Production shortfall at Chapada impacts Yamana’s Q2

JOHANNESBURG (miningweekly.com) – All of TSX- and NYSE-listed Yamana Gold’s operations performed in line with expectations, except for the gold miner’s Chapada mine, in Brazil.

The gold miner noted on Friday that, as a result of production shortfall in the three months to June 30, it expected Chapada to produce 110-million lb of copper and 106 000 oz of gold in 2016.

However, the company’s production expectations for the mine remained unchanged for 2017 and 2018.

Cash costs were impacted on by Chapada’s second-quarter operational performance, as well as by foreign exchange rates.

Given the strengthening of local currencies, primarily the Brazilian real, the Canadian dollar and the Chilean peso, compared with the company's budgeted assumptions in early 2016, cash costs increased in the second quarter compared with the first quarter.

Some of the cost increases in the second quarter were foreseeable, although the local currency strengthened more than anticipated which increased costs more than expected.

Yamana said it continued to focus on tracking operational guidance as it advanced its efforts to create additional value within its Brazil-based portfolio. This included the ramp up of Riacho dos Machados (RDM) towards expected steady-state production in early 2017, the development of Cerro Moro earlier that year, and the ramp up of C1 Santa Luz towards production in 2018.

On a consolidated basis, the company continues to be well positioned to deliver on gold and silver production guidance for the full year.

Additionally, second-half production for all metals is expected to be higher than first-half production.

Net earnings from continuing operations attributable to Yamana equity-holders for the three months ended June 30 were $32.9-million. or $0.03 a share.

Earnings for the period were higher owing to higher gold sales and prices, partly offset by lower sales of silver and copper, lower realised metal prices for copper and lower depletion, depreciation and amortisation (DDA).

Adjusted earnings from continuing operations were $5.4-million, or $0.01 a share, for the period under review.

Revenue for the quarter was $466.5-million, impacted on by increased gold sales, lower silver and copper sales, and a significantly lower price for copper.

Revenue for the second quarter was generated from the sale of 312 356 oz of gold, 1.8-million ounces of silver and 26- million pounds of copper.

The average realised gold price for the quarter was $1 267/oz, while the average realised silver price was $16.82/oz.

The average realised price of copper was $2.12/lb.

Cost of sales excluding DDA for the three months was $283.5-million, compared with $274.5-million for the same period in 2015.

DDA expense for the period was $119.3-million, lower than the comparative period in 2015, owing to lower silver and copper sales volumes, reflecting lower asset book values, owing to the impairment charges recorded in the fourth quarter of 2015, a portion of which related to producing properties.

This is partly offset by higher gold production and the DDA associated with Yamana’s newly acquired RDM mine.