Management Information Circular

Notice of 2017 annual meeting of shareholders		3

Message from the Chairman and Chief Executive Officer		4

1	About the shareholder meeting	6
	Voting	6
	Business of the meeting	8
	About the nominated directors	10
	2016 Board committee reports	23

2	Executive compensation	25

	Message from the Chairman of the Compensation Committee	25

	Compensation discussion and analysis	28
	Executive compensation framework	28
	Compensation governance	29
	Compensation philosophy	34
	Compensation benchmarking	35
	Elements of executive compensation and decisions for 2016	36
	Chairman and CEO compensation profile	49
	Share performance	51

	2016 Compensation details	53
	Summary compensation table	53
	Cost of management analysis	54
	Outstanding share-based and option-based awards	55
	Retirement benefits	59
	Termination and double trigger change of control	60

3	Director compensation	63

	Compensation discussion and analysis	63
	2016 Director fee schedule	63
	Director share ownership	64

	2016 Compensation details	65
	Summary compensation table	65
	Outstanding share-based and option-based awards	66

4	Governance	67
	Our governance practices	67
	About the board	68
	Serving as a director	73

5	Other information	78

Appendix — Charter of the board of directors		82

Message from the Chairman and Chief Executive Officer

On behalf of the board of directors of Yamana Gold Inc., I am pleased to invite you to our 2017 annual meeting of shareholders, on May 4, 2017 at the Design Exchange in Toronto.

This circular provides important information that will assist you as you evaluate the items to be voted on at our upcoming meeting. Our aim is to provide shareholders with the information they need to make informed voting decisions and, as such, we continue to make improvements and enhancements to how we present information in the management information circular.

Along with our director nominees who are standing for re-election, we are excited to introduce Kimberly Keating as a new nominee for 2017. Kim is a Professional Engineer by training, with almost 20 years of experience in the Canadian energy industry. She has significant experience overseeing large capital projects as a member of senior management at large global organizations. Together with her engineering background and leadership experience, Kim will bring a wealth of strategy, risk assessment, policy and technical expertise to the Yamana board.

2016 was a strong year for the organization, reflected by operational and financial performance results meeting or exceeding expectations. We focused on delivering on operational expectations, enhancing our management and organizational construct, improving our mine plans, identifying new exploration targets, advancing our development projects, continuing to deliver significant financial performance, and achieving our health, safety and environment objectives. Take some time to read the more detailed discussion of our achievements in our 2016 annual report, which you have received in your package with this circular.

Performance highlights for the year include:

· Delivered gold, silver and copper production in line with full year guidance

· Increased cash flow and free cash flow, and expanded operating margins

· Achieved record levels for health, safety and environmental performance

· Made important new exploration discoveries at existing operations that support future mineral resource growth and mine life extensions

· Advanced the development of Cerro Moro and Suruca (at Chapada), as well as permitting for the Barnat extension at Canadian Malartic

· Returned value to shareholders with a one-year total shareholder return of 49.44%.

2016 marked the second year of our new approach to executive compensation, supported by shareholders at our last annual meeting with a say on pay score of 87%. Highlights of our framework are provided below — you can read about the details of our program starting on page 25.

Our compensation framework reflects a balanced perspective		Our compensation framework is influenced by our longer-term corporate strategy, feedback from shareholders and an independent review of prevailing market practices for executive pay programs among our industry peers

Performance is assessed against measures that align with our corporate strategy		Performance metrics and targets align with our corporate strategy and our future growth objectives. Measures are pre-defined at the beginning of the year and assessed at the end of the year based on results achieved

Majority of executive compensation is ‘at risk’		For named executives, 75% of total compensation is determined through variable compensation, with the majority delivered in long-term incentives and actual compensation outcomes directly linked to financial, operational and share price performance

We take a long-term view of performance		Long-term incentive grant values are determined based on the achievement of financial, operational, people and growth initiatives. The actual value realized from long-term incentive grants are determined over three, five or seven-year performance cycles, directly related to share price performance and total shareholder returns, including performance compared to our industry peers

The board can use informed judgment to adjust calculated compensation outcomes		Within both the short-term and long-term incentive plans, the compensation committee and board of directors have the flexibility within a narrow band to adjust awards / grant values up or down to ensure calculated values appropriately reflect corporate and individual performance

1. About the shareholder meeting

Voting	6
Business of the meeting	8
About the nominated directors	10
2016 Board committee reports	23

VOTING

Who can vote

If you held our common shares as of March 21, 2017, you’re entitled to vote at our 2017 annual meeting. Each common share entitles the holder to one vote on each item of business.

