideration of $16.5 million is an example of the latter. In line with its investment strategy, the Company also holds interests in other exploration-stage companies in Canada including Quebec and British Columbia, amongst other prominent areas.
Abitibi-Témiscamingue and the province of Quebec, where the Wasamac project is located, represent high-quality regions and jurisdictions for mining which have a long mining pedigree, impressive mining workforces and skilled human capital, and support responsible mining. Furthermore, excellent infrastructure and local and provincial support of mining allows the Company to contain costs, find optimization opportunities, and manage its operations confidently and with an eye on health, safety, environment and community engagement. The focus of the Company in this geographical area is another step in its Canadian and regional strategy, and focus on this region in particular. The geologic nature of Abitibi-Témiscamingue is prolific, with an impressive mineral endowment, where new interpretations of geology and mining skills continue to lead to new, large discoveries.
With Wasamac, Canadian Malartic and Odyssey, the Company will become one of the larger regional and national mining companies in Canada, with a threshold production of approximately 500,000 ounces of gold per year, at costs well below the Company’s and industry average. With the Company’s emphasis on free cash flow(1) generation, and focus on returns, Wasamac fits well into the Company’s corporate portfolio. As a stand-alone asset in that portfolio, the project carries a fraction of the overall value of the Company, although the Company believes there is significant upside that will increase that value and portfolio contribution. Wasamac creates an optimized, more established and prolific Canadian company with impressive cash flow present and future and a dominant regional presence in one of the best jurisdictions for mining in the world, which management believes supports a premium valuation for the Company.
Ten-Year Production Outlook
On January 25, 2021, the Company introduced its longer-term, ten-year production outlook to demonstrate the confidence it has in the sustainability of its production platform and in the long mine lives of its assets. In its inaugural outlook the Company announced a baseline annual production of 1,000,000 GEO(2) from current operations and with growth to 1,200,000 GEO(2) by approximately 2028 from its Wasamac development project.
Opportunities for Further Growth from Operating Assets and Wasamac
Since the announcement of its inaugural ten-year outlook, exploration successes have provided significant support for the outlook and those successes underpin that outlook this year with a greater certainty than when it was first introduced. The Company expects to provide a more formal update on its longer-term ten-year outlook every other year to allow more time for exploration, mineral resource conversion and evaluation of the foregoing to longer-term production plans. and anticipates delivering this again in 2023 subsequent to further analysis on several longer-term growth opportunities. In its next updated outlook, the Company expects it will increase its sustainable baseline annual production at current operations from 1,000,000 GEO(2) to at least 1,050,000 GEO(2) from 2025. Further, the growth potential of 1,200,000 GEO(2) outlined in the previously
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announced ten-year outlook remains a conservative target as the Company has significant production upside at its operating mines and at its Wasamac project. Preliminary evaluations have identified a number of opportunities for further growth, including the potential for a Phase 4 expansion at Jacobina, the potential plant expansion and heap leach project at Cerro Moro, the addition of the new South Deeps discovery into the mine plan at El Peñón and the possible addition of a second shaft and further production from upper ore-bodies accessed by the ramp at Odyssey. At Wasamac there remains the potential for higher production levels from Wildcat, Wildcat South and the highly prospective Francoeur, Arntfield and Lac Fortune properties. Assuming all of these identified opportunities are advanced, the Company's production potential could reach up to 1,500,000 GEO within the ten-year outlook horizon, and meaningfully extend that production profile beyond the ten-year timeframe.
Additional Opportunities Not Included in the Ten-Year Outlook
The Company has additional compelling development projects in its pipeline with the potential to drive significant long-term production upside towards the end of the current decade and beyond. These include the MARA Project, one of the largest copper-gold projects in the world which Yamana owns 56.25% and which has an average annual production of 556 million pounds of copper equivalent (100% basis) during its first ten years. In addition, the Suyai Project is a large gold project in Chubut Province, Argentina, that is projected to reach production of up to 250,000 ounces annually in its first eight years. In Brazil, the Company is expanding the known oxide mineral resource base at Lavra Velha, and the deposit is being evaluated as a potential open pit prospect relying on heap leaching for recovery. Further, Jacobina Norte is a highly-prospective property that lies contiguous to and north of the Company’s prolific Jacobina mine, with preliminary results showing excellent potential for the discovery of standalone Jacobina-type mineralization and the addition of a new mine along the greenstone basin. These opportunities remain outside of the growth outlined in the ten-year outlook.
For full details on the aforementioned updates and additional details on each operation and project, please refer to the February 17, 2022 press release "Yamana Gold Provides 2022-2024 Guidance and an Update To Its Ten-Year-Outlook Highlighting A Sustainable Production Platform With Significant Growth".
2022 - 2024 Guidance
The Company is maintaining its 2022 production guidance and expects production not to be less than 1,000,000 GEO(2). For 2023, the Company is increasing its production guidance from 1,000,000 GEO(2) to 1,030,000 GEO(2). The Company sees further near-term growth continuing in 2024 with production increasing to 1,060,000 GEO(2).
For 2022, the Company expects total cost of sales, cash costs(1) and AISC(1) not to exceed $1,215, $725 and $1,080 per GEO(2) respectively. Over the three-year guidance period, the Company is expecting the increase in GEO(2) production to have a positive impact on costs. In particular, the Company's lowest-cost operation, Jacobina, is a significant contributor to the increase in production over the guidance period, and consequently the Company anticipates this will drive down the average cost of production, improving overall margins and cash flow.
Three-Year Production Guidance
The following table presents the Company's total gold, silver and GEO production expectation in 2022, 2023 and 2024, which demonstrates sequential growth in production, starting at 1,000,000 GEO and increasing to 1,060,000 GEO by 2024. This 3% and 6% production growth exceeds the guidance provided last year and the budgets on which that guidance was based.
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. For comparability, the Company kept the GEO ratio for the guidance period at 72.00, consistent with what was used in last year's guidance, in line with 2021 actuals, and because the Company expects that silver will perform at least as well as gold in 2022. At the spot GEO ratio of approximately 80.00, the calculation of expected 2022 production would be modestly lower, although the underlying production of gold and silver would not change. Further, at the spot GEO ratio, costs on a per GEO basis would be modestly higher. Please refer to the sensitivity write-up at the end of this section for further details and calculations.
Due to mine development and sequencing for 2022, the Company expects an evenly weighted production profile between the first half and the second half of the year, instead of a stronger second half weighting as was customary in prior years. However, the first quarter is expected to be the lowest production quarter of the year, as Jacobina ramps up to 8,500 tpd and due to the temporary disruption to operations during the first three weeks of January at Minera Florida.
The following tables present actual production for 2021 and production guidance for 2022, 2023 and 2024. While the Company provides production guidance within a range of +/- 3% by mine and overall, the following presents the production levels by year in that range which management expects to meet or exceed for the particular year.
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| | | | | | | | | | | | | | | | | |
| (000's ounces) | 2021 Actual | 2022 Guidance | | 2023 Guidance | | 2024 Guidance | |
| | | | | | | |
| Total gold production | 885 | 870 | | 910 | | 930 | |
| Total silver production | 9,169 | 9,500 | | 8,650 | | 9,400 | |
Total GEO production(2) | 1,011 | 1,000 | | 1,030 | | 1,060 | |
| | | | | | | | | | | | | | | | | |
| (000's ounces) | Gold |
| 2021 Actual | 2022 Guidance | | 2023 Guidance | | 2024 Guidance | |
| | | | | | | |
| Canadian Malartic (50%) | 357 | 320 | | 330 | | 340 | |
| Jacobina | 186 | 195 | | 230 | | 230 | |
| Cerro Moro | 80 | 95 | | 95 | | 95 | |
| El Peñón | 176 | 170 | | 165 | | 165 | |
| Minera Florida | 85 | 90 | | 90 | | 100 | |
| Total | 885 | 870 | | 910 | | 930 | |
| | | | | | | | | | | | | | | | | |
| (000's ounces) | Silver |
| 2021 Actual | 2022 Guidance | | 2023 Guidance | | 2024 Guidance | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Cerro Moro | 5,582 | 5,300 | | 4,400 | | 4,450 | |
| El Peñón | 3,587 | 4,200 | | 4,250 | | 4,950 | |
| | | | | | | |
| Total | 9,169 | 9,500 | | 8,650 | | 9,400 | |
| | | | | | | | | | | | | | | | | |
| (000's ounces) | GEO(2) |
| 2021 Actual | 2022 Guidance | | 2023 Guidance | | 2024 Guidance | |
| | | | | | | |
| Canadian Malartic (50%) | 357 | 320 | | 330 | | 340 | |
| Jacobina | 186 | 195 | | 230 | | 230 | |
| Cerro Moro | 156 | 169 | | 156 | | 157 | |
| El Peñón | 226 | 228 | | 224 | | 234 | |
| Minera Florida | 85 | 90 | | 90 | | 100 | |
| Total | 1,011 | 1,000 | | 1,030 | | 1,060 | |
2022 Cost Guidance
The Company has assumed an expected average year-over-year consolidated cost impact in the range of 3% at its wholly owned operations, including the impact of inflation. At Canadian Malartic, costs are expected to increase over 2021 as reflected in the previously disclosed longer term mine plan, mostly due to lower production and increased strip ratio.
Cost pressures from inflation are expected to be moderate as the transitory impacts of commodity-linked consumables and COVID-related supply chain disruptions ease. At the Company’s operations, the impact of inflation on costs is expected to be partially offset by the related devaluation of local currencies, in which the majority of expenses are incurred. Furthermore, the Company has experienced a more modest exposure to inflation given the lower relative exposure to consumables at its portfolio of primarily lower tonnage underground operations and access to lower cost renewable energy versus carbon-based sources of power. At this time, the Company is not experiencing any significant inflationary pressure on capital costs, and the Company believes that its assumptions relating to forecast capital costs remain valid.
Over the three-year guidance period, the Company is expecting a 6% increase in GEO production that is anticipated to have a positive impact on consolidated costs. In particular, the Company's lowest-cost operation, Jacobina, is a significant contributor to the increase in production over the guidance period, and consequently the Company anticipates this will drive down the average cost of production, improving overall margins and cash flow.
The Company anticipates that it will continue to incur some costs in relation to COVID-19 in the near future. Total costs are expected to be approximately $10.0 million for 2022, or approximately $10 per GEO(2) sold on a consolidated basis. The bulk of the COVID-19 costs are expected at Cerro Moro and El Peñón, in relation to additional transportation, testing and sanitation requirements, at approximately $4.0 million and $3.0 million, respectively. COVID-19 costs are not included in the below disclosure as they are currently excluded from total cost of sales per GEO sold(2), cash costs(1) per GEO sold(2) and AISC(1) per GEO sold(2).
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The following table presents cost of sales, cash costs(1) and AISC(1) results in 2021 and cost guidance for 2022. While the Company provides cost guidance within a range of +/- 1.5% overall, with some mines having slightly wider and narrower ranges, the following presents the cost levels in those ranges which management expects to meet or be below for 2022.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (In US Dollars) | Total cost of sales per GEO sold(2) | Cash costs(1) per GEO sold(2) | AISC(1) per GEO sold(2) |
| 2021 Actual | 2022 Guidance | 2021 Actual | 2022 Guidance | 2021 Actual | 2022 Guidance |
| | | | | | | | | |
| | | | | | | | | |
| Canadian Malartic (50%) | $ | 1,135 | | $ | 1,320 | $ | 647 | | $ | 760 | $ | 901 | | $ | 1,030 |
| Jacobina | $ | 863 | | $ | 845 | $ | 566 | | $ | 555 | $ | 738 | | $ | 760 |
| Cerro Moro | $ | 1,332 | | $ | 1,420 | $ | 848 | | $ | 940 | $ | 1,228 | | $ | 1,285 |
| El Peñón | $ | 1,054 | | $ | 1,170 | $ | 673 | | $ | 660 | $ | 932 | | $ | 885 |
| Minera Florida | $ | 1,434 | | $ | 1,280 | $ | 881 | | $ | 740 | $ | 1,224 | | $ | 1,135 |
| Total* | $ | 1,132 | | $ | 1,215 | $ | 689 | | $ | 725 | $ | 1,030 | | $ | 1,080 |
* Total AISC includes additional non-mine site specific costs primarily comprised of corporate G&A and exploration expenditures.
The following table presents expansionary capital, sustaining capital, and total exploration spend results for 2021 and expectations by mine for 2022:
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| Expansionary capital | Sustaining capital | Total exploration |
| (In millions of US Dollars) | 2021 Actual | 2022 Guidance | 2021 Actual | 2022 Guidance | 2021 Actual | 2022 Guidance |
| Canadian Malartic (50%) | $ | 50.1 | | $ | 114.0 | | $ | 69.2 | | $ | 70.0 | | $ | 15.9 | | $ | 14.0 | |
| Jacobina | 28.1 | | 37.0 | | 14.0 | | 24.0 | | 9.5 | | 15.0 | |
| Cerro Moro | 1.2 | | 1.0 | | 39.8 | | 41.0 | | 17.3 | | 18.0 | |
| El Peñón | 7.8 | | 3.0 | | 34.6 | | 28.0 | | 18.8 | | 20.0 | |
| Minera Florida | 22.6 | | 11.0 | | 15.2 | | 20.0 | | 10.0 | | 12.0 | |
| MARA* | 14.3 | | 13.0 | | — | | — | | — | | — | |
| Wasamac | 6.7 | | 15.0 | | — | | — | | 6.9 | | 10.0 | |
| Other capital | 0.8 | | 3.0 | | 0.9 | | 2.0 | | — | | — | |
| Other exploration expense | — | | — | | — | | — | | 10.7 | | 6.0 | |
| Other capitalized exploration | — | | — | | — | | — | | 10.6 | | 15.0 | |
| Total | $ | 131.6 | | $ | 197.0 | | $ | 173.7 | | $ | 185.0 | | $ | 99.7 | | $ | 110.0 | |
* MARA actuals for 2021 and guidance for 2022 in this table are disclosed at the Company's 56.25% interest, and not at 100%, as consolidated and disclosed in other CAPEX tables. MARA expansionary capital is related to work associated with the advancement of the project, including the feasibility study and EIA among others.
Approximately 60% of the Company’s expected exploration investment is capital in nature.
The following table presents other expenditure results in 2021 and expectations for 2022:
| | | | | | | | | | | |
| (In millions of US Dollars) | 2021 Actual | 2022 Guidance |
| Total DDA | $ | 447.9 | | $ | 500 - 520 |
| Cash based G&A* | $ | 70.8 | | $ | 75.0 | |
| Cash income taxes paid** | $ | 151.0 | | $ | 145 - 165 |
| | | |
* Cash based G&A excludes $4.0 million of non-cash stock based compensation expense, included in G&A as reported in the Consolidated Statements of Operations for 2021 actuals.
** 2022 guidance is based on $1,800 gold price and $25.00 silver price as per guidance assumption table below.
Cash taxes paid consider payments made in relation to withholding tax and prior years, as in certain jurisdictions, final payments related to a fiscal year’s taxes are settled in the next fiscal year.
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Guidance Assumptions and 2022 Sensitivity Impact
Key assumptions, in relation to the above guidance, are presented in the table below.
| | | | | | | | | | | | | | | | | | | | |
| | | | Impact of Change to 2022 Guidance Assumptions |
| 2021 Actual* | 2022 Guidance | Change to 2022 Guidance Assumptions | AISC/GEO | Earnings before Taxes ($Ms) | Change in Cash
($Ms) |
| GEO Ratio | 72.55 | | 72.00 | | | | | |
| Gold | $ | 1,800 | | $ | 1,800 | | $ | 50 | | $ | 5 | | $ | 43.0 | | $ | 32.0 | |
| Silver | $ | 25.17 | | $ | 25.00 | | $ | 1.00 | | $ | (6) | | $ | 8.0 | | $ | 6.0 | |
| USD-CAD** | 1.25 | | 1.26 | | 5 | % | $ | (16) | | $ | 12.0 | | $ | 19.0 | |
| USD-BRL** | 5.40 | | 5.50 | | 5 | % | $ | (4) | | $ | 3.0 | | $ | 4.0 | |
| USD-CLP** | 759.07 | | 825.00 | | 5 | % | $ | (6) | | $ | 4.0 | | $ | 6.0 | |
| USD-ARS** | 95.10 | | 130.00 | | 5 | % | $ | (3) | | $ | 2.0 | | $ | 2.0 | |
| | | | | | |
* Metal prices and exchange rates shown in the table above are the average metal prices and exchange rates for the year ended December 31, 2021
** Change represents a US Dollar appreciation in relation to the foreign currency.
MINE BY MINE NEAR-TERM OUTLOOK
Canadian Malartic (50%)
At Canadian Malartic, the mine is transitioning from the Canadian Malartic pit to the Barnat pit and consequently, production level for 2022 is not expected to be less than 320,000 ounces. This represents a decrease in relation to 2021, as per previously disclosed guidance and the 2021 Technical Report. At Canadian Malartic, costs are expected to increase over last year as reflected in the previously disclosed longer term mine plan, mostly due to lower production and increased strip ratio. As previously disclosed, the Company expects that the average strip ratio will normalize over the following years as the mine transitions from the Malartic pit to the Barnat pit, and then decrease as the Barnat pit goes deeper.
Jacobina
At the Jacobina mine, which continues to be a standout performer, production in 2022 is not expected to be less than 195,000 ounces. The guided production mid-point would represent record annual production at the operation. With the accelerated permitting and 2021 out-performance, the mine is now expected to achieve the Phase 2 throughput objective of 8,500 tpd by the second quarter of 2022, approximately one year earlier than planned, with the higher throughput supported by stockpiles during the year.
El Peñón
At El Peñón, GEO production in 2022 is not expected to be less than 228,000 GEO and is in line with production in 2021. The mine’s current production rate—the result of the right-sizing of the operation initiated in late 2016—increased cash flow while ensuring the long-term sustainability of the mine. Exploration successes over the last three years has resulted in an increase in mineral reserves, unlocking opportunities to incrementally increase production by leveraging excess processing capacity at El Peñón. The operation can process approximately 4,200 tpd, which represents upside of 20-30% above currently budgeted levels, with no additional capital expenditures required. District-scale exploration work completed during the year and the fourth quarter yielded positive results, and opens up a new, large area of high exploration potential, suggesting a significant expansion of the highly productive El Peñón vein system south of the existing mine. Such expansion of the vein system could in turn meet the objective of increasing production at a site that, as aforementioned, has significant excess plant capacity.
Minera Florida
At Minera Florida, gold production for 2022 is not expected to be less than 90,000 ounces, slightly above that of 2021. The strategy at Minera Florida is to extend mine life and unlock opportunities for increased annual gold production following an approach similar to the approach taken at Jacobina. This includes focusing on mineral reserve development and generating an inventory of prepared mining areas to increase operational flexibility. Consistent with the 10-year outlook, the plant de-bottlenecking study is advancing on schedule, with the objective to increase throughput from 74,500 to 100,000 tonnes per month, thereby increasing annual gold production to approximately 120,000 ounces. The Company submitted the ESIA during the fourth quarter, with the timeline expected to be approximately 18 months for approval, with another 12 months to receive sectorial permits. With the expected permitting timelines, the mine could begin operating at a planned 100,000 tonnes per month level in 2025. Preliminary studies indicate that the capacity of the processing plant can be increased to approximately 90,000
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tonnes per month with incremental adjustments. An upgrade of the crushing circuit would be required to achieve 100,000 tonnes per month.
Cerro Moro
At Cerro Moro, the Company envisions a modest increase in production for 2022 in relation to 2021, and is not expected to be less than 169,000 GEO, as the mine was catching up development, which has now stabilized. Notably, Cerro Moro replaced depletion of mineral reserves for the first time. Cerro Moro was developed as a high grade, low tonnage operation but, from the beginning, the Company has considered alternative processing options to allow for economic extraction of lower grade mineralization, including a scalable plant and heap leaching. For further information on the Cerro Moro scalable plant and heap leach project and other initiatives please refer to Section 5: Construction, Development and Other Initiatives.
3. REVIEW OF FINANCIAL RESULTS
FOR THE THREE MONTHS ENDED DECEMBER 31, 2021
Revenue
In the three months ended December 31, 2021, revenue was $503.8 million compared to $461.8 million in the same period in 2020. The 9% increase was primarily driven by higher gold sales volumes in the current quarter, which more than offset the lower realized prices(1) compared to the fourth quarter of 2020. The average realized gold price for the quarter ended December 31, 2021 was $1,796 per ounce versus $1,875 per ounce for the comparative quarter. Higher sales volumes were most notable at El Peñón, which had a standout quarter, as well as Canadian Malartic where the transition to, and ramp-up of the Barnat deposit were taking place in the comparative period; Cerro Moro, which was impacted by COVID-19 related travel restrictions, which impacted work availability in the comparative quarter; and Jacobina, which had record production in the fourth quarter of 2021.
For a cautionary note on non-GAAP financial performance measures and a reconciliation to average realized prices, refer to Section 12: Non-GAAP Financial Performance Measures.
Cost of Sales Excluding DDA
Cost of sales excluding DDA increased $13.2 million or 8%, compared with the same quarter in prior year, as result of higher GEO(2) production and sales levels, as discussed above, and in line with plan.
Depletion, Depreciation and Amortization ("DDA")
DDA expense increased $13.2 million or 12%, compared with the same quarter in the prior year. The increase in DDA expense was primarily attributable to the overall higher sales volumes in the current period, in particular, at Canadian Malartic, Jacobina, Cerro Moro and El Peñón, given the notable increase in sales volumes from the comparative period.
General and Administrative
General and administrative ("G&A") expenses include expenses related to management of the business that are not part of direct mine operating costs. In the three months ended December 31, 2021, G&A expenses were $3.4 million lower than in the same period in 2020, primarily due to higher stock-based compensation expense in the comparative quarter related to the significant increase in the Company's share price during 2020, which resulted in the Company recording a higher expense as the value of the stock-based compensation granted in previous years increased (particularly performance share units).
Exploration and Evaluation
Exploration and evaluation expenses of $6.8 million for the three months ended December 31, 2021 were higher than in 2020 due to increased expenditures resulting from the generative exploration program. The program is focused on advancing projects in Yamana’s portfolio, while continuing drilling activity at a number of the Company’s highly prospective earlier stage projects. For more information refer to Section 7: Exploration.
Other Operating Expenses
In the three months ended December 31, 2021, the Company recorded net other operating expenses of $12.1 million compared to net other operating expenses of $1.5 million for the same period in 2020. Operating expenses are comprised primarily of contributions to social and infrastructure development priorities in jurisdictions where the Company is active, business development related costs, care and maintenance expenses, changes in provisions, and mark-to-market adjustments on financial assets and liabilities. The largest expense component in the current period is related to care and maintenance expenditures at the MARA project in relation to the Alumbrera facilities of $6.8 million, of which, only 56.25% is attributable to
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Yamana shareholders. Yamana has consolidated Alumbrera since the completion of the Agua Rica Alumbrera Integration Transaction on December 17, 2020, and accordingly, there was no equivalent meaningful expense in the comparative period.
Finance Costs
Finance costs decreased $3.4 million in the three months ended December 31, 2021 compared to the same period in 2020, primarily due to the decrease in the Company's interest expense, which has decreased from 2020 due to both lower outstanding gross debt, and more favourable interest rates following the senior notes transactions in the third quarter of 2021. Further information on the redemption/issuance of the senior notes can be found in Section 1: Highlights and Relevant Updates.
Other Income/Costs
Other income was $14.3 million in the three months ended December 31, 2021, compared to other costs of $21.6 million in the comparative period. Other income/costs 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 period to period. The income position in the current period was primarily comprised of foreign exchange gains.
Income Tax Expense
The Company recorded an income tax expense of $44.2 million for the three months ended December 31, 2021 compared to an income tax expense of $189.5 million for the three months ended December 31, 2020. The income tax provision reflects a current income tax expense of $57.2 million and a deferred income tax recovery of $13.0 million, compared to a current income tax expense of $24.4 million and a deferred income tax expense of $165.1 million for the three months ended December 31, 2020.
Included in the income tax expense for the three months ended December 31, 2021 are mining taxes of $19.7 million for the three months ended December 31, 2021 compared to $8.3 million for the three months ended December 31, 2020.
FOR THE YEAR ENDED DECEMBER 31, 2021
Revenue
For the year ended December 31, 2021, revenue was $1,815.4 million compared to $1,561.0 million for the same period in 2020. The 16% increase was primarily attributable to higher gold sales volumes in the current period as well as higher realized prices(1) for both gold and silver compared to 2020. Higher sales volumes were seen across all of the Company's mines and were most notable at Canadian Malartic and Cerro Moro, given prior period volumes were impacted by the government-mandated suspension of operations in March and April 2020 and subsequent ramp up throughout the remainder of the period.
For a cautionary note on non-GAAP financial performance measures and a reconciliation to average realized prices, refer to Section 12: Non-GAAP Financial Performance Measures.
Cost of Sales Excluding DDA
Cost of sales excluding DDA increased $80.9 million or 13% for the year ended December 31, 2021 compared to 2020, primarily due to the increase in sales volumes as discussed above, and in line with plan.
Depletion, Depreciation and Amortization ("DDA")
Total DDA expense increased $52.9 million or 13% for the year ended December 31, 2021 compared to 2020, primarily due to the overall higher sales volumes in the current period, as discussed above.
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, 2021, G&A expenses decreased $11.1 million or 13% compared to 2020. This was predominantly due to the significant increase in the Company's share price in the second and third quarters of 2020, impacting non-cash shared-based compensation valuation in the prior year.
Exploration and Evaluation
Exploration and evaluation expenses of $31.6 million for the year ended December 31, 2021 were significantly higher than the $15.1 million of expenses in 2020 due to increased expenditures resulting from the generative exploration program. The program
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is focused on advancing projects in Yamana’s portfolio, while continuing drilling activity at a number of the Company’s highly prospective earlier stage projects. For more information please refer to Section 7: Exploration.
Share of Earnings/Loss of Associates
The Company's share of net earnings related to its associates totalled $0.9 million for the year ended December 31, 2021, and was comprised of the Company's share of earnings/loss of Nomad Royalty Company and Monarch Gold prior to ceasing to account for these investments as associates. In 2020, the Company recorded losses of $1.0 million, being the Company's share of net loss related to its former associate Leagold Mining Corporation, for the period up to March 10, 2020 when Leagold merged with Equinox Gold and Yamana ceased to have significant influence in the investee, and therefore, discontinued equity accounting for the investment using the equity method from this date. This loss was partially offset by the Company's share of net earnings in Nomad Royalty Company and Monarch Gold. As at December 31, 2021, Yamana no longer has any investments accounted for as associates.
Other Operating Expenses
In the year ended December 31, 2021, the Company recorded other operating expenses of $37.4 million (2020: $14.6 million). Operating expenses are comprised primarily of contributions to social and infrastructure development priorities in jurisdictions where the Company is active, business development related costs, care and maintenance expenses, changes in provisions, and mark-to-market adjustments on financial assets and liabilities. The largest expense component in the current period is related to care and maintenance expenditures at the MARA project in relation to the Alumbrera facilities of $25.6 million, of which, only 56.25% is attributable to Yamana shareholders. Yamana has consolidated Alumbrera since the completion of the Agua Rica Alumbrera Integration Transaction on December 17, 2020, and accordingly, there was no equivalent meaningful expense in 2020. Total other expenses incurred in 2021 were largely offset by $10.2 million in gains on discontinuation of the equity method of accounting, associated with the change in the status of the Company's investments in Nomad Royalty Company ("Nomad") and Monarch Gold during the year. The investments in Nomad and the newly formed Monarch Mining are now accounted for at fair value, and Monarch Gold is consolidated. In the prior year, the most significant expense components related to a $10.9 million mark to market loss on deferred share unit compensation due to the increase in the Company's share price, contributions to social and infrastructure development causes in jurisdictions where the Company is active, and various other individually insignificant operating expenses. These expenses were partially offset by a $21.3 million gain recognized upon the discontinuation of the equity method on the Company's investment in Leagold in the first quarter of 2020.
Finance Costs
Finance costs increased $57.4 million in the year ended December 31, 2021 compared to 2020, primarily due to the $53.3 million expense incurred in the third quarter of 2021 relating to the early redemption of certain of the Company's senior notes, partially offset by the decrease in the Company's interest expense, which has decreased from 2020 due to lower outstanding gross debt, and in the latter part of the year, more favourable interest rates following the senior notes transactions in the third quarter of 2021. Further information on the redemption/issuance of the senior notes can be found in Section 1: Highlights and Relevant Updates.
Other Income/Costs, Net
Other income was $26.7 million in the year ended December 31, 2021, compared to other costs of $18.7 million in 2020. Other income/costs 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 income position in the current period was primarily comprised of foreign exchange gains.
Income Tax Expense
The income tax provision for the year ended December 31, 2021 reflects a current income tax expense of $159.8 million and a deferred income tax expense of $135.9 million. This compares to a current income tax expense of $116.2 million and a deferred income tax expense of $170.3 million for the year ended December 31, 2020.
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 76.9% on the earnings before tax for the year ended December 31, 2021, compared to an effective tax rate of 58.5% 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, 2021 and 2020:
•On June 16, 2021, the Argentina government enacted legislation to increase the tax rate from 25% to 35% retroactive to January 1, 2021. As a result, the deferred tax liability relating to the carrying value of certain non-producing assets
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(namely Suyai and MARA) were revalued at the higher tax rate. An expense of $146.92 million was recognized during the year relating to this change in income tax rate.
•Mining tax in the amount of $58.5 million for the year ended December 31, 2021 and $28.9 million for the year ended December 31, 2020 was recorded in income tax expense. Mining taxes in Chile and Canada are calculated based on taxable income and are considered an income tax.
•The tax provision was also impacted by inflation gains in Argentina in the amount of $23.0 million for the year ended December 31, 2021 compared to a net inflation loss of $1.3 million for the year ended December 31, 2020.
•Permanent differences of $28.8 million increased the income tax expense for the year ended December 31, 2020, mainly relating to the sale of Chapada in 2019, compared to a decrease in income tax expense of $2.6 million in December 31, 2021
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 35%; Chile, where the statutory tax rate is 27%; and Canada, where the federal statutory tax rate is 15% with varying provincial tax rates. There is a proposal in Brazil to decrease the income tax rate and impose a tax on dividends, with an overall increase to the combined rate. This change could have an impact on the current or deferred tax expense relating to dividends if it is passed. The newly elected president in Chile will take office in March 2022 and it is anticipated that there will be changes to the income and mining tax regimes. The Company does not anticipate the statutory tax rates to change in the other jurisdictions 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:
| | | | | | | | |
| As at December 31, (In millions of US Dollars) | 2021 | 2020 |
| Canadian Malartic | 283.3 | 296.6 |
| Jacobina | 180.6 | 188.7 |
El Peñón | 234.7 | 234.6 |
| MARA | 372.4 | 266.0 |
| Exploration potential | 182.1 | 171.1 |
QUARTERLY FINANCIAL SUMMARY
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the three months ended | Dec. 31, | Sep. 30, | Jun. 30, | Mar. 31, | Dec. 31, | Sep. 30, | Jun. 30, | Mar. 31, |
| (In millions of US Dollars, except per share amounts) | 2021 | 2021 | 2021 | 2021 | 2020 | 2020 | 2020 | 2020 |
| Financial results | | | | | | | | |
Revenue | $ | 503.8 | | $ | 452.2 | | $ | 437.4 | | $ | 422.0 | | $ | 461.8 | | $ | 439.4 | | $ | 303.4 | | $ | 356.5 | |
Net earnings (loss)(3) | $ | 109.7 | | $ | 27.0 | | $ | (43.9) | | $ | 54.7 | | $ | 103.0 | | $ | 55.6 | | $ | — | | $ | 45.0 | |
Net earnings (loss)(3) per share - basic and diluted | $ | 0.11 | | $ | 0.03 | | $ | (0.05) | | $ | 0.06 | | $ | 0.11 | | $ | 0.06 | | $ | — | | $ | 0.05 | |
4. OPERATING SEGMENTS PERFORMANCE
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CANADIAN MALARTIC (50% interest), CANADA
Canadian Malartic is an open pit gold mine, located in the Abitibi-Témiscamingue region of Quebec, Canada. The Company and its partner, Agnico Eagle Mines Limited ("Agnico"), each own 50% of Canadian Malartic General Partnership (the "Partnership").
| | | | | | | | | | | | | | |
| For the three months ended December 31, | For the year ended December 31, |
| Key Performance Information (50% basis) | 2021 | | 2020 | | 2021 | | 2020 | |
| Operating | | | | |
Ore mined (tonnes) | 2,868,178 | | 3,285,723 | | 10,470,005 | | 12,012,693 | |
Waste mined (tonnes) | 4,219,169 | | 2,718,493 | | 11,785,087 | | 10,649,407 | |
Ore processed (tonnes) | 2,764,921 | | 2,868,329 | | 11,130,195 | | 10,399,882 | |
GEO(2) (Gold) | | | | |
Production (ounces)(5) | 88,933 | | 86,371 | | 357,392 | | 284,317 | |
Sales (ounces)(5) | 91,589 | | 84,348 | | 357,667 | | 264,198 | |
Feed grade (g/t) | 1.12 | | 1.06 | | 1.11 | | 0.97 | |
Recovery rate (%) | 89.5 | | 88.0 | | 89.7 | | 87.4 | |
| Total cost of sales per GEO sold | $ | 1,171 | | $ | 1,126 | | $ | 1,135 | | $ | 1,207 | |
Cash costs per GEO sold(1) | $ | 676 | | $ | 634 | | $ | 647 | | $ | 702 | |
AISC per GEO sold(1) | $ | 931 | | $ | 898 | | $ | 901 | | $ | 945 | |
| DDA per GEO sold | $ | 496 | | $ | 493 | | $ | 488 | | $ | 505 | |
Financial (millions of US Dollars) | | | | |
| Revenue | $ | 164.7 | | $ | 158.4 | | $ | 643.2 | | $ | 471.0 | |
| Cost of sales excluding DDA | (61.8) | | (53.4) | | (231.3) | | (185.4) | |
| Gross margin excluding DDA | $ | 102.9 | | $ | 105.0 | | $ | 411.9 | | $ | 285.6 | |
| DDA | (45.4) | | (41.5) | | (174.7) | | (133.4) | |
| Temporary suspension, standby and other incremental COVID-19 costs | (0.6) | | (0.8) | | (2.5) | | (4.5) | |
| Mine operating earnings | $ | 56.9 | | $ | 62.7 | | $ | 234.7 | | $ | 147.7 | |
Capital expenditures (millions of US Dollars) | | | | |
| Sustaining and other | $ | 17.3 | | $ | 18.6 | | $ | 69.2 | | $ | 52.5 | |
Expansionary(5) | $ | 22.7 | | $ | 5.1 | | $ | 50.1 | | $ | 12.2 | |
| Exploration | $ | 4.4 | | $ | 7.0 | | $ | 15.7 | | $ | 10.1 | |
Canadian Malartic had a strong fourth quarter in line with plan, and exceeded both the comparative prior year quarter and prior quarter by producing 88,933 ounces. Canadian Malartic delivered annual production of 357,392 ounces of gold, exceeding the guidance of 350,000 ounces. Fourth quarter results benefited from higher grade and recoveries compared to the fourth quarter of 2020 from ore deeper in the Malartic pit. During 2021, the mine continued the transition from the Malartic pit to the Barnat pit, and the mine completed the final 7,000 meters of topographic drilling at Barnat during October, while overburden removal was completed earlier in the year as planned. As previously disclosed, the Company expects that the average strip ratio will normalize over the coming years as the mine transitions from the Malartic pit to the Barnat pit, and then decrease as the Barnat pit goes deeper. Further optimizations as part of the budgeting process this year, including a more controlled contribution from stockpiles, have resulted in improved cash flows in the near term, despite the previously guided and disclosed lower production and throughput in 2022, relative to 2021, as noted in the 2021 Technical Report.
Total cost of sales, cash costs(1) and AISC(1) on a per GEO(2) basis for the quarter were impacted by the increased tonnes moved as contemplated by the mine plan, in addition to the modest inflationary pressures observed during 2021. Total cost of sales and cash costs(1) on a per GEO(2) basis for the year were within the guided range and lower than the comparative period.
For further information on the planned Odyssey project and other Malartic initiatives, please refer to Section 5: Construction, Development and Other Initiatives.
Canadian Malartic Exploration
The main focus of exploration during the fourth quarter was to provide support for an aggressive infill drill program at East Gouldie, a new zone discovered in late 2018 at depth approximately 1.5 kilometres east of the Canadian Malartic and Barnat open pits, and south of the underground East Malartic and Odyssey zones. East Gouldie currently has a strike length of approximately 1,400 metres in an east-west direction and dips 60 degrees to the north, extending from 700 metres to 1,900 metres depth below surface. Mineralization remains open to depth and to the east. The zone dips toward the East Malartic zone,
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and may converge with East Malartic at depth. As of December 31, 2020, East Gouldie was estimated to contain inferred mineral resources of 6.4 million ounces of gold, with Yamana’s 50% interest representing 3.2 million ounces of gold contained in 31.5 million tonnes grading 3.17 g/t of gold.
Twelve diamond drill rigs have completed 133,399 metres to year end. The main objective of the 2021 drilling program is to infill the core area of the inferred resource to 75 metre drill spacing from the current 150 metres spacing, convert a part of the inferred resource to indicated, complete some infill and delineation drilling on the Odyssey zones as well as further exploration drilling. Results to date suggest very high conversion rates for both grade and tonnes with excellent continuity and predictability and a modest increase in total resources.
Exploration of the eastern extension of the East Gouldie structure from the Rand property continues, with four drill rigs working. This program included 32,200 metres of drilling with 23,536 metres completed from the Rand property generating seven new pierce points in the eastern extension of the East Gouldie plane. This will allow for a better evaluation of the mineral inventory potential of the eastern extension and provide a solid basis for planning a 2022 drill delineation program.
Infill holes continue to define the East Gouldie main zone. Additionally, step out drilling has encountered lateral extensions of the main mineral envelope; positive results have been encountered from drilling located 150 metres east of the reported resource area. These results, when combined with the east extension exploration drilling, are expected to provide a large potential envelope for drilling in 2022.
The infill program continues to generate excellent results demonstrating consistent grades and widths throughout the mineralized zone, further demonstrating the high quality nature of the reported inferred resource. Drilling beyond the inferred resource to the east is currently testing areas 500 metres east and west respectively of previously reported hole RD21-4680A, the initial hole into this target. This step-out drilling generated excellent results, intersecting 2.7 g/t of gold over an estimated true width of over 10.9 metres at 1,995 metres depth, including 3.1 g/t over 7.2 metres at 1,993 metres depth.
The Partnership acquired a 100% interest in the 262-hectare Rand Malartic property in March 2019 from NSR Resources for $5.0 million, with NSR Resources retaining a 2% net smelter return royalty that can be bought back in its entirety by the Partnership for $7.0 million prior to March 26, 2022.
JACOBINA, BRAZIL
Jacobina is a complex of underground gold mines located in Bahia state, Brazil. | | | | | | | | | | | | | | |
| For the three months ended December 31, | For the year ended December 31, |
| Key Performance Information | 2021 | | 2020 | | 2021 | | 2020 | |
| Operating | | | | |
Ore mined (tonnes) | 775,087 | | 610,257 | | 2,647,979 | | 2,470,091 | |
Ore processed (tonnes) | 700,103 | | 580,287 | | 2,657,590 | | 2,425,886 | |
GEO(2) (Gold) | | | | |
| Production | 48,228 | | 44,165 | | 186,206 | | 177,830 | |
| Sales | 48,732 | | 42,789 | | 186,534 | | 175,561 | |
Feed grade (g/t) | 2.22 | | 2.44 | | 2.26 | | 2.36 | |
Recovery rate (%) | 96.7 | | 96.9 | | 96.4 | | 96.5 | |
| Total cost of sales per GEO sold | $ | 763 | | $ | 907 | | $ | 863 | | $ | 844 | |
Cash costs per GEO sold(1) | $ | 452 | | $ | 590 | | $ | 566 | | $ | 544 | |
AISC per GEO sold(1) | $ | 643 | | $ | 807 | | $ | 738 | | $ | 746 | |
| DDA per GEO sold | $ | 312 | | $ | 317 | | $ | 297 | | $ | 300 | |
Financial (millions of US Dollars) | | | | |
| Revenue | $ | 87.6 | | $ | 80.7 | | $ | 336.2 | | $ | 312.1 | |
| Cost of sales excluding DDA | (22.0) | | (25.2) | | (105.5) | | (95.5) | |
| Gross margin excluding DDA | $ | 65.6 | | $ | 55.5 | | $ | 230.7 | | $ | 216.6 | |
| DDA | (15.2) | | (13.6) | | (55.4) | | (52.6) | |
| Temporary suspension, standby and other incremental COVID-19 costs | (0.2) | | (0.5) | | (1.2) | | (2.0) | |
| Mine operating earnings | $ | 50.2 | | $ | 41.4 | | $ | 174.1 | | $ | 162.0 | |
Capital expenditures (millions of US Dollars) | | | | |
| Sustaining and other | $ | 4.2 | | $ | 5.4 | | $ | 14.0 | | $ | 21.6 | |
| Expansionary | $ | 10.5 | | $ | 4.8 | | $ | 28.1 | | $ | 15.8 | |
| Exploration | $ | 1.8 | | $ | 2.0 | | $ | 7.2 | | $ | 6.0 | |
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Jacobina had an exceptional fourth quarter and delivered record quarterly gold production of 48,228 ounces, and record full-year gold production of 186,206 ounces, exceeding guidance of 175,000 ounces. The record production results were driven by tonnes mined, which also reached all-time highs, providing additional flexibility through the development of stockpiles supporting the higher throughput expected from the ongoing phased expansion. Underground mine development work is in line with the mine plan at 1,500 metres per month, gearing up for the higher production rate and to access new mining panels. Production in 2021 increased for the eighth consecutive year, a trend that is expected to continue in the coming years, as a result of the phased expansion strategy and the exploration programs aimed at generating significant value from the remarkable geological upside of the property.
During the fourth quarter, Jacobina received the expansion permit, allowing throughput to increase to 10,000 tpd, as announced in the December 6 press release “Yamana Gold Receives Permit at Jacobina, Initiating Ramp Up of Phase 2 Expansion, Expects Fourth Quarter Company Wide Production to Exceed 270,000 GEO With Costs Tracking to Be the Lowest of the Year”. The successful result is the culmination of a two-year process during which the Company worked closely with government agencies to ensure that Jacobina continues to operate in a responsible, sustainable way to the benefit of all stakeholders. The Company has strategically elected to operate in the Americas in rules based jurisdictions with a mining pedigree providing certainty for conducting its operations which has been exemplified with the Brazilian permitting process for Jacobina. Receipt of the permit not only marks a significant milestone in the Phase 2 ramp up to 230,000 ounces of gold per year, but also facilitates the future Phase 3 expansion to increase production up to 270,000 ounces per year.
The underground mining rate continues to increase and with the accelerated permitting and 2021 outperformance, the mine is now expected to achieve the Phase 2 throughput objective of 8,500 tpd by the second quarter of 2022, approximately one year ahead of schedule, although higher throughput will be supported by stockpiles during the year. Following receipt of the permit, Jacobina increased throughput to 7,771 tpd in December, achieving an average throughput of 7,610 tpd for the fourth quarter. Grade normalizes in 2023 when production is expected to reach 230,000 ounces. Since May 2021, throughput has been stable at the previously-permitted rate of 7,500 tpd and the mine is well positioned to immediately start ramping up to 8,500 tpd. Over the same time frame, Jacobina has continued with incremental improvements to increase mining and processing capacity in anticipation of receiving the expansion permit. As such, the Company intends to progressively increase throughput over the next six to seven months.
For further information on the planned Jacobina processing plant capacity optimization and expansion initiatives, as well a comprehensive tailings management strategy for long-term sustainability, please refer to Section 5: Construction, Development and Other Initiatives.
Total cost of sales, cash costs(1) and AISC(1) on a per GEO(2) basis were all well below the guided range in the fourth quarter of 2021, and significantly lower than the comparative prior year period, a result of higher production in the current year resultant from the aforementioned increased mill throughput, and fixed production costs being distributed over less ounces in the prior year. Full year total cost of sales, cash costs(1) and AISC(1) on a per GEO(2) basis were all within the guided range for 2021.
