Yamana announces $7.9m 2Q loss but no writedowns

As Yamana lowered its production guidance and reported a net loss of $7.9 million or one cent per share for the second quarter, the company announced it was planning to lower its already low-cost structure by $115 million.

“We are focused on our programs initiated earlier this year to push costs down to reclaim a portion of the margin per ounce lost to the declining metals prices,” said Yamana CEO Peter Marrone. “We are committed to our production and production growth although initially we believe it is prudent to focus on costs.”

“While we will show significant volume growth in production, it will be at lower levels than initially planned until we are confident that the new cost structure we are implementing will be sustainable at the initially planned production levels,” he advised.

In financial results published Wednesday, Yamana said it has concluded “there are no impairment charges in respect of its mineral interests as at June 30, 2013. The company believes that adverse changes in metal prices assumption would partially be offset by other inputs that would result in lower costs and updated mine plans.”

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“The company will reassess potential impairments from time to time particularly at higher risk operations including Alumbrera.”

Instead, Yamana announced that it is “committed to reducing all-in sustaining co-product cash costs” by a combined total of $150 per gold equivalent ounce.

Yamana lowered its 2013 guidance from 1.41 million GEO to between 1.32 million and 1.37 million, adding that in 2015, it expects production to be in excess of 1.55 million GEO compared to the previous guidance of ~1.75 million GEO.

Production expectations include more than 8 million ounces of annual silver production and 130 million pounds of yearly copper production for 2013 through 2015.

Among the reductions Yamana will undertake are reducing jobs for employees and contractors, as well as modification of existing supplier contracts. Power, fuel, and consumables will also be impacted.

The company has begun implementing reductions and deferrals in both sustaining and development capex spending for this year.

For the first six months of the year, Yamana reported 586,858 GEO, up from 567,530 GEO for the first half of last year. The gold equivalent ounces include 505,846 ounces of gold and 4.1 million ounces of silver for the first half of 2013, compared to 577,233 gold ounces and 4.5 million silver ounces during the same period of 2012. The company produced 57.5 million pounds of copper during the first half of this year, down substantially from 70.7 million pounds of copper for the first six months of last year.

For the second-quarter 2013, Yamana reported GEO production of 295,545 GEO, up from 288,700 GEO for the same period of last year. GEO output for the second quarter of the year included 257,608 gold ounces and 1.9 million silver ounces, compared to 242,692 gold ounces and 2.3 million ounces of silver for the same quarter of 2012.

The increase in gold production was mainly due to increased production from El Peñon, Mercedes, Minera Florida and Fazenda Braileiro, partly offset by a production setback at Jacobina and lower production at Chapada, Gualcamayo and Alumbrera. Lower silver production was due to planned lower silver ore grades and lower recovery rates at El Peñon.

Copper production for the second quarter of the year dropped from 40.4 million pounds in second-quarter 2012 to 30.1 million pounds. Chapada copper production was lower as a result of anticipated lower copper grade, recovery rate and lower throughput.

FINANCIALS

All-in sustaining cash costs for the first six months of the year were $982 per GEO on a co-product basis. Co-product cash costs per pound of copper average $1.82 per pound from the Chapada Mine during the same period.

During the second quarter of the year, Yamana reported a net loss of $7.9 million or one-cent per share, compared to net earnings of $42.9 million and earnings per share of 6-cents. Adjusted earnings were $50.2 million or 7-cents per share in the second quarter, compared with $134.9 million or 18-cents per share in the second quarter of 2012. “Lower net earnings and adjusted earnings were attributed mainly to lower realized commodity prices combined with inflationary impacts on costs and equity losses from the company’s 12.5% of interest in Alumbrera,” said Yamana.

Net earnings for the first half of 2013 were $94.2 million or 13-cents per share, down from net earnings of $212.9 million or 29-cents per share for the same period of 2012.

The company’s third and fourth quarters are expected to be stronger as new mines ramp up.