Jacobina Exploration
Exploration continued to ramp up in the fourth quarter in support of the phased expansion plan with results continuing to increase mineral inventory in Canavieiras, Morro do Vento and João Belo, adding high-quality mineralization close to mine infrastructure. Results also demonstrate the mine’s ability to continue to significantly grow mineral reserves and mineral resources beyond depletion, notwithstanding increasing production, underscoring Jacobina’s exceptional long-term growth potential and remarkable geological upside, and ability to further extend strategic mine life.
During the fourth quarter, approximately 12,236 metres of drilling were completed at Jacobina, including 37 drill holes totaling 11,487 metres of infill drilling to convert inferred mineral resources to indicated mineral resources, and 4 drill holes totaling 749 metres of exploratory drilling, dedicated to defining new potential resources in the near mine setting.
The infill program focused on delineation of new indicated resources, targeting inferred resource areas, located around the current development. Infill drilling during the fourth quarter was executed at the Main Reef at Morro do Vento, at João Belo South Extension (LMPC Reef) and at João Belo mine. Results obtained at Morro do Vento continue to confirm grades at Morro do Vento Sul, while drilling results at the north end of Morro do Vento continue to establish the higher grade nature of this sector. Infill drilling at João Belo South Extension also returned positive results, while at João Belo mine drilling is extending mineralization both to the north and south, with good results indicating that mineralization remains open for expansion at shallow levels and close to existing mine development north of João Belo mine.
Exploration drilling activity at Jacobina in the fourth quarter continued to focus on testing and drill delineation of new zones in near-mine areas at Morro do Vento Main Reef down-dip, while exploratory drilling was initiated at Serra do Corrego Norte sector. Positive results returned from the initial test of Morro do Vento Main Reef down-dip in the third quarter, which extended mineralization approximately 675 metres along strike south of historic drill hole MVTEX22 (9.72 g/t of gold over 1.80 metres), is being follow-up utilizing 3 drill rigs, testing a potential strike length of greater than 2,300 metres. The eastern most hole along this trend, encountered visible gold in the hanging wall conglomerate, with final results anticipated in early 2022. At Serra do Corrego Norte, where historic drilling intersected higher grades in drill holes SCO1 (8.09 g/t of gold over 5.23 metres) and SCO461
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(18.17g/t of gold over 2.44 metres) associated with LU Reef, one drill hole has been completed and a second drill is in progress, with local concentrations of visible gold reported in both holes. Assay results are pending.
At Canavieiras, exploratory and conversion drilling programs have confirmed the presence of all mineralized reefs south of Canavieiras Central, expanding the mineral envelope continuously more than 500 metres southward to the northern limit of Canavieiras Sul. Drilling results from this sector have been impressive, with both the LU and MU reefs generating higher grade intercepts over wide intervals and defining high-quality mineralization close to the current mine infrastructure. Drilling completed at Canavieiras in 2021 has been modelled, and new mineral resources calculated have been included in the year end mineral resource mineral reserve statement.
The Main Reef zone at Morro do Vento has demonstrated continuity of mineralization over a large area with 2.5 kilometers of strike length and positive drilling intercepts up to 1,100 metres down dip of mine infrastructure, representing one of the most important mineralized zones of the Jacobina district. In the northern portion of Morro do Vento, the delineation drilling program has provided strong results at Main Reef, indicating high grade mineralization continues down dip and remains open for growth.
Over the last two years, the Company has prioritized exploration of the southern portion of the Jacobina district, the delineation of the recently discovered João Belo Sul sector, located two kilometres south of João Belo, and to exploring extensions of João Belo, historically the most productive mine in the complex with more than one million ounces of past production. João Belo Sul drilling has generated significant results and defined a continuous mineral envelope in the LMPC Reef over a 900-meter north-south strike length and 600 metres down dip. Further drilling has been completed at João Belo Sul and has been modelled and included in the year end inferred resources.
Overall, exploration continues to demonstrate success in identifying and defining new extensions of current producing sectors of the Jacobina mine, with exceptional results replacing depletion with high-quality mineral reserves and mineral resources close to current mine infrastructure. Infill and exploration drilling continued in the fourth quarter as additional drill rigs were added to achieve planned drilling production. Currently, fifteen drill rigs are operating at Jacobina, including five underground and three surface rigs completing infill drilling and seven rigs executing exploration drilling. Aggressive step out exploration drilling is opening up new, extensive frontier areas available for mineral resource growth in new sectors of the property, as exemplified by recent successes at João Belo Sul and Morro do Vento Main Reef down-dip. These discoveries support a strategic mine life of several decades at a production level well above the planned Phase 2 expansion annual production level of 230,000 ounces, expected to be achieved in 2023, and likely 270,000 ounces, which is the planned annual production level for the Phase 3 expansion as described above. Please refer to the press release issued on July 29, 2021 by the Company, entitled "Yamana Gold Reports Significant Progress On Phase 2 Expansion At Jacobina And Strong Exploration Results For The Operation; Costs To Complete Phase 2 Significantly Reduced Compared To Original Estimate; Phase 3 Evaluation Advancing" for further details.
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CERRO MORO, ARGENTINA
Cerro Moro is an underground and open pit gold-silver mining operation, located in the province of Santa Cruz, Argentina.
| | | | | | | | | | | | | | |
| For the three months ended December 31, | For the year ended December 31, |
Key Performance Information | 2021 | | 2020 | | 2021 | | 2020 | |
Operating | | | | |
Ore mined (tonnes) | 100,855 | | 69,189 | | 339,584 | | 277,040 | |
Waste mined (tonnes) | 892,408 | | 817,001 | | 3,789,892 | | 3,655,450 | |
Ore processed (tonnes) | 102,016 | | 97,096 | | 376,557 | | 320,701 | |
GEO(2) | | | | |
| Production | 58,078 | | 42,943 | | 156,484 | | 132,415 | |
| Sales | 56,087 | | 44,101 | | 153,882 | | 133,358 | |
Total cost of sales per GEO sold | $ | 1,224 | | $ | 1,343 | | $ | 1,332 | | $ | 1,513 | |
Cash costs per GEO sold(1) | $ | 726 | | $ | 768 | | $ | 848 | | $ | 868 | |
AISC per GEO sold(1) | $ | 1,044 | | $ | 1,139 | | $ | 1,228 | | $ | 1,280 | |
| DDA per GEO sold | $ | 498 | | $ | 576 | | $ | 485 | | $ | 645 | |
Gold | | | | |
| Production (ounces) | 30,028 | | 21,259 | | 79,988 | | 66,995 | |
| Sales (ounces) | 29,706 | | 22,194 | | 79,001 | | 68,542 | |
Feed grade (g/t) | 9.67 | | 7.18 | | 7.19 | | 6.91 | |
Recovery rate (%) | 94.6 | | 94.9 | | 91.9 | | 94.0 | |
| Silver | | | | |
| Production (ounces) | 2,165,785 | | 1,663,708 | | 5,582,197 | | 5,448,561 | |
| Sales (ounces) | 2,043,439 | | 1,674,308 | | 5,456,296 | | 5,441,868 | |
Feed grade (g/t) | 692.14 | | 575.94 | | 505.11 | | 565.06 | |
Recovery rate (%) | 95.4 | | 92.5 | | 91.3 | | 93.5 | |
Financial (millions of US Dollars) | | | | |
| Revenue | $ | 100.5 | | $ | 81.2 | | $ | 276.5 | | $ | 241.3 | |
| Cost of sales excluding DDA | (40.7) | | (33.8) | | (130.5) | | (115.8) | |
| Gross margin excluding DDA | $ | 59.8 | | $ | 47.4 | | $ | 146.0 | | $ | 125.5 | |
| DDA | (27.9) | | (25.4) | | (74.6) | | (86.1) | |
| Temporary suspension, standby and other incremental COVID-19 costs | (3.2) | | (4.7) | | (20.8) | | (19.2) | |
| Impairment | — | | (369.0) | | — | | (369.0) | |
| Mine operating earnings | $ | 28.7 | | $ | (351.7) | | $ | 50.6 | | $ | (348.8) | |
Capital expenditures (millions of US Dollars) | | | | |
| Sustaining and other | $ | 12.4 | | $ | 9.0 | | $ | 39.8 | | $ | 29.5 | |
| Expansionary | $ | 0.5 | | $ | 4.4 | | $ | 1.2 | | $ | 6.9 | |
| Exploration | $ | 1.3 | | $ | 3.5 | | $ | 5.6 | | $ | 12.5 | |
Cerro Moro had its strongest quarter of the year, producing 58,078 GEO(2) comprising 30,028 ounces of gold and 2,165,785 ounces of silver. Production continued to benefit from access to additional mining faces, which supported the increase in mill feed coming from higher-grade underground ore and stable throughput. Gold and silver recoveries improved significantly in the fourth quarter over the prior quarter, and while gold recovery remained relatively stable over the comparative quarter, silver recovery improved significantly. The recovery increases were the result of actions to improve the counter-current decantation ("CCD") circuit performance late in the third quarter, which included the implementation of a feed blending control system, drilling of new wells to improve processing water quality, and trials of new and improved reagents.
The opening of more mining faces and resultant increase in mill feed coming from higher-grade underground ore continued in the fourth quarter with Zoe contributions becoming more prevalent, and this trend is expected to continue during 2022. During the fourth quarter, most of the ore delivered to the plant came from Escondida Far West, Zoe, Escondida Central and Escondida West. Over the past year, Cerro Moro has optimized the operation of the processing plant to increase daily throughput to approximately 1,100 tpd. With improvements to mine development and flexibility, the Company anticipates a more balanced quarterly production profile over the year.
Total cost of sales, cash costs(1) and AISC(1) on a per GEO(2) basis during the fourth quarter were $1,224, $726, and $1,044, respectively, all well below the guided ranges provided and the comparative period, as a result of the strong production
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observed. Total cost of sales, cash costs(1) and AISC(1) on a per GEO(2) basis during the year were $1,332, $848 and $1,228 respectively, all below the comparative period.
The mine has a significant inventory of lower-grade veins that are not fully reflected in the current mineral reserves and mineral resource statements, many of which are wider than the veins currently being mined. Drilling of these lower grade veins was not typically followed up with infill drilling in the past as the mineralization is below the current cut-off grade. Cerro Moro was developed as a high grade, low tonnage operation but, from the beginning, the Company has considered alternative processing options to allow for economic extraction of lower grade mineralization, including:
a.a scalable plant, where the front-end of the plant anticipates higher 2,000 tpd tonnage, with the expectation of modest capital requirement to achieve this objective,
b.heap leaching near surface, lower-grade material, to supplement other production.
The objective at Cerro Moro is to create a sustainable ten-years of production of at least 160,000 GEO(2) per year, and up to 200,000 GEO(2) per year. If the Company successfully develops both the plant expansion and heap leach projects, which represent significant upside opportunities, along with conversion of the exploration targets to mineral resources, Cerro Moro could produce at least 200,000 GEO(2) per year. This upside would be beyond the current ten-year outlook that assumes Cerro Moro as a 150,000 to 165,000 GEO(2) per year operation, which is expected to be sustainable from mineral reserves mine life, ongoing exploration successes and mineral reserve replacement.
For further information on the Cerro Moro scalable plant and heap leach project and other initiatives please refer to Section 5: Construction, Development and Other Initiatives.
As Cerro Moro’s mineral inventory increases, the Company will evaluate its options for alternative sources of power, which include a connection to the grid and wind power. Both options are expected to improve costs and further reduce GHG emissions, thereby accelerating the achievement of the Company’s carbon emissions reduction goal. This area of southern Argentina is one of the most prospective areas in the world for wind-based energy generation; the Company’s third-party process to evaluate wind power indicates there should be a sufficient and sustainable supply of power. The results of the alternative power analysis will be considered in the plant expansion pre-feasibility and heap leach studies to explore synergies between the projects. Based on preliminary analysis, the Company believes that the conversion of approximately twenty-five per cent of Cerro Moro's power sources to wind would significantly contribute to the carbon reduction goals of the Company to achieve net zero emissions.
Cerro Moro Exploration
Exploration during the fourth quarter included completion of approximately 15,246 metres of drilling in 207 drill holes, including 2,111 metres of infill drilling in 36 holes, 3,626 metres of exploration drilling in 18 drill holes and 9,509 metres of regional diamond, RC and RAB (Rotary Air Blast) drilling in 153 holes testing multiple regional targets and including definition drilling of resources at Domos La Union in support of the evaluation of heap leach potential at Cerro Moro.
Infill drilling in the fourth quarter was conducted at Escondida Far West, Veronica, Michelle and Naty sectors, targeting high quality inferred underground and open pit resources. Positive results have been returned from Escondida Far West, Veronica and Michelle, while notable high-grade gold and silver intercepts were returned over significant estimated true widths in deeper drilling below current resources at Naty.
Exploration drilling in the fourth quarter continued to focus on the core mine Escondida-Zoe structural corridor, targeting extensions of known ore shoots to depth and laterally and to test new sectors. Drilling in the quarter was completed at Escondida West, Escondida Central and Escondida Far East. At Escondida West, exploration drilling returned positive intercepts along a northwestern plunge, confirming continuation to depth along this ore shoot, which remains open for expansion. Significant mineralization with visible gold was intercepted down plunge of inferred resources at Escondida Far East, continuing to expand the mineral envelope at depth, where mineralization remains open for further expansion. Exploration drilling will continue to test this area during the upcoming period. Positive results were also received in the fourth quarter from exploration drilling completed at Zoe, Veronica and Martina. At Veronica, positive intercepts were returned in the shallow down-plunge direction, indicating that the zone remains open for further exploration.
Drill testing of several regional targets continued during the fourth quarter, as the regional drilling program continued to ramp up. Scout drilling completed during the quarter totaled 9,509 metres in 153 diamond, RC and RAB drill holes. Drilling was completed at targets in the Bahia Laura area (Naty NE, Domos La Union, Ocular), with most assay results pending. Positive results were returned from scout drilling at Naty NE, where mineralization remains open for further testing. Drilling at Domos La Union totaled 1,829 metres, were a Phase 1 resource definition drilling program was completed as part of an ongoing evaluation of heap leach potential at Cerro Moro. Definition of a mineral inventory of heap leachable material at Cerro Moro has the potential to increase resources and potentially increase production at the mine. At the Mosquito project, RAB drilling totaling 673 metres was completed in the fourth quarter testing a high-potential target under post-mineral gravels and sedimentary cover. Assay results are pending. This target area will be advanced in 2022. Further positive results were obtained at Cassius along the main Escondida-Zoe trend, defining a new structure parallel to Escondida, where follow up step out drilling is ongoing. Additional work completed during the quarter included ongoing geological mapping, collection of 1,078 soil and 892 rock samples, and alteration
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characterization in the regional Bahia Laura, Lucia, Mosquito and Nevado sectors. Positive drill results from these programs generated new resources to replace mining depletion and provide a basis for inferred resources that may be amenable to heap leach extraction by mid-year 2022.
EL PEÑÓN, CHILE
El Peñón is a gold-silver mine located approximately 160 kilometres southeast of Antofagasta in northern Chile.
| | | | | | | | | | | | | | |
| For the three months ended December 31, | For the year ended December 31, |
| Key Performance Information | 2021 | | 2020 | | 2021 | | 2020 | |
| Operating | | | | |
Ore mined (tonnes) | 301,246 | | 332,247 | | 1,098,888 | | 1,129,036 | |
Ore processed (tonnes) | 326,807 | | 357,096 | | 1,304,807 | | 1,266,829 | |
GEO(2) | | | | |
| Production | 67,901 | | 55,529 | | 226,330 | | 216,749 | |
| Sales | 63,943 | | 51,738 | | 223,375 | | 215,667 | |
| Total cost of sales per GEO sold | $ | 929 | | $ | 1,023 | | $ | 1,054 | | $ | 980 | |
Cash costs per GEO sold(1) | $ | 582 | | $ | 696 | | $ | 673 | | $ | 657 | |
AISC per GEO sold(1) | $ | 761 | | $ | 1,025 | | $ | 932 | | $ | 922 | |
| DDA per GEO sold | $ | 347 | | $ | 327 | | $ | 381 | | $ | 323 | |
| Gold | | | | |
Production (ounces) | 55,282 | | 43,512 | | 176,439 | | 160,824 | |
Sales (ounces) | 52,401 | | 40,129 | | 174,288 | | 158,933 | |
Feed grade (g/t) | 5.69 | | 4.07 | | 4.49 | | 4.22 | |
Recovery rate (%) | 94.7 | | 93.7 | | 94.3 | | 93.7 | |
| Silver | | | | |
Production (ounces) | 976,996 | | 922,954 | | 3,587,092 | | 4,917,101 | |
Sales (ounces) | 894,366 | | 888,858 | | 3,519,973 | | 4,940,217 | |
Feed grade (g/t) | 113.26 | | 92.53 | | 100.60 | | 138.94 | |
Recovery rate (%) | 88.0 | | 86.8 | | 86.7 | | 86.7 | |
Financial (millions of US Dollars) | | | | |
| Revenue | $ | 115.1 | | $ | 96.5 | | $ | 401.5 | | $ | 381.1 | |
| Cost of sales excluding DDA | (37.2) | | (36.0) | | (150.3) | | (141.8) | |
| Gross margin excluding DDA | $ | 77.9 | | $ | 60.5 | | $ | 251.2 | | $ | 239.3 | |
| DDA | (22.2) | | (16.9) | | (85.0) | | (69.6) | |
| Temporary suspension, standby and other incremental COVID-19 costs | (1.0) | | (2.0) | | (4.9) | | (7.0) | |
Reversal of impairment | — | | 560.0 | | — | | 560.0 | |
Mine operating earnings | $ | 54.7 | | $ | 601.6 | | $ | 161.3 | | $ | 722.7 | |
Capital expenditures (millions of US Dollars) | | | | |
| Sustaining and other | $ | 7.1 | | $ | 9.9 | | $ | 34.6 | | $ | 31.4 | |
| Expansionary | $ | 1.6 | | $ | 0.5 | | $ | 7.8 | | $ | 0.5 | |
| Exploration | $ | 2.3 | | $ | 4.7 | | $ | 15.6 | | $ | 15.9 | |
El Peñón had its strongest production quarter of the year, with GEO(2) production of 67,901 exceeding plan, including gold production of 55,282 ounces, and 976,996 ounces of silver. El Peñón's annual production of 226,330 GEO(2) exceeded guidance of 222,000 GEO(2). As planned, operations entered higher-grade zones at the La Paloma and Pampa Campamento mining sectors, which contributed to the higher production results in the fourth quarter. The first step to unlock the opportunity to leverage the existing processing capacity at the mine and increase production was to establish additional mining sectors. The development of La Paloma, Quebrada Colorada Sur and Pampa Campamento Deep was an important component of that strategy; accessing these new areas has now provided increased mining flexibility. With improved access now in place, and development rates able to support throughput, the Company expects more consistent quarter-over-quarter production in 2022 as compared to 2021.
Quarterly total cost of sales, cash costs(1) and AISC(1) on a per GEO(2) basis of $929, $582, and $761, respectively, were all well below guidance and the comparative period, as a result of the current period's planned and previously disclosed higher development rates, that facilitated access to additional mining areas in the second half of the year. Total cost of sales, cash costs(1) and AISC(1) on a per GEO(2) basis for the year to date period were $1,054, $673, and $932, respectively. With the ongoing focus on increasing mine development rates, El Peñón has increased the number of available underground production zones
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which are expected to support the current level of mine production and feed grades going forward. Mine development is currently occurring at a rate that exceeds 3,000 metres per month.
El Peñón Exploration
District-scale exploration work completed during the year and the fourth quarter yielded positive results, and opens up a new, large area of high exploration potential, suggesting a significant expansion of the highly productive El Peñón vein system south of the existing mine. Such expansion of the vein system could in turn meet the objective of increasing production at a site that has significant excess plant capacity. While drilling is ongoing and results will be presented in the next exploration update, fourth quarter work included 2,499 metres of reverse-circulation and diamond drilling in six deeper drill holes, targeting the favorable rhyolite stratigraphy at depth south of the core mine at 500 to 700 metres below surface. All targets drilled intercepted the rhyolite unit and two wide-spaced sections intercepted epithermal vein mineralization with significant gold and silver grades. One section is located 1,000 metres south of the southernmost development on the Martillo vein system while the second section is located 600 metres south of the end of the Orito development. Drilling on both sections cut altered and mineralized rhyolite with El Peñón style alteration including widespread adularia and El Peñón style epithermal veins with gold and silver mineralization.
During the fourth quarter approximately 19,408 metres of drilling were completed at El Peñón, including 34 drill holes totaling 16,699 metres of infill drilling to convert inferred mineral resources to indicated mineral resources, one drill holes totaling 210 metres of exploratory drilling dedicated to defining new inferred mineral resources, and 2,499 metres in 6 reverse-circulation and diamond drill holes testing regional targets.
Infill drilling during the fourth quarter was completed in four sectors of the mine, with positive results returned from the Pampa Campamento, Paloma and Sorpresa Este sectors. Success in the quarter continued to be driven in large part by testing deeper parts of known main veins within the lower dacitic stratigraphy, where drilling continues to highlight the potential in down-dip segments of known structures, which remain open for expansion.
Exploration drilling at El Peñón during the fourth quarter included one drill hole completed at Abundancia Oeste in the northern most sector of the mine, returning positive results. Targeting has benefited from analysis of ore shoot trends, which is helping to target higher grade sectors, as ore zones are extended to depth toward the lower dacitic unit.
The positive infill and near mine exploration results received in 2021 have generated new resources, replacing mining depletion over the year, and have provided new inferred resources for further conversion drilling.
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MINERA FLORIDA, CHILE
Minera Florida is an underground gold mine located south of Santiago in central Chile.
| | | | | | | | | | | | | | |
| For the three months ended December 31, | For the year ended December 31, |
| Key Performance Information | 2021 | | 2020 | | 2021 | | 2020 | |
| Operating | | | | |
Ore mined (tonnes) | 180,462 | | 233,374 | | 817,842 | | 810,294 | |
Ore processed (tonnes) | 201,003 | | 260,199 | | 940,923 | | 892,286 | |
GEO(2) (Gold) | | | | |
| Production | 18,247 | | 26,352 | | 84,768 | | 89,843 | |
| Sales | 20,058 | | 23,979 | | 87,804 | | 87,735 | |
Feed grade (g/t) | 3.05 | | 3.36 | | 3.03 | | 3.37 | |
| Recovery rate (%) | 92.5 | | 93.7 | | 92.6 | | 92.9 | |
| Total cost of sales per GEO sold | $ | 1,535 | | $ | 1,279 | | $ | 1,434 | | $ | 1,366 | |
Cash costs per GEO sold(1) | $ | 911 | | $ | 760 | | $ | 881 | | $ | 862 | |
AISC per GEO sold(1) | $ | 1,313 | | $ | 1,087 | | $ | 1,224 | | $ | 1,152 | |
| DDA per GEO sold | $ | 624 | | $ | 519 | | $ | 553 | | $ | 503 | |
Financial (millions of US Dollars) | | | | |
| Revenue | $ | 35.9 | | $ | 44.9 | | $ | 158.0 | | $ | 155.5 | |
| Cost of sales excluding DDA | (18.3) | | (18.2) | | (77.4) | | (75.6) | |
| Gross margin excluding DDA | $ | 17.6 | | $ | 26.7 | | $ | 80.6 | | $ | 79.9 | |
| DDA | (12.5) | | (12.5) | | (48.5) | | (44.2) | |
| Temporary suspension, standby and other incremental COVID-19 costs | (3.7) | | (1.3) | | (8.0) | | (7.7) | |
| Mine operating earnings | $ | 1.4 | | $ | 12.9 | | $ | 24.1 | | $ | 28.0 | |
Capital expenditures (millions of US Dollars) | | | | |
| Sustaining and other | $ | 2.9 | | $ | 4.4 | | $ | 15.2 | | $ | 12.6 | |
| Expansionary | $ | 6.3 | | $ | 9.1 | | $ | 22.6 | | $ | 19.9 | |
| Exploration | $ | 3.1 | | $ | 1.8 | | $ | 6.5 | | $ | 7.0 | |
Minera Florida reported gold production of 18,247 ounces during the fourth quarter, and 84,768 ounces for the year, in line with the previously provided guidance range. Production was partially affected in December by a strike which ended in January when the Company entered into a long term collective bargaining agreement with its unions. During the year, Minera Florida has seen improved operational efficiency and reduced haulage distances as a result of re-establishing ore passes. Widening of the final ore pass at Fantasma/Polvorin was completed during October, which will further reduce haulage distances and possibly allow for optimizing the hauling fleet. Internalization of mining activities, ongoing optimization of the haulage infrastructure, and increasing disposal storage of development waste into underground voids will further improve mine productivity going forward. A review of the processing plant in the first quarter identified several opportunities to increase recovery. Management is prioritizing these opportunities, focusing on the initiatives that can be implemented quickly with minimal investment.
Consistent with the 10-year outlook, the plant de-bottlenecking study is advancing on schedule, with the objective to increase throughput from 74,500 to 100,000 tonnes per month, thereby increasing annual gold production to approximately 120,000 ounces. The Company submitted the ESIA for the expansion during the fourth quarter, with the timeline expected to be approximately 18 months for approval, with another 12 months to receive sectoral permits. With the expected permitting timelines, the mine could begin operating at a planned 100,000 tonnes per month level in 2025. Preliminary studies indicate that the capacity of the processing plant can be increased to approximately 90,000 tonnes per month with incremental adjustments. An upgrade of the crushing circuit would be required to achieve 100,000 tonnes per month.
Total cost of sales, cash costs(1) and AISC(1) on a per GEO(2) basis during the fourth quarter were $1,535, $911, and $1,313 respectively. Total cost of sales, cash costs(1) and AISC(1) on a per GEO(2) basis during the year were $1,434, $881 and $1,224 respectively. Costs are expected to improve in 2022 due to higher grades, and higher silver and zinc by-product credits. In addition to the aforementioned plant improvements, the Company completed a processing plan earlier in the year, which identified opportunities to implement cost control initiatives; these are currently under consideration and may positively impact future costs.
Minera Florida Exploration
Exploration results continued to identify extensions of known mineralized zones and generate new discoveries. Exploration activities at Minera Florida during the fourth quarter included completion of approximately 14,154 metres of drilling in 87 diamond drill holes, including 29 drill holes totaling 4,582 metres of infill drilling to convert inferred mineral resources to indicated mineral
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resources, 44 drill holes totaling 7,141 metres of exploratory drilling dedicated to defining new inferred mineral resources and 2,431 metres in 14 drill holes testing regional targets.
Infill drilling in the quarter was completed in six areas, including Cantillana, Don Leopoldo, Fantasma, Hallazgo, Patagua and Circular. Positive results were received in the quarter from Patagua Norte, Bandolera 1 Vein, Fantasma, Mila Maqui, Don Leopoldo, VCN and Falla Hallazgo veins, including high-grade intercepts returned from Patagua Norte, Don Leopoldo, Fantasma and Bandolera 1.
Exploration drilling in the fourth quarter included approximately 7,141 metres completed in 44 drill holes, testing ten targets, including Cantillana, Circular, Polvorin, Don Leopoldo, Patagua, Mila, VCN, Paco, Ricky and Satelites (Mina Este vein system). Drill highlights include high-grade intercepts generated at Polvorin Oeste, Satelite Paco, VCN, and Mila Maqui, where high grades were intercepted 150 metres below the current ore zone, where mineralization remains open for further expansion, and at the intersection between Patagua Norte and Don Leopoldo veins, generating wide, high-grade intercepts.
District-scale exploration activity, focused on the discovery of new deposits, included 2,431 metres of scout drilling in 14 drill holes, targeting five sectors, including the Cucaracha, Quemazon, Patagua Norte Oeste, Peumo Oeste and Mejias Oeste veins. High-grade intercepts over good widths were returned at Patagua Norte Oeste, defining new areas for further exploration. Mineralization at Patagua Norte Oeste occurs within a down-dropped structural block, where mineralization is likely to be well preserved. Good grades were also intercepted at Peumo Oeste vein (west of La Flor fault). Work is ongoing in these sectors. Additional district exploration during the fourth quarter included the collection of over 700 surface rock and soil samples, and geological mapping, to define select target areas which may be drill tested in the future.
5. CONSTRUCTION, DEVELOPMENT AND OTHER INITIATIVES
CONSTRUCTION, DEVELOPMENT AND ADVANCED STAGE PROJECTS
The Company has several construction, development and advanced stage projects underway. Notable progress relating to some of these key initiatives include, but are not limited to the following:
Wasamac Project, Canada
Project Summary
The wholly owned Wasamac underground gold project is located 15 kilometres west of Rouyn-Noranda in the Abitibi-Témiscamingue Region of Quebec adjacent to the Trans-Canada highway and Ontario Northland rail line, and just 100 kilometres west of Yamana’s 50%-owned Canadian Malartic mine. Yamana acquired the project in January 2021, further expanding its footprint in Quebec and significantly enhancing the Company’s long-term growth prospects.
On July 19, 2021, the Company issued the press release "Yamana Gold Announces Positive Development Decision On Its Wholly owned Wasamac Project Based on Positive Results From Several Studies Showing Higher Average Daily Throughput, Increased Mineral Reserves, Increased Average Annual Production And Strong, Increased Cash Flows". In the press release, the Company announced the results of several studies on Wasamac, intended to corroborate diligence reviews conducted by the Company on its purchase of Wasamac in early 2021 and update a historical feasibility study. These studies updated the baseline technical and financial aspects of Wasamac that now underpin the decision to advance the project to production. The results from all studies were consistent with the Company’s conclusions in its diligence reviews relating to the purchase of Wasamac and, in some cases, are better than the conclusions from those reviews.
Wasamac is designed as a modern underground operation with a small footprint and almost all surface infrastructure located on the north of Route 117 highway, away from the neighbouring community. Use of an underground conveyor, electric mining equipment and high-efficiency ventilation fans to minimize energy use and carbon emissions, with further electrification planned as new technology becomes commercially available between now and project execution. Ore will be processed through a new processing plant at a planned average throughput of 7,000 tpd and tailings will be deposited underground as paste fill and in a filtered dry-stack tailings storage facility.
Following a rapid production ramp-up in first year, Wasamac will sustain gold production of approximately 200,000 ounces per year for at least the following four years. Including the ramp-up phase, average annual production for the first five years of operation is expected to be 184,000 ounces.
Yamana expects to receive all permits and certificates of authorization required for project construction by the third quarter of 2024. Construction time to processing plant commissioning is estimated at two and a half years, with the underground crusher and conveyor system scheduled for commissioning six months later. First gold production is scheduled for the fourth quarter of 2026, with commercial production planned for the fourth quarter of 2027, however, the Company has already identified opportunities to accelerate the production ramp-up and decrease the processing plant construction period, which would improve timing significantly over the feasibility study's base case production profile.
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As previously disclosed, the initial capital cost is expected to be relatively modest for a 7,000 tpd underground operation, at approximately $416 million. The Company undertook extensive due diligence relating to the acquisition of Wasamac and identified several opportunities for optimizations and improvements; the updated studies confirmed the opportunities. The Company plans to fully fund development with available cash and cash flows. The Company anticipates building significant cash balances over the upcoming years, which will be allocated to the project in time for its formal development, once the required permits are received.
Total LOM sustaining capital estimated at $318 million primarily for underground mine development and mobile equipment. LOM cash costs(1) and AISC(1) of $640 per ounce and $828 per ounce, respectively, remaining well below the Company average, reflecting the application of more conservative cost assumptions to de-risk the project and align with benchmark costs from Yamana’s other operations.
Robust project economics with an after-tax IRR of 16.1% at $1,550 per ounce of gold and an after-tax IRR of 24% at $1,850 per ounce of gold, based on mineral reserves and excluding future upside potential from encouraging exploration prospects. There is potential for a significant increase in NPV and after-tax IRR with an increase in mineral inventory and increase in mine life. An increase in mine from the presently contemplated 10 years to 15 years doubles the NPV of the project.
Yamana’s average annual gold production in Quebec, including production from Wasamac and the Odyssey underground at Canadian Malartic, has the potential to increase to approximately 500,000 ounces by 2028, and continue at this level through at least 2041.
Fourth Quarter Progress Update
Exploration drilling at Wasamac in the fourth quarter continued to deliver promising results. On December 1, 2021, the Company issued the press release “Yamana Gold Announces the Discovery of New Mineralized Zones at Wasamac and Provides an Update on Its Growth Projects”, which included drill results south of the Wildcat zone which intersected two new mineralized zones, referred to as South Wildcat. The first is a zone of shearing and quartz carbonate stockwork in altered mafic volcanic rocks and the second intersected zone is a wide zone of shearing and strong alteration. This drill hole demonstrates the excellent potential of the area south of the Wasamac shear and north of the Cadillac Tectonic zone; follow-up drilling is planned for early 2022. These results demonstrate the excellent exploration potential and opportunity to further grow the mineral inventory and are expected to support a production platform of 200,000 ounces per year with AISC(1) below $850 per ounce over a mine life of at least 15 years. An exploration budget of $10.0 million is planned for 2022. This production level would significantly improve the approved development plan of an average of 169,000 ounces per year over a mine life of 10 years, thereby meaningfully increasing overall value.
The Company has decided to advance the bulk sample permitting process for Wasamac and expects to obtain the required approvals in the first quarter of 2023. The bulk sample permit would allow construction to commence on the ramp, enabling earlier access to the deposit to increase the level of confidence in metallurgical and geotechnical assumptions and optimize the processing flow sheet and mining sequence. Construction on surface facilities to support the ramp development activity and associated environmental requirements would also advance.
The bulk sample was not considered in the feasibility study base case and initiating the process has the potential to further enhance the economics and mitigate risks of the project. Additional benefits of the bulk sample include:
a.Build production-ready models for the grade, recovery, and geotechnical aspects of the project, to support the first three years of production.
b.Capture opportunities to optimize the processing performance, as preliminary results of optimization studies indicate the potential to improve average gold recovery by 3%, and up to 5.5% for certain zones of the deposit.
c.Confirm stope stability parameters to optimize stope dimensions, backfilling strategy and mining sequence while contributing to ensuring a safe working environment.
d.Establish drilling platforms to perform delineation and exploration drilling at Wasamac, Wildcat and new zones from underground.
Substantial work is also underway to select the leading technologies available for the development and operation of Wasamac. The key objectives remain to increase worker safety, minimize impact on the environment and the community, and reduce consumption of non-renewable energy and greenhouse gases. Technologies under evaluation include electric production vehicles, autonomous vehicles, bio-lubricants and ventilation on demand.
The Company relies on a collaborative approach to ensure the success of Wasamac. In this regard, our environmental assessment process is conducted in collaboration with our stakeholders, including neighbors, and First Nations. A community relations office has now been established to further facilitate ongoing engagement with local residents and accessibility to the Company's team, as well as providing up-to-date information on the project. A campaign of environmental baseline data collection is currently underway. Completion of all work for the submission of the Environmental Impact Assessment (“EIA”) is expected in the second quarter of 2022, with the filing expected by the end of 2022.
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For additional information on the planned Wasamac exploration initiatives, please refer to Section 7: Exploration.
Opportunities Providing Upside
The Company believes that the discovery of the two new parallel mineralized structures in between the Wasamac shear and the Cadillac Tectonic zone is further evidence of the excellent geological upside on the large Wasamac property, and it plans to continue the drilling programs to grow the mineral inventories with an accelerated program. These results are aligned with the Company’s strategic objective and are expected to support a production platform of 200,000 ounces per year with AISC(1) below $850 per ounce over a mine life of at least 15 years.
A concurrent exploration effort will focus on expanding the current mineral resource envelopes to depths below the established mineral resource, with testing for mineralization to target poorly explored gaps between mineralized zones. The Francoeur, Arntfield, and Lac Fortune gold deposits, located just six kilometres from the planned Wasamac milling facilities, represent additional potential exploration upside. Mineralization on the Francoeur property and that exposed in recent trenching at Arntfield by the property’s previous owner consists of mylotinized, albite-carbonate altered rocks with pyrite mineralization very similar to Wasamac. This shear zone can be traced a further six kilometres from the Wasamac-Francoeur property boundary to the west of the historic Francoeur mine. Several parallel shear zones located south of Francoeur with significant known mineralization, including Lac Fortune, and an interpreted southern splay of the Wasa Shear in the Arntfield area are excellent further targets for drilling and potential mineral resource expansion.
Exploration success also unlocks the opportunity to utilize the full design capacity of the processing plant of 2.74 million tonnes per year, or 7,500 tpd, which could increase annual gold production. Furthermore, future potential incremental expansions to the processing plant will be considered in the engineering phase in the event that ongoing exploration success provides additional production sources.
A program has been implemented to improve recovery, simplifying the process and to better understand the metallurgy of the different areas of the deposit. Preliminary testing indicates that average gold recovery could potentially increase by approximately 3% as compared to the feasibility study.
Odyssey Project, Canadian Malartic, Canada (50% interest)
Project Summary
The underground Odyssey project is located east of the current Canadian Malartic open pit operation and is comprised of the East Gouldie, Odyssey South, Odyssey North and East Malartic mining zones with a combined mining rate of approximately 19,500 tonnes per day when operating at full capacity. Ore will be transported to surface using a combination of shaft hoisting, from the lower zones, and truck haulage, from the upper zones; all ore will be processed at the existing Canadian Malartic processing plant. Tailings will be deposited underground as paste fill and in the Canadian Malartic pit, once the pit is depleted.
A NI 43-101 technical report for Canadian Malartic was completed in March 2021, and includes a full summary of the Odyssey underground project. The project demonstrates robust economics, a significant increase in mineral resources, and a mine life extension to at least 2039. First production from the Odyssey South deposit is expected in 2023. As Canadian Malartic transitions from open pit to underground mining, underground production will offset a significant portion of the corresponding decline in open pit production. Whereas the Company had originally considered a production platform for the new underground mine conservatively in the range of 450,000 ounces per year, the mine plan now supports annual gold production of 500,000 to 600,000 ounces when fully ramped up on a 100% basis.
As of December 31, 2021, the Odyssey Project contains 2.35 million ounces of gold in Indicated Mineral Resources and 13.15 million ounces of gold in Inferred Mineral Resources of which 7.3 million ounces, or approximately 47%, is included in the technical study mine plan. The Odyssey project will utilize a transverse long hole stoping mining method with primary and secondary stopes and paste backfill to fill the voids, a proven mining method in the region. The mineralization geometry and very good rock quality are ideal for bulk mining. The East Gouldie zone in particular is at least one kilometre in height, one kilometre in strike length and typically 15 metres wide, with maximum widths of up to 80 metres. Infill drilling confirms excellent grade continuity throughout the deposit. As such, large stopes of 30 to 50 metres high by 20 metres wide are achievable.
On a 100% basis, average annual payable gold production is expected to be approximately 545,400 ounces from 2029 to 2039 with total cash costs per ounce of approximately $630 per ounce. Sustaining capital from 2029 to 2039 is expected on a 50% (and 100%) basis to average approximately $27.9 million ($55.8 million) per year.
The Odyssey project has modest capital requirements in any given year which are manageable and fully funded using Canadian Malartic's cash on hand and free cash flow generation, with no external funding required. With work in 2022 and 2023 related to the shaft sinking and the focus on surface infrastructure as further described below, capital costs are highest in 2022, and as previously disclosed, begin to decline in 2023.
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Fourth Quarter Progress Update
The Company and its partner made a positive construction decision of the Odyssey project following technical study results in February of 2021. The project advanced significantly in 2021, with several milestones achieved in the fourth quarter. The project continues to be on budget, and on schedule.
In October, the concrete pour to construct the 93-metre-tall headframe was completed on schedule, in preparation for shaft sinking slated to begin in the fourth quarter of 2022. Structural steel installation inside the headframe and construction of the fresh air intake is ongoing. The production shaft will be 6.5 metres in diameter and 1,800 metres deep, with the first of two loading stations at 1,135 metres below surface. The sinking hoist and auxiliary hoist are expected to be delivered mid-2022.
In parallel, underground development is advancing according to plan and, as of the end of 2021, the ramp from surface to the upper zones has reached the elevation of the third production level and the base of the first stoping horizon. Underground development rates increased in the fourth quarter of 2021 to approximately 400 metres per month with the opening of additional headings and implementation of automated scoops to operate between shifts, achieving a total of 2,081 linear metres for the year. Development rates are planned to increase further in 2022 with the addition of the Canadian Malartic development crews. The first development jumbo drill is scheduled to be delivered in February and, as an employer of choice in the Abitibi, the Odyssey project is successfully building a highly skilled team. Priority will continue to be placed on the main ramp and also the level 16 exploration drift for infill drilling of the Odyssey South and Internal zones. The first underground ore from Odyssey South is on track to be processed through the existing Canadian Malartic plant in early 2023.
Construction of surface infrastructure is advancing on schedule with critical preparation works completed in the fourth quarter to allow construction to continue as planned throughout the winter. Construction of the surface workshop, warehouse and compressor buildings are ongoing and construction of the paste fill plant is scheduled to commence in February. Most long-lead items have been secured. Decree amendment and the mining lease process continue to be on target for the first quarter of 2022 and fourth quarter of 2022 respectively.
Opportunities Providing Upside
The intention of the Partnership was always to build upon the base case scenario presented in the technical study by realizing value enhancement opportunities improving the production profile and extending mine life. Throughout 2021, these opportunities have increased in confidence and definition as a result of the ongoing exploration success and the rapid advancement of the project.
Extension of the mine life beyond 2039 provides additional upside, with several opportunities under evaluation. The upside from grade improvements and underground mine life extensions are expected to be realized through infill drilling to improve geological confidence, exploration drilling to extend known deposits and make new discoveries and engineering efforts, especially close to historical underground excavations and at depth at East Malartic. Drilling in 2021 added 1.1 million ounces of total gold mineral resources as a result expanding the resource envelope at East Gouldie and infill drilling of East Gouldie confirmed the deposit grades and widths and converted 1.5 million ounces to gold indicated resources on a 100% basis.
In the near-term, Canadian Malartic has the opportunity to improve the gold production profile during the transition from open pit to underground mining, especially from 2026 to 2028. As a first step, the Barnat pit design was optimized, adding 290,000 ounces (100% basis) to year-end 2020 open pit mineral reserves. Processing of the marginal grade stockpile also remains an opportunity, especially if the gold price remains at current levels. Furthermore, infill drilling of the Odyssey Internal zones from the underground ramp in 2021 has defined potentially mineable zones that are currently not included in the technical study mine plan and could potentially be mined from the Odyssey South ramp within the next five years.
In the technical study, gold production during the 2021 to 2028 construction period is expected at 932,000 ounces (100% basis), with net proceeds from the sale of these ounces significantly reducing the capital requirements for the construction of the project. Assuming a gold price of $1,550 per ounce, the projected initial expansionary capital of $1.14 billion over this eight-year period would be reduced in half. Proceeds from additional underground production, from Odyssey Internal zones or other, would further reduce capital requirements.
The Canadian Malartic mill is currently planned to be downsized from approximately 60,000 tpd to 20,000 tpd in 2026 as open pit feed declines, with one ball mill and two crushers planned to be put in care-and-maintenance. However, if additional ore sources are identified in future, this equipment could remain in operation or be re-started at a later date for possible throughput increases. Exploration drilling of the East Gouldie Extension and parallel structures, while widely spaced, indicate that a corridor of mineralization extends at least 1.3 kilometres to the east of East Gouldie. Although at the very early stages, these results suggest the potential for a second production shaft that could increase throughput over the longer term. Open pit and underground exploration targets within the Canadian Malartic land package present additional potential ore sources.
For further details on the Odyssey Project, please refer to Yamana's February 11, 2021 press release entitled 'Yamana Gold Reports Strong Fourth Quarter and Full Year 2020 Results; Impressive Technical Study Results Delivered for the Odyssey Underground Project at Canadian Malartic With Construction Decision Approved; Adopts Climate Change Strategy'.
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Jacobina, Brazil
Project Summary
Phased expansion of the Jacobina operation in Brazil is expected to establish a gold production platform of up to 270,000 ounces per year. Jacobina’s large inventory of mineral reserves and mineral resources continues to grow faster than mining depletion, providing the basis for a multi-decade strategic mine life at low costs and high cash flow.
In 2021, the Company initiated a simplified approach to the Phase 2 expansion to continue incremental debottlenecking and operational improvements, without requiring an expansion of the grinding circuit as originally contemplated. The simplified expansion approach is a continuation of the strategy that has been the basis for the quarter-over-quarter success of Jacobina over the past several years, and is expected to de-risk the project and require significantly lower capital than originally planned in the Phase 2 pre-feasibility study, an amount not expected to exceed $15 million to $20 million.
With the Phase 2 expansion advancing ahead of schedule, the Company is now pursuing the Phase 3 expansion as part of a comprehensive plan which aligns the processing plant, underground mine, and tailings management strategy, while managing capital expenditures and cash flow. Engineering for the Phase 3 expansion to 10,000 tpd will advance in parallel with the Phase 2 expansion, and the processing model will continue to be updated to integrate operational data from Phase 2, with a feasibility study for Phase 3 scheduled for completion in 2023.
Fourth Quarter Progress Update
During the fourth quarter, Jacobina received the expansion permit, allowing throughput to increase to 10,000 tpd, as announced in the December 6 press release “Yamana Gold Receives Permit at Jacobina, Initiating Ramp Up of Phase 2 Expansion, Expects Fourth Quarter Company Wide Production to Exceed 270,000 GEO With Costs Tracking to Be the Lowest of the Year”. The successful result is the culmination of a two-year process during which the Company worked closely with government agencies to ensure that Jacobina continues to operate in a responsible, sustainable way to the benefit of all stakeholders. The Company has strategically elected to operate in the Americas in rules-based jurisdictions with a mining pedigree providing certainty for conducting its operations which has been exemplified with the Brazilian permitting process for Jacobina. Receipt of the permit not only marks a significant milestone in the Phase 2 ramp up to 230,000 ounces of gold per year, but also facilitates the future Phase 3 expansion to increase production up to 270,000 ounces per year.
The underground mining rate continues to increase and with the accelerated permitting and 2021 outperformance, the mine is now expected to achieve the Phase 2 throughput objective of 8,500 tpd by the second quarter of 2022, approximately one year ahead of schedule, although higher throughput will be supported by stockpiles during the year. Following receipt of the permit, Jacobina increased throughput to 7,771 tpd in December, achieving an average throughput of 7,610 tpd for the fourth quarter. Grade normalizes in 2023 when production is expected to reach 230,000 ounces. Since May 2021, throughput has been stable at the previously-permitted rate of 7,500 tpd and the mine is well positioned to immediately start ramping up to 8,500 tpd. Over the same time frame, Jacobina has continued with incremental improvements to increase mining and processing capacity in anticipation of receiving the expansion permit. As such, the Company intends to progressively increase throughput over the next six to seven months.
The ramp up to 8,500 tpd will be achieved through a continuation of incremental improvements to de-bottleneck the processing plant. Optimization of the crushing circuit which did not require the installation of new equipment is already complete. During the first half of 2022 several additional initiatives are expected to be completed including optimizing the grinding process with the installation of ultrasonic density meters to optimize ore feed control to the mills and increasing the capacity of the electrowinning circuit. In 2023, further initiatives could be undertaken to support recovery rates at the higher throughput level but depending on performance, some of these initiatives may have the flexibility to be deferred until the Phase 3 expansion.
To support the higher processing rates, Jacobina continues to increase underground mining capacity and has prepared an inventory of lower grade stopes and stockpiled ore on surface to provide supplementary mill feed during the ramp up phase. With the higher than planned processing rates that are now anticipated, the Company expects to continue drawing from this supplementary ore into the first half of 2022. New mobile mining equipment has been delivered to Jacobina with additional equipment planned to be received in the first quarter of 2022 to facilitate the increased mining capacity. A modest increase in underground development is also expected in 2022. The accelerated mine plan shows mill feed grades increasing over the next two years.
The tailings storage strategy is aligned with the accelerated expansion timeline. Construction of the latest phase of the tailings storage facility was recently completed, providing tailings storage capacity at 8,500 tpd until the end of 2023. Further permitted phases of the tailings storage facility provide adequate storage capacity to support the life of mine plan. A comprehensive tailings storage strategy is well advanced to provide additional storage solutions including hydraulic backfill, paste fill, and a dry-stack tailings storage facility.
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Opportunities Providing Upside
The Company is further evaluating the strategic options and direction related to Jacobina and the significant exploration that is available along the greenstone belt which hosts the mine. Jacobina is being envisioned as a complex of multiple mines, and more emphasis is being placed on regional and generative exploration, to work towards the strategic plan of Jacobina being a 400,000 ounce-plus mining complex.
The Jacobina mine is part of the Jacobina district, for which geological evidence and tectonic reconstruction suggest strong affinities with similar gold districts in West and South Africa, which host exceptionally large gold deposits, including those of the prolific Witwatersrand Basin and the Tarkwa mine. Gold mineralization at Jacobina is hosted by the Serra do Corrego Formation, preserved within the Jacobina belt, for a strike length of over ninety kilometers. The mine complex consists of six mining areas exploiting economic mineralization within a nine-kilometer long mineralized belt extending from João Belo in the south to Canavieiras Norte in the north. As at December 31, 2021, past gold production from the mine complex was well over two million ounces, with mineral reserves of 2.94 million ounces of gold and total mineral resources of approximately 5.7 million ounces of gold, indicating the world class size of the current known deposit. Since 2019, the Company has started systematic exploration of its 77,800 hectare land package that covers 155 kilometers of exploration potential along the north-south trending belt. This work has defined a fourteen-kilometer long belt of gold-bearing conglomerate located north of the mine complex and has also extended the known mineralized reefs south of João Belo in a continuous area extending 2,200 metres south of the limits of the João Belo mine. Further areas have been identified both to the north and further south during reconnaissance exploration programs. Work will continue to define mineralized reefs exposed on surface and follow up with widely spaced drill testing targeting both extensions of the mine complex and new standalone mine targets. Consequently, the Company sees significant opportunities to grow its regional presence and continue to build the world-class Jacobina Complex.
Cerro Moro, Argentina
Project Summary
The mine has a significant inventory of lower-grade veins that are not fully reflected in the current mineral reserves and mineral resource statements, many of which are wider than the veins currently being mined. Drilling of these lower grade veins was not typically followed up with infill drilling in the past as the mineralization is below the current cut-off grade. Cerro Moro was developed as a high grade, low tonnage operation but, from the beginning, the Company has considered alternative processing options to allow for economic extraction of lower grade mineralization, including:
a.a scalable plant, where the front-end of the plant anticipates higher 2,000 tpd tonnage, with the expectation of modest capital requirement to achieve this objective,
b.heap leaching near surface, lower-grade material, to supplement other production.
The objective at Cerro Moro is to create a sustainable ten-years of production of at least 160,000 GEO(2) per year, and up to 200,000 GEO(2) per year. If the Company successfully develops both the plant expansion and heap leach projects, which represent significant upside opportunities, along with conversion of the exploration targets to mineral resources, Cerro Moro could produce at least 200,000 GEO(2) per year. This upside would be beyond the current ten-year outlook that assumes Cerro Moro as a 150,000 to 165,000 GEO(2) per year operation, which is expected to be sustainable from mineral reserves mine life, ongoing exploration successes and mineral reserve replacement.
Fourth Quarter Progress Update
During the fourth quarter, Yamana advanced the plant expansion study with a trade-off of various comminution circuit configurations to optimize the expansion processing flow sheet. Similar to the approach that has proven successful at Jacobina, the Company is considering a low-risk, phased expansion for Cerro Moro with quick payback from the initial phase used to fund subsequent phases. As such, the Company is considering using fine screens instead of cyclones for classification to improve the efficiency of the existing ball mill. Combined with a slightly coarser grind size, this initial phase is expected to increase throughput to at least 1,500 tpd, a 40% to 50% increase in capacity, without impacting gold and silver recoveries. The incremental capacity could be used for processing of lower grade mineralization, which is expected to increase annual gold and silver production and reduce unit processing and G&A operating costs. Preliminary analysis based on current operating data indicates that the existing crushing and flotation circuits are adequate for the higher throughput rate and reconfiguration of the leaching circuit could achieve the target throughput without requiring additional leach tanks. Upgrades to the concentrate thickener, clarifying filters, flocculant make-up system, and pumping would likely be required. The capital cost of this initial phase is estimated at a modest $15 million to $20 million dollars. Many of the upgrades in phase 1 expansion would be sufficient for a second expansion phase to increase plant throughput to approximately 2,200 tpd, double the existing capacity, further increasing production and reducing operating unit costs. The Company is currently evaluating two options for phase 2 expansion, the addition of a high pressure grinding rolls ("HPGR") unit before the existing ball mill or the addition of a regrind unit. An expansion of the flotation circuit would also be required. The selected option will depend on the results of testwork that is currently underway and expected to be completed by the end of the first quarter, after which cost estimates and economic evaluation will be completed. The Company
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will advance the selected phase 1 and phase 2 expansion options to a pre-feasibility study level, expected for completion in early 2023.
Positive exploration results achieved throughout 2021 successfully replaced depletion of mineral reserves for the first time, as reflected in increased mineral reserves and mineral resources at year-end, turning the corner for the operation. Significantly, the expansion of higher-grade veins, both within the core mine at Zoe and Martina, and outside the core mine at Naty, extends the Cerro Moro mine life at the current gold equivalent feed grade and existing throughput rate of approximately 1,100 tonnes per day. Additional high-grade targets identified in 2021 provide a pipeline of opportunities for continued mineral reserves replacement going forward which supports the plant expansion opportunity. Lastly, at a higher level of throughput, the Company may be able to create a greater inventory of mineral resources, focused on a balance between high grade and more mineral resources, rather than grade alone.
In parallel, a technical study on the potential heap leach project is underway following promising results from metallurgical testing conducted in 2021. A four-month cyanide column leach test program was conducted on eight samples with gold grades of 0.71 to 3.22 g/t. and at three different sizes of feed materials, -25 mm, -19 mm and -9.5 mm. The results indicate good potential for leaching of both oxidized near-surface vein material, zones with hypogene oxides (hematite) and some low sulphide gold-bearing veins, with extractions from column leaching varying from 32.5% to 96.9%, averaging 68.6%. Gold recoveries at the Domos La Union and Michelle zones were particularly impressive, averaging 85.6% from the four samples. As a result, exploration is focusing on these zones, with an objective of defining a heap leachable inventory of 5 million tonnes. Conceptual engineering for a 5,000 tpd heap leach operation commenced in the fourth quarter. A conventional heap leach configuration is envisaged with three stages of crushing to a crushed size P80 of 12.5 mm, followed by agglomeration and retreat conveyor stacking in a multiple lift, single use pad with a design capacity of approximately 14 million tonnes. The leach pad, solution storage ponds, and Merrill-Crowe plant are conceptually planned to be located approximately 2 kilometres east of the current tailings storage facility. Average feed grade is estimated at approximately 1.0 to 1.4 g/t of gold, adding 45,000 to 65,000 ounces of gold production per year in addition to gold and silver production from the existing processing plant. Conceptual capital and operating cost estimation is expected to be completed in the second quarter, and an initial mineral inventory estimate, based on results from 2021 drilling, is planned for mid-2022.
Opportunities Providing Upside
As Cerro Moro’s mineral inventory increases, the Company will evaluate its options for alternative sources of power, which include a connection to the grid and wind power. Both options are expected to improve costs and further reduce GHG emissions, thereby accelerating the achievement of the Company’s carbon emissions reduction goal. This area of southern Argentina is one of the most prospective areas in the world for wind-based energy generation; the Company’s third-party process to evaluate wind power indicates there should be a sufficient and sustainable supply of power. The results of the alternative power analysis will be considered in the plant expansion pre-feasibility and heap leach studies to explore synergies between the projects. Based on preliminary analysis, the Company believes that the conversion of approximately twenty-five per cent of Cerro Moro's power sources to wind would significantly contribute to the carbon reduction goals of the Company to achieve net zero emissions.
MARA Project, Argentina (56.25% interest)
Project Summary
On December 17, 2020, the Company completed the integration with Glencore and Newmont and a new joint venture, the MARA Joint Venture, was formed to manage, develop and operate the project. MARA is the combined project comprised of the Agua Rica site, Alumbrera site as well as the Alumbrera plant and ancillary buildings and facilities. Under the integration, Yamana, the former 100% holder of Agua Rica and the former partners of Alumbrera have created the MARA Joint Venture pursuant to which Yamana holds a controlling ownership interest in the MARA Project at 56.25%. Glencore holds a 25.00% interest and Newmont holds an 18.75% interest in the MARA Project. Yamana has been appointed manager of the MARA Joint Venture and will continue to lead the engagement with local, provincial, and national stakeholders, and completion of the feasibility study and ESIA for the MARA Project. Among other governance committees, a MARA Joint Venture Technical Committee was formalized, comprised of representatives of the three shareholder companies, to provide oversight and guidance to the advancement of the feasibility study.
The integration creates significant synergies by combining existing substantive infrastructure which was formerly used to process ore from the Alumbrera mine during its mine life, including processing facilities, a fully permitted TSF, pipeline, logistical installations, ancillary buildings, and other infrastructure, with the future open pit Agua Rica mine. The result is a de-risked project with a smaller environmental footprint and improved efficiencies, creating one of the lowest capital intensity projects in the world as measured by pound of copper produced and in-situ copper mineral reserves, and creating significant benefits for the host communities, the province of Catamarca and Argentina.
The MARA Project has Mineral Reserves and Mineral Resources in the Agua Rica and the Alumbrera ore bodies. Agua Rica is a large-scale copper, gold, silver and molybdenum deposit and it 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 259.9 million tonnes of Measured and Indicated Mineral Resources, containing more than 1.6 billion pounds of copper and 954,000 ounces of gold.
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Additionally, Inferred Mineral Resources of 742.9 million tonnes represent significant upside potential to further define an increase in Mineral Reserves and life of mine. The MARA Project also has Mineral Resources in the Alumbrera deposit which consist of 125.2 million tonnes of Measured and Indicated Mineral Resources containing more than 800 million pounds of copper and 1.2 million ounces of gold on a 100% basis.
On July 19, 2019, the Company announced the positive results of pre-feasibility study (A) ("PFS(A)"), underscoring that the MARA Project is a long life (with an initial life of 28 years) and low-cost asset 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 Joint Venture Technical Committee advanced optimization studies in late 2019 and early 2020, the results of which were compiled as pre-feasibility study (B) ("PFS(B)"), and is now advancing a full feasibility study on the MARA Project, with updated Mineral Reserve, production and project cost estimates.
The pre-feasibility study for the MARA Project considers the Agua Rica deposit will be mined using 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 42 million tonnes per year and average life of mine strip ratio of 1.66.
Ore extracted from the Agua Rica 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 over the total 35 kilometre conveyor right-of-ways to the Alumbrera processing 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 at the Alumbrera plant. The copper and by-products concentrates will be transported by the existing pipeline to Tucuman and then by railway 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 are studied as part of current design phase.
These previously completed studies provide the framework for the preparation and submission of a new ESIA to the authorities of the Catamarca Province and for the continued engagement with local stakeholders and communities. The shareholders of the MARA Joint Venture began the ESIA process in 2019, given the significant level of environmental baseline data required for such studies.
The 2020 PFS(B) highlights include:
•Annual ore feed increased to 42 million tonnes per year.
•Annual production for the first 10 full years increased to 556 million pounds of copper equivalent* production;
•Cash costs(1) of $1.32 per pound and AISC(1) of $1.44 per pound for the first 10 years of production;
•Initial capital of $2.78 billion. Initial capital reduced to $2.39 billion if first year of owner mine fleet purchases are reclassified as sustaining capital, as was assumed for PFS(A). Total LOM capital spending the same under both PFS(A) and PFS(B);
•NPV of $1.906 billion and an increased IRR of 21.2%**; and
•PFS(B) reflects the inclusion of a progressive Argentina export tax with a long-term assumption of 4.3%.
* 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.
After obtaining all the permits required for local authorities, work during 2021 focused on advancing the feasibility study engineering, mine design and planning, metallurgical and geotechnical drilling campaigns and other field work at site. MARA has also been advancing social and environmental baseline studies as well as permitting and engaging with local stakeholders to strengthen the project’s social license.
The MARA Project represents both a significant strategic value opportunity and a solid development and growth project, which the Company intends to continue to advance through the development and permitting processes via Yamana’s controlling interest, while considering strategic alternatives that could unlock significant value along the way. The project design minimizes the environmental footprint of the project, incorporating the input of local stakeholders. MARA is planned to be a multi-decade, low cost copper gold operation with annual production in the first ten years of 556 million pounds of copper equivalent and a life of mine annual production of 469 million pounds of copper equivalent on a 100% basis. MARA will be among the top 25 copper producers in the world when in production, and will be one of the lowest capital intensity projects globally.
During the last year, several proposals were presented to the Company for its interest in MARA and, after consideration, the board determined that any strategic initiatives will be considered closer to the completion of the feasibility study and application for permitting later this year as the certainty of the project from these events is expected to create more value for the project.
Fourth Quarter Progress Update
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Work during 2021 focused on advancing the feasibility study engineering, mine design and planning, metallurgical and geotechnical drilling campaigns and field work at site. MARA has also been advancing baseline social and environmental studies, as well as permitting and working with local stakeholders. During 2021, field work progressed well with the ongoing drilling campaign completing more than 50% of the drill holes planned, totaling 6,190 meters. All the geometallurgical and geotechnical drill holes in the pit area have been completed, as well as extensive field surveys and technical assessments from different engineering disciplines. Preliminary results are positive and aligned with the expected parameters, confirming grade distribution on existing models. The field work plan continues, with the drilling campaign now covering the Agua Rica infrastructure and is expected to be completed by mid-2022.
The Company is also planning to perform deep drill holes in 2022 to check the extension of high-grade chalcopyrite mineralization that could potentially unlock a pit expansion of Agua Rica, as well as to test for deep extensions of mineralization in the hypogene area of the porphyry, given the deposit is open at depth and relatively unexplored beyond the supergene zone.
The metallurgical field drilling program has been completed and all metallurgical drill core samples have been shipped for metallurgical test work in Canada. Assaying of all samples has been completed with the metallurgical test program now underway. The initial test work results received are well aligned with previous results and expectations. The current bench-scale work will be followed by pilot plant investigations that will also generate samples of final concentrate and process plant tailings required for third party testing and equipment sizing by the various major equipment vendors. The program is planned to be completed in the second quarter of 2022.
Opportunities Providing Upside
The most recent technical studies indicate that the processing facility at Alumbrera is capable of processing up to 44.0 million tonnes per year, with minor additional capital expenditures, which represents a significant upside to the pre-feasibility study results. Further tests and studies are being advanced for the feasibility study stage to confirm and optimize these results. Mine engineering work completed to date includes mine design and mine sequencing optimizations, and an updated preliminary production plan at the higher throughput rate. Efforts on the mining area during 2022 will be focused on updates of the resource model with the new field information and subsequent updates to the mine plan, as well as to continue advancing the engineering of the mine infrastructure.
Project engineering work has advanced on many fronts to a full feasibility study-level of definition. These include the mining area interface, primary crushing and overland conveying system to the existing Alumbrera plant. Mechanical layouts and process and instrumentation diagrams have been completed and detailed earthworks, foundation and structural steel designs are underway. Supplemental geotechnical drilling for the ore transportation tunnel access started recently and the detailed tunnel design will be advanced upon availability of updated field information.
Parallel to the exploration program, MARA is conducting field campaigns to complement the ESIA baseline data. Preliminary results and advancement of the project are being shared with the Intergovernmental Commission of Catamarca, prior to filing the full ESIA. The Company plans to complete the ESIA for MARA in the second half of 2022. The estimated remaining expenses for the Company to advance the project through the feasibility study and ESIA are approximately $13.0 million (Yamana's 56.25% interest), representing a manageable and modest investment in relation to the value creation of advancing the MARA Project to the next phases of development.
OTHER INITIATIVES - STRATEGIC, OPTIMIZATION AND MONETIZATION
A number of projects are underway with a goal of surfacing value from non-producing assets. Notable progress relating to some of these initiatives include, but are not limited to the following:
Suyai, Argentina
On April 28, 2020, the Company announced it entered into a definitive option agreement pursuant to which it granted CAM, a privately held portfolio management and capital markets company based in Argentina, owned by Messrs. Eduardo Elsztain and Saul Zang, the right to acquire up to a maximum 40% interest in a joint venture formed to hold the Suyai Project. CAM's portfolio includes the largest real estate company in the country, NASDAQ-listed international agricultural companies, along with banking and mining investments. CAM has successfully led the development of significant construction projects across the country.
An initial amount of $2.0 million was received by the Company to secure the option. CAM will assume responsibility for all ESG matters, including leading the permitting efforts aimed to advance the project through its different stages of development. As noted, CAM has the right to earn a maximum 40% interest in the resulting joint venture formed to hold the Suyai Project by fulfilling certain obligations and achieving certain milestones, mostly relating to ESG matters, and by paying $31.6 million in various installments in addition to the proportionate expenses, on or before December 31, 2024. The Company believes there is considerable value, far in excess of cash value, in fulfilling the obligations and achieving the milestones relating to ESG matters
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which would advance the Suyai project. Through certain of its holding companies, Yamana would hold the remaining 60% of the joint venture.
In the event the project receives approval to proceed, Yamana would oversee its development, applying best industry mining and HSSD/ESG practices and its experience in project development and operations in southern Argentina. Development of the project would occur under the oversight of a board of directors of the holding company that owns the project with CAM nominating two out of the five directors. Yamana would nominate the other directors. The joint venture would entitle each party to its proportion of gold production from the project.
The Company previously completed studies that in addition to redesigning Suyai as a small scale high-grade underground project, evaluated different options for ore processing, which provided favourable project economics.
The preferred option envisages the construction of a processing facility for on-site production of gold and silver contained in a high-grade flotation concentrate, which would be transported by land and by sea to one or more gold smelters world-wide. As only a flotation concentrate would be produced at Suyai, no cyanide or other deleterious chemicals would be used at site. Gold production is expected to reach up to 250,000 ounces annually for an initial eight years.
Agua de la Falda, Chile
The Company continues to pursue development and strategic initiatives for the 56.7% position held in the Agua de la Falda joint venture with Codelco, located El Salvador in the Atacama region of northern Chile. While the historical Jeronimo Feasibility Study focused on maximizing gold production from the sulphide deposits, the Company completed the study of a low-capital starter-project based on the remaining oxide inventory in heap leach pads and open pits; the study demonstrated positive results and quick payback. The Company is also evaluating strategic alternatives for the asset, including the highly prospective claims surrounding the mine, where early-stage targets for both gold and copper mineralization have been identified. Re-logging of historical holes and exploratory drilling support the potential to extend the gold oxide mineralization, as well as the potential for copper/gold deposits within the joint venture claims and in the areas the Company owns 100%. Agua de la Falda has processing capacity and infrastructure already installed, and it is in the vicinity of the El Salvador Division of Codelco.
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 2021 annual report.
For mineral reserve estimation purposes, the gold price assumption for Yamana operating mines of $1,250 is consistent with prior year. The Company believes that increases in mineral reserves as result of exploration and drilling are a more meaningful representation of an orebody 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, 2021 are summarized in the following tables. Complete information relating to mineral reserves and mineral resources including a complete listing of metal price assumptions, tonnage, grade and recoveries is contained in a complete mineral resource and mineral reserve table accompanying the 2021 annual report available on the Company's website, www.yamana.com.
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(i)Other is related to La Pepa.
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(i)Other is related to La Pepa.
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| | | | | | | | | | | | | | | | | | | | |
| Mineral Reserves & Mineral Resources Estimates* | Contained Gold | Contained Silver | Contained Copper |
| (in 000's ounces) | (in 000's ounces) | (in million pounds) |
| Proven & probable mineral reserves | 2021 | 2020 | 2021 | 2020 | 2021 | 2020 |
| Canadian Malartic (50%) | 1,767 | | 2,214 | | — | | — | | — | | — | |
| Jacobina | 2,938 | | 2,807 | | — | | — | | — | | — | |
| Cerro Moro | 457 | | 431 | | 22,180 | | 23,897 | | — | | — | |
| El Peñón | 933 | | 921 | | 29,383 | | 29,214 | | — | | — | |
| Minera Florida | 430 | | 428 | | 3,011 | | 2,979 | | — | | — | |
| Wasamac | 1,910 | | 1,767 | | — | | — | | — | | — | |
| Jeronimo (56.7%) | 1,082 | | 1,082 | | — | | — | | — | | — | |
| MARA (56.25%) | 4,152 | | 4,152 | | 56,689 | | 56,689 | | 6,654 | | 6,654 | |
| Total proven & probable mineral reserves | 13,669 | | 13,803 | | 111,264 | | 112,780 | | 6,654 | | 6,654 | |
| | | | | | |
| Measured & indicated mineral resources | | | | | | |
| Canadian Malartic (50%) | 1,270 | | 535 | | — | | — | | — | | — | |
| Jacobina | 3,807 | | 3,514 | | — | | — | | — | | — | |
| Cerro Moro | 117 | | 90 | | 7,834 | | 6,220 | | — | | — | |
| El Peñón | 748 | | 765 | | 25,259 | | 25,541 | | — | | — | |
| Minera Florida | 1,056 | | 959 | | 5,844 | | 5,279 | | — | | — | |
| Wasamac | 326 | | 525 | | — | | — | | — | | — | |
| Jeronimo (56.7%) | 139 | | 139 | | — | | — | | — | | — | |
| MARA (56.25%) | 1,245 | | 1,245 | | 8,442 | | 8,442 | | 1,383 | | 1,383 | |
| La Pepa (80%)** | 1,751 | | 2,208 | | — | | — | | — | | — | |
| Monument Bay | 1,787 | | 1,787 | | — | | — | | — | | — | |
| Suyai | 2,286 | | 2,286 | | 3,523 | | 3,523 | | — | | — | |
| Total measured & indicated mineral resources | 14,532 | | 14,053 | | 50,902 | | 49,004 | | 1,383 | | 1,383 | |
| | | | | | |
| Inferred mineral resources | | | | | | |
| Canadian Malartic (50%) | 6,647 | | 6,883 | | — | | — | | — | | — | |
| Jacobina | 1,904 | | 1,494 | | — | | — | | — | | — | |
| Cerro Moro | 226 | | 254 | | 8,159 | | 8,786 | | — | | — | |
| El Peñón | 881 | | 850 | | 28,984 | | 28,138 | | — | | — | |
| Minera Florida | 658 | | 755 | | 3,138 | | 3,596 | | — | | — | |
| Wasamac | 258 | | 263 | | — | | — | | — | | — | |
| Jeronimo (56.7%) | 161 | | 161 | | — | | — | | — | | — | |
| MARA (56.25%) | 1,222 | | 1,222 | | 21,765 | | 21,765 | | 2,125 | | 2,125 | |
| Arco Sul | 615 | | 615 | | — | | — | | — | | — | |
| La Pepa (80%)** | 293 | | 496 | | — | | — | | — | | — | |
| Lavra Velha | 543 | | 543 | | — | | — | | — | | — | |
| Monument Bay | 1,781 | | 1,781 | | — | | — | | — | | — | |
| Suyai | 274 | | 274 | | 575 | | 575 | | — | | — | |
| Total inferred mineral resources | 15,463 | | 15,591 | | 62,621 | | 62,859 | | 2,125 | | 2,125 | |
* The assumptions used for mineral reserve and mineral resource estimates as at December 31, 2021 for all operating mines reported in this MD&A were $1,250 per ounce gold, $18.00 per ounce silver, and $1.25 per pound of zinc. Mineral resources are reported exclusive of mineral reserves, using a cut-off grade (or cut-off value) 75% of the one used for mineral reserves. The Arco Sul project mineral resource estimate uses $1,250 per ounce of gold. The Jeronimo project mineral reserve and mineral resource estimates use $900 per ounce of gold. The La Pepa project mineral resource estimate uses $1,650 per ounce of gold. The Lavra Velha project mineral resource estimate uses $1,300 per ounce of gold, and $3.50 per pound of copper. The Agua Rica project (MARA) mineral reserve estimate uses $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 (MARA) mineral resource estimate uses $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 Alumbrera project (MARA) mineral resource estimate uses $1,300 per ounce of gold and $2.83 per pound of copper. The Monument Bay project mineral resource estimate uses $1,200 per ounce of gold. The Suyai project mineral resource estimate uses a 5.0 g/t gold cut-off grade assumption. The Wasamac project mineral reserve estimate uses $1,250 per ounce of gold. The Wasamac project mineral resource estimate uses $1,250 per ounce of gold.
** During December 2021, Mineros Atacama SpA was issued shares representing a 20% interest in Minera Cavancha SpA, the legal entity that holds the La Pepa property. The 2021 mineral resource estimates for La Pepa reflect Yamana's 80% post-issuance interest. The 2020 mineral resource estimates have been recast to reflect Yamana's 80% post-issuance interest. Prior to the issuance of shares, Yamana owned 100% of La Pepa.
5-Year Mineral Reserves and Mineral Resources Growth
Yamana has attempted to differentiate itself over the last several years by replacing depletion of mineral reserves and has been mostly successful at such differentiation. The result of which is that when looked at over several years, there has been a very
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significant increase of mineral reserves and corresponding extension of mine lives. This differentiation is expected to continue in the next several years and in most cases, the discovery of new inferred mineral resources at existing mines already represents an excellent source of future proven and probable mineral reserves. Characterized by large land packages in prospective geological districts, Yamana’s operations continue to demonstrate the ability to add value through drilling which, at a minimum, ensures sustainability of mine lives at current production rates. This also, creates opportunities to increase production and ultimately increase free cash flow generation. In recent years, results have exceeded expectations with operations not only replacing depletion but also increasing mineral reserves, mineral resources, and the pipeline of exploration targets for future conversion.
Last year is a continuation of the Company’s track record of successful brownfield exploration strategy, highlighted by the significant growth in mineral reserves and mineral resources within the five existing operations over the past five years. The acquisition, and subsequent optimization, of the Wasamac project in 2021 further enhances this growth profile.
Over the past five years, total gold equivalent mineral reserves and mineral resources at the five operating mines have increased by 32%, net of the 4.6 million GEO(2) produced by the operations over that period. This brownfield exploration success extends the lives of the existing operations and presents opportunities for growth within the portfolio. As a result, the Company is able to add value through the drill bit, at a low cost per ounce, with low risk and with minimal disturbance to the environment.
With the addition of Wasamac, the mineral reserves and mineral resources growth rate increases to 45% over five years. Wasamac, a small-footprint underground project located 100 kilometres from Canadian Malartic, is already showing the exploration potential to replicate the mineral reserves and mineral resources replacement cycle demonstrated at the Company’s operating mines.
At Canadian Malartic, the Odyssey project’s continued exploration success has grown indicated mineral resources to 2.35 million ounces of gold and inferred mineral resources to 13.15 million ounces of gold on a 100% basis. Only 7.3 million ounces, or approximately 47% of these mineral resources are included in the mine plan outlined in the March 2021 technical study, providing significant upside potential to a mine life already expected to last until at least 2039.
Jacobina has significantly grown its inventory of mineral reserves and mineral resources to support a low-risk, phased expansion strategy that has allowed the mine to sustainably increase production by 54% over the last five years. The growth in mineral reserves and mineral resources now supports further sustainable growth to 230,000 ounces per year in Phase 2 and a target of 270,000 ounces per year in Phase 3.
El Peñón, now in its 23rd year of production, continues to replace mineral reserve depletion which was achieved again in 2021, with further exploration successes advancing the objective of increasing production from the significant excess plant capacity.
The approach to replace depletion is also now delivering positive results at Cerro Moro which, for the first time in 2021, replaced depletion of mineral reserves, a foundation of targets and geological knowledge continues to support further exploration plans for the asset.
Year-End Mineral Reserves and Mineral Resources Summary
During the year, the Company's wholly-owned operations successfully replaced depletion. At Odyssey, delineation drilling highlighted the strong geological and grade continuity and underground mineral resources continued to grow in advance of future conversion to mineral reserves. For 2021, the Company reports 13.7 million ounces of gold mineral reserves and 111 million ounces of silver mineral reserves, relatively unchanged from the prior year.
Mineral reserves of 7.1 million ounces of gold, 57 million ounces of silver, and 6.7 billion pounds of copper at the Company’s development projects represents significant upside potential within the existing portfolio. In particular, the wholly-owned Wasamac project in Quebec, advancing towards first production in 2026, is expected to add approximately 200,000 ounces of gold to the Company’s production platform. The MARA project currently at the feasibility study stage, is expected to produce an average of 556 million pounds of copper equivalent in the first 10 years, on a 100% basis, with an initial mine life of 28 years.
Largely consistent with the prior year, the Company reports measured and indicated mineral resources of 14.5 million ounces of gold, 51 million ounces of silver, and 1.4 billion pounds of copper exclusive of mineral reserves. Significant increases in measured and indicated mineral resources at Canadian Malartic, Jacobina and Minera Florida more than offset the change in measured and indicated mineral resources at Wasamac and La Pepa. At Wasamac mineral reserves and mineral resources were updated in mid-2021, providing the foundation for the optimized mine plan and feasibility study update. Yamana successfully increased conversion of mineral resources to mineral reserves through the optimization of the mining method and mine design following an in-depth geotechnical analysis. As a result, mineral reserves increased by 231,000 ounces to 1.91 million ounces with an unchanged average gold grade of 2.56 g/t. At La Pepa, pursuant to the terms of the option agreement with Mineros Atacama SpA (“Mineros”) dated December 14, 2018, in December 2021 Mineros acquired a 20% interest in Minera Cavancha SpA, the legal entity that holds the La Pepa property. The 2021 mineral resource estimate for La Pepa reflects Yamana's current 80% interest (previously 100%). In addition, an updated structural model was used to constrain the
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mineralization in addition to updated metal price assumptions which were revised to be in-line with Yamana's projects and mining parameters being adjusted to reflect benchmarked costs.
The Company reports inferred mineral resources of 15.5 million ounces of gold, 63 million ounces of silver, and 2.13 billion pounds of copper. The large base of mineral resources provides the pipeline for future conversion to mineral reserves at existing operations and development projects and represents further growth opportunities at the Company’s generative exploration projects.
Major discovery potential at each operation continues to provide game-changing upside, as achieved with the discovery of the East Gouldie deposit in 2018, which was recognized in October 2021 with the "Discovery of the Year" Award at the Quebec Mineral Exploration Association virtual 2021 Xplor Convention. The discovery of East Gouldie has significantly changed the Odyssey project by ensuring its economic viability and providing a long term production profile beyond the life of the open pit.
Further information by mine is detailed below.
Canadian Malartic including Odyssey, Canada (50%)
At Canadian Malartic on a 50% basis, open pit gold mineral reserves of 1.77 million ounces, reflects depletion from 2021 production and an adjustment of approximately 48,000 ounces due to a slight increase in cut-off grade, which will be added to the marginal stockpile, and a localized adjustment in the lower benches of the Canadian Malartic pit. For the Barnat pit, drill hole datasets from the former East Malartic and Sladen underground mines were incorporated into the resource model, increasing confidence in the Barnat grade estimation and without significantly changing mineral reserves or mineral resources. Underground mineral resources for the Odyssey project continue to grow as a result of ongoing exploration drilling, with a total of 2.35 million ounces of indicated mineral resources and 13.15 million ounces of inferred mineral resources reported at year-end. At East Gouldie, drilling added 82 new pierce points in the mineralized zones, confirming estimated grades and widths and resulting in the first gold indicated mineral resources for the deposit of 1.5 million ounces, on a 100% basis. The ongoing infill drilling program continues to increase the inventory of indicated mineral resources to support the planned conversion of mineral resources to mineral reserves. Expansion of the mineral resource envelope on all sides added new inferred mineral resources with a high potential for future conversion in the mine plan, while step out drilling extended the mineralized zone 1,260 metres beyond the reported East Gouldie mineral resource and identified a new subparallel zone, located 400 metres in the footwall of the East Gouldie zone. These exploration holes are still widely spaced and therefore not yet considered in the mineral resource statement.
Jacobina, Brazil
Jacobina had another successful year of exploration, adding 324,000 ounces of gold mineral reserves, a 5% increase compared to the prior year above depletion of mining. Gold mineral reserves have grown by 55% or more than 1 million ounces over the past four years to 2.94 million ounces. Mineral resources have increased by 69% over the same period. Mineral reserves average gold grade is unchanged from the previous year at 2.18 g/t and the Company continues to sequence lower grade stopes later in the mine life. Importantly, the rate of growth in mineral reserves and mineral resources exceeds annual depletion, supporting the Company’s strategy to sustain a multi-decade mine life and facilitating the future Phase 3 expansion to increase production up to 270,000 ounces per year. Highlights from 2021 include the addition of inferred mineral resources at João Belo Sul, which represents a potential new mining sector, and the continued expansion of the Morro do Vento, Canavieiras, and João Belo mines at depth.
Cerro Moro, Argentina
Cerro Moro successfully replaced depletion of GEO(2) mineral reserves and mineral resources, largely as a result of expansion of high grade veins at the main ore bodies of Zoe, Martina, and Naty, which remain open at depth. The significance of the result is that it establishes what the Company expects to be an ongoing trend of year-over-year mineral reserve and mineral resource growth, similar to the mineral reserves replacement cycle established at the Company’s more mature operations, extending the mine life at a production rate of 150,000 to 165,000 GEO(2) per year. Cerro Moro is a high-grade operation with an average mineral reserves grade of 13.6 g/t gold equivalent. New mineral reserves added in 2021 at a higher average gold to silver ratio and higher silver grade targets will be followed up with drilling in 2022. A high level of geological understanding incorporated into the resource models is resulting in excellent reconciliation and confidence in mine plans, as reflected in improved operational performance. Additionally, Cerro Moro has a significant inventory of lower-grade veins that are not fully reflected in the current mineral reserves and mineral resource statements, which could potentially be processed with an expansion of the processing plant or through a parallel heap leach operation. The Company has initiated an infill drilling program to expand and define the most promising lower-grade heap leach targets.
El Peñón, Chile
Successful drilling at El Peñón resulted in the operation achieving a fourth consecutive year of adding new mineral reserves in excess of mining depletion, with mineral reserves growing 23% to 1.3 million GEO(2) over that period. Drilling continues to expand the mineral resource envelopes to depths below several producing sectors, most notably Paloma, Pampa Campamento
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and Sorpresa. New mineral reserves added in 2021 are typically higher than average grade, resulting in the average gold and silver mineral reserves grades increasing by 3%. The significance of the result is the continued extension of the El Peñón mine life at a production rate of 220,000 to 230,000 GEO(2) per year, while replacement of mineral resources provides an inventory for future mineral reserves development. The year-end mineral reserve and mineral resource estimates do not include results from deep exploratory drilling intercepts targeting extensions of the major producing vein systems at depth and to the south of the mine. Initial drill results show significant potential for discovery of blind continuations of the main vein system which will be followed up with drilling in 2022 to support planned production increases at El Peñón.
Minera Florida, Chile
At Minera Florida, new mineral reserves replaced mining depletion extending mine life. Drilling in key production sectors of the mine, most notably Don Leopoldo and Fantasma, continued to expand mineralization along strike and down dip. Targets remain open in both directions, underscoring the potential for expansion of the mineral envelope in both sectors. Exploratory drilling at Minera Florida has generated new discoveries in the core mine area, including VNC, providing increased optionality for the mining operation and demonstrating the geological potential in the central Alhué block. The recent discovery of veins such as Cucaracha in new areas beyond the eastern and western limits of the central Alhué block, the historic focus of exploration and mining at Minera Florida, underscores the potential for further near-mine discoveries. The robust exploration results and replacement of mineral reserves and mineral resources at Minera Florida support the plan for production increases at the operation.
Wasamac, Canada
Wasamac mineral reserves and mineral resources were updated in mid-2021, providing the foundation for the optimized mine plan and feasibility study update. Yamana successfully increased conversion of mineral resources to mineral reserves through the optimization of the mining method and mine design following an in-depth geotechnical analysis. As a result, mineral reserves increased by 231,000 ounces to 1.91 million ounces with an unchanged average gold grade of 2.56 g/t. Mineral resource classification was updated using revised criteria, with measured mineral resources being reclassified as indicated mineral resources to align with Yamana’s prerequisite that measured mineral resources must be supported by underground development sampling with the required quality assurance and quality control. Additionally, mineral resources are now constrained within potentially mineable shapes to demonstrate reasonable prospects for eventual economic extraction and to align with the reporting standard at other Yamana operations. Year-end mineral reserves and mineral resources do not yet include positive drill results from the second half of 2021, which expanded the Wildcat zone and discovered two new mineralized zones, referred to as South Wildcat. The initial drilling results further align with the objective to sustain 200,000 ounces per year of production at Wasamac and achieve a strategic mine life of more than 15 years.
La Pepa, Chile (80%)
Since the signing of the agreement with Yamana in 2018, Mineros S.A. completed extensive surface mapping at La Pepa, followed by 18 RC holes in 2019-2020. This new information allowed the refinement of the lithological model and the understanding of the controls on the porphyritic gold mineralization. An updated structural model that includes the Cavancha and the Azufre faults was used to constrain the mineralization. Metal price assumptions were revised to be in-line with Yamana's projects. Mining parameters were adjusted to reflect benchmarked costs. Additional work is ongoing to evaluate the mineralization east of the Cavancha fault, which represents an opportunity for further expansion of the deposit since it is not currently included in the updated mineral resource estimate.
7. EXPLORATION
Exploration on the most prospective properties is a key to unlocking and creating value for shareholders. The Company has built significant land positions including projects that are at different stages of advancement in prospective mineral districts in all countries where it has producing assets, and is actively advancing this portfolio of exploration projects in these countries. This effort allows for the rapid advancement of the highest value projects, while at the same time moving the most promising early-stage properties up the exploration pipeline. The following are key elements and objectives of the generative exploration program:
•Target the Company’s most advanced exploration projects while retaining the flexibility to prioritize other projects in the portfolio as and when merited by drill results.
•Advance at least one project to achieve mineral reserve and mineral resource inventories of at least 1.5 million gold equivalent ounces within the next three years to move at least one project towards a preliminary economic assessment.
•On a longer-term basis, advance at least one project to a mineral inventory that is large enough to support a mine plan demonstrating positive economics with annual gold production of approximately 150,000 ounces for at least eight years.
•Advance both gold-only and copper-gold projects and, in the latter case, consider joint venture agreements aimed at increasing mineral resource and advancing the project to development while Yamana maintains an economic interest in the project.
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•Evaluate the acquisition or investment on prospective exploration opportunities companies that align with Yamana’s objectives for capital allocation and financial results, jurisdiction quality, geology and operational expertise.
The generative exploration program is first focusing on the most advanced projects in Yamana’s portfolio while continuing drilling activity at a number of the Company’s highly prospective earlier stage projects. These project stages are categorized and defined as follows:
•Tier One - Projects with well-defined gold mineral resources and opportunities to grow to a potentially economic threshold in the next three years.
•Tier Two - Projects that have achieved significant drill intercepts and whose geology along with other factors support rapid resource growth.
•Tier Three - Highly prospective projects with known mineralization defined with rock and soil geochemistry that warrant future drill testing.
The Company is confident that its exploration pipeline includes projects that can meet its shorter-term objective of at least one project achieving 1.5 million ounces of gold in the inferred mineral resource category within three years as well as its longer-term objective of building at least one gold mineral resource that can support a mine with annual production of approximately 150,000 ounces per year for at least eight years.
The Company is focusing its exploration activities in part on the large land positions held within the Company, including projects that are at different stages of advancement in prospective mineral districts in all countries where it has producing assets and can leverage its technical and operational expertise, and it is pursuing advancing this portfolio through exploration projects in these countries. This effort will allow for the rapid advancement of the highest value projects, while at the same time moving the most promising early-stage properties up the exploration pipeline. In the current high market valuation environment of high-profile gold exploration projects, the Company feels it is timely and prudent to advance its in-house exploration assets.
As a complement to the advancement of the internal exploration opportunities, the Company will consider the acquisition of earlier-stage development assets or companies that align with Yamana's objectives for capital allocation and financial results, jurisdiction, geology and operational expertise. Such opportunities will typically be funded through internal resources, meet minimum return levels that far exceed the cost of capital and would meet the Company's minimum requirements to achieve mineral reserve and mineral resource inventories, mine life and per year production rate. Furthermore, preference would be given to geological and operational characteristics where the Company has an identified expertise and excellent opportunities for value enhancement, and where the Company can deploy its corporate knowledge to provide value-added support. As part of its corporate approach, the Company shares information and best practices among its operations. Such opportunities would also extend an existing regional presence or lead to that longer-term objective. Although the Company has an established portfolio of early-to-later-stage organic growth projects, the Company also considers it prudent to consider opportunities to extend regional presences in quality jurisdictions that offer geological and operational synergies and similarities to its current portfolio of assets.
Exploration Expenditures
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:
| | | | | | | | | | | | | | |
| For the three months ended December 31, | For the year ended December 31, |
| (In millions of US Dollars) | 2021 | | 2020 | | 2021 | | 2020 | |
Exploration and evaluation capitalized* | $ | 19.6 | | $ | 21.0 | | $ | 68.1 | | $ | 57.6 | |
Exploration and evaluation expensed** | 6.8 | | 6.0 | | 31.6 | | 15.1 | |
| Total exploration and evaluation expenditures | $ | 26.4 | | $ | 27.0 | | $ | 99.7 | | $ | 72.7 | |
* Capitalized exploration and evaluation costs are reflected in property, plant and equipment in the Consolidated Balance Sheets. Details by mine can be found in the Capital Expenditures table in Section 1: Highlights and Relevant Updates.
** Expensed exploration and evaluation costs are reported in the Consolidated Statements of Operations for the respective period.
During the fourth quarter, exploration drilling and other field activities continued as planned in most jurisdictions, as successful COVID-19 prevention, monitoring, testing and quarantine, and contact tracing protocols, as well as further increases to the high levels of employee and contractor vaccination rates, continued across the Company’s operations. The Company is currently refocusing its efforts on regional exploration projects, with greater efforts being placed on Jacobina and Lavra Velha, which represent the best opportunities for advancement of the goals of the generative exploration program. Drilling activities continued in the fourth quarter in Brazil at Lavra Velha and Jacobina Norte. Targets were advanced at the Company’s Ivolandia, Colider and Arenopolis projects, with collection of soil and rock samples and geological mapping at several targets. An airborne geophysical survey will be flown over a 210 square kilometre area at Ivolandia in early 2022. Exploration in Chile in the fourth quarter included surface evaluation and target development on several early-stage Yamana projects near the El Peñón mine and elsewhere. Surface samples collected during the quarter across all projects in Chile totaled 1,243 rock and 932 soil and stream sediment samples. 147 days of geological mapping were completed. Preliminary assay results have been received for several projects which will determine which projects are advanced in 2022. In Argentina, permitting and contracting work continued in preparation for drilling on the Company’s Las Flechas property, where a 1,500-2,000 metre drill program to test breccia-related
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high-sulphidation epithermal gold and porphyry copper gold targets has been rescheduled for late in 2022 with an aggressive geological and geochemical program planned. At Monument Bay, Manitoba, results from the recently completed deep drilling program are being evaluated with planning for the next steps for the project. Further, exploration drilling continued at the recently acquired advanced Wasamac property, in the Abitibi-Témiscamingue Region, Quebec, where ongoing exploration drilling has identified new zones of mineralization at the Wildcat South target. Initial field work continued on the recently developed Orogen Royalties Inc. Nevada Alliance and Raven-Callaghan property option.
Monument Bay, Canada
The Monument Bay deposit is hosted in the Stull Lake Greenstone Belt, comprising 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.
The focus of the current exploration program has been the advancement of the Twin Lakes resource. Beyond the Twin Lakes target, the large Monument Bay land package is under-explored and hosts potential for additional discovery. A smaller but important component of recent exploration at Monument Bay has been the continued evaluation and advancement of secondary targets on the property.
Most recent exploration at Monument Bay has been to advance the evaluation and definition of high-grade ore shoots at depth at the Twin Lakes resource as part of assessing the project as an underground mine. Approaching the Twin Lakes target as a potential underground project is an economically attractive alternative to the open pit scenario with lower capital (due to the higher investment required to develop a large tonnage, low grade, open pit mine), reduced environmental footprint, and clear upside exploration potential. The recently completed winter 2021 drill program provided an initial test of the depth extent and potential of several well-defined high-grade steeply plunging mineralized shoots along a four kilometre strike length of the deposit. Shallow diamond drilling during the first half of 2020 confirmed the continuation and orientation of higher-grade mineralization and provided targets for follow up drilling at depth. Highlights from the winter 2021 program included the following core length intercepts: 6.52 g/t of gold over 2.14 metres (TL-21-732) and 4.20 g/t of gold over 6.28 metres, including 2.58 metres grading 7.48 g/t of gold (TL-21-727B) as previously reported in the September 13, 2021 press release 'Yamana Gold Reports Positive Initial Exploration Drill Results at Wasamac; Provides an Update on Its Generative Exploration Program'. These and other results are being evaluated as next steps are being determined.
Domain, Canada
The Domain project is located near Oxford Lake in northeast Manitoba, comprising a 20,000-hectare property that is 100%-controlled by the Company. Interpretation of regional airborne magnetics, together with results from government geological survey geochemical results collected from glacial till, support a highly prospective environment for folded iron formation hosted gold occurrences. The Company's property surrounds three claims totaling 576 hectares that are under a joint venture agreement with Capella Minerals Limited, which holds a 29.6% interest. The joint venture claims cover an area of historic drilling with significant gold intercepts hosted by iron formation that includes intervals reported by Rolling Rock Resources in 2008 and New Dimension Resources in 2017.
The Company recently signed an exploration agreement with the Bunibonibee Cree Nation (“BCN”) that provides a framework for a cooperative, mutually respectful agreement supporting the advancement of exploration within the Traditional Territory of the BCN while providing employment and business opportunities to the BCN. Yamana is in the planning stages of a work program for the property, and pending conclusion of community consultation, completion of an archeology study, and permitting, exploration work is anticipated to be completed in 2022. Data compilation and drill target refinement have been recently completed.
Wasamac, Canada
The addition of the Wasamac project to Yamana’s portfolio further solidifies the Company’s long-term growth profile with a top-tier gold project in Quebec’s Abitibi-Témiscamingue region, a prolific mining district where Yamana has deep operational and technical expertise and experience. Please refer to Section 5: Construction, Development and Other Initiatives for details on the Wasamac (Monarch Gold) acquisition, which closed during the first quarter of 2021.
Exploration activities continued to ramp up during the fourth quarter, with a focus on infill drilling on the Wasamac resource, with 19,466 metres in 19 drill holes completed. Total infill drilling completed in 2021 was 21,649 metres in 31 drill holes. Three drill rigs are currently operating to advance the infill drilling program, and a fourth rig is planned to be added in the first quarter of 2022. Drilling completed in the fourth quarter also included 2,293 metres of geotechnical drilling in 28 drill holes in the ramp area, bringing total geotechnical drilling completed in 2021 to 6,463 metres in 36 drill holes. No additional exploration drilling was completed in the fourth quarter, as pending results are forthcoming. Exploration drilling completed in 2021 totaled 7,291 metres in 22 holes, divided between the West Wasa Shear offset, Wildcat, Wildcat South and West 117 Wasa targets.
Exploration drilling results received during the fourth quarter included a high-grade intercept over underground mining widths at the newly defined Wildcat South target, located approximately 300 metres south of Wildcat. Wildcat South is a magnetic anomaly generated from a recently completed, property wide high-resolution (25 metre) helicopter-borne magnetic survey covering 2,992
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line-kilometres. As previously reported in the December 1, 2021 press release 'Yamana Gold Announces The Discovery Of New Mineralized Zones At Wasamac And Provides An Update On Its Growth Projects', drill hole WS-21-524 intercepted two new mineralized zones, including an upper mineralized interval that returned 7.31 g/t of gold over an estimated true width of 3.37 metres at a downhole depth of 402.93 metres. This high-grade zone was followed further down hole by two mineralized intervals within a 30 metre wide chlorite-sericite-pyrite altered shear zone returning assays of 2.3 g/t of gold over a core length of 0.60 metres and 1.3 g/t of gold over a core length of 0.30 metres. Results from Wildcat South will be integrated into exploration models and followed up as exploration drilling is restarted in early 2022. Drilling completed at West 117 Wasa intersected mostly narrow, rhyolite-hosted shear zones. Assay results are pending for these drill holes. Additional results from exploration drilling are expected in the first quarter 2022.
Additional ongoing exploration work completed during the fourth quarter included integration of the merged high-resolution magnetic survey data over the Wasamac and Francoeur properties with project wide data compilation and targeting. A two year schedule and long-term exploration strategy for the combined properties is being developed. Positions of senior project geologist, project geologist and surface exploration geologist have been filled. Additional, ongoing work included continued sampling of select, previously unassayed, historic drill hole intervals hosting stockwork style mineralization, to assess for their potential to contribute to the mineral resource base.
Francoeur, Canada
The Wasamac property was expanded during the second quarter of 2021 with the acquisition in June, 2021 of the adjoining Francoeur, Arntfield and Lac Fortune properties (the “Francoeur” property), located to the west and along strike of the Wasamac property, as well as additional claims in the Beauchastel township to the east of Wasamac, from Globex Mining Enterprises Inc. Project consolidation and integration of exploration data from Wasamac and the acquired properties continued during the fourth quarter. The acquisition of the Globex claims will significantly add to the exploration upside of the Wasamac project, and it is consistent with Yamana’s strategy to expand its presence in the Abitibi-Témiscamingue Region of Quebec. Historical drilling, previous production from Francoeur and Arntfield, both former operating mines, and recent trenching and exploration work by Globex has defined a six-kilometre western continuation of the Wasa shear - located immediately north of the prolific Cadillac Break - with mineralization similar to that at Wasamac. Exploration drilling is expected to begin during the first quarter of 2022, following completion of data compilation and integration and target definition, with objectives of adding mineral resources that could extend mine life or enhance production scenarios at the proposed Wasamac mine.
Lavra Velha, Brazil
Lavra Velha is a near surface advanced Tier 1 exploration project located in the Lavra Velha district in Brazil’s Bahia state. Surface work and drilling has defined significant gold mineralization, building on the 2013 inferred mineral resource of 3.93 million tonnes at 4.29 g/t for 543,000 ounces of gold. The defined Lavra Velha deposit consists of shallowly dipping, stacked near surface mineralization that may be amenable to low capital intensity open pit mining and heap leaching. Metallurgical studies are ongoing. Exploration has defined numerous additional gold-(copper) anomalies in soil and rock which are being advanced and drill tested as part of the ongoing exploration program. There are a number of significant drill targets on the 55,000-hectare property, and Lavra Velha represents one of the most immediate, shorter-term opportunities to achieve the Company’s stated exploration goals given the mineral resource to date and drilling following the initial mineral resource estimate. Further, Lavra Velha is well-placed to meet the Company’s long-term objectives, as it is a shallow, flat-dipping orebody, making it ideal for open pit mining with a low strip ratio, and oxide mineralization, with potential to be processed as a heap leach operation. Therefore, the project has potential as a low capital cost, low operating cost operation. Additionally, the property hosts higher-grade gold and copper potential, as recently demonstrated by positive drilling results at Lavra Velha SW target, and the Company is exploring for Iron Oxide Copper Gold ("IOCG") mineralization.
Exploration activity at Lavra Velha during the fourth quarter included the completion of 2,344 metres of exploration drilling in 10 drill holes, including four drill holes completed at Anomalia Central, five holes completed at Lavra Velha SW (LVSW) and one drill hole completed at Lavra Velha SW Extension (LVSW Ext.). Drilling in the fourth quarter at LVSW and LVSW Ext. tested the NE and SSW extensions of shallow gold bearing structures at these targets. Drilling at LVSW targeting the SE footwall to the LVSW target intersected a zone of high-grade gold (copper) mineralization associated with iron oxide and iron sulphide mineralization. These results may be followed up with additional drilling in early 2022. Additional generative work completed during the fourth quarter included collection of 1,291 soil samples, 20 rock samples and 18 stream sediment samples, and 42 days of geological mapping, advancing several targets, including Bananeiras (Alvinopolis block), Baiza Funda NW, Novo Horizonte and Santa Quiteria. To support ongoing exploration activities, alteration indices are being assessed as an aid to targeting the differing styles of mineralization encountered to date on the property.
Jacobina Norte, Brazil
The Jacobina Norte project, located in Brazil’s Bahia state just nine kilometres north of the Jacobina mine, is one of Yamana’s most promising, wholly owned advanced exploration projects. The Company controls 78,000 hectares that cover over 150 kilometres of strike extent of the Serra do Corrego Formation, which hosts paleoplacer gold mineralization at the Jacobina mine.
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Surface exploration along strike has defined mineralization at Jacobina Norte where surface sampling and historic shallow drilling of mineralized reefs along a 15-kilometre trend have defined significant gold grades.
Historic drill results in a restricted part of the Jacobina Norte area reported four intercepts with grades and widths that indicate a strong exploration target. Once a mineral resource is identified for Jacobina Norte, the Company will evaluate if the area is best developed as a standalone mine or as a source of additional mine feed to the existing Jacobina plant. The southernmost section of Jacobina Norte (the Serra Branca target) is located just nine kilometres north of Canavieiras Norte within the existing Jacobina mine infrastructure.
The experience at the Jacobina mine leads the Company to conclude that there is a strong possibility of developing a second Jacobina-type mine along the concession owned by Yamana near the current Jacobina mine over the next decade. Further, the concessions extend well beyond the Jacobina mine and Jacobina Norte, which creates excellent opportunities for further discoveries.
Exploratory drilling completed during the fourth quarter at Jacobina Norte totaled 1,186 metres in seven drill holes, including one hole completed at the Barrocão Velho target and one hole at the Santa Cruz target, while five drill holes targeted the Arapongas sector, with three holes ongoing. During 2021, a total of 3,613 metres of drilling was completed. Drilling at the Barrocão Velho and Santa Cruz targets continued to define a low-grade mineral envelope, extending this zone 500 metres northward into the Santa Cruz sector, where initial drilling intersected MSPC layer hosting a narrow strongly hematite altered mineralized zone hosting minor visible gold. These results are considered encouraging and drilling has now outlined a 1,250 metre strike length of the Rubio Reef mineral envelope which may be followed up in 2022. Exploratory drilling at Arapongas returned narrow zones of gold mineralization in both the Cafeeiro and Rubio reefs, displaying strong oxidation and hematite, fuchsite alteration and pyrite, similar in appearance to the Main Reef at Morro do Vento. Additional drilling is planned at this target.
Additional exploration activity completed in the fourth quarter included collection of 1,741 surface soil and rock samples and 40 days of geological mapping, advancing other targets, including the Curralinho target, a largely covered area located between Serra Branca and Arapongas, where anomalous values ranging up to 1.0 g/t of gold in soil samples has outlined a 3.2 kilometre long anomalous trend associated with conglomerate occurrences mapped in the field.
Borborema, Brazil
The Borborema project is a 25,000-hectare land package in the Borborema district in Brazil’s Pernambuco state. The project is located in a Proterozoic magmatic arc environment that is similar to the belt hosting the Chapada mine, a large copper-gold mine developed by Yamana, put into production in 2007 and disposed of in 2019.
Originally explored for narrow high-grade gold veins, exploration at Borborema also identified strong copper–gold anomalies in both rocks and soils. Initial drill testing of the São Francisco anomaly in 2019 led to the discovery of very high grade near surface copper (gold) intercepts from massive sulphide mineralization. Notable drill intercepts, previously reported in the February 20, 2020 press release 'Yamana Gold Provides Update on Its Generative Exploration Program', with greater than 5% copper include: 3.66 metres at 0.58 g/t of gold and 7.14% copper (12.33 g/t gold equivalent) (starting at 90 metres down hole, SF-08); 2.97 metres at 0.40 g/t of gold and 7.20% copper (12.25 g/t gold equivalent) (starting at 44.18 metres down hole, SF-05); and 7.50 metres at 0.35 g/t of gold and 6.41% copper (10.90 g/t gold equivalent) (starting at 70.37 metres down hole, SF-06).
Subsequent drilling results were reported in the December 03, 2020 press release ‘Yamana Gold Advances Projects in Its Generative Exploration Program’, including several intercepts demonstrating grades greater than 5% copper, include the following core length intercepts (estimated to approximately equal true widths): 7.53 metres at 3.80% of copper, 0.36 g/t of gold, and 0.26% of zinc, including 3.42 metres at 7.40% of copper, 0.75 g/t of gold, and 0.50% of zinc (starting at 76.80 metres downhole, SF-12); 4.37 metres at 2.15% of copper, 0.13 g/t of gold, and 0.34% of zinc, including 1.30 metres at 5.54% of copper, 0.29 g/t of gold, and 0.70% of zinc (starting at 45.26 metres downhole, SF-09); and 5.65 metres at 1.83% of copper, 0.18 g/t of gold, and 0.17% of zinc, including 1.65 metres at 5.50% of copper, 0.50 g/t of gold, and 0.53% of zinc (starting at 116.35 metres downhole, SF-16). The latest round of drilling results, reported in the September 13, 2021 press release 'Yamana Gold Reports Positive Initial Exploration Drill Results at Wasamac; Provides an Update on Its Generative Exploration Program’, included the following core length intercepts: 0.26% of copper over 40.15 metres, including 1.02% of copper over 5.16 metres (SF-026); and 0.20 g/t of gold, 1.81% of copper and 0.19% of zinc over 5.00 metres (SF-020). Disseminated and massive sulfide mineralization at the São Francisco target is now defined semi-continuously along a 2.3-kilometre east-west corridor, which remains open for expansion along strike and down dip.
Exploration activities completed at Borborema during the fourth quarter included continued development of regional targets with collection of 1,075 soil and rock samples and continued geological mapping at the Atoleiro target, located 20 kilometres northeast of São Francisco, where historic surface rock samples range up to greater than 30 g/t of gold, 1,000 ppm of zinc and 250 ppm of copper within a geological setting similar to that defined at São Francisco, and at the Tigre target, located 30 kilometres northeast of São Francisco where historical surface rock samples range up to greater than 5 g/t of gold occur along a 7 km trend. A planned high-resolution airborne magnetics and radiometric geophysical surveys over a 200-square kilometre area at Borborema has been completed and is being integrated into the property database. The results of this survey are anticipated
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to significantly improve targeting of gold-bearing massive and disseminated copper (zinc) and iron sulphide targets at São Francisco and on the wider Borborema property.
While the Company will continue to advance Borborema, the project is primarily a high-grade copper deposit with some gold and zinc. As such, Borborema represents an excellent opportunity for a joint venture pursuant to which Yamana would continue to benefit and create value while it maintains its focus on its precious metals opportunities. Several other well-defined copper gold soil and rock anomalies and significant areas of alteration associated with anomalous gold and copper values occur on the property.
Colíder, Brazil
Colíder is an early stage project located in Mato Grosso state in the newly developing Alta Floresta district, which is being explored for porphyry copper and porphyry gold deposits by Anglo American and Aura Minerals. Yamana has completed soil and rock geochemistry surveys on parts of its 19,700-hectare property, with several drill-ready gold and polymetallic targets defined. Initial drill testing of targets began late in the second quarter, and was completed in the third quarter. Drilling completed totaled 1,460 metres distributed amongst eight drill holes, which tested two target areas. Three drill holes were completed at the Aruanã target, where extensive gold in soil and rock anomalies are hosted by volcanic rocks and volcaniclastic sandstone, and four holes tested large gold and base-metal soil anomalies at Cambará target, centred approximately three kilometres northeast of Aruanã. Most results have now been received, with the best results returned from the Cambará target, including low-grade gold and base-metal (copper, lead and zinc) intercepts in two holes along a 100 metre zone at the contact between granite and volcaniclastic host rocks. Exploration work completed at Colíder in the fourth quarter included follow-up to phase I drilling, including collection of an additional 531 soil and rock samples and 20 days of mapping at the central Bororo target, Inaja and Cambará targets. At Bororo, soil sample results define a 1.4 kilometre long silver and gold anomaly, where historical surface rock chip sample results range up to 3.97 g/t of gold. Further exploration work will include soil sampling at the newly acquired Peixotinho target, 10 kilometres south of Colider.
Ivolandia, Brazil
Exploration activities completed at Ivolandia in the fourth quarter included a regional soil sampling program, initiated at the Arenopolis property where anomalous gold and copper in rock samples define a 12 kilometre trend, rock sampling, field reviews and core re-logging at the Ivolandia target in anticipation of a first quarter 2022 drilling program, collection of surface soil and rock samples and completion of 20 days of mapping at Ivolandia Esemeril, Partida and Boa Vista targets on Ivolandia. In total, 890 soil and rock samples were collected during the quarter at Ivolandia and Arenopolis. An airborne magnetic survey encompassing a 210 km2 area at Ivolandia, covering main NW – SE trend from Boa Vista - Ivolandia to Esmeril - Matrinxão corridor, is anticipated to be completed in early 2022.
8. FINANCIAL CONDITION AND LIQUIDITY
BALANCE SHEET REVIEW | | | | | | | | | | | |
| As at, (In millions of US Dollars) | December 31, 2021 | December 31, 2020 | December 31, 2019 |
Cash and cash equivalents | $ | 525.0 | | $ | 651.2 | | $ | 158.8 | |
| Current assets (including cash and cash equivalents) | 835.5 | | 917.9 | | 401.6 | |
| Non-current assets | 7,547.2 | | 7,504.9 | | 6,715.6 | |
| Total assets | $ | 8,382.7 | | $ | 8,422.8 | | $ | 7,117.2 | |
| Current liabilities (excluding current portion of debt) | 445.8 | | 441.8 | | 352.2 | |
| Non-current liabilities (excluding long-term debt) | 1,960.9 | | 1,814.9 | | 1,497.2 | |
Debt (current and long-term) | 772.8 | | 993.8 | | 1,047.9 | |
| Total liabilities | $ | 3,179.5 | | $ | 3,250.5 | | $ | 2,897.3 | |
| Equity attributable to Yamana Gold Inc. equity holders | 4,395.9 | | 4,346.3 | | 4,185.2 | |
| Non-controlling interests | 807.3 | | 826.0 | | 34.7 | |
| Total equity | $ | 5,203.2 | | $ | 5,172.3 | | $ | 4,219.9 | |
Working capital(6) | $ | 389.7 | | $ | 476.2 | | $ | (6.7) | |
| | | |
Total assets were $8.4 billion as at December 31, 2021, compared to total assets of $8.4 billion as at December 31, 2020. 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, indirect taxes recoverable (consisting of value-added taxes in the jurisdictions in which the Company operates), advances and deposits, and cash and cash equivalents.
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Total liabilities as at December 31, 2021, were $3.2 billion compared to $3.3 billion as at December 31, 2020. The Company's liability base is primarily comprised of non-current liabilities such as long-term debt, deferred tax liabilities, and decommissioning and reclamation liabilities. Other significant liabilities include: trade payables, current income taxes payable and provisions.
Cash and Working Capital
Cash and cash equivalents were $525.0 million as at December 31, 2021, compared to $651.2 million as at December 31, 2020. The Company has sufficient cash on hand, available credit and liquidity to fully manage its business. Cash balances include cash acquired as part of MARA transaction, with a December 31, 2021 balance of $217.3 million, and a December 31, 2020 balance of $223.1 million. The Company had working capital of $389.7 million as at December 31, 2021, compared to a working capital of $476.2 million at December 31, 2020.
Net change in working capital movement was a cash inflow of $7.4 million for the three months ended December 31, 2021. Working capital for the quarter was impacted by several items including:
•An increase related to higher trade and other payables and employee related accruals, partially offset by
•Net increases in finished goods, stockpile and material and supplies inventories at certain mines, and
•A decrease related to the timing of collection of indirect tax credit recoverables and payments related to prepaids and advances
Net change in working capital movement was a cash outflow of $42.3 million for the year ended December 31, 2021. Working capital for the year was impacted by several items including:
•Net increases in materials and supplies inventories at certain mines;
•Net repayments of previous draw downs of working capital facilities;
•Partially offset by a decrease in trade and other receivables, and prepaids and advances.
Total Debt
Total debt was $772.8 million as at December 31, 2021, a decrease of $221.0 million when compared to $993.8 million at December 31, 2020. Yamana believes that a strong financial position and financial resilience also requires a manageable debt maturity profile. During the third quarter, the Company took advantage of market conditions to improve the terms of its outstanding notes by extending maturity and reducing carrying costs, by completing an offering of $500 million aggregate principal amount of its 2.630% Senior Notes due August 15, 2031. The Senior 2031 Notes are unsecured, senior obligations of Yamana and are unconditionally guaranteed by certain of Yamana’s subsidiaries that are also guarantors under Yamana’s credit facility. Yamana used the net proceeds from the offering, together with cash on hand, to fund the redemptions of its 4.76% Series C Senior Notes due 2022, its 4.91% Series D Senior Notes due 2024, its 4.78% Series B Senior Notes due 2023 and its 4.950% Senior Notes due 2024. The completion of the offering of the Senior 2031 Notes and the subsequent redemption of the existing notes represents the culmination of significant debt reduction efforts initiated in 2019.
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, 2021, the financial resources available to the Company for meeting its financial obligations include $750.0 million from its revolving credit facility.
The Company’s near-term financial obligations include financial commitments of $145.2 million. The Company remains committed to maintaining amongst the strongest financial position in the industry and continues with its objective of achieving a positive net cash position.
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) | 2021 | | 2020 | | 2021 | | 2020 | |
| Cash flows from operating activities | $ | 238.2 | | $ | 181.5 | | $ | 742.3 | | $ | 617.8 | |
Cash flows from operating activities before net change in working capital | $ | 230.8 | | $ | 207.4 | | $ | 784.6 | | $ | 688.7 | |
| Cash flows (used in) from investing activities | $ | (117.5) | | $ | 136.3 | | $ | (399.7) | | $ | 51.4 | |
| Cash flows used in financing activities | $ | (55.7) | | $ | (141.0) | | $ | (467.5) | | $ | (175.9) | |
Net free cash flow(1) | $ | 188.4 | | $ | 118.9 | | $ | 547.4 | | $ | 455.6 | |
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Operating Activities
The increase in net cash flows from operating activities for both the three months and year ended December 31, 2021 compared to the comparative periods in 2020 is largely attributable to higher gross margins recognized on sales as a result of increased production.
Investing Activities
For the three months ended December 31, 2021, net cash outflows from investing activities were $117.5 million compared to net cash inflows of $136.3 million in the comparative quarter. Net cash outflows in the current quarter were comprised primarily of capital expenditures of $117.9 million (2020: $95.2 million). The increase in capital expenditures from the comparative quarter was most significant at Canadian Malartic, where the Company has begun development work on the Odyssey project, and normalized levels of capital expenditures across all of the Company's other mines, which were lower than plan in the comparative prior year quarter due to COVID-19 related restrictions.
For the year ended December 31, 2021, net cash outflows from investing activities were $399.7 million compared to net cash inflows of $51.4 million in 2020. Net cash outflows in the current period were comprised primarily of capital expenditures of $384.6 million (2020: $273.7 million), and $44.8 million being the net cash consideration in the acquisition of Monarch Gold in the first quarter of 2021, partially offset by the proceeds received on the sale of investments (primarily shares in other companies held by Yamana) of $61.5 million (2020: $137.2 million). Cash inflows in 2020 were also attributable to $222.5 million of cash acquired on the acquisition of Alumbrera pursuant to the Agua Rica-Alumbrera Integration Transaction. Consistent with the three month period above, the increase in capital expenditures from 2020 was attributable to Canadian Malartic and normalized levels of capital expenditures across the Company's mines.
Details on capital expenditures by mine can be found in Section 1: Highlights and Relevant Updates.
Financing Activities
In the three months ended December 31, 2021, net cash outflows from financing activities were $55.7 million compared to net cash outflows of $141.0 million in the comparative quarter. Cash outflows from financing activities in the quarter included dividend payments of $28.8 million (2020: $16.6 million), payments for the repurchase of certain of the Company's shares of $14.1 million (2020: nil), and interest payments on long-term debt of $8.3 million (2020: $21.3 million), partially offset by cash contributions received from MARA non-controlling interests of $4.8 million (2020: $3.4 million). The comparative quarter also included a repayment of $100.0 million on the revolving credit facility - the final repayment of the $200.0 million drawn down in the first quarter of 2020 as a precaution due to the uncertainty around COVID-19 at the time.
In the year ended December 31, 2021, net cash outflows from financing activities were $467.5 million compared to net cash outflows of $175.9 million in 2020. Cash outflows from financing activities in 2021 were largely driven by the net repayments of $223.7 million on the Company's senior notes in the third quarter of 2021, along with the associated $53.3 million in early redemption fees. In 2020, the Company repaid $56.2 million of senior notes that became due in March 2020. Other financing cash flows in the year included interest payments of $47.2 million (2020: $54.9 million), dividend payments of $104.1 million (2020: $53.0 million) and lease payments of $19.2 million (2020: $17.1 million), partially offset by cash contributions received from MARA non-controlling interests of $18.6 million (2020: $3.4 million). Other financing cash flows in 2021 also included payments for the repurchase of certain of the Company's shares of $28.3 million (2020: nil).
Net Free Cash Flow(1)
The Company generated net free cash flow(1) of $188.4 million in the fourth quarter of 2021, compared to net free cash flow(1) of $118.9 million in the fourth quarter of 2020. The Company generated net free cash flow(1) of $547.4 million in the year ended December 31, 2021, compared to net free cash flow(1) of $455.6 million in the same period of 2020. The positive change is largely attributable to higher gross margins recognized on sales as a result of higher production.
For a cautionary note on non-GAAP financial performance measures and a reconciliation from cash flows from operating activities to net free cash flow, refer to Section 12: Non-GAAP Financial Performance Measures.
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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) | December 31, 2021 | December 31, 2020 |
| Shareholders’ equity | $ | 5,203.2 | | $ | 5,172.3 | |
| Debt | 772.8 | | 993.8 | |
| 5,976.0 | | 6,166.1 | |
| Less: Cash and cash equivalents | (525.0) | | (651.2) | |
| | $ | 5,451.0 | | $ | 5,514.9 | |
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.
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, 2021, shown on an undiscounted basis:
| | | | | | | | | | | | | | | | | |
| (In millions of US Dollars) | Within 1 year | Years 2 and 3 | Years
4 and 5 | After 5 years | Total* |
| Debt | | | | | |
| Repayment of principal | $ | — | | $ | — | | $ | — | | $ | 782.9 | | $ | 782.9 | |
| Interest | 28.7 | | 56.4 | | 52.5 | | 73.4 | | 211.0 | |
| Capital and other financial commitments | 89.7 | | 54.4 | | 18.1 | | — | | 162.2 | |
| Environmental rehabilitation provisions | 26.8 | | 51.7 | | 34.4 | | 434.1 | | 547.0 | |
| Total contractual obligations and commitments | $ | 145.2 | | $ | 162.5 | | $ | 105.0 | | $ | 1,290.4 | | $ | 1,703.1 | |
* Additionally, as at December 31, 2021, the Company had outstanding letters of credit totalling $71.4 million (C$90.5 million) representing guarantees for reclamation obligations and road construction relating to the Company’s share of mining interest in Canadian Malartic, $34.1 million and $13.6 million representing reclamation guarantees related to the Company's Chilean mines and US properties respectively, $24.4 million representing security guarantees in Brazil, $2.0 million representing guarantees for fuel supply at Cerro Moro, and $0.7 million (C$0.9 million) representing surety bonds for reclamation obligations acquired as part of the Company's acquisition of Monarch Gold Corporation.
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. 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) | February 17, 2022 | December 31, 2021 |
| Common shares issued and outstanding | 959,840 | | 959,806 | |
| Share options outstanding | — | | 256 | |
| Restricted share units | 2,748 | | 2,210 | |
SUPPLEMENTAL OBLIGOR GUARANTOR INFORMATION
The following summarized financial information has been prepared in accordance with Rules 3-10 and 13-01 of Regulation S-X. Certain of the Company’s subsidiaries, Jacobina Mineração e Comércio Ltda., Minera Meridian Limitada, Minera Florida Limitada and Yamana Santa Cruz Holdings B.V. (the “Guarantor Subsidiaries” and, together with Yamana Gold Inc., the “Obligor Group”), have fully and unconditionally guaranteed, on a joint and several basis, the obligations under (a) the Company's Revolving Credit Facility, and (b) the $300.0 million, 10-year 4.625% notes issued December 2017 and the $500.0 million, 10-year 2.63% notes issued August 2021, both issued by the Company on a senior unsecured basis. The guarantee of any Guarantor Subsidiary will be terminated if the Guarantor Subsidiary is no longer a guarantor or otherwise an obligor under the Credit Facility. Refer to Note 28 in the Company’s Consolidated Financial Statements for the year ended December 31, 2021 for further information.
The following presents the summarized financial information on a combined basis for the Obligor Group. Transactions between entities in the Obligor Group have been eliminated. Information for the non-Guarantor Subsidiaries has been excluded from the combined summarized financial information of the Obligor Group, except as noted below, and therefore amounts provided do not represent the Company’s total consolidated amounts.
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Condensed Combined Statement of Operations
Yamana Gold Inc. (as Parent and Issuer) and Guarantor Subsidiaries
(Unaudited)
| | | | | | | | |
For the years ended December 31, | 2021 | | 2020 | |
Revenue* | $ | 1,789.8 | | $ | 1,539.1 | |
| Mine operating earnings | $ | 397.4 | | $ | 355.2 | |
| Earnings before taxes** | $ | 314.3 | | $ | 195.2 | |
| Net earnings** | $ | 233.1 | | $ | 99.6 | |
| Net earnings attributable to Yamana equity holders** | $ | 233.1 | | $ | 99.6 | |
* The Obligor Group acquired and subsequently sold precious metals produced by non-Guarantor Subsidiaries in the amount of $894.2 million and $690.3 million for the years ended December 31, 2021 and December 31, 2020, respectively.
** Includes intercompany income from non-Guarantor Subsidiaries of $91.5 million and $4.7 million for the years ended December 31, 2021 and December 31, 2020, respectively.
Condensed Combined Balance Sheets
Yamana Gold Inc. (as Parent and Issuer) and Guarantor Subsidiaries
(Unaudited)
| | | | | | | | |
| As at December 31, | 2021 | | 2020 | |
Current assets* | $ | 628.2 | | $ | 686.9 | |
| Non-current assets* | $ | 2,408.4 | | $ | 2,003.3 | |
| Current liabilities* | $ | 401.8 | | $ | 409.9 | |
| Non-current liabilities* | $ | 2,919.3 | | $ | 3,433.8 | |
| | |
* Includes amounts due from and to non-Guarantor Subsidiaries. For each of the balances as at December 31, 2021 and December 31, 2020, respective amounts included are as follows; current assets of $188.6 million and $149.3 million, non-current assets of $991.8 million and $595.6 million, current liabilities of $144.5 million and $138.6 million, non-current liabilities of $1,854.5 million and $2,158.2 million.
9. 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 and levels of operating cash flows.
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 and related uncertainties as described in the Company’s latest available 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. There were no significant changes to those risks or to the Company's management of exposure during the three months ended December 31, 2021, except as noted below:
METAL 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 and silver. Market price fluctuations of these precious metals 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, inflation), banking and political conditions, nature and climate condition risks, and mining specific factors.
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The following chart summarizes one-year movements in the US Dollar price of gold (source: LBMA PM gold price):
Gold Price - Market Update
For the quarter ended December 31, 2021, spot gold prices averaged $1,795 per ounce, representing a decrease of 4% compared to $1,874 per ounce in the fourth quarter of 2020. Prices ranged between $1,753 and $1,865 per ounce during the fourth quarter of 2021. As at December 31, 2021, the closing price was $1,806 per ounce.
On average, gold prices were higher in the fourth quarter of 2021, compared to the previous quarter. In November, prices reached their highest level since June before decreasing moderately into year-end. Prices continue to be driven by inflation expectations, nominal rates and US Federal Reserve policy signals. Declining investor interest was evident as global exchange-traded fund ("ETF") holdings saw a reduction in the fourth quarter. In the short-term, gold prices are likely to continue to be driven by the US dollar and real yields, global monetary policy and fiscal stimulus, and financial market volatility. Going forward, accommodative global monetary policies, combined with rising money supply and further inflationary pressures, should continue to be supportive of gold over the longer term.
Central banks have been net buyers of gold in 2021, however purchases have eased somewhat, following a heavy purchasing period earlier in the year. Thailand, Japan and India have been notable buyers in 2021. Higher oil prices, inflationary concerns and geopolitical trends should continue to support central bank purchases.
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.
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US Dollar - Market Update
The following chart summarizes one-year movements in key currencies vis-à-vis the US Dollar (source: Bloomberg):
The Brazilian Real, Argentinian Peso and Chilean Peso weakened against the US Dollar, while the Canadian Dollar strengthened, during the three months ended December 31, 2021, compared to the same quarter of 2020. In the short term, these currencies will continue to be impacted by specific regional events and central bank monetary policies. As a flight to safety, the performance of the US Dollar will be driven by economic and financial market shocks.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Average Exchange Rate | Period-end Exchange Rate |
| For the three months ended December 31, | For the year ended December 31, | As at December 31, | |
| 2021 | | 2020 | | % * | 2021 | | 2020 | | % * | 2021 | | 2020 | | % * |
| USD-CAD | 1.2600 | | 1.3030 | | (3.3) | % | 1.2537 | | 1.3412 | | (6.5) | % | 1.2678 | | 1.2732 | | (0.4) | % |
| USD-BRL | 5.5827 | | 5.3964 | | 3.5 | % | 5.3950 | | 5.1558 | | 4.6 | % | 5.5805 | | 5.1967 | | 7.4 | % |
| USD-ARS | 100.496 | | 80.081 | | 25.5 | % | 95.096 | | 70.6514 | | 34.6 | % | 102.720 | | 84.150 | | 22.1 | % |
| USD-CLP | 825.23 | | 761.96 | | 8.3 | % | 759.07 | | 792.17 | | (4.2) | % | 844.69 | | 710.95 | | 18.8 | % |
* Positive variance represents a US Dollar appreciation in relation to the foreign currency.
As at December 31, 2021, the Company had zero-cost collar contracts, which allow the Company to participate in exchange rate movements between two strikes, as follows:
| | | | | | | | | | | |
| Average call price* | Average put strike price* | Total (millions)** |
| Brazilian Real to USD | | | |
| January - December 2022 | R$5.25 | R$5.71 | R$192.0 |
| Chilean Peso to USD | | | |
| January - December 2022 | CLP$750.00 | CLP$850.75 | CLP$62,400.0 |
* R$ = Brazilian Reais, CLP$ = Chilean Pesos.
** Evenly split by month.
In addition, as at December 31, 2021, the Company had forward contracts as follows: | | | | | | | | | | | |
| Average forward price* | Total (millions)** |
| Brazilian Real to USD | | |
| January - December 2022 | R$5.4925 | R$192.0 |
| Chilean Peso to USD | | | |
| | |
| January - December 2022 | CLP$798.69 | CLP$62,400.0 |
| | | |
| | |
* R$ = Brazilian Reais, CLP = Chilean Pesos
** Evenly split by month.
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INFECTIOUS DISEASE RISK
Emerging infectious diseases or the threat of outbreaks of viruses or other contagions or epidemic diseases, including the COVID-19 outbreak, could have a material adverse effect on the Company by causing operational and supply chain delays and disruptions (including as a result of government regulation and prevention measures), labour shortages and shutdowns, social unrest, breach of material contracts and customer agreements, government or regulatory actions or inactions, increased insurance premiums, decreased demand or the inability to sell and deliver precious metals, declines in the price of precious metals, delays in permitting or approvals, governmental disruptions, capital markets volatility, or other unknown but potentially significant impacts. In addition, governments may impose strict emergency measures in response to the threat or existence of an infectious disease. The full extent and impact of the COVID-19 pandemic is unknown and to date has included extreme volatility in financial markets, a slowdown in economic activity, extreme volatility in commodity prices (including precious metals) and has raised the prospect of a global recession. The international response to COVID-19 has led to significant restrictions on travel, temporary business closures, quarantines, global stock market volatility and a general reduction in global consumer activity. The estimates of management are considered reasonable at this time, however, the full impact of the effects these conditions on mining operations or financial results may vary significantly due to uncertainties relating to the ultimate geographic spread of the virus, the severity of the disease, the duration of the outbreak, and the length of the travel restrictions and business closures that have been or may be imposed by the governments of impacted countries. In addition, a significant outbreak of contagious diseases in the human population, such as COVID-19, could result in a widespread health crisis that could adversely affect the economies and financial markets of many countries, resulting in an economic downturn that could result in a material adverse effect on commodity prices, demand for metals, investor confidence, and general financial market liquidity, all of which may adversely affect the Company’s business and the market price of the Company’s common shares. Accordingly, any outbreak or threat of an outbreak of an epidemic disease or similar public health emergency, including COVID-19, could have a material adverse effect on the Company’s business, financial condition and results of operations.
10. CONTINGENCIES
The Company 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 favourably, it may have a material adverse impact on the Company's financial condition, cash flow and results of operations.
11. CRITICAL ACCOUNTING POLICIES AND ESTIMATES
BASIS OF PREPARATION
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 are described in Note 3 to the Company's consolidated financial statements for the year ended December 31, 2021.
CRITICAL JUDGEMENTS AND ESTIMATES
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, revenue 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 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 uncertainty in the application of accounting policies during the year ended
December 31, 2021 are disclosed in Note 4 to the Company's consolidated financial statements for the year ended December 31, 2021.
12. NON-GAAP FINANCIAL PERFORMANCE MEASURES
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
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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.
NON-GAAP FINANCIAL PERFORMANCE MEASURES
The Company has included certain non-GAAP financial performance measures to supplement its Consolidated Financial Statements, which are presented in accordance with IFRS, including the following:
•Cash costs per gold equivalent ounce ("GEO") sold;
•All-in sustaining costs ("AISC") per GEO sold;
•Net free cash flow; and
•Average realized price per ounce of gold/silver 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 performance 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 financial performance measures and other financial 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.
CASH COSTS AND ALL-IN SUSTAINING COSTS PER GEO SOLD
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 performance 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 non-GAAP financial performance measures employed by other companies. Non-GAAP financial performance 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.
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 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 does 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
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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 components to the GEO production and sales activities but net of by-product revenue credits from sales of zinc.
The following tables provide detailed reconciliations from total costs of sales to cash costs and AISC, for the years ended December 31, 2021, and December 31, 2020. Subtotals and per unit measures may not calculate based on amounts presented in the following tables due to rounding.
Reconciliation of Total Cost of Sales to Cash Costs and AISC
| | | | | | | | | | | | | | | | | | | | |
Cash Cost & AISC Reconciliation - Total | For the three months ended
December 31, 2021 | For the three months ended
December 31, 2020 |
| (In millions of US Dollars except GEO sold and per GEO sold amounts) | Total | Total
GEO | Non-Sustaining | Total | Total
GEO | Non-Sustaining |
| Cost of sales excluding DDA | $ | 180.0 | | $ | 180.0 | | $ | — | | $ | 166.8 | | $ | 166.8 | | $ | — | |
| DDA | 125.7 | | 125.7 | | — | | 112.5 | | 112.5 | | — | |
| Total cost of sales | $ | 305.7 | | $ | 305.7 | | $ | — | | $ | 279.3 | | $ | 279.3 | | $ | — | |
| DDA | (125.7) | | (125.7) | | — | | (112.5) | | (112.5) | | — | |
| Total cash costs | $ | 180.0 | | $ | 180.0 | | $ | — | | $ | 166.8 | | $ | 166.8 | | $ | — | |
| AISC adjustments: | | | | | | |
| General and administrative expenses | 20.0 | | 20.0 | | — | | 23.4 | | 23.4 | | — | |
| Community costs in other operating expenses | 2.7 | | 2.7 | | — | | 1.9 | | 1.9 | | — | |
| Reclamation & remediation - accretion & amortization | 8.7 | | 6.8 | | 1.8 | | 5.8 | | 5.8 | | — | |
| Exploration capital expenditures | 19.6 | | 8.4 | | 11.1 | | 21.0 | | 11.8 | | 9.2 | |
| Exploration and evaluation expenses | 6.8 | | 0.7 | | 6.1 | | 6.0 | | 3.5 | | 2.5 | |
| Sustaining capital expenditures | 44.4 | | 44.4 | | — | | 47.8 | | 47.8 | | — | |
| Leases (IFRS 16 Adjustment) | 6.7 | | 6.7 | | — | | 4.8 | | 4.8 | | — | |
| Total AISC | | $ | 269.7 | | | | $ | 265.8 | | |
GEO sold(2) | | 280,409 | | | | 246,955 | | |
| Cost of sales excluding DDA per GEO sold | | $ | 642 | | | | $ | 675 | | |
| DDA per GEO sold | | $ | 448 | | | | $ | 455 | | |
| Total cost of sales per GEO sold | | $ | 1,091 | | | | $ | 1,131 | | |
| Cash costs per GEO sold | | $ | 642 | | | | $ | 675 | | |
| AISC per GEO sold | | $ | 962 | | | | $ | 1,076 | | |
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| | | | | | | | | | | | | | | | | | | | |
Cash Cost & AISC Reconciliation - Total | For the year ended
December 31, 2021 | For the year ended
December 31, 2020 |
| (In millions of US Dollars except GEO and per GEO amounts) | Total | Total
GEO | Non-sustaining | Total | Total
GEO | Non-Sustaining |
| Cost of sales excluding DDA | $ | 695.0 | | $ | 695.0 | | $ | — | | $ | 614.1 | | $ | 614.1 | | $ | — | |
| DDA | 447.9 | | 447.9 | | — | | 395.0 | | 395.0 | | — | |
| Total cost of sales | $ | 1,142.9 | | $ | 1,142.9 | | $ | — | | $ | 1,009.1 | | $ | 1,009.1 | | $ | — | |
| DDA | (447.9) | | (447.9) | | — | | (395.0) | | (395.0) | | — | |
| Total cash costs | $ | 695.0 | | $ | 695.0 | | $ | — | | $ | 614.1 | | $ | 614.1 | | $ | — | |
| AISC adjustments: | | | | | | |
| General and administrative expenses | 74.8 | | 74.8 | | — | | 85.9 | | 85.9 | | — | |
| Community costs in other operating expenses | 6.5 | | 6.5 | | — | | 6.4 | | 6.4 | | — | |
| Reclamation & remediation - accretion & amortization | 34.6 | | 27.2 | | 7.4 | | 20.1 | | 20.1 | | — | |
| Exploration capital expenditures | 68.1 | | 34.9 | | 33.2 | | 57.6 | | 41.2 | | 16.4 | |
| Exploration and evaluation expenses | 31.6 | | 2.7 | | 28.9 | | 15.1 | | 9.6 | | 5.5 | |
| Sustaining capital expenditures | 173.7 | | 173.7 | | — | | 149.3 | | 149.3 | | — | |
| Leases (IFRS 16 Adjustment) | 24.3 | | 24.3 | | — | | 20.3 | | 20.3 | | — | |
| Total AISC | | $ | 1,039.1 | | | | $ | 946.9 | | |
GEO sold(2) | | 1,009,262 | | | | 876,520 | | |
| Cost of sales excluding DDA per GEO sold | | $ | 689 | | | | $ | 701 | | |
| DDA per GEO sold | | $ | 444 | | | | $ | 451 | | |
| Total cost of sales per GEO sold | | $ | 1,132 | | | | $ | 1,151 | | |
| Cash costs per GEO sold | | $ | 689 | | | | $ | 701 | | |
| AISC per GEO sold | | $ | 1,030 | | | | $ | 1,080 | | |
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| | | | | | | | | | | | | | | | | | | | | | | |
Cash Cost & AISC Reconciliation - Operating Segments | For the three months ended December 31, 2021 |
| (In millions of US Dollars except GEO sold and per GEO sold amounts) | Total | Malartic
GEO | Jacobina
GEO | Cerro Moro
GEO | El Peñón
GEO | Minera Florida
GEO | Corporate & Non-Sustaining |
| Cost of sales excluding DDA | $ | 180.0 | | $ | 61.8 | | $ | 22.0 | | $ | 40.7 | | $ | 37.2 | | $ | 18.3 | | $ | — | |
| DDA | 125.7 | | 45.4 | | 15.2 | | 27.9 | | 22.2 | | 12.5 | | 2.5 | |
| Total cost of sales | $ | 305.7 | | $ | 107.2 | | $ | 37.2 | | $ | 68.6 | | $ | 59.4 | | $ | 30.8 | | $ | 2.5 | |
| DDA | (125.7) | | (45.4) | | (15.2) | | (27.9) | | (22.2) | | (12.5) | | (2.5) | |
| Total cash costs | $ | 180.0 | | $ | 61.8 | | $ | 22.0 | | $ | 40.7 | | $ | 37.2 | | $ | 18.3 | | $ | — | |
| AISC adjustments: | | | | | | | |
| General and administrative expenses | 20.0 | | 1.3 | | 0.2 | | 0.3 | | 0.3 | | 0.4 | | 17.5 | |
| Community costs in other operating expenses | 2.7 | | 0.9 | | 0.3 | | 1.3 | | — | | — | | 0.2 | |
| Reclamation & remediation - accretion & amortization | 8.7 | | 3.9 | | 0.3 | | 1.2 | | 0.4 | | 0.8 | | 2.1 | |
| Exploration capital expenditures | 19.6 | | — | | 1.8 | | 1.3 | | 2.3 | | 3.1 | | 11.1 | |
| Exploration and evaluation expenses | 6.8 | | — | | — | | — | | — | | — | | 6.8 | |
| Sustaining capital expenditures | 44.4 | | 17.3 | | 4.2 | | 12.4 | | 7.1 | | 2.9 | | 0.5 | |
| Leases (IFRS 16 Adjustment) | 6.7 | | 0.2 | | 2.4 | | 1.4 | | 1.3 | | 0.9 | | 0.5 | |
| Total AISC | | $ | 85.4 | | $ | 31.2 | | $ | 58.6 | | $ | 48.6 | | $ | 26.4 | | |
GEO sold(2) | | 91,589 | | 48,732 | | 56,087 | | 63,943 | | 20,058 | | |
| Cost of sales excluding DDA per GEO sold | | $ | 676 | | $ | 452 | | $ | 726 | | $ | 582 | | $ | 911 | | |
| DDA per GEO sold | | $ | 496 | | $ | 312 | | $ | 498 | | $ | 347 | | $ | 624 | | |
| Total cost of sales per GEO sold | | $ | 1,171 | | $ | 763 | | $ | 1,224 | | $ | 929 | | $ | 1,535 | | |
| Cash costs per GEO sold | | $ | 676 | | $ | 452 | | $ | 726 | | $ | 582 | | $ | 911 | | |
| AISC per GEO sold | | $ | 931 | | $ | 643 | | $ | 1,044 | | $ | 761 | | $ | 1,313 | | |
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Cash Cost & AISC Reconciliation - Operating Segments | For the three months ended December 31, 2020 |
| (In millions of US Dollars except GEO sold and per GEO sold amounts) | Total | Malartic
GEO | Jacobina
GEO | Cerro Moro
GEO | El Peñón
GEO | Minera Florida
GEO | Corporate & Non-Sustaining |
| Cost of sales excluding DDA | $ | 166.8 | | $ | 53.4 | | $ | 25.2 | | $ | 33.8 | | $ | 36.0 | | $ | 18.2 | | $ | — | |
| DDA | 112.5 | | 41.5 | | 13.6 | | 25.4 | | 16.9 | | 12.5 | | 2.6 | |
| Total cost of sales | $ | 279.3 | | $ | 94.9 | | $ | 38.8 | | $ | 59.2 | | $ | 52.9 | | $ | 30.7 | | $ | 2.6 | |
| DDA | (112.5) | | (41.5) | | (13.6) | | (25.4) | | (16.9) | | (12.5) | | (2.6) | |
| Total cash costs | $ | 166.8 | | $ | 53.4 | | $ | 25.2 | | $ | 33.8 | | $ | 36.0 | | $ | 18.2 | | $ | — | |
| AISC adjustments: | | | | | | | |
| General and administrative expenses | 23.4 | | 1.0 | | 0.2 | | 0.3 | | 0.3 | | 0.2 | | 21.4 | |
| Community costs in other operating expenses | 1.9 | | 0.1 | | 0.1 | | 1.6 | | — | | — | | 0.1 | |
| Reclamation & remediation - accretion & amortization | 5.8 | | 2.4 | | 0.5 | | 0.7 | | 0.6 | | 1.0 | | 0.6 | |
| Exploration capital expenditures | 21.0 | | — | | 2.0 | | 3.5 | | 4.7 | | 1.8 | | 9.0 | |
| Exploration and evaluation expenses | 6.0 | | 0.1 | | 0.1 | | — | | — | | — | | 6.0 | |
| Sustaining capital expenditures | 47.8 | | 18.6 | | 5.4 | | 9.0 | | 9.9 | | 4.4 | | 0.5 | |
| Leases (IFRS 16 Adjustment) | 4.8 | | 0.2 | | 1.0 | | 1.3 | | 1.5 | | 0.4 | | 0.4 | |
| Total AISC | | $ | 75.8 | | $ | 34.5 | | $ | 50.2 | | $ | 53.0 | | $ | 26.0 | | |
GEO sold(2) | | 84,348 | | 42,789 | | 44,101 | | 51,738 | | 23,979 | | |
| Cost of sales excluding DDA per GEO sold | | $ | 634 | | $ | 590 | | $ | 768 | | $ | 696 | | $ | 760 | | |
| DDA per GEO sold | | $ | 493 | | $ | 317 | | $ | 576 | | $ | 327 | | $ | 519 | | |
| Total cost of sales per GEO sold | | $ | 1,126 | | $ | 907 | | $ | 1,343 | | $ | 1,023 | | $ | 1,279 | | |
| Cash costs per GEO sold | | $ | 634 | | $ | 590 | | $ | 768 | | $ | 696 | | $ | 760 | | |
| AISC per GEO sold | | $ | 898 | | $ | 807 | | $ | 1,139 | | $ | 1,025 | | $ | 1,087 | | |
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Cash Cost & AISC Reconciliation - Operating Segments | For the year ended December 31, 2021 |
| (In millions of US Dollars except GEO and per GEO amounts) | Total | Malartic
GEO | Jacobina
GEO | Cerro Moro
GEO | El Peñón
GEO | Minera Florida
GEO | Corporate & Non-Sustaining |
| Cost of sales excluding DDA | $ | 695.0 | | $ | 231.3 | | $ | 105.5 | | $ | 130.5 | | $ | 150.3 | | $ | 77.4 | | $ | — | |
| DDA | 447.9 | | 174.7 | | 55.4 | | 74.6 | | 85.0 | | 48.5 | | 9.7 | |
| Total cost of sales | $ | 1,142.9 | | $ | 406.0 | | $ | 160.9 | | $ | 205.1 | | $ | 235.3 | | $ | 125.9 | | $ | 9.7 | |
| DDA | (447.9) | | (174.7) | | (55.4) | | (74.6) | | (85.0) | | (48.5) | | (9.7) | |
| Total cash costs | $ | 695.0 | | $ | 231.3 | | $ | 105.5 | | $ | 130.5 | | $ | 150.3 | | $ | 77.4 | | $ | — | |
| AISC adjustments: | | | | | | | |
| General and administrative expenses | 74.8 | | 4.0 | | 0.7 | | 0.4 | | 0.5 | | 0.7 | | 68.5 | |
| Community costs in other operating expenses | 6.5 | | 1.2 | | 0.9 | | 4.0 | | — | | — | | 0.4 | |
| Reclamation & remediation - accretion & amortization | 34.6 | | 15.7 | | 1.5 | | 3.2 | | 2.0 | | 4.4 | | 7.8 | |
| Exploration capital expenditures | 68.1 | | — | | 7.2 | | 5.6 | | 15.6 | | 6.5 | | 33.2 | |
| Exploration and evaluation expenses | 31.6 | | 0.2 | | 0.2 | | — | | — | | — | | 31.2 | |
| Sustaining capital expenditures | 173.7 | | 69.2 | | 14.0 | | 39.8 | | 34.6 | | 15.2 | | 0.9 | |
| Leases (IFRS 16 Adjustment) | 24.3 | | 0.7 | | 7.6 | | 5.4 | | 5.1 | | 3.3 | | 2.2 | |
| Total AISC | | $ | 322.3 | | $ | 137.6 | | $ | 188.9 | | $ | 208.1 | | $ | 107.5 | | |
GEO sold(2) | | 357,667 | | 186,534 | | 153,882 | | 223,375 | | 87,804 | | |
| Cost of sales excluding DDA per GEO sold | | $ | 647 | | $ | 566 | | $ | 848 | | $ | 673 | | $ | 881 | | |
| DDA per GEO sold | | $ | 488 | | $ | 297 | | $ | 485 | | $ | 381 | | $ | 553 | | |
| Total cost of sales per GEO sold | | $ | 1,135 | | $ | 863 | | $ | 1,332 | | $ | 1,054 | | $ | 1,434 | | |
| Cash costs per GEO sold | | $ | 647 | | $ | 566 | | $ | 848 | | $ | 673 | | $ | 881 | | |
| AISC per GEO sold | | $ | 901 | | $ | 738 | | $ | 1,228 | | $ | 932 | | $ | 1,224 | | |
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Cash Cost & AISC Reconciliation - Operating Segments | For the year ended December 31, 2020 |
| (In millions of US Dollars except GEO and per GEO amounts) | Total | Malartic
GEO | Jacobina
GEO | Cerro Moro
GEO | El Peñón
GEO | Minera Florida
GEO | Corporate & Non-Sustaining |
| Cost of sales excluding DDA | $ | 614.1 | | $ | 185.4 | | $ | 95.5 | | $ | 115.8 | | $ | 141.8 | | $ | 75.6 | | $ | — | |
| DDA | 395.0 | | 133.4 | | 52.6 | | 86.1 | | 69.6 | | 44.2 | | 9.1 | |
| Total cost of sales | $ | 1,009.1 | | $ | 318.8 | | $ | 148.1 | | $ | 201.8 | | $ | 211.4 | | $ | 119.8 | | $ | 9.1 | |
| DDA | (395.0) | | (133.4) | | (52.6) | | (86.1) | | (69.6) | | (44.2) | | (9.1) | |
| Total cash costs | $ | 614.1 | | $ | 185.4 | | $ | 95.5 | | $ | 115.8 | | $ | 141.8 | | $ | 75.6 | | $ | — | |
| AISC adjustments: | | | | | | | |
| General and administrative expenses | 85.9 | | 2.5 | | 0.7 | | 0.5 | | 0.5 | | 0.4 | | 81.3 | |
| Community costs in other operating expenses | 6.4 | | 0.3 | | 0.7 | | 4.6 | | — | | — | | 0.8 | |
| Reclamation & remediation - accretion & amortization | 20.1 | | 8.2 | | 2.2 | | 2.8 | | 2.2 | | 3.6 | | 1.1 | |
| Exploration capital expenditures | 57.6 | | — | | 6.0 | | 12.6 | | 15.9 | | 7.0 | | 16.1 | |
| Exploration and evaluation expenses | 15.1 | | 0.1 | | 0.1 | | — | | — | | — | | 14.9 | |
| Sustaining capital expenditures | 149.3 | | 52.5 | | 21.6 | | 29.5 | | 31.4 | | 12.6 | | 1.7 | |
| Leases (IFRS 16 Adjustment) | 20.3 | | 0.7 | | 4.1 | | 5.0 | | 7.0 | | 1.8 | | 1.7 | |
| Total AISC | | $ | 249.7 | | $ | 130.9 | | $ | 170.8 | | $ | 198.8 | | $ | 101.0 | | |
GEO sold(2) | | 264,198 | | 175,561 | | 133,358 | | 215,667 | | 87,735 | | |
| Cost of sales excluding DDA per GEO sold | | $ | 702 | | $ | 544 | | $ | 868 | | $ | 657 | | $ | 862 | | |
| DDA per GEO sold | | $ | 505 | | $ | 300 | | $ | 645 | | $ | 323 | | $ | 503 | | |
| Total cost of sales per GEO sold | | $ | 1,207 | | $ | 844 | | $ | 1,513 | | $ | 980 | | $ | 1,366 | | |
| Cash costs per GEO sold | | $ | 702 | | $ | 544 | | $ | 868 | | $ | 657 | | $ | 862 | | |
| AISC per GEO sold | | $ | 945 | | $ | 746 | | $ | 1,280 | | $ | 922 | | $ | 1,152 | | |
NET FREE CASH FLOW
The Company uses the financial measure "net free cash flow", which is a non-GAAP financial performance 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
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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 and other cash flows not related to current period production, less non-discretionary items such as sustaining capital expenditures, interest paid, payment of lease liabilities, and cash used in other financing activities.
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| For the three months ended December 31, | For the year ended December 31, |
(In millions of US Dollars) | 2021 | | 2020 | | 2021 | | 2020 | |
Cash flows from operating activities | $ | 238.2 | | $ | 181.5 | | $ | 742.3 | | $ | 617.8 | |
Adjustments to operating cash flows: | | | | |
Amortization of deferred revenue | 3.5 | | 3.8 | | 18.0 | | 16.1 | |
| Temporary suspension, standby and other incremental COVID-19 costs | 8.7 | | 9.2 | | 37.4 | | 40.5 | |
| Legal contingencies included in other cash payments | — | | — | | — | | 8.0 | |
Non-discretionary items related to the current period | | | | |
Sustaining capital expenditures | (44.4) | | (47.8) | | (173.7) | | (149.3) | |
| Interest paid | (8.3) | | (21.3) | | (47.2) | | (54.9) | |
| Payment of lease liabilities | (5.8) | | (4.2) | | (19.2) | | (17.1) | |
| Cash used in other financing activities | (3.5) | | (2.3) | | (10.2) | | (5.5) | |
Net free cash flow | $ | 188.4 | | $ | 118.9 | | $ | 547.4 | | $ | 455.6 | |
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AVERAGE REALIZED PRICE PER OUNCE OF GOLD & SILVER
The Company uses the financial measures "average realized gold price" and "average realized silver price", which are non-GAAP financial performance 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 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 and silver divided by the quantity of the respective units of metals sold, i.e. gold ounce and silver ounce. Reconciliations of average realized metal prices to revenue are provided below:
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| For the three months ended December 31, | 2021 | | 2020 |
| Quantity sold | | Revenue per ounce | Revenue (In millions of US Dollars) | | Quantity sold | | Revenue
per ounce | Revenue (In millions of US Dollars) |
Gold | 242,486 | | oz | $ | 1,796 | | $ | 435.5 | | | 213,439 | | oz | $ | 1,875 | | $ | 400.2 | |
Silver | 2,937,805 | | oz | $ | 23.24 | | 68.3 | | | 2,563,166 | | oz | $ | 24.02 | | 61.6 | |
Revenue | | | | $ | 503.8 | | | | | | $ | 461.8 | |
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| For the three months ended December 31, | 2021 | | 2020 |
| Quantity sold | | Average Realized Price | Revenue (In millions of US Dollars) | | Quantity sold | | Average Realized Price | Revenue (In millions of US Dollars) |
Gold | 242,486 | | oz | $ | 1,796 | | $ | 435.5 | | | 213,439 | | oz | $ | 1,875 | | $ | 400.2 | |
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| Silver | 2,709,252 | | oz | $ | 23.35 | | 63.3 | | | 2,294,546 | | oz | $ | 24.32 | | 55.8 | |
Silver subject to metal sales agreement* | 228,553 | | oz | $ | 21.94 | | 5.0 | | | 268,620 | | oz | $ | 21.44 | | 5.8 | |
| 2,937,805 | | oz | $ | 23.24 | | | | 2,563,166 | | oz | $ | 24.02 | | |
Gross revenue | | | | $ | 503.8 | | | | | | $ | 461.8 | |
(Deduct) add: | | | | | | | | | |
Deferred revenue adjustment** | | | | — | | | | | | — | |
Other adjustments | | | | — | | | | | | — | |
Revenue | | | | $ | 503.8 | | | | | | $ | 461.8 | |
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| For the year ended December 31, | 2021 | | 2020 |
| Quantity sold | | Revenue
per ounce | Revenue (In millions of US Dollars) | | Quantity
sold | | Revenue
per ounce | Revenue (In millions of US Dollars) |
Gold | 885,293 | | oz | $ | 1,799 | | $ | 1,592.4 | | | 754,970 | | oz | $ | 1,777 | | $ | 1,341.8 | |
Silver | 8,976,269 | | oz | $ | 24.85 | | 223.0 | | | 10,382,086 | | oz | $ | 21.11 | | 219.2 | |
| Revenue | | | | $ | 1,815.4 | | | | | | $ | 1,561.0 | |
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| For the year ended December 31, | 2021 | | 2020 |
| Quantity sold | | Average Realized Price | Revenue (In millions of US Dollars) | | Quantity sold | | Average Realized Price | Revenue (In millions of US Dollars) |
Gold | 885,293 | | oz | $ | 1,799 | | $ | 1,592.4 | | | 754,970 | | oz | $ | 1,777 | | $ | 1341.8 | |
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Silver | 7,951,386 | | oz | $ | 24.85 | | 197.6 | | | 9,380,951 | | oz | $ | 21.04 | | 197.4 | |
Silver subject to metal sales agreement* | 1,024,883 | | oz | $ | 22.59 | | 23.2 | | | 1,001,135 | | oz | $ | 19.91 | | 19.9 | |
| 8,976,269 | | oz | $ | 24.59 | | | | 10,382,086 | | oz | $ | 20.93 | | |
Gross revenue | | | | $ | 1,813.2 | | | | | | $ | 1,559.1 | |
(Deduct) add: | | | | | | | | | |
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Deferred revenue adjustment** | | | | 2.4 | | | | | | 1.9 | |
| Other adjustments | | | | (0.2) | | | | | | — | |
Revenue | | | | $ | 1,815.4 | | | | | | $ | 1,561.0 | |
* Balances represent the metals sold under the metal sales agreement.
** Consideration from the Company's metal sales agreement is considered variable. Revenue can be subject to cumulative adjustments when the number of ounces to be delivered under the agreement changes. During the three months ended March 31, 2021 and 2020, the Company recognized an adjustment to revenue and finance costs due to a change in the Company's reserve and resource estimates, and therefore, the number of ounces expected to be delivered under the life of the agreement.
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13. 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.
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, 2021, 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, 2021 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, 2021.
CHANGES IN INTERNAL CONTROLS
During the three months and year ended December 31, 2021, 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
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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, 2021, and December 31, 2020, and results of operations for the periods ended December 31, 2021, and December 31, 2020.
This Management’s Discussion and Analysis has been prepared as of February 17, 2022. 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, 2021 (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 on file with the Securities Commissions of all of the provinces in Canada and 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 Canadian Dollar, 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, changes in project parameters as plans continue to be refined, changes in project development, construction, production and commissioning time frames, risks associated with infectious diseases, including COVID-19, 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
| 69
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, P. Geo 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 Company's most recent Annual Information Form and other continuous disclosure documents filed by the Company since January 1, 2021 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.
*************
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ENDNOTES
| | | | | |
| (1) | A cautionary note regarding non-GAAP financial performance measures, along with detailed reconciliations and descriptions, can be found in Section 12: Non-GAAP Financial Performance Measures. |
| |
(2) | GEO is calculated as the sum of gold ounces and the gold equivalent of silver ounces using a ratio of 77.28 and 72.55 for the three months and year ended December 31, 2021, respectively, and 76.82 and 88.86 for the three months and year ended December 31, 2020, respectively. GEO calculations for actuals are based on an average market gold to silver price ratio for the relevant period. Guidance GEO assumes gold ounces plus the equivalent of silver ounces using a ratio of 72.00. |
| |
| (3) | Net earnings and adjustments to net earnings are those attributable to Yamana Gold Inc. equity holders. |
| |
| (4) | Yamana mines is defined as Yamana's currently held mines, which are Canadian Malartic, Jacobina, Cerro Moro, El Peñón and Minera Florida. |
| |
| (5) | Included in the year ended December 31, 2020 gold production figure is 18,929 of pre-commercial production ounces, related to the Company's 50% interest in the Canadian Malartic mine's Barnat pit which achieved commercial production on September 30, 2020. Pre-commercial production ounces are excluded from sales figures, however pre-commercial production ounces that were sold during their respective period of production had their corresponding revenues and costs of sales capitalized to mineral properties, captured as a reduction to expansionary capital expenditures. |
| |
| |
| (6) | Working capital is defined as the excess of current assets over current liabilities. |
| |
| (7) | Vaccination rates are exclusive of Canadian Malartic, in which we hold a 50% interest. Vaccination rates at Canadian Malartic are in line with the high Abitibi-Témiscamingue regional rates. |
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EXHIBIT 99.3
CONSOLIDATED FINANCIAL STATEMENTS
AS AT AND FOR THE YEARS ENDED
DECEMBER 31, 2021 AND 2020
| | | | | | | | | | | | | | |
| TABLE OF CONTENTS | | Page |
| | Management's Responsibility for Financial Reporting | |
| | Reports of Independent Registered Public Accounting Firm (PCAOB ID 1208) | 3 |
| | Consolidated Statements of Operations | |
| | Consolidated Statements of Comprehensive Earnings | |
| | | Consolidated Statements of Cash Flows | |
| | | Consolidated Balance Sheets | |
| | | Consolidated Statements of Changes in Equity | |
| | | | |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: | |
Note 1: | | Description of Business and Nature of Operations | |
Note 2: | | Basis of Preparation and Presentation | |
Note 3: | | Significant Accounting Policies | |
Note 4: | | Critical Judgements and Estimation Uncertainties | |
Note 5: | | Recent Accounting Pronouncements | |
Note 6: | | Business Transactions | |
Note 7: | | Segment Information | |
Note 8: | | Revenue | |
Note 9: | | Employee Compensation and Benefits Expenses | |
| | | |
Note 10: | | Other Operating Expenses, Net | | |
Note 11: | | Other (Income) Costs, Net | |
Note 12: | | Finance Costs | |
Note 13: | | Impairment and Reversal of Impairment | |
Note 14: | | Income Taxes | |
Note 15: | | Earnings Per Share | |
Note 16: | | Supplementary Cash Flow Information | |
Note 17: | | Financial Instruments | |
Note 18: | | Financial Risk Management | |
Note 19: | | Inventories | |
| | | |
Note 20: | | Other Financial Assets | |
Note 21: | | Other Assets | |
Note 22: | | Property, Plant and Equipment | |
Note 23: | | Goodwill and Other Intangible Assets | |
Note 24: | | Investments in Associates | |
Note 25: | | Trade and Other Payables | |
Note 26: | | Other Financial Liabilities | |
Note 27: | | Other Provisions and Liabilities | |
Note 28: | | Long-Term Debt and Credit Facility | |
Note 29: | | Environmental Rehabilitation Provision | |
Note 30: | | Share Capital | |
Note 31: | | Share-Based Payments | |
Note 32: | | Non-Controlling Interests | |
Note 33: | | Capital Management | |
Note 34: | | Leases | |
Note 35: | | Commitments and Contingencies | |
Note 36: | | Related Party Transactions | |
| | | |
| | | |
| | | |
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, 2021, 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 Senior Vice President, Finance and
Chief Executive Officer Chief Financial Officer
February 17, 2022
| 1
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, 2021 and 2020, the related consolidated statements of operations, comprehensive earnings, cash flows and changes in equity, for each of the two years in the period ended December 31, 2021, 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, 2021 and 2020, and its financial performance and its cash flows for each of the two years in the period ended December 31, 2021, 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, 2021, 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 17, 2022, 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 and silver), inputs to the Company’s market capitalization deficiency assessment (specifically, control premiums, industry specific factors and company performance), future 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 fair value specialists.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to future commodity prices (gold and silver), inputs to the market capitalization deficiency assessment (specifically, control premiums, industry specific factors and company performance), future foreign exchange rates and the discount rate considered in the assessment of indicators of impairment or impairment reversal included the following, among others:
| 2
•Evaluated the effectiveness of controls over management’s assessment of indicators of impairment or impairment reversal, including the determination of future commodity prices (gold and silver), future foreign exchange rates and the discount rate.
•With the assistance of fair value specialists;
◦Evaluated the reasonableness of the forecasts of future gold and silver prices and future foreign exchange rates by comparing management’s forecasts to third party forecasts.
◦Evaluated management’s assessment of the market capitalization deficiency to the carrying value of the Company’s net assets which included assessing control premiums, industry specific factors and company performance.
◦Evaluated the reasonableness of the discount rate by testing the source information underlying the determination of the discount rate.
Impairment assessment – Canadian Malartic Cash-Generating Unit (CGU) Goodwill – Refer to Notes 4, 13, 22 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 carrying value of the CGU may be above its recoverable amount using the higher of fair value less costs of disposal and value in use. In addition, at each reporting date, the Company reviews the carrying amounts of its mining properties and plant and equipment at a CGU level to determine whether there is an indication that these assets might be impaired, or that previously recognized impairment losses may no longer exist or may have decreased. If any such indicators exist, the recoverable amount of the relevant CGU is estimated based on the higher of its fair value less costs of disposal and value in use, to determine the extent of the impairment loss or impairment loss reversal.
While there are several inputs that are required to determine the recoverable amount for this CGU, the estimates and assumptions with the highest degree of subjectivity and judgment uncertainty are forecasts of future revenues (specifically future gold and silver prices and potential ounces), future foreign exchange rates and discount rate. Performing audit procedures to evaluate the reasonableness of such estimates and assumptions required a high degree of auditor judgment and an increased extent of audit effort, including the involvement of fair value specialists.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the forecasts of future revenues (specifically future gold and silver prices and potential ounces), future foreign exchange rates and discount rate used in determining the recoverable value of the CGU included the following, among others:
•Evaluated the effectiveness of controls over management’s determination of the future commodity prices (gold and silver), in-situ value assigned to the potential ounces, future foreign exchange rates, and the discount rate.
•With the assistance of fair value specialists;
◦Evaluated the reasonableness of the forecasts of future gold and silver prices and future foreign exchange rates by comparing management’s forecasts to third party forecasts.
◦Obtained third party information surrounding in-situ values to assess the reasonableness of the value assigned to the potential ounces.
◦Evaluated the reasonableness of the discount rate by testing the source information underlying the determination of the discount rate and developed a range of independent estimates for the discount rate and compared to the discount rate selected by management.
"/s/ Deloitte LLP”
Chartered Professional Accountants
Licensed Public Accountants
Toronto, Canada
February 17, 2022
We have served as the Company's auditor since 1995.
| 3
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, 2021, 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, 2021, 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, 2021 of the Company and our report dated February 17, 2022, 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 17, 2022
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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) | | | 2021 | | 2020 | |
Revenue (Note 8) | | | $ | 1,815.4 | | $ | 1,561.0 | |
Cost of sales excluding depletion, depreciation and amortization | | | (695.0) | | (614.1) | |
| Gross margin excluding depletion, depreciation and amortization | | | $ | 1,120.4 | | $ | 946.9 | |
| Depletion, depreciation and amortization | | | (447.9) | | (395.0) | |
| Temporary suspension, standby and other incremental COVID-19 costs | | | (37.4) | | (40.5) | |
Reversal of impairment of mining properties, net (Note 13) | | | — | | 191.0 | |
| Mine operating earnings | | | $ | 635.1 | | $ | 702.4 | |
| | | | |
| Expenses | | | | |
| General and administrative | | | (74.8) | | (85.9) | |
| Exploration and evaluation | | | (31.6) | | (15.1) | |
Share of earnings (loss) of associates (Note 24) | | | 0.9 | | (1.0) | |
Other operating expenses, net (Note 10) | | | (37.4) | | (14.6) | |
| | | | |
| Operating earnings | | | $ | 492.2 | | $ | 585.8 | |
Finance costs (Note 12) | | | (134.4) | | (77.0) | |
Other income (costs), net (Note 11) | | | 26.7 | | (18.7) | |
| Earnings before taxes | | | $ | 384.5 | | $ | 490.1 | |
Current income tax expense (Note 14) | | | (159.8) | | (116.2) | |
Deferred income tax expense (Note 14) | | | (135.9) | | (170.3) | |
| Income tax expense, net | | | $ | (295.7) | | $ | (286.5) | |
| Net earnings | | | $ | 88.8 | | $ | 203.6 | |
| | | | |
| Attributable to: | | | | |
| Yamana Gold Inc. equity holders | | | $ | 147.5 | | $ | 203.6 | |
Non-controlling interests (Note 32) | | | (58.7) | | — | |
| Net earnings | | | $ | 88.8 | | $ | 203.6 | |
| | | | |
Earnings per share attributable to Yamana Gold Inc. equity holders (Note 15) | | | | |
| Basic and diluted | | | $ | 0.15 | | $ | 0.21 | |
| | | | |
Weighted average number of shares outstanding (in thousands) (Note 15) | | | | |
| Basic | | | 963,393 | | 951,818 | |
| Diluted | | | 964,932 | | 953,846 | |
The accompanying notes are an integral part of the consolidated financial statements.
| 5
YAMANA GOLD INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS
FOR THE YEARS ENDED DECEMBER 31,
| | | | | | | | | | |
| | |
| (In millions of US Dollars) | | | 2021 | | 2020 | |
| Net earnings | | | $ | 88.8 | | $ | 203.6 | |
| | | | |
| Other comprehensive earnings, net of taxes | | | | |
| Items that may be reclassified subsequently to net earnings: | | | | |
| Cash-flow hedges | | | | |
- Effective portion of changes in fair value of cash flow hedges (Note 17) | | | (11.8) | | (24.0) | |
- Reclassification of losses recorded in earnings (Note 17) | | | 9.7 | | 16.9 | |
- Tax Impact on fair value of hedging instruments (Note 14) | | | 1.9 | | 2.0 | |
- Time value of options contracts excluded from hedge relationship (Note 17) | | | (4.9) | | (0.2) | |
| Investment in associate | | | | |
- Share of other comprehensive loss from investment in associate (Note 24) | | | — | | (1.6) | |
- Reclassification of accumulated other comprehensive losses from investment in associate to net earnings upon discontinuation of the equity method (Note 6) | | | — | | 11.1 | |
| | | $ | (5.1) | | $ | 4.2 | |
| Items that will not be reclassified to net earnings: | | | | |
| Changes in the fair value of equity investments at FVOCI | | | (11.0) | | 13.9 | |
| | | | |
| Income tax relating to items that will not be reclassified subsequently to net earnings | | | 1.5 | | (1.5) | |
| Re-measurement of employee benefit plan | | | (1.3) | | (0.7) | |
| Total other comprehensive (loss) earnings | | | $ | (15.9) | | $ | 15.9 | |
| Total comprehensive earnings | | | $ | 72.9 | | $ | 219.5 | |
| | | | |
| Attributable to: | | | | |
| Yamana Gold Inc. equity holders | | | $ | 131.6 | | $ | 219.5 | |
| Non-controlling interests | | | (58.7) | | — | |
| Total comprehensive earnings | | | $ | 72.9 | | $ | 219.5 | |
The accompanying notes are an integral part of the consolidated financial statements.
| 6
YAMANA GOLD INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31,
| | | | | | | | | | |
| | |
| (In millions of US Dollars) | | | 2021 | | 2020 | |
| Operating activities | | | | |
| Earnings before taxes | | | $ | 384.5 | | $ | 490.1 | |
| Adjustments to reconcile earnings before taxes to net operating cash flows: | | | | |
| Depletion, depreciation and amortization | | | 447.9 | | 395.0 | |
Share-based payments | | | 3.2 | | 31.5 | |
Other (income) costs, net | | | (4.9) | | 18.7 | |
Finance costs (Note 12) | | | 134.4 | | 77.0 | |
| Mark-to-market on financial instruments | | | 0.3 | | (6.9) | |
| | | | |
Share of (earnings) loss of associates (Note 24) | | | (0.9) | | 1.0 | |
Reversal of impairment of mining properties, net (Note 13) | | | — | | (191.0) | |
Amortization of deferred revenue (Note 27) | | | (18.0) | | (16.1) | |
| | | | |
Gain on discontinuation of the equity method (Note 6) | | | (10.2) | | (21.3) | |
Other non-cash expenses, net (Note 16) | | | 20.7 | | 28.7 | |
| | | | |
Environmental rehabilitation obligations paid (Note 29) | | | (16.2) | | (3.2) | |
| Other cash payments | | | (5.2) | | (15.5) | |
| Cash flows from operating activities before income taxes paid and net change in working capital | | | $ | 935.6 | | $ | 788.0 | |
| Income taxes paid | | | (151.0) | | (99.3) | |
| | | | |
| Cash flows from operating activities before net change in working capital | | | $ | 784.6 | | $ | 688.7 | |
Net change in working capital (Note 16) | | | (42.3) | | (70.9) | |
| Cash flows from operating activities | | | $ | 742.3 | | $ | 617.8 | |
| Investing activities | | | | |
| Acquisition of property, plant and equipment | | | $ | (384.6) | | $ | (273.7) | |
Cash acquired in Agua Rica integration transaction (Note 6) | | | — | | 222.5 | |
Acquisition of Monarch Gold, net of cash acquired (Note 6) | | | (44.8) | | — | |
| Net cash used on acquisition of investments and other assets | | | (25.0) | | — | |
| Net proceeds on disposal of investments and other assets | | | 61.5 | | 137.2 | |
| Cash used in other investing activities | | | (6.8) | | (34.6) | |
| Cash flows (used in) from investing activities | | | $ | (399.7) | | $ | 51.4 | |
| Financing activities | | | | |
Dividends paid | | | $ | (104.1) | | $ | (53.0) | |
Cash paid on acquisition of own shares (Note 30) | | | (28.3) | | — | |
| Interest paid | | | (47.2) | | (54.9) | |
Early note redemption premium (Note 12) | | | (53.3) | | — | |
| | | | |
Repayment of senior notes and credit facility (Note 28) | | | (719.0) | | (256.2) | |
Net proceeds from senior notes and credit facility (Note 28) | | | 495.2 | | 200.0 | |
| Payment of lease liabilities | | | (19.2) | | (17.1) | |
Proceeds from issuance of flow-through shares (Note 30) | | | — | | 7.4 | |
| Cash contributions from non-controlling interests | | | 18.6 | | 3.4 | |
| Cash used in other financing activities | | | (10.2) | | (5.5) | |
| Cash flows used in financing activities | | | $ | (467.5) | | $ | (175.9) | |
| Effect of foreign exchange of non-US Dollar denominated cash and cash equivalents | | | (1.3) | | (0.9) | |
| (Decrease) Increase in cash and cash equivalents | | | $ | (126.2) | | $ | 492.4 | |
| Cash and cash equivalents, beginning of period | | | $ | 651.2 | | $ | 158.8 | |
| | | | |
| Cash and cash equivalents, end of period | | | $ | 525.0 | | $ | 651.2 | |
| | | | |
| | | | |
Supplementary Cash Flow Information (Note 16). The accompanying notes are an integral part of the consolidated financial statements.
| 7
YAMANA GOLD INC.
CONSOLIDATED BALANCE SHEETS
AS AT DECEMBER 31, | | | | | | | | |
| (In millions of US Dollars) | 2021 | | 2020 | |
| | |
| Assets | | |
| Current assets: | | |
Cash and cash equivalents (Note 16) | $ | 525.0 | | $ | 651.2 | |
| Trade and other receivables | 3.0 | | 4.2 | |
Inventories (Note 19) | 167.2 | | 152.1 | |
Other financial assets (Note 20) | 27.0 | | 14.3 | |
Other assets (Note 21) | 113.3 | | 96.1 | |
| | |
| $ | 835.5 | | $ | 917.9 | |
| Non-current assets: | | |
Property, plant and equipment (Note 22) | $ | 6,775.2 | | $ | 6,684.8 | |
Goodwill and other intangible assets (Note 23) | 391.8 | | 396.4 | |
Investments in associates (Note 24) | — | | 34.3 | |
Deferred tax assets (Note 14) | 96.2 | | 98.1 | |
Other financial assets (Note 20) | 81.0 | | 88.7 | |
Other assets (Note 21) | 203.0 | | 202.6 | |
| Total assets | $ | 8,382.7 | | $ | 8,422.8 | |
| | |
| Liabilities | | |
| Current liabilities: | | |
Trade and other payables (Note 25) | $ | 274.7 | | $ | 240.4 | |
| Income taxes payable | 37.4 | | 45.0 | |
Other financial liabilities (Note 26) | 76.0 | | 78.8 | |
Other provisions and liabilities (Note 27) | 57.7 | | 77.6 | |
| | |
| | $ | 445.8 | | $ | 441.8 | |
| Non-current liabilities: | | |
Long-term debt (Note 28) | $ | 772.8 | | $ | 993.8 | |
Environmental rehabilitation provision (Note 29) | 352.9 | | 363.5 | |
Deferred tax liabilities (Note 14) | 1,364.2 | | 1,229.1 | |
Other financial liabilities (Note 26) | 121.9 | | 109.7 | |
Other provisions and liabilities (Note 27) | 121.9 | | 112.6 | |
| Total liabilities | $ | 3,179.5 | | $ | 3,250.5 | |
| | |
| Equity | | |
Share capital (Note 30) | $ | 7,689.9 | | $ | 7,648.9 | |
| Contributed surplus | 24.9 | | 22.7 | |
| Accumulated other comprehensive (loss) income | (22.4) | | (6.5) | |
| Deficit | (3,296.5) | | (3,318.8) | |
| Attributable to Yamana Gold Inc. equity holders | $ | 4,395.9 | | $ | 4,346.3 | |
Non-controlling interests (Note 32) | 807.3 | | 826.0 | |
| Total equity | $ | 5,203.2 | | $ | 5,172.3 | |
| Total liabilities and equity | $ | 8,382.7 | | $ | 8,422.8 | |
| | |
| | |
| | |
| | |
| | |
Commitments and Contingencies (Note 35)
The accompanying notes are an integral part of the consolidated financial statements
Approved by the Board | | | | | |
| “Peter Marrone” | “Richard Graff” |
| PETER MARRONE | RICHARD GRAFF |
| Director | Director |
| 8
YAMANA GOLD INC.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
FOR THE YEARS ENDED DECEMBER 31,
| | | | | | | | | | | | | | | | | | | | | | | |
| (In millions of US Dollars) | Share
capital | Contributed surplus | Accumulated other comprehensive (loss) income | Deficit | Attributable
to Yamana Gold Inc. equity holders | Non-
controlling
interests | Total
equity |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| As at January 1, 2020 | $ | 7,639.9 | | $ | 21.0 | | $ | (21.9) | | $ | (3,453.8) | | $ | 4,185.2 | | $ | 34.7 | | $ | 4,219.9 | |
| Total comprehensive earnings | | | | | | | |
| Net earnings | — | | — | | — | | 203.6 | | 203.6 | | — | | 203.6 | |
| Other comprehensive earnings | — | | — | | 15.9 | | — | | 15.9 | | — | | 15.9 | |
| $ | — | | $ | — | | $ | 15.9 | | $ | 203.6 | | $ | 219.5 | | $ | — | | $ | 219.5 | |
| Transactions with owners | | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Issued on vesting of restricted share units (Note 30) | 3.4 | | (3.4) | | — | | — | | — | | — | | — | |
| Vesting restricted share units | — | | 4.2 | | — | | — | | 4.2 | | — | | 4.2 | |
Issued on exercise of share options (Note 30) | 0.9 | | (0.2) | | — | | — | | 0.7 | | — | | 0.7 | |
Flow through share issuance, net of issue costs (Note 30) | 5.3 | | — | | — | | — | | 5.3 | | — | | 5.3 | |
Non-controlling interests arising on Agua Rica Alumbrera integration (Note 6) | — | | — | | — | | — | | — | | 787.9 | | 787.9 | |
| Cash contributions from non-controlling interests in MARA | — | | — | | — | | — | | — | | 3.4 | | 3.4 | |
Share cancellations and other adjustments (Note 30) | (1.1) | | 1.1 | | — | | — | | — | | — | | — | |
Dividend reinvestment plan (Note 30) | 0.5 | | — | | — | | — | | 0.5 | | — | | 0.5 | |
Dividends (Note 30) | — | | — | | — | | (69.1) | | (69.1) | | — | | (69.1) | |
| As at December 31, 2020 | $ | 7,648.9 | | $ | 22.7 | | $ | (6.5) | | $ | (3,318.8) | | $ | 4,346.3 | | $ | 826.0 | | $ | 5,172.3 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| As at January 1, 2021 | $ | 7,648.9 | | $ | 22.7 | | $ | (6.5) | | $ | (3,318.8) | | $ | 4,346.3 | | $ | 826.0 | | $ | 5,172.3 | |
| Total comprehensive earnings | | | | | | | |
| Net earnings (loss) | — | | — | | — | | 147.5 | | 147.5 | | (58.7) | | 88.8 | |
| Other comprehensive loss | — | | — | | (15.9) | | — | | (15.9) | | — | | (15.9) | |
| $ | — | | $ | — | | $ | (15.9) | | $ | 147.5 | | $ | 131.6 | | $ | (58.7) | | $ | 72.9 | |
| Transactions with owners | | | | | | | |
| | | | | | | |
| | | | | | | |
Issued on acquisition of Monarch Gold (Note 6) | 61.2 | | — | | — | | — | | 61.2 | | — | | 61.2 | |
| Issued on acquisition of exploration properties (Note 6) | 3.1 | | — | | — | | — | | 3.1 | | — | | 3.1 | |
Issued on vesting of restricted share units (Note 30) | 4.5 | | (4.5) | | — | | — | | — | | — | | — | |
| Vesting restricted share units | — | | 4.9 | | — | | — | | 4.9 | | — | | 4.9 | |
| Issued on exercise of warrants | 0.1 | | — | | — | | — | | 0.1 | | — | | 0.1 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Cash contributions from non-controlling interests in MARA | — | | — | | — | | — | | — | | 18.6 | | 18.6 | |
| Vesting of Mineros option on La Pepa (Note 6) | — | | 2.0 | | — | | — | | 2.0 | | — | | 2.0 | |
| Issued on exercise of Mineros option on La Pepa (Note 6) | — | | — | | — | | (16.4) | | (16.4) | | 21.4 | | 5.0 | |
Acquisition of own shares, share cancellations and other adjustments (Note 30) | (28.6) | | (0.2) | | — | | — | | (28.8) | | — | | (28.8) | |
Dividend reinvestment plan (Note 30) | 0.7 | | — | | — | | — | | 0.7 | | — | | 0.7 | |
Dividends (Note 30) | — | | — | | — | | (108.6) | | (108.6) | | — | | (108.6) | |
As at December 31, 2021 | $ | 7,689.9 | | $ | 24.9 | | $ | (22.4) | | $ | (3,296.5) | | $ | 4,395.9 | | $ | 807.3 | | $ | 5,203.2 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
The accompanying notes are an integral part of the consolidated financial statements.
| 9
YAMANA GOLD INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 2021 and December 31, 2020
(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), the New York Stock Exchange (Symbol: AUY) and the London 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. The Company's significant projects include the MARA project in Argentina (56.25% interest), and the Wasamac project in Canada.
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, 2021.
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 17, 2022.
Impact of COVID-19 Pandemic
The Company continues to actively monitor the impact of the COVID-19 pandemic, including the impact on economic activity and financial reporting. Throughout the pandemic the Company has taken a number of measures to safeguard the health of its employees and their local communities while continuing to operate safely and responsibly. During 2021, the Company continued to incur standby charges associated with the underutilization of labour and contractors related to delays caused by COVID-19, as well as other incremental directly attributable costs including those associated with community support, the acquisition of additional personal protective equipment, higher transportation costs, and overtime costs resulting from lower headcount levels on site to accommodate social distancing. These costs are included in "Temporary Suspension, standby and other incremental COVID-19 costs" in the consolidated statement of operations.
As the pandemic continues to progress and evolve, it is difficult to predict the full extent and duration of resulting operational and economic impacts for the Company, which are expected to impact a number of reporting periods. This uncertainty impacts judgements made by the Company, including those relating to determining the recoverable values of the Company’s non-current assets as discussed in Note 4.
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
| 10
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.
The principal subsidiaries of the Company and the Company's ownership interest in these subsidiaries are as follows:
| | | | | | | | | | | | | | |
| | | |
| Legal Entity | Mine/Project Location | December 31, 2021 | December 31, 2020 | Mining properties
and projects owned |
| | | | |
| Minera Meridian Ltda. | Chile | 100.00 | % | 100.00 | % | El Peñón mine |
| | | | |
| Jacobina Mineração e Comércio Ltda. | Brazil | 100.00 | % | 100.00 | % | Jacobina mine |
Estelar Resources S.A.(i) | Argentina | 100.00 | % | 100.00 | % | Cerro Moro mine |
| Minera Florida Ltda. | Chile | 100.00 | % | 100.00 | % | Minera Florida mine |
| | | | |
| Minera Agua Rica Alumbrera Ltd. | Argentina | 56.25 | % | 56.25 | % | MARA project |
Yamana Gold Quebec Inc.(ii) | Canada | 100.00 | % | See (b) below | Wasamac project |
| Suyai del Sur S.A.U. | Argentina | 100.00 | % | 100.00 | % | Suyai project |
| Agua De La Falda S.A. | Chile | 56.70 | % | 56.70 | % | Jeronimo project |
(i)Refer to discussion at Note 32.
(ii)On January 21, 2021, Yamana completed a transaction with Monarch Gold Corporation ("Monarch Gold") pursuant to which, Yamana acquired the Wasamac property and the Camflo property and mill through the acquisition of all of the outstanding shares of Monarch Gold not owned by Yamana, under a plan of arrangement (the "Arrangement"). In connection with the Arrangement, Monarch Gold completed a spin-out to its shareholders, through newly formed Monarch Mining Corporation ("Monarch Mining") of its other mineral properties and certain other assets and liabilities. Subsequent to the completion of the transaction, Yamana renamed the new subsidiary Yamana Gold Quebec Inc. Refer to Note 6 for further details.
(b) Investments in Associates and Joint Arrangements
These consolidated financial statements also include the following joint arrangement and investments in associates:
| | | | | | | | | | | | | | | | | |
Associates and
joint arrangements | Location | December 31, 2021 | December 31, 2020 | Classification and accounting method | Mining properties
and projects owned |
| Canadian Malartic | Canada | 50.00 | % | 50.00 | % | Joint operation,
consolidate Yamana's share | Canadian Malartic mine |
Nomad Royalty Company(i) | Canada | 7.72 | % | 7.75 | % | Associate, equity method
(now financial asset at FVOCI) | Portfolio of royalty interests |
Monarch Gold Corporation(ii) | Canada | See (a) above | 6.92 | % | Associate, equity method (now subsidiary, see above) | Wasamac project and other
exploration properties located in Quebec |
(i) During the second quarter of 2021, Yamana concluded that it ceased to have significant influence over its investee, Nomad Royalty Company ("Nomad"), due to no longer having representation on Nomad's board of directors, and therefore, discontinued accounting for the investment using the equity method. The investment is now accounted for as a financial asset at FVOCI. Refer to Note 6 for further details.
(ii) Upon completion of the Monarch Gold plan of arrangement, Monarch Gold became a subsidiary of the Company, and therefore, the Company discontinued accounting for the investment using the equity method. Refer to discussion on the Monarch Gold transaction under (a) above.
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 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
| 11
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 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, associates 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.
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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 gain or loss on disposal.
(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.
| 13
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 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.
Streaming Arrangements
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 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. Following the crediting of gold or silver to a customer’s metal account, 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 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 expected to be delivered under the contract.
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.
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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
Identifying a Lease
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.
The Company as a Lessee
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.
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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.
(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.
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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. 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 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. |
| Debt investments at FVOCI | 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. |
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 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
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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.
Performance share units ("PSUs") and deferred share units ("DSUs") are settled in cash. PSUs are recognized as share-based compensation expense within general and administrative expenses in the consolidated statement of operations ("G&A") over the vesting period, which includes the remeasurement of those PSUs that have partially vested. DSUs are recognized as share-based compensation expense within G&A on the date of grant, as these instruments vest immediately. Mark to market adjustments on DSUs subsequent to vesting are recognized as share-based compensation in other operating expenses.
Transactions entered into with third parties whereby the Company issues shares of the parent or of a subsidiary in exchange for goods or services received, are accounted for as share-based payment transactions. The Company recognizes the goods or services received when it obtains the goods or as the services are received, and recognizes a corresponding increase in equity. The Company measures the goods or services received at the fair value of the goods or services received, unless that fair value cannot be estimated reliably.
(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, penalties and interest on income taxes, 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.
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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.
(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. | | | | | | | | |
| Depreciation Method | Useful Life |
| Building | Straight Line | 4 to 30 years |
| Machinery and equipment | Straight Line | 2 to 7 years |
| Vehicles | Straight Line | 3 to 5 years |
| Furniture and office equipment | Straight Line | 2 to 10 years |
| Computer equipment and software | Straight Line | 3 to 5 years |
| Land | Not depreciated | 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.
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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.
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 (which may include acquired plant and equipment) 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.
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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.
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
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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.
(q) Flow-Through Shares
Under Canadian income tax legislation, a company is permitted to issue flow-through shares whereby the company agrees to incur qualifying expenditures and renounce the related income tax deductions to the investors. The Company allocates the proceeds from the issuance of these shares between the offering of shares and the sale of tax benefits. The allocation is made based on the difference between the quoted price of the shares and the amount the investors pay for the shares, with a deferred flow-through premium liability recognized for the difference. The liability is reversed and a tax provision recognized upon filing of the appropriate renunciation forms with the Canadian taxation authorities for qualifying expenditures previously incurred. The spending also gives rise to a deferred tax temporary difference between the carrying value and tax value of the qualifying expenditure.
(r) Asset acquisitions
Upon the acquisition of an asset or a group of assets and liabilities that does not constitute a business, the Company identifies and recognizes the individual identifiable assets acquired and liabilities assumed. The cost of the group is allocated to the individual identifiable assets and liabilities on the basis of their relative fair values at the date of purchase. Such a transaction or event does not give rise to goodwill.
When the acquisition of an asset or a group of assets and liabilities is achieved in stages, the Company’s previously held interests in the acquired assets and liabilities are not remeasured to their acquisition-date fair values and instead, continue to be measured at their carrying values.
When the Company acquires a controlling, but less than 100% interest in an entity that does not constitute a business, and the transaction is therefore, accounted for as the acquisition of an asset or group of assets and liabilities, the Company consolidates the entity and recognizes a non-controlling interest for the portion of the entity it did not acquire. The Company recognizes non-controlling interests that arise in an asset acquisition either at fair value or at the non-controlling interests’ proportionate share of the acquired entity’s net identifiable assets. This decision is made on an acquisition-by-acquisition 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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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 an impairment write-down or reversal of a previous impairment on the carrying amounts of the Company’s mining interests and/or an impairment write-down of goodwill.
No impairment losses or reversals of previous impairments were recognized during the year ended December 31, 2021. During the year ended December 31, 2020, the Company recognized a net impairment reversal of $191.0 million in respect of the carrying amounts of certain mineral properties. Refer to Note 13.D
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.
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 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 metal ounces 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 mineral reserves and a portion of mineral 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 mineral reserve and mineral 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 arrangement, management has determined that based on the agreement, the counterparty assumes significant business risk and rewards associated with the timing and amount of metals being delivered. As such, the deposits received from the counterparty have been recorded as deferred revenue in the
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consolidated balance sheet. Additionally, the Company has determined that the transaction is not a financial liability as; based on the specific rights and obligations set out in the agreement, 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.
Income Taxes
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.
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.
Non-monetary Exchanges
Critical Judgements in Applying Accounting Policies
In accounting for assets (or a group of assets and liabilities) that are acquired in a non-monetary exchange, the Company records the acquired assets at cost. The cost of such assets is measured at the fair value of the other consideration given to acquire the assets at the time of their acquisition, unless the exchange transaction lacks commercial substance or the fair value of neither the assets received nor the assets given up can be reliably measured. If the Company is able to measure reliably the
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fair value of either the assets received or the assets given up, then the fair value of the assets given up is used to measure the cost of the assets received unless the fair value of the assets received is more clearly evident.
The 2020 Integration Transaction, pursuant to which the Company relinquished a non-controlling interest in Agua Rica for an increased interest in Alumbrera, was a non-monetary exchange of assets and liabilities, with the consideration paid for the additional interest in Alumbrera being a 43.75% interest relinquished in Agua Rica. The Company determined that the fair value of both what was being given up in Agua Rica and what was being acquired (the Alumbrera assets and liabilities) could be measured reliably; however, concluded that the fair value of the Alumbrera assets and liabilities was more clearly evident. Refer to Note 6 for further details on the Integration Transaction and the valuation approach.
Asset acquisition vs. Business combination
Critical Judgements in Applying Accounting Policies
To be considered a business, an acquired set of activities and assets must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs. While businesses usually have outputs, outputs are not required for an integrated set of activities and assets to qualify as a business.
The set of activities and assets acquired in the acquisition of Alumbrera in 2020 included inputs such as plant and other infrastructure assets and limited mineral resources, but did not include an organized workforce. Alumbrera had no outputs at the acquisition date as mining ceased in the third quarter of 2018 at the end of the mine life. Given the absence of an organized workforce, the Company determined that no substantive processes had been acquired and therefore, Alumbrera did not meet the definition of a ‘business’ in IFRS, and the acquisition was accounted for as an acquisition of assets and liabilities. Refer to Note 6 for further details on the Integration Transaction.
Determination of technical feasibility and commercial viability
Critical Judgements in Applying Accounting Policies
IFRS 6 specifies the accounting for exploration and evaluation expenditures, defined as “expenditures incurred by an entity in connection with the exploration for and evaluation of mineral resources before the technical feasibility and commercial viability of extracting a mineral resource are demonstrable”. Once the technical feasibility and commercial viability of extracting a mineral resource are demonstrable, the recording of exploration and evaluation expenditures ceases for that mineral project, capitalized exploration and evaluation assets are tested for impairment, and those exploration and evaluation assets are reclassified to other applicable development-stage accounts.
In January 2021, following the completion of an internal PEA-level technical study in late 2020, the Canadian Malartic partnership approved the construction of a new underground mining complex at the Odyssey project. At this point in time, an assessment was performed to determine whether the technical feasibility and commercial viability of extracting a mineral resource were demonstrable. Based on factors including the results of the recently completed PEA-level study (which was incorporated into a NI 43-101 report filed in March 2021) demonstrating the financial viability of the project and the approval of both the Yamana and Agnico Eagle Boards of Directors to proceed, it was determined that technical feasibility and commercial viability were demonstrable, and the Odyssey project was reclassified to an asset under construction within property, plant and equipment.
On July 19, 2021, the Company announced a positive development decision on the Wasamac Project. At this point in time, an assessment was performed to determine whether the technical feasibility and commercial viability of extracting a mineral resource were demonstrable. Based on factors such as the established mineral reserves and resources of the project, the expected financial viability of the project based on the most recently completed feasibility study, and the decision by the Company's Board of Directors to advance the project, it was determined that technical feasibility and commercial viability were demonstrable, and the Wasamac project was reclassified to an asset under construction within property, plant and equipment.
5. RECENT ACCOUNTING PRONOUNCEMENTS
Adoption of Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 – Interest Rate Benchmark Reform – Phase 2
The Company adopted Interest Rate Benchmark Reform - Phase 2 (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16) on January 1, 2021. The amendments address the financial reporting impact from reform of the London Interbank Offered Rate (LIBOR) and other benchmark interest rates (collectively “IBOR reform”).
As at December 31, 2021, these amendments have not affected the Company’s consolidated financial statements as the Company has not yet transitioned any agreements that are exposed to the London Inter-bank Offered Rate (LIBOR) to an alternative benchmark interest rate. While there remains some uncertainty around the timing of adoption and the precise nature of an alternative benchmark rate, the replacement of the rate is not expected to result in a significant change in the Company’s interest rate risk management strategy or interest rate risk. The Company’s revolving credit facility (currently undrawn) is the
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most significant financial instrument exposed to LIBOR. The Company continues to monitor developments on alternative benchmark interest rates and expects to transition to alternative rates as widespread market practice is established. The revolving credit facility also includes language to replace LIBOR with a suitable alternative benchmark rate once that matter is resolved.
Other Narrow Scope Amendments to IFRSs and IFRS Interpretations
The Company adopted various amendments to IFRSs, which were effective for accounting periods beginning on or after January 1, 2021. The impact of adoption was not significant to the Company's consolidated financial statements.
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, 2021. There are currently no such pronouncements that are expected to have a significant impact on the Company's consolidated financial statements upon adoption; however, the pronouncement below may have a significant impact in future periods.
Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS 16).
These amendments clarify the accounting for the net proceeds from selling any items produced while bringing an item of property, plant and equipment to the location and condition necessary for it to be capable of operating in the manner intended by management. The amendments prohibit entities from deducting amounts received from selling items produced from the cost of property, plant and equipment while the Company is preparing the asset for its intended use. Instead, sales proceeds and the cost of producing these items will be recognized in the consolidated statements of operations. The amendments are effective for annual reporting periods beginning on or after January 1, 2022, with earlier application permitted. The amendments apply retrospectively, but only to assets brought to the location and condition necessary for them to be capable of operating in the manner intended by management on or after the beginning of the earliest period presented in the financial statements in which the Company first applies the amendments.
6. BUSINESS TRANSACTIONS
Acquisition of Monarch Gold Corporation
In June 2020, pursuant to a private placement offer by Monarch Gold Corporation ("Monarch Gold") (TSX: MQR), Yamana subscribed for $3.1 million (C$4.2 million) worth of units of Monarch Gold at a price of C$0.24 per unit and was issued 17,500,000 common shares of Monarch Gold, along with 8,750,000 warrants. Each warrant entitled Yamana to purchase one common share of Monarch Gold at a price of C$0.29 until June 10, 2023.
As Yamana’s shareholding was above 5%, the Company was entitled to name a representative to Monarch Gold’s Board of Directors. As Yamana was represented on Monarch Gold's Board of Directors, the Company concluded that it had significant influence over Monarch Gold, and the investment was accounted for as an investment in associate using the equity method.
Yamana acquired additional shares in Monarch Gold during the third quarter of 2020, increasing the Company's shareholding from 6% to 7.1% of Monarch Gold's issued and outstanding shares. Yamana's shareholding was subsequently reduced to 6.92% due to the exercise of options/warrants by other option/warrant holders.
On November 2, 2020, Yamana announced that it had entered into a definitive agreement with Monarch Gold whereby Yamana would acquire the Wasamac property and the Camflo property and mill through the acquisition of all of the outstanding shares of Monarch Gold not owned by Yamana, under a plan of arrangement (the "Arrangement"). In connection with the Arrangement, Monarch Gold would complete a spin-out to its shareholders, through newly formed Monarch Mining Corporation ("Monarch Mining") of its other mineral properties and certain other assets and liabilities.
On January 21, 2021, the Company announced the completion of the Arrangement.
Pursuant to the terms of the Arrangement, each former holder of Monarch Gold shares received the following consideration per Monarch Gold share held immediately prior to the effective time of the Arrangement:
a.0.0376 of a Yamana share;
b.C$0.192 in cash from Yamana; and
c.0.2 of a share of the newly formed Monarch Mining.
Yamana also issued replacement warrants to holders of outstanding Monarch warrants, to purchase from Yamana 0.0376 of a Yamana share.
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As Monarch Gold became a wholly owned subsidiary of Yamana, the Monarch Gold shares were de-listed from the TSX on January 25, 2021 and Monarch Gold ceased to be a reporting issuer.
The set of activities and assets acquired in the acquisition of Monarch Gold included inputs such as certain mining permits and mineral resources, but did not include an organized workforce. Monarch Gold had no outputs at the acquisition date as the properties acquired are exploration stage properties. Given the absence of an organized workforce, the Company determined that no substantive processes had been acquired and therefore, Monarch Gold did not meet the definition of a ‘business’ under IFRS, and the acquisition was accounted for as an acquisition of assets and liabilities.
IFRS requires a cost-based approach to be applied in accounting for an asset acquisition. The consideration paid for the acquisition of Monarch Gold was comprised of share consideration, cash consideration and the replacement of certain outstanding Monarch Gold warrants with Yamana warrants. Given the consideration paid included Yamana shares exchanged for Monarch Gold shares; the cost of the transaction for accounting purposes was determined in accordance with IFRS 2, which requires an entity to measure the goods (assets and liabilities) received, and the corresponding increase in equity, directly at the fair value of the goods received, unless that fair value cannot be estimated reliably. Accordingly, the acquisition cost was measured based on the fair value of the Monarch Gold assets acquired and liabilities assumed as the Company concluded that the fair value of such assets and liabilities could be estimated reliably.
The fair value of the Monarch Gold assets acquired and liabilities assumed for accounting purposes was determined to be equal to the value of the consideration paid. Yamana issued 11,608,195 Yamana Shares (with a fair value of $61.2 million), paid $46.9 million (C$59.3 million) in cash, and issued 383,764 replacement warrants (with a fair value of $0.6 million) for total consideration paid of $108.6 million.
Given the transaction resulted in Yamana’s previously held 6.92% interest in Monarch Gold being comprised of a portion that is now part of the Company’s 100% interest in Monarch Gold, and a portion that is now an interest in Monarch Mining (discussed below); in accounting for the transaction, the Company bifurcated the carrying value of the previously held interest between the two new investments.
In accounting for the Company's existing 6.92% interest that continued as Monarch Gold, the interest was accounted for at its carrying amount of $3.2 million (and not remeasured to fair value) in line with the Company’s accounting policy whereby existing interests are not remeasured when accounting for an asset acquisition.
Upon completion of the Arrangement, the net book value of Monarch Gold was $113.5 million, including capitalized transaction costs.
The Company acquired cash and cash equivalents of $2.0 million in the acquisition of Monarch Gold.
Fair Value Measurement
The Company obtained independent valuations for the property, plant and equipment of Monarch Gold, and management's assessment of fair value of such assets took into account the independent valuations obtained. Different approaches were used in valuing the different asset groups. Where the fair value of an asset was able to be determined by reference to market-based evidence, such as sales of comparable assets, the fair value was determined using this information. Where fair value of the asset was not able to be reliably determined using market-based evidence, discounted cash flows were used to determine fair value.
The valuation techniques used for measuring the fair value of the material assets acquired was as follows.
| | | | | | | | | | | |
| Assets acquired | Fair value at January 21, 2021 | Fair value measurement category | Valuation techniques |
| | | |
| Exploration properties | $ | 105.8 | Level 3(i) | Income approach: Development of a discounted cash flow ("DCF") model that takes into account the mining plan produced in a technical report ("LOM"). Market comparison technique: The valuation model considers observed transaction multiples (based on a per hectare range of $6,080 - $9,425), determined after analyzing precedent transactions in Québec from 2018 to 2020, for land packages under 2,000 hectares and with an acquisition price greater than USD $5.0 million, and making appropriate adjustments to reflect differences between the transaction and comparable transactions. |
(i)For further detail regarding the hierarchy used in determining and disclosing fair value, refer to Note 17.
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Interest in Monarch Mining
As noted above, Monarch Gold shareholders (including Yamana) received shares of Monarch Mining under the Arrangement. Accordingly, Yamana now owns 4,450,000 common shares of Monarch Mining, or approximately 6.7% of the outstanding common shares of Monarch Mining and is entitled to acquire an additional 2,225,000 common shares of Monarch Mining upon the exercise of previously held Monarch Gold warrants, representing a partially diluted share ownership in Monarch Mining of approximately 9.8%.
Yamana's interest in the former Monarch Gold that was exchanged for shares in Monarch Mining was accounted for using the equity method. Given the relatively low shareholding and the fact that Yamana has no right to representation on the Board of Directors of Monarch Mining, the Company concluded that it no longer had significant influence with respect to this investment, and therefore, discontinued accounting for the investment using the equity method from the date of the completion of the transaction. Yamana recorded a gain on discontinuation of the equity method of $1.1 million, which is included in other operating expenses, net in the consolidated statement of operations for the year ended December 31, 2021. The gain was calculated as the difference between the fair value of Yamana's new interest in Monarch Mining and the carrying amount of the part of the investment in former Monarch Gold that became an investment in Monarch Mining at the date the equity method was discontinued, adjusted for the loss previously recognized in other comprehensive income that was reclassified to profit or loss on discontinuation of the equity method. The investment in Monarch Mining is accounted for as a financial asset at FVOCI. Monarch Mining shares commenced trading on the TSX on January 26, 2021 under the symbol "GBAR".
During the second quarter of 2021, the Camflo property was sold to the Canadian Malartic General Partnership in which, the Company has a 50% interest. The value of the Camflo Assets acquired and the proceeds for which they were subsequently disposed were consistent with each other and not material.
The Wasamac property was added to Yamana's Canadian exploration portfolio at the time of acquisition, and was included in the "Corporate and other" reporting segment in Note 7.
On July 19, 2021, the Company announced a positive development decision on the Wasamac property. Given technical feasibility and commercial viability of extracting mineral resources are now demonstrable, the Wasamac property was reclassified from an exploration and evaluation asset to a development stage asset during the third quarter of 2021.
La Pepa Option Exercise
In December 2018, the Company entered into an Option Agreement with respect to the Company's La Pepa gold project with Mineros Atacama SpA ("Mineros"). The Option Agreement granted Mineros the right and option to acquire up to a 51% interest in Minera Cavancha SpA, the legal entity that directly holds the La Pepa project, through satisfaction of certain requirements over two option (earn-in) periods, and then the remaining 49% interest pursuant to a call option.
The first option period, during which Mineros was granted the right to acquire a 20% interest by making expenditures aggregating $5.0 million, ended on July 2, 2021 and Mineros provided notice of its intention to exercise the first option before the end of the first option period.
Given the transaction resulted in Yamana issuing shares in a subsidiary company in exchange for services received from Mineros (in the form of exploration work performed on the La Pepa property), the transaction was accounted for as a share-based payment transaction. Specifically, the Company recognized the services as received, along with a corresponding increase in equity. The services received were measured at the fair value of the services, being the $5.0 million in expenditures incurred by Mineros.
During the fourth quarter of 2021, Mineros was issued shares representing a 20% interest in Minera Cavancha SpA. Yamana recognized the non-controlling interest in Minera Cavancha SpA at the non-controlling interest's proportionate share of the net identifiable assets of Minera Cavancha SpA, being $21.4 million.
The second option period, during which Mineros has the right to acquire a further 31% interest, commenced upon issuance of the 20% interest shares for a 24-month period. The services received in the second option period will be recognized as the services are received, along with a corresponding interest in equity, consistent with the accounting for the services received during the first option period.
Acquisition of Exploration Properties Adjoining the Wasamac Project
On June 14, 2021, the Company announced that it had entered into a Definitive Purchase Agreement ("Agreement") with Globex Mining Enterprises Inc. (“Globex”) (TSX: GMX) to acquire the Francoeur, Arntfield and Lac Fortune gold properties adjoining the Company’s Wasamac project as well as additional claims in the Beauchastel township to the east of the Wasamac project. The transaction was completed on June 21, 2021.
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The purchase price for the purchased assets was $11.9 million (C$14.8 million). Pursuant to the terms of the Agreement, Yamana paid an initial amount of $3.1 million (C$3.8 million) on closing in the form of Yamana shares. The remaining payment of C$11.0 million is payable over four years in either cash or shares at the election of Globex, and is accounted for as deferred consideration and included in other financial liabilities. In addition, Globex received a 2% Gross Metal Royalty from Yamana, of which 0.5% may be bought back at any time by Yamana for C$1.5 million, following which the royalty would be reduced to a 1.5% Gross Metal Royalty.
Agua Rica-Alumbrera Integration ("MARA Project")
On March 7, 2019, Yamana, Glencore International AG (“Glencore”) and Goldcorp Inc., now Newmont Corporation (“Newmont”) (collectively “the Parties”) entered into a definitive Integration Agreement with the purpose of seeking to integrate the Agua Rica project with the Alumbrera mine, plant and infrastructure (the “Integration Project”) through an Integration Transaction.
On December 17, 2020, the Parties announced the completion of the Integration Transaction, with the Integration Project to be known as the MARA Project. Under the MARA Project, Agua Rica will be developed and operated using the existing infrastructure and facilities from the Alumbrera mine, approximately 35 kilometres away.
The Integration Transaction resulted in Yamana relinquishing a non-controlling interest in Agua Rica for an increased interest in Alumbrera. The below sets out the ownership percentages before and after the completion of the Integration Transaction:
| | | | | | | | | | | |
| Before Transaction | After Transaction |
| Alumbrera(i) | Agua Rica | MARA Project |
| Yamana | 12.50 | % | 100.00 | % | 56.25 | % |
| Glencore | 50.00 | % | — | % | 25.00 | % |
| Newmont | 37.50 | % | — | % | 18.75 | % |
| 100.00 | % | 100.00 | % | 100.00 | % |
(i)Although Yamana’s investment in Alumbrera was less than 20% of the issued and outstanding shares, after consideration of other relevant factors including the proportion of seats on Alumbrera’s board assigned to Yamana, the nature of the business decisions that required unanimous consent of the directors, and Yamana’s ability to influence the operating, strategic and financing decisions concerning Alumbrera; the Company determined that it had significant influence over Alumbrera, and therefore, accounted for Alumbrera as an investment in associate using the equity method.
Upon closing of the Integration Transaction, the Company acquired an additional 43.75% interest in Alumbrera. As a result, the Company’s equity interest in Alumbrera increased from 12.50% to 56.25%. The consideration paid for the additional interest in Alumbrera was a 43.75% interest in Agua Rica, taking the Company’s interest in Agua Rica down to 56.25%. The Company determined that it controlled the MARA Project through its 56.25% voting interest, and therefore, in accounting for the Integration Transaction the Company was required to consolidate Alumbrera, and recognize the non-controlling interests in both Agua Rica and Alumbrera.
The set of activities and assets acquired in the acquisition of Alumbrera included inputs such as plant and other infrastructure assets and limited mineral resources, but did not include an organized workforce. Alumbrera had no outputs at the acquisition date as mining ceased in the third quarter of 2018 at the end of the mine life. Given the absence of an organized workforce, the Company determined that no substantive processes had been acquired and therefore, Alumbrera did not meet the definition of a ‘business’ in IFRS, and the acquisition was accounted for as an acquisition of assets and liabilities.
IFRS requires a cost-based approach to be applied in accounting for an asset acquisition. The Integration Transaction was a non-monetary exchange of assets, with the consideration paid for the additional interest in Alumbrera being a 43.75% interest relinquished in Agua Rica. The acquisition cost was measured based on the fair value of the Alumbrera assets and liabilities as it was determined that the fair value of these assets and liabilities was more clearly evident than the fair value of the interest being given up in Agua Rica. The net fair value of the Alumbrera assets acquired and liabilities assumed was estimated to be $787.9 million. (The net fair value of Alumbrera on a 100% basis was estimated to be $900.5 million).
Prior to the Integration Transaction, Yamana’s existing 12.5% interest in Alumbrera was carried at nil due to previous impairment write downs largely associated with the Alumbrera mine coming to the end of its life. The Company assessed whether the potential Integration Transaction was an indicator of impairment reversal for the equity accounted investment given the integration of the Alumbrera assets with the Agua Rica assets would have a favourable effect on and increase the estimated service potential of the underlying Alumbrera assets. However, the Company concluded that there was no indicator of impairment reversal as there was no certainty that the value of Alumbrera had changed until the Integration Transaction was completed, at which point in time the equity investment in Alumbrera, which had been historically impaired, was derecognized.
In accounting for the Company's existing 12.5% interest in the Integration Transaction, the interest was accounted for at its carrying amount of nil (and not remeasured to fair value) in line with the Company’s accounting policy whereby existing interests are not remeasured when accounting for an asset acquisition.
The Company recognizes non-controlling interests that arise in an asset acquisition either at fair value or at the non-controlling interests’ proportionate share of the acquired entity’s net identifiable assets. This decision is made on an acquisition-by-
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acquisition basis. For the non-controlling interests in the MARA Project, the Company elected to recognize the non-controlling interests at the non-controlling interests' proportionate share of the acquired entity's net identifiable assets.
The net book value of Agua Rica immediately before the Integration Transaction was $889.3 million.
Upon completion of the Integration Transaction, the book value of the MARA Project was $1,677.2 million, of which $889.3 million was attributable to Yamana, and $787.9 million attributable to the non-controlling interests.
The Company acquired cash and cash equivalents of $222.5 million in the acquisition of Alumbrera.
Fair Value Measurement
The Company obtained independent valuations for the property, plant and equipment and mineral resources of Alumbrera, and management's assessment of fair value of such assets took into account the independent valuations obtained. Different approaches were used in valuing the different asset groups. Where the fair value of an asset was able to be determined by reference to market-based evidence, such as sales of comparable assets, the fair value was determined using this information. Where fair value of the asset was not able to be reliably determined using market-based evidence, discounted cash flows or optimized depreciated replacement cost was used to determine fair value.
The valuation techniques used for measuring the fair value of the material non-cash assets acquired were as follows.
| | | | | | | | | | | |
| Assets acquired | Fair value at December 17, 2020 (100%) | Fair value measurement category | Valuation technique |
Property, plant
and equipment | $ | 696.7 | Level 3 | Cost technique: The valuation model considers market prices for similar items when they are available, and depreciated replacement cost when appropriate. Depreciated replacement cost reflects adjustments for physical deterioration as well as functional and economic obsolescence. |
Mineral resources | $ | 72.0 | Level 3 | Market comparison technique: The valuation model considers observed transaction multiples using transactions of majority interests in development stage copper projects in North and South America over the past 10 years. In arriving at a selected multiple, appropriate adjustments were made to take into account the availability of existing infrastructure relative to comparable transactions, while being cognizant of the initial capital costs that will still need to be incurred. |
Environmental rehabilitation provision | $ | (85.7) | Level 3 | Present-value technique using the entity’s own data about the future cash outflows to be paid to fulfil the obligation and other inputs including the credit adjusted risk-free interest rate. |
The Company believes the methodologies and estimates used to determine fair value are similar to what a market participant would use in similar circumstances.
Leagold Mining Corporation and Equinox Gold Corp. merger, and subsequent sale of Equinox Units
On May 24, 2018, Yamana completed the disposal of its 53.6% controlling interest in Brio Gold to Leagold Mining Corporation ("Leagold"). Pursuant to the terms of the sale, the Company received 20.5% of Leagold's issued and outstanding shares. The Company concluded that it had significant influence over Leagold, and therefore, the investment in Leagold was accounted for as an investment in an associate using the equity method.
On December 16, 2019, Leagold and Equinox Gold Corp. ("Equinox") jointly announced that the companies had entered into a definitive agreement to combine in an at-market merger. On March 10, 2020, the companies announced that the merger had been completed. The combined company continues as Equinox Gold under the ticker symbol “EQX” on both the Toronto Stock Exchange and the New York Stock Exchange.
Pursuant to the transaction, Leagold shareholders received 0.331 of an Equinox share for each Leagold share held. This resulted in Yamana owning approximately 9% of the combined company at the date of the completion of the merger.
Yamana concluded that, as a result of its reduced shareholding, it no longer had significant influence in the investee, and therefore, discontinued accounting for the investment using the equity method from the date of the completion of the merger. Yamana recorded a gain on discontinuation of the equity method of $21.3 million, which is included in other operating expenses, net in the consolidated statement of operations for the year ended December 31, 2020. The gain was calculated as the difference between the fair value of Yamana's retained interest (in the form of Equinox shares) and the carrying amount of the
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investment in Leagold at the date the equity method was discontinued, adjusted for the loss previously recognized in other comprehensive income that was reclassified to profit or loss on discontinuation of the equity method. The investment in Equinox is accounted for as a financial asset at FVOCI.
On April 13, 2020 Yamana announced it had entered into an agreement with Stifel GMP and Cormark Securities Inc. (collectively, the “Dealers”) to sell 12,000,000 units (each, a “Unit”) at a price of C$10.00 per Unit for gross proceeds to Yamana of $85.2 million (C$120.0 million) (the “Sale Transaction"). Each Unit consisted of one (1) common share of Equinox owned by Yamana and one-half (0.5) of a common share purchase warrant of Yamana (each whole warrant a “Warrant”). Each Warrant entitles the holder thereof to acquire one (1) additional common share of Equinox owned by Yamana (a “Warrant Share”) at an exercise price of C$13.50 for a term of 9 months from the date of issue. The Sale Transaction closed on April 15, 2020.
During the third quarter of 2020, Yamana disposed of 1,200,000 Equinox shares for proceeds of approximately $15.6 million (C$20.5 million).
As at December 31, 2020, Yamana held 6,000,000 Equinox shares, representing approximately 2.5% of the issued and outstanding Equinox shares, on a non-diluted basis.
In early January 2021, 405,000 of the 6,000,000 outstanding purchase warrants to acquire Equinox common shares held by Yamana were exercised and the same number of shares disposed of at the exercise price of C$13.50, for total proceeds of $4.2 million (C$5.5 million). The remainder of the purchase warrants expired on January 15, 2021.
Sale of the Royalty Portfolio
On February 23, 2020, the Company announced that it had entered into a definitive purchase agreement (the “Purchase Agreement”) to sell a portfolio of royalty interests and the contingent payment to be received upon declaration of commercial production at the Deep Carbonates Project (“DCP”) at the Gualcamayo gold mine (together, the “Royalty Portfolio”) to Guerrero Ventures Inc. (TSX-V:GV) (“Guerrero”).
The assets in the Royalty Portfolio being sold pursuant to the transaction were:
•A 1% net smelter return royalty (“NSR”) on gold production and 2% NSR on base metals from the Riacho dos Machados (“RDM”) gold mine operating in Minas Gerais, Brazil;
•A 2% NSR on oxide gold production from the Gualcamayo gold mine operating in San Juan, Argentina, once the operation produces approximately 275,000 ounces from January 1, 2020;
•A 1.5% NSR on production from the DCP at the Gualcamayo gold mine;
•A $30.0 million cash payment receivable upon declaration of commercial production at the DCP at the Gualcamayo gold mine; and
•A 2% NSR on production from the Suruca project in Goiás, Brazil.
On May 25, 2020, Guerrero announced that it had formally changed its corporate name to Nomad Royalty Company Ltd. (“Nomad”).
On May 27, 2020, the transaction was completed and Yamana received $64.2 million in consideration as follows:
•$10.0 million in cash;
•$10.8 million, being the fair value of the $10.0 million deferred cash payment. The deferred cash payment is measured at fair value due to the convertible nature of the financial instrument. Pursuant to the terms in the Deferred Payment Agreement, Yamana will receive interest on the deferred cash payment of 3% calculated and payable on a quarterly basis, and the deferred cash payment may be converted at any time, in whole or in part, by Yamana into shares of Nomad at C$0.90 per share. The deferred cash payment will be due for payment in full at the end of two years. However, Nomad may pay the deferred cash payment in full at the end of one year, subject to additional payment by Nomad equal to 5% of the deferred cash payment, and the right of Yamana to convert the deferred cash payment into shares of Nomad at a price of C$0.90 per share. The instrument creating the deferred cash payment can be transferred at any time. The deferred cash payment is accounted for as a financial asset at fair value through profit or loss; and
•$43.4 million in Nomad common shares at a price of C$0.90 per share, representing approximately 13% of Nomad's issued and outstanding shares. These shares were subject to a lockup period of six months.
In conjunction with the acquisition of Yamana’s Royalty Portfolio, Guerrero also entered into an agreement to acquire a portfolio of precious metals royalty, stream and gold loan assets from funds related to Orion Resource Partners (USA) LP (collectively, “Orion”) for total consideration of $268.0 million.
The purchase price payable to Orion was satisfied through the issuance of $268.0 million in Nomad common shares at a price of C$0.90 per share, representing approximately 77% of Nomad's issued and outstanding shares. These shares are subject to a lockup period of 12 months.
On May 29, 2020, Nomad's shares commenced trading on the TSX under the ticker symbol "NSR".
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On December 11, 2020, Yamana disposed of 22,750,000 Nomad shares through a secondary offering at a price of C$1.10 per share for total gross proceeds of approximately $19.7 million (C$25.0 million).
As at December 31, 2020, Yamana held 43,750,000 Nomad shares, representing approximately 7.75% of the issued and outstanding Nomad shares on a non-diluted basis (approximately 10% on a partially-diluted basis).
As Yamana was represented on Nomad's board of directors, the Company concluded that it had significant influence over Nomad, and the investment in Nomad was accounted for as an investment in associate using the equity method.
During the second quarter of 2021, Yamana concluded that it ceased to have significant influence over Nomad due to no longer having representation on Nomad's board of directors, and therefore, discontinued accounting for the investment using the equity method. Yamana recorded a gain on discontinuation of the equity method of $9.2 million, calculated as the difference between the fair value and the carrying value of the investment at the date significant influence was lost. The investment is now accounted for as a financial asset at FVOCI.
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. In addition to these reportable segments, the Company aggregates and discloses the financial 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 | | Corporate and other(i) | Total |
Property, plant and equipment at December 31, 2021 | $ | 1,013.9 | | $ | 926.2 | | $ | 419.2 | | $ | 1,081.2 | | $ | 295.3 | | | $ | 3,039.4 | | $ | 6,775.2 | |
Total assets at December 31, 2021 | $ | 1,613.5 | | $ | 973.4 | | $ | 507.9 | | $ | 1,139.4 | | $ | 327.8 | | | $ | 3,820.7 | | $ | 8,382.7 | |
Total liabilities at December 31, 2021 | $ | 466.4 | | $ | 287.5 | | $ | 87.0 | | $ | 384.0 | | $ | 96.6 | | | $ | 1,858.0 | | $ | 3,179.5 | |
Capital expenditures for the year ended December 31, 2021 | $ | 135.0 | | $ | 49.3 | | $ | 46.6 | | $ | 58.0 | | $ | 44.3 | | | $ | 51.3 | | $ | 384.6 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| Canadian Malartic | Jacobina | Cerro Moro | El Peñón | Minera Florida | | Corporate and other(i) | Total |
Property, plant and equipment at December 31, 2020 | $ | 1,059.5 | | $ | 897.7 | | $ | 457.8 | | $ | 1,111.0 | | $ | 296.1 | | | $ | 2,862.7 | | $ | 6,684.8 | |
Total assets at December 31, 2020 | $ | 1,638.1 | | $ | 936.4 | | $ | 550.0 | | $ | 1,168.0 | | $ | 322.2 | | | $ | 3,808.1 | | $ | 8,422.8 | |
Total liabilities at December 31, 2020 | $ | 458.3 | | $ | 273.1 | | $ | 79.2 | | $ | 407.3 | | $ | 108.6 | | | $ | 1,924.0 | | $ | 3,250.5 | |
Capital expenditures for the year ended December 31, 2020 | $ | 74.8 | | $ | 43.4 | | $ | 48.9 | | $ | 47.8 | | $ | 39.5 | | | $ | 19.3 | | $ | 273.7 | |
(i)"Corporate and other" includes advanced stage development projects, exploration properties, corporate entities, the Company's investments in associates and the MARA Project with property, plant and equipment of $1,883.4 million, total assets of $2,134.7 million and total liabilities of $549.3 million (December 31, 2020: $1,856.4 million, $2,109.7 million, and $429.2 million, respectively).
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| | | | | | | | | | | | | | | | | | | | | | | | |
For the year ended December 31, 2021 | Canadian Malartic | Jacobina | Cerro Moro | El Peñón | Minera Florida | | Corporate
and other | Total |
Revenue | $ | 643.2 | | $ | 336.2 | | $ | 276.5 | | $ | 401.5 | | $ | 158.0 | | | $ | — | | $ | 1,815.4 | |
Cost of sales excluding DDA(i) | (231.3) | | (105.5) | | (130.5) | | (150.3) | | (77.4) | | | — | | (695.0) | |
| Gross margin excluding DDA | $ | 411.9 | | $ | 230.7 | | $ | 146.0 | | $ | 251.2 | | $ | 80.6 | | | $ | — | | $ | 1,120.4 | |
| DDA | (174.7) | | (55.4) | | (74.6) | | (85.0) | | (48.5) | | | (9.7) | | (447.9) | |
| Temporary suspension, standby and other incremental COVID-19 costs | (2.5) | | (1.2) | | (20.8) | | (4.9) | | (8.0) | | | — | | (37.4) | |
| | | | | | | | |
| Segment income (loss) | $ | 234.7 | | $ | 174.1 | | $ | 50.6 | | $ | 161.3 | | $ | 24.1 | | | $ | (9.7) | | $ | 635.1 | |
Other expenses(ii) | (250.6) | |
| Earnings before taxes | $ | 384.5 | |
| Income tax expense | (295.7) | |
| Net earnings | $ | 88.8 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
For the year ended December 31, 2020 | Canadian Malartic | Jacobina | Cerro Moro | El Peñón | Minera Florida | | Corporate
and other | Total |
Revenue | $ | 471.0 | | $ | 312.1 | | $ | 241.3 | | $ | 381.1 | | $ | 155.5 | | | $ | — | | $ | 1,561.0 | |
Cost of sales excluding DDA(i) | (185.4) | | (95.5) | | (115.8) | | (141.8) | | (75.6) | | | — | | (614.1) | |
| Gross margin excluding DDA | $ | 285.6 | | $ | 216.6 | | $ | 125.5 | | $ | 239.3 | | $ | 79.9 | | | $ | — | | $ | 946.9 | |
| DDA | (133.4) | | (52.6) | | (86.1) | | (69.6) | | (44.2) | | | (9.1) | | (395.0) | |
| Temporary suspension, standby and other incremental COVID-19 costs | (4.5) | | (2.0) | | (19.2) | | (7.0) | | (7.7) | | | (0.1) | | (40.5) | |
(Impairment) reversal of impairment of mining
properties and goodwill | — | | — | | (369.0) | | 560.0 | | — | | | — | | 191.0 | |
| Segment income (loss) | $ | 147.7 | | $ | 162.0 | | $ | (348.8) | | $ | 722.7 | | $ | 28.0 | | | $ | (9.2) | | $ | 702.4 | |
Other expenses(ii) | (212.3) | |
| Earnings before taxes | $ | 490.1 | |
| Income tax expense | (286.5) | |
| Net earnings | $ | 203.6 | |
(i)Depletion, depreciation and amortization ("DDA").
(ii)Other expenses are comprised of general and administrative expenses, exploration and evaluation expenses, share of earnings (loss) of associates, other operating expenses, net, finance costs and other income (costs), net, 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, | 2021 | | 2020 | |
| Canada | $ | 643.2 | | $ | 471.0 | |
| Chile | 559.5 | | 536.6 | |
| Brazil | 336.2 | | 312.1 | |
| Argentina | 276.5 | | 241.3 | |
| Total revenue | $ | 1,815.4 | | $ | 1,561.0 | |
Non-current assets for this purpose exclude deferred tax assets. | | | | | | | | |
As at December 31, | 2021 | | 2020 | |
| Canada | $ | 1,854.8 | | $ | 1,784.4 | |
| Chile | 1,864.2 | | 1,891.2 | |
| Brazil | 957.6 | | 927.0 | |
| Argentina | 2,740.8 | | 2,769.4 | |
| United States | 33.6 | | 34.7 | |
| Total non-current assets | $ | 7,451.0 | | $ | 7,406.7 | |
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Information about Major Customers
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, | 2021 | 2020 |
Customer | | |
| 1 | $ | 504.5 | $ | 394.6 |
| 2 | 346.0 | 365.6 |
| 3 | 297.6 | 334.7 |
| 4 | 287.4 | 199.7 |
| 5 | 233.5 | 158.9 |
| Total sales to customers exceeding 10% of annual metal sales | $ | 1,669.0 | $ | 1,453.5 |
| Percentage of total metal sales | 91.9 | % | 93.1 | % |
8. REVENUE
Disaggregation of Revenue
The following table disaggregates revenue by metal: | | | | | | | | |
For the years ended December 31, | 2021 | | 2020 | |
| Gold | $ | 1,592.4 | | $ | 1,341.8 | |
| Silver | 223.0 | | 219.2 | |
| | |
| | |
| | |
| Total revenue | $ | 1,815.4 | | $ | 1,561.0 | |
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 arrangement 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, 2021 the aggregate amount of the revenue allocated to unsatisfied performance obligations was $64.2 million.
The Company expects to recognize approximately $12.6 million of this revenue over the next 12 months and the remainder over a period of approximately 7 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, | 2021 | | 2020 | |
| Wages and salaries | $ | 175.8 | | $ | 176.2 | |
Social security, pension and government-mandated programs(i) | 76.0 | | 79.0 | |
Other benefits(ii) | 17.0 | | 29.2 | |
| Total employee compensation and benefits expenses | $ | 268.8 | | $ | 284.4 | |
| | |
| | |
| | |
(i)Included in this item are defined contribution pension plan contributions 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 $7.3 million (2020: $6.4 million) represents contributions payable to these plans by the Company at rates specified in the rules of the plans. As at December 31, 2021, contributions of $3.1 million due in respect of the 2021 reporting period (2020: $2.6 million) had not been paid over to the plans but were paid subsequent to the end of the year.
(ii)Included in Other benefits are share-based payment transactions. Refer Note 31 for further information.
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10. OTHER OPERATING EXPENSES, NET
| | | | | | | | |
For the years ended December 31, | 2021 | | 2020 | |
Changes in provisions(i) | $ | 10.4 | | $ | 9.1 | |
| Recovery of tax recoverables and other assets | (1.3) | | (2.1) | |
Gain on discontinuation of the equity method (Note 6) | (10.2) | | (21.3) | |
| | |
| | |
Care and maintenance costs(ii) | 25.6 | | 1.2 | |
| (Gain)/Loss on sale of other assets | (1.4) | | 3.8 | |
| Mark-to-market (gain)/loss on deferred share compensation | (0.9) | | 10.9 | |
| Net mark-to-market loss/(gain) on financial assets and financial liabilities | 0.3 | | (6.9) | |
Other expenses(iii) | 14.9 | | 19.9 | |
| Other operating expenses, net | $ | 37.4 | | $ | 14.6 | |
(i)Amount represents the recording (reversal) of certain existing provisions based on management's best estimate of the likely outcome.
(ii)Amount relates to care and maintenance expenditures incurred on the Alumbrera facilities component of the MARA project, of which 43.75% are attributable to the non-controlling interests. Yamana has consolidated Alumbrera since the completion of the Agua Rica Integration Transaction (Note 6) on December 17, 2020.
(iii)Other expenses is comprised primarily of contributions to social and infrastructure development causes in jurisdictions where the Company is active, and business and professional transaction costs.
11. OTHER (INCOME) COSTS, NET
| | | | | | | | |
For the years ended December 31, | 2021 | | 2020 | |
| Finance income | $ | (2.8) | | $ | (1.1) | |
| Net gain on derivatives | — | | (1.8) | |
| Net foreign exchange (gain) loss | (23.9) | | 21.6 | |
| Other (income) costs, net | $ | (26.7) | | $ | 18.7 | |
12. FINANCE COSTS
| | | | | | | | |
For the years ended December 31, | 2021 | | 2020 | |
| | |
| | |
| | |
| | |
| | |
| Unwinding of discounts on provisions | $ | 13.9 | | $ | 9.0 | |
| Interest expense on long-term debt | 41.8 | | 51.9 | |
Early note redemption premium (Note 28) | 53.3 | | — | |
Interest expense on lease liabilities (Note 34) | 6.7 | | 3.5 | |
Amortization of deferred financing, bank, financing fees and other finance costs(i) | 18.7 | | 12.6 | |
| Finance costs | $ | 134.4 | | $ | 77.0 | |
(i)Included in other finance costs for the years ended December 31, 2021 and 2020 is $4.6 million and $4.5 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 2021, the Company reviewed its cash-generating unit's ("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.
For the year ended December 31, 2020, the Company's net impairment reversal in respect of the following CGUs was as follows: | | | | | | | | | | | | | |
| For the year ended December 31, | | | | 2020 | | | |
| | | | | | | | | |
| El Peñón | | | | $ | 560.0 | | | | | | |
| Cerro Moro | | | | (369.0) | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| Net impairment reversal | | | | $ | 191.0 | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
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2020 Indicators of Impairment and Impairment Reversal
El Peñón
The Company recorded impairments at the El Peñón mine in 2015 and 2016. The impairment in 2015 was a result of the Company downward adjusting its macroeconomic assumptions, which negatively impacted future estimated cash flows, and the Company's updated view on value beyond mineral reserves and mineral resources. During 2016, the Company determined that the sustainable, long-term optimal production level for the mine was a production expectation of 140,000 ounces of gold and 4,150,000 ounces of silver per annum, which negatively impacted future cash flows.
Following a standout year and solid fourth quarter from El Peñón in 2020, where sustained production and costs were in line with an improved LOM and budget, the mine demonstrated its ability to maintain its current production and cost profile. The Company considered the following factors to be an indicator of reversal of the previous impairment charge:
•Prolonged and sustained high production levels, which have led to significantly higher production for both gold and silver than that envisioned in the mine plan developed in 2016 at the time of rightsizing of the operation. This was the result of both plant improvements to increase throughput, and higher grade ores being mined.
•A sustained reduction in costs benefiting from the higher production and continuous cost reduction initiatives carried out over the past year.
•Significant exploration successes throughout the year, which lead to increased mineral resources for December 31, 2020, which both extended the life of the mine and improved the life of mine models.
The Company concluded that the recoverable amount for the El Peñón CGU, representing the CGU’s FVLCD, exceeded the carrying amount. This resulted in a non-cash accounting reversal of the impairment charges previously recorded in 2015 and 2016 on mineral properties subject to depletion, which was limited to the carrying amount of the El Peñón CGU that would have been determined had no impairment charge been recognized in prior years, net of depletion, depreciation and amortization charges, totalling $560.0 million.
Cerro Moro
During 2020, the Cerro Moro mine experienced lower production at higher than expected unit costs. The following considerations were taken into account while developing the new LOM plan:
•Country-specific matters including the announcement on December 30, 2020 of the change to the export tax in Argentina to 4.3%, and its indefinite extension.
•Expected lower annual production in comparison with prior year guidance and expectations, particularly for 2021.
•A higher cost structure than previously anticipated and consistent with current costs being observed in the operation, which have exceeded those in the Company’s budget and guidance due to general cost pressures, inefficiencies and general operational challenges in relation to COVID-19.
•Delays in reaching previously targeted exploration results and mineral reserve and mineral resource additions. Despite promising recent results in core areas of the mine and newly discovered areas, the Company has been delayed in its goal of increasing mineral reserves and mineral resources in the operation.
Given the decrease in the overall Cerro Moro CGU profitability as identified in the latest LOM plan, the impact of the LOM plan on the value of exploration potential and land interest, and the impact of a reduction in reserves and resources, the Company concluded that these factors represent an indicator of impairment for Cerro Moro as of December 31, 2020. The Company concluded that the recoverable amount for the Cerro Moro CGU, representing the CGU’s FVLCD, was below the carrying amount. In consideration of the above, a non-cash accounting impairment of $369.0 million was recognized.
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 proven 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.
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•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 $1,550 per ounce (2020: $1,550 per ounce), $20.00 per ounce (2020: $20.00 per ounce) and $3.00 per pound (2020: $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 3.50% (2020: 3.50%) 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.
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, | 2021 | | 2020 | |
| Current tax expense (recovery) | | |
| Current tax expense in respect of the current year | $ | 146.9 | | $ | 119.5 | |
| Adjustment for prior periods | 11.3 | | (4.5) | |
| Impact of foreign exchange | (0.3) | | 0.1 | |
| Interest and penalties | 2.0 | | 1.1 | |
| $ | 159.8 | | $ | 116.2 | |
| | |
| Deferred income tax expense (recovery) | | |
| Deferred income tax recovery recognized in the current year | $ | 135.1 | | $ | 114.1 | |
| Adjustment for prior periods | (1.0) | | 3.4 | |
| Impact of foreign exchange | 1.7 | | 52.8 | |
| $ | 135.9 | | $ | 170.3 | |
| Net income tax expense | $ | 295.7 | | $ | 286.5 | |
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, | 2021 | | 2020 | |
| Earnings before income taxes | $ | 384.5 | | $ | 490.1 | |
Canadian statutory tax rate (%) | 26.5 | % | 26.5 | % |
| Expected income tax expense | 101.9 | | 129.9 | |
Impact of higher foreign tax rates(i) | (37.3) | | 28.8 | |
Impact of change in enacted tax rates(ii) | 146.9 | | 2.8 | |
| Permanent differences | (2.6) | | 29.4 | |
| Change in recognition of deferred tax assets | (16.2) | | 53.4 | |
| Foreign exchange and other translation amounts | (3.6) | | (3.4) | |
| Inflation adjustments | 23.0 | | (1.3) | |
True-up of tax provisions in respect of prior years | 12.1 | | (1.1) | |
| Withholding taxes | 7.2 | | 8.4 | |
| Mining taxes on profit | 58.5 | | 28.9 | |
| Planned distribution of foreign earnings of the company | 6.5 | | 10.1 | |
| Other | (0.8) | | 0.6 | |
| Net income tax expense | $ | 295.7 | | $ | 286.5 | |
| Income tax expense (recovery) is represented by: | | |
| Current income tax expense | $ | 159.8 | | $ | 116.2 | |
| Deferred income tax expense | 135.9 | | 170.3 | |
| Net income tax expense | $ | 295.7 | | $ | 286.5 | |
Certain of the comparative numbers have been reclassified to conform with the current year presentation.
| 38
(i)The Company operates in multiple foreign tax jurisdictions that have tax rates that differ from the Canadian statutory rate.
(ii)On June 16, 2021, the Argentine government enacted legislation that increased the corporate tax rate from 25% to 35% effective January 1, 2021.
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, | 2021 | | 2020 | |
| The net deferred income tax assets (liabilities) are classified as follows: | | |
| Deferred income tax assets | $ | 96.2 | | $ | 98.1 | |
| Deferred income tax liabilities | (1,364.2) | | (1,229.1) | |
| $ | (1,268.0) | | $ | (1,131.0) | |
| | |
| | | | | | | | | | | | | | | | | | | |
For the year ended December 31, 2021 | Opening balance | | Recognized in profit or loss | Recognized
in OCI | Flow-Through Shares | | Closing
balance |
| Deductible temporary differences | $ | 13.2 | | | $ | 15.9 | | $ | — | | $ | — | | | $ | 29.1 | |
| Amounts related to tax losses | 114.4 | | | (58.7) | | — | | — | | | 55.7 | |
| Financing costs | 61.1 | | | (46.1) | | — | | — | | | 15.0 | |
| Environmental rehabilitation provision | 41.7 | | | 19.2 | | — | | — | | | 60.9 | |
| Derivative liability | 2.4 | | | (0.4) | | 1.9 | | — | | | 3.9 | |
| Property, plant and equipment | (1,363.0) | | | (62.6) | | — | | (4.4) | | | (1,430.0) | |
| Equity securities at FVOCI | (1.8) | | | (1.1) | | 1.5 | | — | | | (1.5) | |
| Other | 1.0 | | | (2.1) | | — | | — | | | (1.1) | |
| Net deferred income tax liabilities | $ | (1,131.0) | | | $ | (135.9) | | $ | 3.4 | | $ | (4.4) | | | $ | (1,268.0) | |
| | | | | | | | | | | | | | | | | |
For the year ended December 31, 2020 | Opening balance | | Recognized in profit or loss | Recognized
in OCI | | | Closing
balance |
| Deductible temporary differences | $ | 11.8 | | | $ | 1.4 | | $ | — | | | | $ | 13.2 | |
| Amounts related to tax losses | 102.6 | | | 11.8 | | — | | | | 114.4 | |
| Financing costs | 71.7 | | | (10.6) | | — | | | | 61.1 | |
| Environmental rehabilitation provision | 14.1 | | | 27.6 | | — | | | | 41.7 | |
| Derivative liability | 0.5 | | | (0.1) | | 2.0 | | | | 2.4 | |
| Property, plant and equipment | (1,160.1) | | | (202.9) | | — | | | | (1,363.0) | |
| | | | | | | |
| Equity securities at FVOCI | — | | | 0.4 | | (2.2) | | | | (1.8) | |
| Other | (1.1) | | | 2.1 | | — | | | | 1.0 | |
| Net deferred income tax liabilities | $ | (960.5) | | | $ | (170.3) | | $ | (0.2) | | | | $ | (1,131.0) | |
Certain of the prior year numbers have been reclassified to conform with the current year presentation.
A deferred income tax asset in the amount of $93.9 million has been recorded in Canada (2020: $95.8 million). 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, | 2021 | | 2020 | |
| Deductible temporary differences (no expiry) | $ | 59.3 | | $ | 71.5 | |
| Capital losses (no expiry) | 119.4 | | 120.2 | |
| Operating losses | 135.2 | | 101.2 | |
| $ | 313.9 | | $ | 292.9 | |
| 39
Operating losses at December 31, 2021 will expire as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Canada | U.S. | Brazil | Chile | Argentina | Other | Total |
| 2022 | $ | — | | $ | 18.8 | | $ | — | | $ | — | | $ | — | | $ | — | | $ | 18.8 | |
| 2023 | — | | 34.2 | | — | | — | | — | | — | | $ | 34.2 | |
| 2024 | — | | 15.0 | | — | | — | | 28.7 | | — | | $ | 43.7 | |
| 2025 | — | | 7.3 | | — | | — | | 96.1 | | 4.7 | | $ | 108.1 | |
| 2026 | — | | 12.4 | | — | | — | | — | | 2.4 | | $ | 14.8 | |
| 2027 and onwards | 220.6 | | 127.4 | | — | | — | | — | | 2.8 | | $ | 350.9 | |
| Unlimited | 909.7 | | 3.3 | | 60.6 | | 108.0 | | — | | 0.6 | | $ | 1,082.3 | |
| $ | 1,130.4 | | $ | 218.4 | | $ | 60.6 | | $ | 108.0 | | $ | 124.8 | | $ | 10.5 | | $ | 1,652.8 | |
Unrecognized Taxable Temporary Differences Associated with Investments and Interests in Subsidiaries
As at December 31, 2021, an aggregate temporary difference of $3.5 billion (2020: $3.2 billion) related to investments in subsidiaries was not recognized because the Company is able to control the timing of the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.
15. EARNINGS PER SHARE
Earnings per share for the years ended December 31, 2021 and 2020 was calculated based on the following: | | | | | | | | |
| 2021 | | 2020 | |
| Attributable to Yamana Gold Inc. equity holders | | |
| Net earnings | $ | 147.5 | | $ | 203.6 | |
Earnings per share is based on the weighted average number of common shares of the Company outstanding during the period. The diluted earnings 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 per share for the years ended December 31 was based on the following:
| | | | | | | | |
| (in thousands of units) | 2021 | | 2020 | |
Weighted average number of common shares - basic | 963,393 | | 951,818 | |
Weighted average number of dilutive share options | 15 | | 74 | |
Weighted average number of dilutive restricted share units | 1,524 | | 1,954 | |
Weighted average number of common shares - diluted | 964,932 | | 953,846 | |
| | |
| | |
| | |
| | |
The following securities could potentially dilute basic earnings per share in the future, but were not included in the computation of diluted earnings per share because they were anti-dilutive:
| | | | | | | | |
| (in thousands of units) | 2021 | | 2020 | |
| Potential dilutive securities | | |
| Share options | 241 | | 182 | |
| Restricted share units | 686 | | 541 | |
| 926 | | 722 | |
| 40
16. SUPPLEMENTARY CASH FLOW INFORMATION
Net Change in Working Capital
| | | | | | | | |
| For the years ended December 31, | 2021 | | 2020 | |
| Net (increase) decrease in: | | |
| Trade and other receivables | $ | 6.0 | | $ | 3.0 | |
| Inventories | (12.1) | | (21.6) | |
| Other assets | 2.8 | | (16.8) | |
| Net increase (decrease) in: | | |
| Trade and other payables | (2.8) | | (10.7) | |
| Other liabilities | (27.2) | | (6.7) | |
| Movement in above related to foreign exchange | (9.0) | | (18.1) | |
Net change in working capital(i) | $ | (42.3) | | $ | (70.9) | |
(i)Change in working capital is net of items related to Property, Plant and Equipment.
Cash and Cash Equivalents
| | | | | | | | |
| As at December 31, | 2021 | | 2020 | |
| Cash at bank | $ | 523.8 | | $ | 485.8 | |
| Bank short-term deposits | 1.2 | | 165.4 | |
Total cash and cash equivalents(i)(ii) | $ | 525.0 | | $ | 651.2 | |
(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.
(ii)The cash and cash equivalents disclosed above and in the consolidated statement of cash flows include $217.3 million (December 31, 2020: $223.1 million) that are held by the MARA Project. These deposits are to be used specifically by the MARA Project and are therefore, not available for general use by the other entities within the consolidated Company.
Other Non-Cash Expenses, net
| | | | | | | | |
| For the years ended December 31, | 2021 | | 2020 | |
| Loss on disposal and write-down of assets | $ | 2.1 | | $ | 13.7 | |
| Amortization of union negotiation bonuses | 11.1 | | 11.4 | |
| Provision on indirect taxes | (3.4) | | (5.9) | |
| | |
| Other expenses | 10.9 | | 9.5 | |
| Total non-cash expenses, net | $ | 20.7 | | $ | 28.7 | |
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.
| | | | | | | | | | | | | | | | | | | | | | | | |
| 2021 | | 2020 |
| Debt | Accrued interest(i) | Lease liabilities | | Debt | Accrued interest(i) | Lease liabilities | |
| At January 1, | $ | 993.8 | | $ | 4.1 | | $ | 35.2 | | | $ | 1,047.9 | | $ | 4.0 | | $ | 43.5 | | |
| Changes from financing cash flows | | | | | | | | |
| Debt issued | 495.2 | | — | | — | | | 200.0 | | — | | — | | |
| Debt repayments | (719.0) | | — | | — | | | (256.2) | | — | | — | | |
| Interest paid | — | | (40.5) | | (6.7) | | | — | | (51.4) | | (3.5) | | |
| Payment of lease liabilities | — | | — | | (19.2) | | | — | | — | | (17.1) | | |
| Other changes | | | | | | | | |
| Interest expense | — | | 42.7 | | 6.7 | | | — | | 51.9 | | 3.5 | | |
| Capitalized interest | — | | (0.9) | | — | | | — | | — | | — | | |
| New leases | — | | — | | 52.2 | | | — | | — | | 8.6 | | |
| | | | | | | | |
| Other | 2.8 | | 0.4 | | (4.4) | | | 2.1 | | (0.4) | | 0.2 | | |
| At December 31, | $ | 772.8 | | $ | 5.8 | | $ | 63.8 | | | $ | 993.8 | | $ | 4.1 | | $ | 35.2 | | |
(i) Included in Note 25: Trade and Other Payables.
| 41
Non-cash investing and financing activities
Key non-cash investing and financing activities disclosed in other notes are:
•Full or partial settlement of asset acquisition transactions – Note 6
•Full or partial consideration received on disposal transactions – Note 6
•Exchange of non-monetary assets (Agua Rica – Alumbrera Integration transaction) – Note 6
•Dividends satisfied by the issue of shares under the dividend reinvestment plan – Note 30
•Acquisition of right-of-use assets – Note 34
17. FINANCIAL INSTRUMENTS
(a) Financial Assets and Financial Liabilities by Categories
| | | | | | | | | | | | | | | | | |
As at December 31, 2021 | Amortized cost | FVOCI - equity instruments | Mandatorily at FVTPL - others | FV - Hedging instruments | Total |
| Financial assets | | | | | |
| Cash and cash equivalents | $ | — | | $ | — | | $ | 525.0 | | $ | — | | $ | 525.0 | |
| Trade and other receivables | 3.0 | | — | | — | | — | | 3.0 | |
| | | | | |
Convertible loan receivable(ii) | — | | — | | 10.0 | | — | | 10.0 | |
Investments in equity securities(i) | — | | 74.1 | | — | | — | | 74.1 | |
| Warrants | — | | — | | 1.4 | | — | | 1.4 | |
| | | | | |
| | | | | |
| Other financial assets | 22.5 | | — | | — | | — | | 22.5 | |
| Total financial assets | $ | 25.5 | | $ | 74.1 | | $ | 536.4 | | $ | — | | $ | 636.0 | |
| | | | | |
| Financial liabilities | | | | | |
| Total debt | $ | 772.8 | | $ | — | | $ | — | | $ | — | | $ | 772.8 | |
| Trade and other payables | 274.7 | | — | | — | | — | | 274.7 | |
| Derivative liabilities - Hedging instruments | — | | — | | — | | 14.5 | | 14.5 | |
| Derivative liabilities - Non-hedge | — | | — | | 11.0 | | — | | 11.0 | |
| Other financial liabilities | 172.4 | | — | | — | | — | | 172.4 | |
| Total financial liabilities | $ | 1,219.9 | | $ | — | | $ | 11.0 | | $ | 14.5 | | $ | 1,245.4 | |
| | | | | | | | | | | | | | | | | | |
As at December 31, 2020 | Amortized cost | FVOCI - equity instruments | Mandatorily at FVTPL - others | FV- Hedging instruments | | Total |
| Financial assets | | | | | | |
| Cash and cash equivalents | $ | — | | $ | — | | $ | 651.2 | | $ | — | | | $ | 651.2 | |
| Trade and other receivables | 4.2 | | — | | — | | — | | | 4.2 | |
| | | | | | |
Convertible loan receivable(ii) | — | | — | | 11.7 | | — | | | 11.7 | |
Investments in equity securities(i) | — | | 68.7 | | — | | — | | | 68.7 | |
| Warrants | — | | — | | 2.5 | | — | | | 2.5 | |
| | | | | | |
| Derivative assets - Non-hedge | — | | — | | 0.4 | | — | | | 0.4 | |
| Other financial assets | 19.7 | | — | | — | | — | | | 19.7 | |
| Total financial assets | $ | 23.9 | | $ | 68.7 | | $ | 665.8 | | $ | — | | | $ | 758.4 | |
| | | | | | |
| Financial liabilities | | | | | | |
| Total debt | $ | 993.8 | | $ | — | | $ | — | | $ | — | | | $ | 993.8 | |
| Trade and other payables | 240.4 | | — | | — | | — | | | 240.4 | |
| Derivative liabilities - Hedging instruments | — | | — | | — | | 9.0 | | | 9.0 | |
| Derivative liabilities - Non-hedge | — | | — | | 6.1 | | — | | | 6.1 | |
| Other financial liabilities | 173.4 | | — | | — | | — | | | 173.4 | |
| Total financial liabilities | $ | 1,407.6 | | $ | — | | $ | 6.1 | | $ | 9.0 | | | $ | 1,422.7 | |
(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. The balance at December 31, 2020 included the Company's remaining investment in Equinox Gold. During the year ended December 31, 2021, the Company disposed of its remaining interest in Equinox Gold for total net proceeds of $51.2 million. As noted above, equity securities in the Company's investment portfolio are considered to be strategic investments. For such investments, the Company's focus is to assess the best path for creation of value for shareholders, which may include monetization of said investments, which was the case in the sale of the Equinox shares. The fair value of the Equinox shares at the date of derecognition was $51.4 million and the Company recorded a cumulative gain of $5.5 million on disposal. The balance at December 31, 2021 includes the Company's investments in Nomad, which was previously accounted for as an investment in an associate, and Ascot. Refer to Note 6 and 20.
(ii)Represents the Deferred Cash Payment receivable from the Nomad transaction. Refer to Note 6.
| 42
(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, 2021 | December 31, 2020 |
| Level 1
input | Level 2
input | | Aggregate
fair value | Level 1
input | Level 2
input | | Aggregate
fair value |
| Assets | | | | | | | | |
| Cash and cash equivalents | $ | 525.0 | | $ | — | | | $ | 525.0 | | $ | 651.2 | | $ | — | | | $ | 651.2 | |
| Convertible loan receivable | — | | 10.0 | | | 10.0 | | — | | 11.7 | | | 11.7 | |
| | | | | | | | |
| Investments in equity securities | 74.1 | | — | | | 74.1 | | 68.7 | | — | | | 68.7 | |
| Warrants | — | | 1.4 | | | 1.4 | | — | | 2.5 | | | 2.5 | |
| Derivative related assets | — | | — | | | — | | — | | 0.4 | | | 0.4 | |
| $ | 599.1 | | $ | 11.4 | | | $ | 610.5 | | $ | 719.9 | | $ | 14.6 | | | $ | 734.5 | |
| Liabilities | | | | | | | | |
| Derivative related liabilities | $ | — | | $ | 25.5 | | | $ | 25.5 | | $ | — | | $ | 15.1 | | | $ | 15.1 | |
| $ | — | | $ | 25.5 | | | $ | 25.5 | | $ | — | | $ | 15.1 | | | $ | 15.1 | |
At December 31, 2021, there were no financial assets and liabilities measured and recognized at fair value on a non-recurring basis.
At December 31, 2021 and December 31, 2020, 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.
There were no transfers between any levels of the fair value hierarchy during the year ended December 31, 2021.
ii) Valuation Methodologies Used in the Measurement of Fair Value for Level 2 Financial Assets and Financial Liabilities
Warrants and Convertible loan receivable
The fair value of warrants, and the convertible loan receivable are determined using a Black-Scholes model based on relevant assumptions including risk free interest rate, expected dividend yield, expected volatility and expected warrant life which are supported by observable current market conditions.
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.
| 43
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, 2021 | December 31, 2020 |
| Financial instrument classification | Carrying amount | Fair value(i) | Carrying amount | Fair value(i) |
| Debt | | | | | |
| Senior notes | Amortized cost | $ | 775.9 | | $ | 797.5 | | $ | 996.5 | | $ | 989.3 | |
(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 using quoted prices (unadjusted) in active markets where available, and is otherwise determined by discounting the future cash flows by a discount factor that 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, 2021
| | | | | | | | | | | | | | | | | | | | |
| | | | Notional Amount | |
| Average call strike price
(per USD) | Average put strike price
(per USD) | Remaining term | Cash flow hedge | Non-hedge | Fair value
(USD) |
| Currency contracts | | | | | | |
Option contracts | | | | | | |
| | | | | | |
| | | | | | |
BRL option contracts (millions)(i) | R$5.25 | R$5.71 | January - December 2022 | R$192.0 | — | | $ | (1.6) | |
CLP option contracts (billions)(i) | CLP$750.00 | CLP$850.75 | January - December 2022 | CLP62.4 | — | | $ | (3.9) | |
| Forward contracts | Average FX/USD forward rate | | | | |
BRL forward contracts (millions)(ii) | R$5.4925 | January - December 2022 | R$192.0 | — | | $ | (2.1) | |
CLP forward contracts (billions)(iii) | CLP$798.69 | January - December 2022 | CLP62.4 | — | | $ | (6.9) | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| Other | Per share value (C$) | | | | |
DSU contracts (millions of DSUs)(iv) | $7.26 | January - November 2022 | — | | DSU 4.2 | | $ | (6.0) | |
(i)The Company has designated zero cost collar option contracts as cash flow hedges for its highly probable forecasted BRL and CLP 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. The BRL cash flow hedges are expected to cover approximately. 32% of the BRL denominated forecasted costs from January to December 2022. The CLP cash flow hedges are expected to cover approximately 36% of the CLP denominated forecasted costs from January to December 2022.
(ii)In January 2021, the Company entered into forward contracts totalling BRL 288.0 million (approximately US$54.3 million) split evenly from July 2021 to December 2022 at a weighted average BRL to US Dollar forward rate of BRL 5.4925 per US Dollar. These forward contracts are expected to cover approximately 32% of the BRL denominated forecasted costs from January to December 2022.
(iii)In August 2021, the Company entered into forward contracts totalling CLP62.4 billion (approximately US$79.1 million) split evenly from January to December 2022, at a weighted average CLP to US Dollar forward rate of CLP798.69 per US Dollar. These forward contracts are expected to cover approximately 36% of the CLP denominated forecasted costs from January to December 2022.
(iv)During the fourth quarter of 2020, 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 4.2 million DSUs (approximately 88% outstanding DSUs at the time) at a value of C$7.26 per share.
As at December 31, 2021, the Company also had derivative liabilities relating to option agreements of $4.7 million.
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Fair Values of Derivatives
| | | | | | | | | | | | | | | | | |
| |
| Asset derivatives | | Liability derivatives |
| At as December 31, | 2021 | | 2020 | | | 2021 | | 2020 | |
| Derivatives designated as hedging instruments | | | | | |
| Currency contracts | $ | — | | $ | — | | | $ | 14.5 | | $ | 9.0 | |
| Total derivatives designated as hedging instruments | $ | — | | $ | — | | | $ | 14.5 | | $ | 9.0 | |
| Derivatives not designated as hedging instruments | | | | | |
| | | | | |
| Warrants and options contracts | — | | — | | | 5.0 | | 6.1 | |
| DSU contracts | — | | 0.4 | | | 6.0 | | — | |
| Total derivatives not designated as hedges | $ | — | | $ | 0.4 | | | $ | 11.0 | | $ | 6.1 | |
Total derivative instruments (Note 20 and Note 26) | $ | — | | $ | 0.4 | | | $ | 25.5 | | $ | 15.1 | |
| | | | | |
| | | | | |
| | | | | |
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, | 2021 | | 2020 | | 2021 | | 2020 | |
| Exchange rate risk | | | | |
| Currency option contracts | $ | (11.8) | | $ | (24.0) | | $ | 9.7 | | $ | 16.9 | |
| $ | (11.8) | | $ | (24.0) | | $ | 9.7 | | $ | 16.9 | |
Time value of option contracts excluded from
hedge relationship | (4.9) | | (0.2) | | — | | — | |
| $ | (16.7) | | $ | (24.2) | | $ | 9.7 | | $ | 16.9 | |
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, | 2021 | | 2020 | | | |
| Realized gains (losses) | | | | |
| | | | |
| DSU contracts | — | | 1.8 | | | |
| $ | — | | $ | 1.8 | | | |
| Unrealized gains (losses) | | | | |
| | | | |
| | | | |
| DSU contracts | (6.5) | | (3.4) | | | |
| $ | (6.5) | | $ | (3.4) | | | |
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; predominantly 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 and capital expenditures denominated in foreign currencies, the Company enters into forward contracts and zero-cost collar option contracts.
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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.
| | | | | | | | | | | | | | |
| Effect on net
earnings, before tax | Effect on other comprehensive income, before tax |
| (On 10% change in US Dollars exchange rate) | 2021 | | 2020 | | 2021 | | 2020 | |
| BRL | $ | 0.2 | | $ | 0.3 | | $ | 0.6 | | $ | 1.0 | |
| ARS | $ | 1.3 | | $ | 0.5 | | $ | — | | $ | — | |
| CAD | $ | 1.3 | | $ | 4.2 | | $ | 0.1 | | $ | 0.1 | |
| CLP | $ | 1.6 | | $ | 2.3 | | $ | 1.3 | | $ | 0.1 | |
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.
There were no derivatives to hedge metal sales outstanding at December 31, 2021 or December 31, 2020.
(c) 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, 2021, 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, 2021.
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, 2021.
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 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. The assessment of recoverability of trade receivables at December 31, 2021 considered the impacts of COVID-19 and no recoverability issues were identified. For derivatives, the
| 46
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, | 2021 | | 2020 | |
| Cash and cash equivalents | $ | 525.0 | | $ | 651.2 | |
| Trade and other receivables | 3.0 | | 4.2 | |
Derivative assets (Note 17) | — | | 0.4 | |
Convertible loan receivable (Note 6) | 10.0 | | 11.7 | |
| Loans and other receivables | 22.5 | | 19.7 | |
| $ | 560.5 | | $ | 687.2 | |
Liquidity Risk
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.
The following table summarizes the remaining contractual maturities of the Company's significant financial liabilities, shown in contractual undiscounted cash flows.
| | | | | | | | | | | | | | | | | | | | |
| 2021 | 2020 | |
| As at December 31, | Within 1 year | 2 - 3
years | 4 - 5
years | Over 5 years | Total | Total |
| Trade and other payables | $ | 274.7 | | $ | — | | $ | — | | $ | — | | $ | 274.7 | | $ | 240.4 | |
| Debt repayments | — | | — | | — | | 782.9 | | 782.9 | | 1,001.8 | |
| Interest payments on debt | 28.7 | | 56.4 | | 52.5 | | 73.4 | | 211.0 | | 187.3 | |
| Lease liabilities | 27.6 | | 37.8 | | 8.1 | | 12.5 | | 86.0 | | 54.0 | |
| Derivative liabilities | 23.5 | | 2.0 | | — | | — | | 25.5 | | 15.1 | |
| Other financial liabilities | 29.9 | | 10.8 | | 2.4 | | 65.5 | | 108.6 | | 139.2 | |
| Total | $ | 384.4 | | $ | 107.0 | | $ | 63.0 | | $ | 934.3 | | $ | 1,488.7 | | $ | 1,637.8 | |
At December 31, 2021, the Company had letters of credit and guarantees outstanding in the amount of $146.2 million (December 31, 2020: $178.9 million) of which $119.8 million (December 31, 2020: $155.9 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, | 2021 | | 2020 | |
| Product inventories | $ | 22.9 | | $ | 26.6 | |
| Work in process | 13.0 | | 9.9 | |
| Ore stockpiles | 189.2 | | 168.5 | |
| Materials and supplies | 109.4 | | 96.5 | |
| $ | 334.5 | | $ | 301.5 | |
Less: non-current ore stockpiles included in other non-current assets (Note 21) | (167.3) | | (149.4) | |
| $ | 167.2 | | $ | 152.1 | |
| | |
During the year ended December 31, 2021, a charge of $1.6 million (2020: $6.2 million) was recorded within cost of sales excluding depletion, depreciation and amortization to reduce the carrying value of materials and supplies inventories to their net realizable value.
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20. OTHER FINANCIAL ASSETS
| | | | | | | | |
| As at December 31, | 2021 | | 2020 | |
Derivative assets (Note 17) | $ | — | | $ | 0.4 | |
| Loans and other receivables | 22.5 | | 19.7 | |
Investments in equity securities and warrants(i)(ii)(iii) | 75.5 | | 71.2 | |
Convertible loan receivable(iv) | 10.0 | | 11.7 | |
| $ | 108.0 | | $ | 103.0 | |
| Current | $ | 27.0 | | $ | 14.3 | |
| Non-current | 81.0 | | 88.7 | |
| | $ | 108.0 | | $ | 103.0 | |
(i)The balance at December 31, 2020 included the Company's investment in Equinox Gold. During the year ended December 31, 2021, the Company disposed of its interest in Equinox Gold for total proceeds of $51.2 million. The balance at December 31, 2021 includes the Company's investments in Nomad Royalty Company, which was previously accounted for as an investment in an associate, and Ascot Resources Ltd. Refer to (ii) below.
(ii)On April 12 2021, pursuant to a private placement offer by Ascot Resources Ltd. ("Ascot") (TSX: AOT), Yamana subscribed for $16.5 million (C$20.6 million) worth of common shares of Ascot at an issue price of C$0.86 per share. The offering closed on April 20, 2021. Upon closing, Yamana held approximately 6.4% of Ascot's basic shares outstanding. Yamana has no right to representation on Ascot's Board of Directors and the investment is accounted for as a financial asset at FVOCI.
(iii)On November 26, 2021, pursuant to a private placement offer by Benchmark Metals Inc. ("Benchmark") (TSX-V: BNCH), Yamana subscribed for 8 million Units at a price of C$1.00 per unit for a total cost of $6.3 million (C$8.0 million). Each Unit consisted of one Benchmark common share and one-half of one transferable common share purchase warrant. Upon closing, Yamana held 3.99% of Benchmark on a non-diluted basis. Yamana has no right to representation on Benchmark's Board of Directors and the investment is accounted for as a financial asset at FVOCI.
(iv)As part of the sale of the Royalty Portfolio in March 2020, the Company received a deferred cash payment that is convertible into shares of Nomad. Refer to Note 6 for further details.
21. OTHER ASSETS
| | | | | | | | |
| As at December 31, | 2021 | | 2020 | |
Non-current portion of ore stockpiles (Note 19)(i) | $ | 167.3 | | $ | 149.4 | |
| Income tax recoverable and installments | 6.9 | | 2.8 | |
Tax credits recoverable(ii) | 70.6 | | 77.4 | |
| Advances, deposits and prepaids | 67.4 | | 64.1 | |
| Other | 4.1 | | 5.0 | |
| | $ | 316.3 | | $ | 298.7 | |
| Current | $ | 113.3 | | $ | 96.1 | |
| Non-current | 203.0 | | 202.6 | |
| | $ | 316.3 | | $ | 298.7 | |
(i)Non-current ore stockpiles represent material not scheduled for processing within the next twelve months at the Company's Canadian Malartic and Jacobina mines.
(ii)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.
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22. PROPERTY, PLANT AND EQUIPMENT
| | | | | | | | | | | | | | |
| | Land, building,
plant & equipment | Operating mine mineral interests(iv)(v) | Development projects and Exploration & evaluation | Total |
| Cost | | | | |
At January 1, 2021 | $ | 1,912.4 | | $ | 7,294.1 | | $ | 3,475.1 | | $ | 12,681.5 | |
Additions | 73.1 | | 257.7 | | 51.6 | | 382.4 | |
Reclassifications, transfers and other non-cash movements(ii) | 63.3 | | (19.2) | | 129.0 | | 173.1 | |
| Disposals | (33.0) | | (0.1) | | (3.5) | | (36.6) | |
At December 31, 2021 | $ | 2,015.8 | | $ | 7,532.5 | | $ | 3,652.2 | | $ | 13,200.4 | |
| Accumulated depletion, depreciation and amortization ("DDA") and impairment | | | | |
At January 1, 2021 | $ | (1,258.6) | | $ | (3,965.3) | | $ | (772.7) | | $ | (5,996.7) | |
| DDA | (123.0) | | (333.1) | | — | | (456.1) | |
| | | | |
Disposals | 27.6 | | — | | — | | 27.6 | |
At December 31, 2021 | $ | (1,354.0) | | $ | (4,298.4) | | $ | (772.7) | | $ | (6,425.2) | |
Carrying amount, December 31, 2021 | $ | 661.8 | | $ | 3,234.1 | | $ | 2,879.5 | | $ | 6,775.2 | |
| | | | |
Amounts included above as at December 31, 2021 | | | | |
Assets under construction(i) | $ | 2.2 | | $ | 120.5 | | $ | 131.1 | | $ | 253.8 | |
| Assets not being depreciated | $ | — | | $ | 690.0 | | $ | 2,879.5 | | $ | 3,569.5 | |
| | | | | | | | | | | | | | |
| | Land, building,
plant & equipment | Operating mine mineral interests(iv)(v) | Development projects and Exploration & evaluation | Total |
| Cost | | | | |
At January 1, 2020 | $ | 1,868.9 | | $ | 7,066.6 | | $ | 2,839.2 | | $ | 11,774.6 | |
Additions | 68.7 | | 187.4 | | 17.8 | | 273.9 | |
Reclassification, transfers and other non-cash movements(ii) | 19.4 | | 40.1 | | 681.6 | | 741.1 | |
| Reclassified as held for sale and disposals | (44.6) | | — | | (63.5) | | (108.1) | |
At December 31, 2020 | $ | 1,912.4 | | $ | 7,294.1 | | $ | 3,475.1 | | $ | 12,681.5 | |
| Accumulated depletion, depreciation and amortization ("DDA") and impairment | | | | |
At January 1, 2020 | $ | (1,042.6) | | $ | (4,006.3) | | $ | (772.7) | | $ | (5,821.7) | |
| DDA | (139.7) | | (264.0) | | — | | (403.7) | |
Impairment and impairment reversal(iii) | (114.0) | | 305.0 | | — | | 191.0 | |
| Disposals | 37.7 | | — | | — | | 37.7 | |
At December 31, 2020 | $ | (1,258.6) | | $ | (3,965.3) | | $ | (772.7) | | $ | (5,996.7) | |
Carrying amount, December 31, 2020 | $ | 653.8 | | $ | 3,328.8 | | $ | 2,702.4 | | $ | 6,684.8 | |
| | | | |
Amounts included above as at December 31, 2020 | | | | |
| | | | |
| Assets not being depreciated | $ | — | | $ | 655.8 | | $ | 2,702.4 | | $ | 3,358.2 | |
(i)During 2021, the Company capitalized interest of $0.9 million related to qualifying capital expenditures at its Canadian assets under construction at a weighted average capitalization rate of 3.8%. There was no interest capitalized in 2020.
(ii)Reclassifications, transfers and other non-cash movements includes PPE acquired as part of the acquisition of Monarch Gold Corporation, non-cash additions to PPE and changes in the environmental rehabilitation provision as per Note 29. Also includes non-cash additions acquired as part of the MARA transaction in 2020. Refer to Note 6 for additional details.
(iii)During the year ended December 31, 2020, the Company recognized an impairment charge totalling $369.0 million related to Cerro Moro and an impairment reversal of $560.0 million related to El Peñón. Refer to Note 13 for additional details.
(iv)At December 31, 2021, $495.1 million of E&E assets related to assets in production were included in operating mine mineral interests (December 31, 2020 - $509.6 million). During the year ended December 31, 2020, the Company impaired $15.0 million of such E&E costs at Cerro Moro.
(v)At December 31, 2021, the carrying amount of stripping costs capitalized and included in mining properties was $39.4 million (December 31, 2020: $37.2 million).
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23. GOODWILL AND OTHER INTANGIBLE ASSETS
| | | | | | | | | | | |
| Goodwill(i) | Other intangible assets(ii) | Total |
| Cost | | | |
At January 1, 2021 | $ | 403.7 | | $ | 85.3 | | $ | 489.0 | |
| Additions | — | | 0.2 | | 0.2 | |
| | | |
At December 31, 2021 | $ | 403.7 | | $ | 85.5 | | $ | 489.2 | |
| Accumulated amortization and impairment | | | |
At January 1, 2021 | $ | (45.0) | | $ | (47.6) | | $ | (92.6) | |
| Amortization | — | | (4.8) | | (4.8) | |
| | | |
At December 31, 2021 | $ | (45.0) | | $ | (52.4) | | $ | (97.4) | |
Net book value at December 31, 2021 | $ | 358.7 | | $ | 33.1 | | $ | 391.8 | |
| | | | | | | | | | | |
| Goodwill(i) | Other intangible assets(ii) | Total |
| Cost | | | |
At January 1, 2020 | $ | 403.7 | | $ | 76.0 | | $ | 479.7 | |
| Additions | — | | 9.6 | | $ | 9.6 | |
| Dispositions | — | | (0.3) | | (0.3) | |
| | | |
At December 31, 2020 | $ | 403.7 | | $ | 85.3 | | $ | 489.0 | |
| Accumulated amortization and impairment | | | |
At January 1, 2020 | $ | (45.0) | | $ | (42.5) | | $ | (87.5) | |
| Amortization | — | | (5.1) | | (5.1) | |
| | | |
At December 31, 2020 | $ | (45.0) | | $ | (47.6) | | $ | (92.6) | |
Net book value at December 31, 2020 | $ | 358.7 | | $ | 37.7 | | $ | 396.4 | |
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(i)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 derecognized $24.0 million of goodwill allocated to the exploration properties.
(ii)Other intangible assets primarily comprise capitalized system development costs.
24. INVESTMENTS IN ASSOCIATES
The Company had no investments in associates as at December 31, 2021. Details of the Company's investments in associates during the years ended December 31, 2021 and 2020 are as follows:
Leagold Mining Corporation
On January 1, 2020, Yamana held approximately 20% of Leagold Mining Corporation ("Leagold"). On March 10, 2020 Leagold completed a merger transaction with Equinox Gold Corp., which resulted in Yamana owning approximately 9% of the combined company. Yamana concluded that, as a result of its reduced shareholding, it no longer had significant influence in the investee, and therefore, discontinued accounting for the investment using the equity method from the date of the completion of the merger. Refer to Note 6 for further details on the merger transaction.
The following table summarizes the change in the carrying amount of the Company's investment in Leagold:
| | | | | | |
| | 2020 |
| Balance as at January 1 | | $ | 120.3 | |
| | |
| Company's share of net loss of Leagold | | (4.1) | |
| Company's share of other comprehensive loss of Leagold | | (1.6) | |
Derecognition of investment in Leagold upon discontinuation of the equity method (Note 6) | | (114.6) | |
| Balance as at December 31 | | $ | — | |
| | |
| | |
| | |
| | |
| | |
Summarized financial information in respect of the Company’s investment in Leagold is set out below. The summarized financial information includes the results of Leagold for the period from January 1 to March 10, 2020, because Yamana ceased to have significant influence in the investee as of March 10, 2020.
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Summarized Consolidated Statement of Operations and Comprehensive (loss) Income Information
| | | | | | |
| For the year ended December 31, | | 2020 |
| | |
| Net loss | | $ | (20.0) | |
| Other comprehensive loss | | (8.1) | |
| Total comprehensive loss | | $ | (28.1) | |
| | |
| | |
Immaterial Associates
The Company acquired interests in two individually immaterial associates during the year ended December 31, 2020 (Nomad Royalty Company and Monarch Gold Corporation). The Company acquired its interest in both of these associates as the result of transactions entered into by the Company. The Company's interest in both associates was below 20%; however, the Company determined that it had significant influence because it had representation on the boards of both investees.
During the year ended December 31, 2021, the Company ceased accounting for both investments as investments in associates. In January 2021 the Company acquired all of the remaining shares of Monarch Gold that it did not already own and began accounting for Monarch Gold as a subsidiary. During the second quarter of 2021, Yamana concluded that it ceased to have significant influence over Nomad due to no longer having representation on Nomad's board of directors, and therefore, discontinued accounting for the investment using the equity method. Refer to Note 6 for further details.
The following table analyzes, in aggregate, the carrying amount and share of net earnings of these associates.
| | | | | | | | |
| 2021 | 2020 |
| Aggregate carrying amount of individually immaterial associates | $ | — | | $ | 34.3 | |
| Aggregate amounts of the Company's share of: | | |
| Net earnings | $ | 0.9 | | $ | 3.1 | |
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25. TRADE AND OTHER PAYABLES
| | | | | | | | |
| As at December 31, | 2021 | | 2020 | |
| Trade payables | $ | 173.1 | | $ | 154.2 | |
Other payables(i) | 101.6 | | 86.2 | |
| $ | 274.7 | | $ | 240.4 | |
(i)Other payables include dividends, salaries, bonuses, pension, and interest payable, among other accruals.
26. OTHER FINANCIAL LIABILITIES
| | | | | | | | |
| As at December 31, | 2021 | | 2020 | |
Lease liabilities (Note 34) | $ | 63.8 | | $ | 35.2 | |
Royalty payable | 12.0 | | 16.5 | |
| Severance accrual | 38.5 | | 39.7 | |
Deferred share units/performance share units liability (Note 31) | 25.1 | | 38.4 | |
Accounts receivable and value added tax financing credit(i) | 10.0 | | 27.6 | |
| | |
Derivative liabilities (Note 17) | 25.5 | | 15.1 | |
| Other | 23.0 | | 16.0 | |
| | $ | 197.9 | | $ | 188.5 | |
| Current | $ | 76.0 | | $ | 78.8 | |
| Non-current | 121.9 | | 109.7 | |
| | $ | 197.9 | | $ | 188.5 | |
(i)Accounts receivable and value added tax ("VAT") financing credits are payable within 30 days from the receipt of proceeds on doré sales, or payable in the month of approval of the VAT credit, respectively.
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27. OTHER PROVISIONS AND LIABILITIES
| | | | | | | | |
| As at December 31, | 2021 | | 2020 | |
| Other taxes payable | $ | 17.4 | | $ | 19.7 | |
Provision for repatriation taxes payable(i) | 14.8 | | 18.5 | |
| Provision for taxes | 18.4 | | 3.9 | |
Deferred revenue on metal streaming arrangement(ii) | 64.2 | | 77.6 | |
| | |
Other provisions and liabilities(iii) | 64.9 | | 70.5 | |
| | $ | 179.6 | | $ | 190.2 | |
| Current | $ | 57.7 | | $ | 77.6 | |
| Non-current | 121.9 | | 112.6 | |
| | $ | 179.6 | | $ | 190.2 | |
(i)The Company is subject to additional taxes in Chile on the repatriation of profits to its foreign shareholders. Total taxes in the amount of $14.8 million (2020: $18.5 million) have been accrued on the assumption that the profits will be repatriated.
(ii)On October 27, 2015 the Company entered into three metal streaming 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 metals are delivered to the counterparty. The liabilities associated with the deferred revenue balances referenced to production from the Chapada mine were derecognized as part of the sale of the Chapada mine in July 2019. The following table summarizes the changes in deferred revenue from the metal streaming arrangements during 2021:
| | | | | | |
| 2021 | | |
| | |
| | |
As at December 31, 2020 | $ | 77.6 | | |
| Recognition of revenue during the year net of interest accretion | (11.9) | | |
| Variable consideration adjustment | (1.5) | | |
| | |
| $ | 64.2 | | |
| Current portion | $ | 12.6 | | |
| Non-current portion | 51.6 | | |
As at December 31, 2021 | $ | 64.2 | | |
(iii)Other provisions and liabilities include the current portion of environmental rehabilitation provisions, and other contingent provisions.
28. LONG-TERM DEBT AND CREDIT FACILITY
| | | | | | | | |
| As at December 31, | 2021 | | 2020 | |
| Senior notes | | |
$500 million notes issued August 2021 | | |
2.63% 10-year notes due August 2031 | $ | 495.1 | | $ | — | |
$300 million notes issued December 2017 | | |
4.625% 10-year notes due December 2027 | 280.8 | | 280.4 | |
$500 million notes issued June 2014 | | |
4.95% 10-year notes due July 2024 | — | | 149.8 | |
$300 million notes issued June 2013 | | |
Series B - 4.78% 10-year notes due June 2023 ($265 million) | — | | 240.4 | |
$500 million notes issued March 2012 | | |
| | |
Series C - 4.76% 10-year notes due March 2022 ($200 million) | — | | 190.5 | |
Series D - 4.91% 12-year notes due March 2024 ($140 million) | — | | 135.4 | |
| | |
| | |
| $ | 775.9 | | $ | 996.5 | |
| Revolving credit facility | | |
Revolving credit facility (net of capitalized debt issuance costs) | (3.1) | | (2.7) | |
| | |
| | |
Total debt(i) | $ | 772.8 | | $ | 993.8 | |
| | |
| | |
| | |
| | |
| | |
(i)Balances are net of unamortized discounts and capitalized transaction costs of $10.0 million (2020: $8.0 million).
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.
During the third quarter of 2021, the Company completed the offering of $500 million, 10-year 2.63% unsecured senior notes ("Senior 2031 Notes"). The Company used the proceeds from the issuance of the Senior 2031 Notes, together with available
| 52
cash on hand, to redeem all outstanding senior notes due in 2022, 2023, and 2024. The Company paid an early redemption premium of $53.3 million on the early redemption of these series of senior notes.
The Company's next repayment on the senior notes is now due December 2027.
Revolving Credit Facility
During the third quarter of 2021, the Company extended the term of the revolving credit facility ("the Facility") from July 2024 to August 2026, under existing terms and conditions. The maximum amount available under the Facility remains at $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 Facility is currently undrawn.
Covenants
The senior notes and revolving credit facility are subject to various financial and general covenants. The principal covenants are 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, 2021.
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, 2021, the present value of the environmental rehabilitation provision relating to the Company's mining properties was estimated at $377.2 million (December 31, 2020: $392.7 million) using discount rates ranging between 0.37% and 131.96% (December 31, 2020: 0.08% and 52.76%). The undiscounted value of these liabilities was $547.0 million (December 31, 2020: $527.1 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.
| | | | | | | | |
| 2021 | | 2020 | |
| Balance, beginning of year | $ | 392.7 | | $ | 220.4 | |
Environmental rehabilitation provisions acquired during the year (Note 6) | 3.0 | | 85.7 | |
| Accretion expense included in finance costs | 13.9 | | 9.0 | |
| Revisions in estimates and obligations | 6.0 | | 82.4 | |
| Expenditures during the current year | (16.2) | | (3.2) | |
| Foreign exchange impact | (20.7) | | (1.6) | |
| Environmental rehabilitation provisions disposed of during the year | (1.5) | | — | |
| | |
| Balance, end of year | $ | 377.2 | | $ | 392.7 | |
Current(i) | $ | 24.3 | | $ | 29.2 | |
| Non-current | 352.9 | | 363.5 | |
| $ | 377.2 | | $ | 392.7 | |
(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, 2021, the Company had outstanding letters of credit in the amount of $71.4 million (C$90.5 million) (December 31, 2020: $66.4 million (C$84.6 million)) representing guarantees for reclamation obligations and road construction relating to the Company's share of mining interest in Canadian Malartic, and $34.1 million (December 31, 2020: $20.1 million) and $13.6 million (December 31, 2020: $13.7 million) representing guarantees for reclamation obligations relating to the Company's Chilean mines and US properties, respectively. These letters of credit are automatically extended for one year periods from their expiration dates. The Company's MARA Project also had outstanding bank guarantees for reclamation obligations totalling $55.6 million as at December 31, 2020, for which an equivalent amount of cash collateral had been posted at the time.
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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, 2021 (2020: nil).
| | | | | | | | | | | | | | |
| For the years ended December 31, | 2021 | 2020 |
| | Number of
common shares | | Number of
common shares | |
| Issued and outstanding - 959,805,965 common shares | Amount | Amount |
| (December 31, 2020 - 952,620,947 common shares): | (In thousands) | (In millions) | (In thousands) | (In millions) |
| Balance, beginning of year | 952,621 | | $ | 7,648.9 | | 950,435 | | $ | 7,639.9 | |
| Issued on vesting of restricted share units | 1,353 | | 4.5 | | 1,100 | | 3.4 | |
Dividend reinvestment plan | 147 | | 0.7 | | 70 | | 0.5 | |
Issued as consideration in Monarch acquisition (Note 6) | 11,608 | | 61.2 | | — | | — | |
Issued as consideration in acquisition of exploration properties (Note 6) | 706 | | 3.1 | | — | | — | |
| | | | |
| Exercise of warrants | 44 | | 0.1 | | — | | — | |
| Exercise of options and share appreciation rights | — | | — | | 167 | | 0.9 | |
Issuance of flow-through shares(i) | — | | — | | 1,000 | | 5.3 | |
Acquisition of own shares, share cancellations and other adjustments(ii) (iii) | (6,673) | | (28.6) | | (151) | | (1.1) | |
| Balance, end of year | 959,806 | | $ | 7,689.9 | | 952,621 | | $ | 7,648.9 | |
(i)On July 3, 2020, the Company closed a flow-through financing for proceeds of $7.4 million (C$10.0 million) consisting of the issue and sale of 1,000,000 flow-through common shares at a price of C$10.00 per share. The proceeds were allocated between the offering of shares and the sale of tax benefits. The allocation was made based on the difference between the quoted price of the shares and the amount the investors paid for the shares, with a deferred flow-through premium liability recognized for the difference. Accordingly, the Company recorded share capital of $5.3 million (C$7.2 million) and a deferred flow-through premium liability of $2.0 million (C$2.7 million). During the first quarter of 2021, the company fulfilled its obligation and derecognized the liability.
(ii)Under the Company's normal-course issuer bid ("NCIB"), the Company is able to purchase up to 48,321,676 of its common shares no later than August 3, 2022. During the year of 2021, the Company purchased 6,672,628 of its common shares under the NCIB, which were subsequently cancelled.
(iii)Prior year includes the cancellation of 150,456 common shares that were not exchanged by holders of Osisko common shares pursuant to the terms of the Plan of Arrangement related to the acquisition of the Canadian Malartic mine in 2014. Holders of Osisko common shares were to exchange their shares for common shares of Yamana within a time period of six years following the closing of the transaction. As certain Osisko shareholders failed to surrender their certificates representing Osisko common shares by June 16, 2020, non-certificated positions representing 150,456 Yamana common shares were cancelled during the third quarter of 2020.
Dividends Paid and Declared
| | | | | | | | |
| For the years ended December 31, | 2021 | | 2020 | |
| Dividends paid | $ | 104.8 | | $ | 53.0 | |
| Dividends declared in respect of the year | $ | 108.6 | | $ | 69.1 | |
Dividend paid (per share) | $ | 0.109 | | $ | 0.056 | |
Dividend declared in respect of the year (per share) | $ | 0.113 | | $ | 0.072 | |
The Company's dividend reinvestment plan resulted in $0.7 million (2020: $0.5 million) being reinvested into the Company.
| 54
31. SHARE-BASED PAYMENTS
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, | 2021 | | 2020 | |
| Expense related to equity-settled compensation plans | $ | 5.0 | | $ | 4.4 | |
| Expense related to cash-settled compensation plans | (1.8) | | 27.1 | |
| Total expense recognized as compensation expense | $ | 3.2 | | $ | 31.5 | |
| | |
| | |
| | |
| | | | | | | | |
| As at December 31, | 2021 | | 2020 | |
Total carrying amount of liabilities for cash-settled arrangements (Note 26) | $ | 25.1 | | $ | 38.4 | |
The following table summarizes the equity instruments outstanding related to share-based payments. | | | | | | | | |
| As at December 31, (In thousands) | 2021 | | 2020 | |
Share options outstanding(i)(ii)(iii) | 256 | | 256 | |
Restricted share units ("RSU")(iv) | 2,210 | | 2,494 | |
Deferred share units ("DSU")(v)(vi) | 5,061 | | 4,751 | |
Performance share units ("PSU")(vii) | 2,020 | | 2,119 | |
(i)The aggregate maximum number of common shares that may be reserved for issuance under the Company's Share Incentive Plan is 24.9 million (2020: 24.9 million).
(ii)As at December 31, 2021, 256,348 share options with a weighted average exercise price of C$5.30 were outstanding and exercisable (December 31, 2020: 256,348 share options with a weighted exercise price of C$5.30 outstanding and exercisable).
(iii)During the year ended December 31, 2021, no share options were granted, excised or expired.
(iv)During the year ended December 31, 2021, the Company granted 1,078,361 RSUs with a weighted average grant date fair value of C$6.38 per RSU; a total of 1,352,628 RSUs vested and the Company credited $4.5 million (2020: $3.4 million) to share capital in respect of RSUs that vested during the year. There were a total of 10,095 RSUs cancelled during the year ended December 31, 2021.
(v)During the year ended December 31, 2021, the Company granted 309,858 DSUs and recorded an expense of $1.4 million, and no DSUs were settled.
(vi)During the fourth quarter of 2020, 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 4.2 million DSUs (approximately 88% of outstanding DSUs at the time) at a value of C7.26 per share. For the year ended December 31, 2021, the Company recorded a mark-to-market gain on DSUs of $7.4 million and a mark-to-market loss on the DSU hedge of $6.5 million.
(vii)During the year ended December 31, 2021, 981,698 PSU units were granted with an expiry date of December 11, 2023 and a fair value of C$3.55 per unit at December 31, 2021. There were payouts of 1,080,433 PSU units and no cancellations of PSU units during the year ended December 31, 2021.
32. NON-CONTROLLING INTERESTS
| | | | | | | | |
| As at December 31, | 2021 | | 2020 | |
Agua De La Falda S.A.(i) | $ | 18.7 | | $ | 18.7 | |
| | |
Estelar Resources S.A.(ii) | 16.0 | | 16.0 | |
Minera Agua Rica Alumbrera Ltd.(iii) | 751.1 | | 791.3 | |
Minera Cavancha SpA(iv) | 21.5 | | — | |
| $ | 807.3 | | $ | 826.0 | |
(i)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.
(ii)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 the Cerro Moro mine, Estelar Resources S.A. 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.
(iii)On December 17, 2020, the Company, along with partners Glencore and Newmont, completed the integration of the Agua Rica project with the Alumbrera plant and infrastructure, pursuant to which, Yamana relinquished a non-controlling interest in Agua Rica for an increased interest in Alumbrera. Upon completion of the integration transaction, Yamana owned 56.25%, with Glencore and Newmont owning 25.00% and 18.75%, respectively, of Minera Agua Rica Alumbrera Ltd., the legal entity that indirectly holds the integrated MARA project. The following table summarizes the information relating to the MARA subsidiary, before any intra-group eliminations:
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| | | | | | | | |
| As at December 31, | 2021 | 2020 |
| Current assets | $ | 237.4 | | $ | 241.9 | |
| Non-current assets | 1,897.4 | | 1,867.7 | |
| Current liabilities | 26.8 | | 45.8 | |
| Non-current liabilities | 522.5 | | 383.3 | |
| Net assets | $ | 1,585.5 | | $ | 1,680.5 | |
| Net assets attributable to NCI | $ | 693.7 | | $ | 735.2 | |
| | |
| For the year ended December 31, | 2021 | 2020* |
| Net loss and comprehensive loss | $ | (134.2) | | $ | — | |
| Net loss and comprehensive loss allocated to NCI | $ | (58.7) | | $ | — | |
| | |
| | |
| | |
| | |
| | |
| | |
* Net loss (and therefore, net loss attributable to non-controlling interests) and cash flows for the 14 day period between completion of the integration transaction and December 31, 2020 were negligible.
Key cash flows related to MARA during the year ended December 31, 2021 were net outflows of $12.7 million related to care and maintenance costs and servicing of environmental rehabilitation provisions, net outflows of $25.6 million related to capital expenditures, and net inflows of $42.4 million related to contributions from shareholders.
(iv) In December 2018, the Company entered into an Option Agreement with Mineros, with respect to the Company's wholly-owned La Pepa gold project. The Option Agreement granted Mineros the right and option to acquire up to a 51% interest in Minera Cavancha SpA, the legal entity that directly holds the La Pepa project. During 2021, Mineros exercised the first option in the Option Agreement, and was issued shares representing a 20% interest in Minera Cavancha SpA. Refer to Note 6 for further details.
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
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
| | | | | | | | | | | | | | |
| Buildings | Vehicles | Machinery and Equipment | Total |
Balance at December 31, 2020 | $ | 13.4 | | $ | 5.4 | | $ | 14.1 | | $ | 32.9 | |
| Additions | 2.0 | | 12.2 | | 38.0 | | 52.2 | |
| Depreciation charge for the year | (2.6) | | (5.6) | | (14.4) | | (22.6) | |
| | | | |
Balance at December 31, 2021 | $ | 12.8 | | $ | 12.0 | | $ | 37.7 | | $ | 62.5 | |
| | | | |
| | | | |
| | | | | | | | | | | | | | |
| Buildings | Vehicles | Machinery and Equipment | Total |
Balance at January 1, 2020 | $ | 7.1 | | $ | 13.5 | | $ | 22.7 | | $ | 43.3 | |
| Additions | 7.6 | | 2.2 | | 0.6 | | 10.4 | |
| Depreciation charge for the year | (1.3) | | (10.3) | | (9.2) | | (20.8) | |
| | | | |
Balance at December 31, 2020 | $ | 13.4 | | $ | 5.4 | | $ | 14.1 | | $ | 32.9 | |
| 56
(b) Lease liabilities
| | | | | | | | |
| 2021 | | 2020 | |
| Maturity analysis - contractual undiscounted cash flows | | |
| Less than one year | $ | 27.6 | | $ | 11.7 | |
| Two to three years | 37.8 | | 17.4 | |
| Four to five years | 8.1 | | 9.7 | |
| More than five years | 12.5 | | 15.2 | |
| Total undiscounted lease liabilities at December 31 | $ | 86.0 | | $ | 54.0 | |
Lease liabilities included in the balance sheet at December 31 (Note 26) | $ | 63.8 | | $ | 35.2 | |
| Current | $ | 22.6 | | $ | 12.9 | |
| Non-current | $ | 41.2 | | $ | 22.3 | |
(c) Amounts recognized in net earnings
| | | | | | | | |
| 2021 | | 2020 | |
| Depreciation expense on right-of-use assets | $ | 22.6 | | $ | 20.8 | |
Interest expense on lease liabilities (Note 12) | $ | 6.7 | | $ | 3.5 | |
Variable lease payments not included in the measurement of lease liabilities(i) | $ | 86.0 | | $ | 61.2 | |
| Expenses relating to short-term leases | $ | 21.8 | | $ | 13.7 | |
| Expenses relating to leases of low value assets, excluding short-term leases of low value assets | $ | 0.9 | | $ | 0.9 | |
(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
For the year ended December 31, 2021, the Company had total cash outflows for leases of $134.6 million (2020: $96.4 million).
35. COMMITMENTS AND CONTINGENCIES
In addition to entering into various operational commitments in the normal course of business, the Company had commitments of approximately $34.5 million at December 31, 2021 (December 31, 2020: $8.7 million) for construction activities at its sites and projects.
36. RELATED PARTY TRANSACTIONS
Related Parties and Transactions
The Company’s related parties include its subsidiaries, associates, 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, 2021 and 2020.
Compensation of Key Management Personnel
Key management personnel compensation comprises:
| | | | | | | | |
| For the years ended December 31, | 2021 | | 2020 | |
Short-term employee benefits(i) | $ | 14.8 | | $ | 14.5 | |
| Post-employment benefits | 2.0 | | 1.9 | |
| | |
| | |
Share-based payment expense(ii) | 3.3 | | 17.5 | |
| $ | 20.0 | | $ | 33.9 | |
(i)Short-term employee benefits include salaries, bonuses payable within 12 months of the balance sheet date and other annual employee benefits.
(ii)Relates to share option, RSU, DSU and PSU grants. Balances exclude the periodic fair value adjustment on the DSUs.
*************
| 57 CERTIFICATION REQUIRED BY RULE 13a-14(a) OR RULE 15d-14(a), PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Daniel Racine, certify that:
1.I have reviewed this annual report on Form 40-F of Yamana Gold Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the issuer as of, and for, the periods presented in this report;
4.The issuer's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the issuer and have:
a.designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;
c.evaluated the effectiveness of the issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.disclosed in this report any change in the issuer's internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the issuer's internal control over financial reporting; and
5.The issuer's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the issuer's auditors and the audit committee of the issuer's board of directors (or persons performing the equivalent functions):
a.all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the issuer's ability to record, process, summarize and report financial information; and
b.any fraud, whether or not material, that involves management or other employees who have a significant role in the issuer's internal control over financial reporting.
Date: March 28, 2022
“Daniel Racine”
Name: Daniel Racine
Title: President and Chief Executive Officer
CERTIFICATION REQUIRED BY RULE 13a-14(a) OR RULE 15d-14(a), PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Jason LeBlanc, certify that:
1.I have reviewed this annual report on Form 40-F of Yamana Gold Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the issuer as of, and for, the periods presented in this report;
4.The issuer's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the issuer and have:
a.designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;
c.evaluated the effectiveness of the issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.disclosed in this report any change in the issuer's internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the issuer's internal control over financial reporting; and
5. The issuer's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the issuer's auditors and the audit committee of the issuer's board of directors (or persons performing the equivalent functions):
a.all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the issuer's ability to record, process, summarize and report financial information; and
b.any fraud, whether or not material, that involves management or other employees who have a significant role in the issuer's internal control over financial reporting.
Date: March 28, 2022
“Jason LeBlanc”
Name: Jason LeBlanc
Title: Senior Vice President, Finance
and Chief Financial Officer
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ENACTED PURSUANT TO
SECTION 906 OF THE U.S. SARBANES-OXLEY ACT OF 2002
Yamana Gold Inc. (the “Company”) is filing with the U.S. Securities and Exchange Commission on the date hereof, its annual report on Form 40-F for the fiscal year ended December 31, 2021 (the “Report”).
I, Daniel Racine, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. section 1350, as enacted pursuant to section 906 of the U.S. Sarbanes-Oxley Act of 2002, that:
(i) the Report fully complies with the requirements of section 13(a) or 15(d) of the U.S. Securities
Exchange Act of 1934; and
(ii) the information contained in the Report fairly presents, in all material respects, the financial
condition and results of operations of the Company.
“Daniel Racine”
Name: Daniel Racine
Title: President and Chief Executive Officer
Date: March 28, 2022
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ENACTED PURSUANT TO
SECTION 906 OF THE U.S. SARBANES-OXLEY ACT OF 2002
Yamana Gold Inc. (the “Company”) is filing with the U.S. Securities and Exchange Commission on the date hereof, its annual report on Form 40-F for the fiscal year ended December 31, 2021 (the “Report”).
I, Jason LeBlanc, Senior Vice President, Finance and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. section 1350, as enacted pursuant to section 906 of the U.S. Sarbanes-Oxley Act of 2002, that:
(i) the Report fully complies with the requirements of section 13(a) or 15(d) of the U.S. Securities
Exchange Act of 1934; and
(ii) the information contained in the Report fairly presents, in all material respects, the financial
condition and results of operations of the Company.
“Jason LeBlanc”
Name: Jason LeBlanc
Title: Senior Vice President, Finance and Chief Financial Officer
Date: March 28, 2022
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in Registration Statements Nos., 333-159047, 333-148048 and 333-145300 on Form S-8 and Registration Statement No. 333-217016 on Form F-3D and Registration Statement No. 333-237728 on Form F-10/A and to the use of our reports dated February 17, 2022 relating to the financial statements of Yamana Gold Inc. (“Yamana”) and the effectiveness of Yamana’s internal control over financial reporting appearing in this Annual Report on Form 40-F for the year ended December 31, 2021.
/s/ Deloitte LLP
Chartered Professional Accountants
Licensed Public Accountants
Toronto, Canada
March 28, 2022
CONSENT OF EXPERT
In connection with the Annual Report on Form 40-F of Yamana Gold Inc. (“Yamana”) for the year ended December 31, 2021 (the “Form 40-F”), I, Eduardo de Souza Soares, MAusIMM CP (Min), hereby consent to the use of my name in connection with the references to the report entitled “NI 43-101 Technical Report, Jacobina Gold Mine, Bahia State, Brazil” dated May 29, 2020 (the “Report”), to the use of my name in connection with the mineral reserve estimate for the Jacobina Mine as at December 31, 2021 (the “Estimate”) and to the inclusion of the written disclosure of the Report, the Estimate and of extracts from or summaries thereof (the “Incorporated Information”) in the Annual Information Form filed as an exhibit to the Form 40-F.
I do also hereby consent to the use of my name and the incorporation by reference of the Incorporated Information in Yamana's Registration Statements on Form S-8 (Commission File No. 333-159047, File No. 333-148048 and File No. 333-145300), Form F-3D (Commission File No. 333-217016) and on Form F-10 (Commission File No. 333-237728).
By: /s/ "Eduardo de Souza Soares"
Name: Eduardo de Souza Soares, MAusIMM CP (Min)
March , 2022
CONSENT OF EXPERT
In connection with the Annual Report on Form 40-F of Yamana Gold Inc. (“Yamana”) for the year ended December 31, 2021 (the “Form 40-F”), I, Renan Garcia Lopes, MAusIMM CP (Geo), hereby consent to the use of my name in connection with the references to the report entitled “NI 43-101 Technical Report, Jacobina Gold Mine, Bahia State, Brazil” dated May 29, 2020 (the “Report”) and to the inclusion of the written disclosure of the Report and of extracts from or a summary thereof (the “Incorporated Information”) in the Annual Information Form filed as an exhibit to the Form 40-F.
I do also hereby consent to the use of my name and the incorporation by reference of the Incorporated Information in Yamana's Registration Statements on Form S-8 (Commission File No. 333-159047, File No. 333-148048 and File No. 333-145300), Form F-3D (Commission File No. 333-217016) and on Form F-10 (Commission File No. 333-237728).
By: /s/ "Renan Garcia Lopes"
Name: Renan Garcia Lopes, MAusIMM CP (Geo)
March 28, 2022
CONSENT OF EXPERT
In connection with the Annual Report on Form 40-F of Yamana Gold Inc. (“Yamana”) for the year ended December 31, 2021 (the “Form 40-F”), I, Henry Marsden, P.Geo., hereby consent to the use of my name in connection with the reference to the reports entitled “NI 43-101 Technical Report, Jacobina Gold Mine, Bahia State, Brazil” dated May 29, 2020 and “NI 43-101 Technical Report, El Peñón Gold-Silver Mine, Antofagasta Region, Chile” dated March 25, 2021 (the “Reports”) and to the inclusion of the written disclosure of the Reports and of extracts from or summaries thereof (the “Incorporated Information”) in the Annual Information Form filed as an exhibit to the Form 40-F.
I do also hereby consent to the use of my name and the incorporation by reference of the Incorporated Information in Yamana's Registration Statements on Form S-8 (Commission File No. 333-159047, File No. 333-148048 and File No. 333-145300), Form F-3D (Commission File No. 333-217016) and on Form F-10 (Commission File No. 333-237728).
By: /s/ "Henry Marsden"
Name: Henry Marsden, P.Geo.
March 28, 2022
CONSENT OF EXPERT
In connection with the Annual Report on Form 40-F of Yamana Gold Inc. (“Yamana”) for the year ended December 31, 2021 (the “Form 40-F”), I, Carlos Iturralde, P.Eng., hereby consent to the use of my name in connection with the reference to the reports entitled “NI 43-101 Technical Report, Jacobina Gold Mine, Bahia State, Brazil” dated May 29, 2020 and “NI 43-101 Technical Report, El Peñón Gold-Silver Mine, Antofagasta Region, Chile” dated March 25, 2021 (the “Reports”) and to the inclusion of the written disclosure of the Reports and of extracts from or summaries thereof (the “Incorporated Information”) in the Annual Information Form filed as an exhibit to the Form 40-F.
I do also hereby consent to the use of my name and the incorporation by reference of the Incorporated Information in Yamana's Registration Statements on Form S-8 (Commission File No. 333-159047, File No. 333-148048 and File No. 333-145300), Form F-3D (Commission File No. 333-217016) and on Form F-10 (Commission File No. 333-237728).
By: /s/ "Carlos Iturralde"
Name: Carlos Iturralde, P.Eng.
March 28, 2022
CONSENT OF EXPERT
In connection with the Annual Report on Form 40-F of Yamana Gold Inc. (“Yamana”) for the year ended December 31, 2021 (the “Form 40-F”), I, Luis Vasquez, M.Sc., P.Eng., hereby consent to the use of my name in connection with the references to the report entitled “NI 43-101 Technical Report, Jacobina Gold Mine, Bahia State, Brazil” dated May 29, 2020 (the “Report”) and to the inclusion of the written disclosure of the Report and of extracts from or a summary thereof (the “Incorporated Information”) in the Annual Information Form filed as an exhibit to the Form 40-F.
I do also hereby consent to the use of my name and the incorporation by reference of the Incorporated Information in Yamana's Registration Statements on Form S-8 (Commission File No. 333-159047, File No. 333-148048 and File No. 333-145300), Form F-3D (Commission File No. 333-217016) and on Form F-10 (Commission File No. 333-237728).
By: /s/ "Luis Vasquez"
Name: Luis Vasquez, M.Sc., P.Eng.
March 28, 2022
CONSENT OF EXPERT
In connection with the Annual Report on Form 40-F of Yamana Gold Inc. (“Yamana”) for the year ended December 31, 2021 (the “Form 40-F”), I, Sébastien Bernier, P.Geo., hereby consent to the use of my name in connection with the technical disclosure set forth under the heading “Description of the Business – Material Producing Mines – Jacobina Mining Complex”, other than the technical disclosure under the heading “Mineral Projects – Summary of Mineral Reserve and Mineral Resource Estimates”, to the use of my name in connection with the technical disclosure set forth under the heading “Description of the Business – Material Producing Mines – El Peñón Mine”, other than the technical disclosure under the heading “Mineral Projects – Summary of Mineral Reserve and Mineral Resource Estimates” and to the use of my name in connection with the technical disclosure set forth under the heading “Description of the Business – Material Producing Mines – Canadian Malartic Mine”, other than the technical disclosure under the heading “Mineral Projects – Summary of Mineral Reserve and Mineral Resource Estimates” (together, the “Technical Disclosure”) in the Annual Information Form filed as an exhibit to the Form 40-F.
I do also hereby consent to the use of my name and the incorporation by reference of the Technical Disclosure in Yamana's Registration Statements on Form S-8 (Commission File No. 333-159047, File No. 333-148048 and File No. 333-145300), Form F-3D (Commission File No. 333-217016) and on Form F-10 (Commission File No. 333-237728).
By: /s/ "Sébastien Bernier"
Name: Sébastien Bernier, P.Geo.
March 28, 2022
CONSENT OF EXPERT
In connection with the Annual Report on Form 40-F of Yamana Gold Inc. (“Yamana”) for the year ended December 31, 2021 (the “Form 40-F”), I, Sergio Castro, Registered Member, Chilean Mining Commission, hereby consent to the use of my name in connection with the references to the report entitled “NI 43-101 Technical Report, El Peñón Gold-Silver Mine, Antofagasta Region, Chile” dated March 25, 2021 (the “Report”), and to the inclusion of the written disclosure of the Report and of extracts from or summaries thereof (the “Incorporated Information”) in the Annual Information Form filed as an exhibit to the Form 40-F.
I do also hereby consent to the use of my name and the incorporation by reference of the Incorporated Information in Yamana's Registration Statements on Form S-8 (Commission File No. 333-159047, File No. 333-148048 and File No. 333-145300), Form F-3D (Commission File No. 333-217016) and on Form F-10 (Commission File No. 333-237728).
By: /s/ "Sergio Castro"
Name: Sergio Castro, Registered Member, Chilean Mining Commission
March 28, 2022
CONSENT OF EXPERT
In connection with the Annual Report on Form 40-F of Yamana Gold Inc. (“Yamana”) for the year ended December 31, 2021 (the “Form 40-F”), I, Marco Velásquez Corrales, Registered Member, Chilean Mining Commission, hereby consent to the use of my name in connection with the references to the report entitled “NI 43-101 Technical Report, El Peñón Gold-Silver Mine, Antofagasta Region, Chile” dated March 25, 2021 (the “Report”), to the use of my name in connection with the mineral resource estimate for the El Peñón Mine as at December 31, 2021 (the “Estimate”) and to the inclusion of the written disclosure of the Report, the Estimate and of extracts from or summaries thereof (the “Incorporated Information”) in the Annual Information Form filed as an exhibit to the Form 40-F.
I do also hereby consent to the use of my name and the incorporation by reference of the Incorporated Information in Yamana's Registration Statements on Form S-8 (Commission File No. 333-159047, File No. 333-148048 and File No. 333-145300), Form F-3D (Commission File No. 333-217016) and on Form F-10 (Commission File No. 333-237728).
By: /s/ "Marco Velásquez Corrales"
Name: Marco Velásquez Corrales, Registered Member, Chilean Mining Commission
March 28, 2022
CONSENT OF EXPERT
In connection with the Annual Report on Form 40-F of Yamana Gold Inc. (“Yamana”) for the year ended December 31, 2021 (the “Form 40-F”), I, Pascal Lehouiller, P.Geo., hereby consent to the use of my name in connection with the references to the report entitled “NI 43-101 Technical Report, Canadian Malartic Mine, Québec, Canada” dated March 25, 2021 (the “Report”), to the use of my name in connection with the mineral resource estimate for the Canadian Malartic Mine as at December 31, 2021 (the “Estimate”) and to the inclusion of the written disclosure of the Report, the Estimate and of extracts from or summaries thereof (the “Incorporated Information”) in the Annual Information Form filed as an exhibit to the Form 40-F.
I do also hereby consent to the use of my name and the incorporation by reference of the Incorporated Information in Yamana's Registration Statements on Form S-8 (Commission File No. 333-159047, File No. 333-148048 and File No. 333-145300), Form F-3D (Commission File No. 333-217016) and on Form F-10 (Commission File No. 333-237728).
By: /s/ "Pascal Lehoullier"
Name: Pascal Lehouiller, P.Geo.
March 28, 2022
CONSENT OF EXPERT
In connection with the Annual Report on Form 40-F of Yamana Gold Inc. (“Yamana”) for the year ended December 31, 2021 (the “Form 40-F”), I, Guy Gagnon, Eng., hereby consent to the use of my name in connection with the references to the report entitled “NI 43-101 Technical Report, Canadian Malartic Mine, Québec, Canada” dated March 25, 2021 (the “Report”), to the use of my name in connection with the mineral reserve estimate for the Canadian Malartic Mine as at December 31, 2021 (the “Estimate”) and to the inclusion of the written disclosure of the Report, the Estimate and of extracts from or summaries thereof (the “Incorporated Information”) in the Annual Information Form filed as an exhibit to the Form 40-F.
I do also hereby consent to the use of my name and the incorporation by reference of the Incorporated Information in Yamana's Registration Statements on Form S-8 (Commission File No. 333-159047, File No. 333-148048 and File No. 333-145300), Form F-3D (Commission File No. 333-217016) and on Form F-10 (Commission File No. 333-237728).
By: /s/ "Guy Gagnon"
Name: Guy Gagnon, Eng.
March 28, 2022
CONSENT OF EXPERT
In connection with the Annual Report on Form 40-F of Yamana Gold Inc. (“Yamana”) for the year ended December 31, 2021 (the “Form 40-F”), I, Sylvie Lampron, Eng., hereby consent to the use of my name in connection with the references to the report entitled “NI 43-101 Technical Report, Canadian Malartic Mine, Québec, Canada” dated March 25, 2021 (the “Report”) and to the inclusion of the written disclosure of the Report and of extracts from or a summary thereof (the “Incorporated Information”) in the Annual Information Form filed as an exhibit to the Form 40-F.
I do also hereby consent to the use of my name and the incorporation by reference of the Incorporated Information in Yamana's Registration Statements on Form S-8 (Commission File No. 333-159047, File No. 333-148048 and File No. 333-145300), Form F-3D (Commission File No. 333-217016) and on Form F-10 (Commission File No. 333-237728).
By: /s/ "Sylvie Lampron"
Name: Sylvie Lampron, Eng.
March 28, 2022
CONSENT OF EXPERT
In connection with the Annual Report on Form 40-F of Yamana Gold Inc. (“Yamana”) for the year ended December 31, 2021 (the “Form 40-F”), I, Nicole Houle, P.Geo., hereby consent to the use of my name in connection with the references to the report entitled “NI 43-101 Technical Report, Canadian Malartic Mine, Québec, Canada” dated March 25, 2021 (the “Report”) and to the inclusion of the written disclosure of the Report and of extracts from or a summary thereof (the “Incorporated Information”) in the Annual Information Form filed as an exhibit to the Form 40-F.
I do also hereby consent to the use of my name and the incorporation by reference of the Incorporated Information in Yamana's Registration Statements on Form S-8 (Commission File No. 333-159047, File No. 333-148048 and File No. 333-145300), Form F-3D (Commission File No. 333-217016) and on Form F-10 (Commission File No. 333-237728).
By: /s/ "Nicole Houle"
Name: Nicole Houle, P.Geo.
March 28, 2022
CONSENT OF EXPERT
In connection with the Annual Report on Form 40-F of Yamana Gold Inc. (“Yamana”) for the year ended December 31, 2021 (the “Form 40-F”), I, François Bouchard, P.Geo., hereby consent to the use of my name in connection with the references to the report entitled “NI 43-101 Technical Report, Canadian Malartic Mine, Québec, Canada” dated March 25, 2021 (the “Report”) and to the inclusion of the written disclosure of the Report and of extracts from or a summary thereof (the “Incorporated Information”) in the Annual Information Form filed as an exhibit to the Form 40-F.
I do also hereby consent to the use of my name and the incorporation by reference of the Incorporated Information in Yamana's Registration Statements on Form S-8 (Commission File No. 333-159047, File No. 333-148048 and File No. 333-145300), Form F-3D (Commission File No. 333-217016) and on Form F-10 (Commission File No. 333-237728).
By: /s/ "François Bouchard"
Name: François Bouchard, P.Geo.
March 28, 2022
CONSENT OF EXPERT
In connection with the Annual Report on Form 40-F of Yamana Gold Inc. (“Yamana”) for the year ended December 31, 2021 (the “Form 40-F”), I, Jimmy Avendaño Gonzalez, hereby consent to the use of my name in connection with the mineral reserve estimate for the El Peñón Mine as at December 31, 2021 (the “Estimate”) and to any summary or extract of the Estimate (the “Incorporated Information”) in the Annual Information Form filed as an exhibit to the Form 40-F.
I do also hereby consent to the use of my name and the incorporation by reference of the Incorporated Information in Yamana's Registration Statements on Form S-8 (Commission File No. 333-159047, File No. 333-148048 and File No. 333-145300), Form F-3D (Commission File No. 333-217016) and on Form F-10 (Commission File No. 333-237728).
By: /s/ "Jimmy Avendaño"
Name: Jimmy Avendaño Gonzalez
March 28, 2022
CONSENT OF EXPERT
In connection with the Annual Report on Form 40-F of Yamana Gold Inc. (“Yamana”) for the year ended December 31, 2021 (the “Form 40-F”), I, Luiz Carlos Damasceno dos Santos, MAusIMM CP (Geo)., hereby consent to the use of my name in connection with the mineral resource estimate for the Jacobina Mine as at December 31, 2021 (the “Estimate”) and to any summary or extract of the Estimate (the “Incorporated Information”) in the Annual Information Form filed as an exhibit to the Form 40-F.
I do also hereby consent to the use of my name and the incorporation by reference of the Incorporated Information in Yamana's Registration Statements on Form S-8 (Commission File No. 333-159047, File No. 333-148048 and File No. 333-145300), Form F-3D (Commission File No. 333-217016) and on Form F-10 (Commission File No. 333-237728).
By: /s/ "Luiz Carlos Damasceno dos Santos"
Name: Luiz Carlos Damasceno dos Santos, MAusIMM CP (Geo).
March 28, 2022