We’ll prepare a list of all registered shareholders of record who are entitled to vote at the meeting, as required by the Canada Business Corporations Act. Our transfer agent, CST Trust Company (CST), will have a copy at their office and at the meeting if you want to review it.

As of March 28, 2017, we had 948,036,679 common shares issued and outstanding. Management and the board of directors are not aware of any person or company that beneficially owns (directly or indirectly) or exercises control or direction over our common shares carrying more than 10 percent of the voting rights.

Registered shareholders

You’re a registered shareholder if you have a share certificate in your name.

Non-registered shareholders

Most of our shareholders are non-registered (or beneficial) shareholders. This means that the shares are registered in the name of either:

· an intermediary like your brokerage firm, bank, trust company, securities dealer or broker, or trustee or administrator of a self-directed RRSP, RRIF, RESP or similar plan (your nominee), or

· a clearing agency (like The Canadian Depository for Securities Limited) that acts on behalf of your nominee.

How to vote

Registered shareholders

Your package includes a proxy form, and a consent form that allows us to send you additional mailings and documents electronically

Voting by proxy		You can vote in person or vote by proxy. Voting by proxy is the easiest way to vote because you can appoint anyone to be your proxyholder to attend the meeting and vote your shares according to your instructions. This person does not need to be a shareholder.

		The executive officers named in the proxy form (Yamana proxyholders) can act as your proxyholder and vote your shares according to your instructions.

		If you appoint the Yamana proxyholders and don’t indicate your voting instructions, they will vote your shares:

		· for the nominated directors

		· for the appointment of the auditors

		· for the ‘say on pay’ vote on our approach to executive compensation as described in this circular.

		If you want to appoint someone else as your proxyholder, print that person’s name in the blank space provided in the proxy form (or complete another proxy form) and send the form to CST. Make sure this person is aware that you appointed them as your proxyholder and that they must attend the meeting to vote on your behalf and according to your instructions. The shares represented by your proxy will be voted or withheld from voting according to your instructions on any ballot that may be called for at the meeting.

		If you don’t indicate your voting instructions or if other matters are properly brought before the meeting, your proxyholder can vote as he or she sees fit.

		How to send us your proxy form

		You can send your completed proxy form to CST by phone, fax, mail, email or on the internet. Follow the instructions on the proxy form included in your package.

		CST must receive the completed form by 4 p.m. (Toronto time) on May 2, 2017. If the meeting is postponed or adjourned, CST must receive the form at least 48 hours (not including Saturdays, Sundays and holidays) before the meeting is reconvened. The Chairman of the meeting can accept or reject late proxies at his discretion.

		Questions?

		Call CST at 1.800.387.0825 or 416.682.3860.

Voting in person		If you want to attend the meeting and vote in person, do not return the proxy form because you will cast your vote at the meeting.

Non-registered shareholders

Your package also includes either a proxy or voting instruction form, the consent form and a copy of our 2016 annual report if you requested a copy

Voting by proxy		We’re required by law to send meeting materials to intermediaries and clearing agencies to distribute them to our non-registered (beneficial) shareholders. Intermediaries often use service companies (like Broadridge Financial Solutions, Inc.) to send the materials.

		We send meeting materials to brokers, intermediaries, custodians, nominees and fiduciaries and request the materials be sent to beneficial shareholders promptly. We will pay for the distribution of the meeting materials by clearing agencies and intermediaries to objecting beneficial shareholders.

		If you’re a non-registered shareholder and have not waived the right to receive these materials, your intermediary must send you the notice of the meeting, the circular, a consent form to receive supplemental mailings, a copy of our 2016 annual report if you requested a copy and documents by electronic delivery, and either a voting instruction form (not signed by your intermediary) or a proxy form (signed by your intermediary):

		· voting instruction form (not signed by your intermediary) — a one page, pre-printed form or a regular printed proxy form with a page of instructions that includes a removable label with a bar code and other information. Complete the form, sign it and follow the instructions for affixing the label to the form before sending it to your intermediary or service provider. You must properly affix the label to the form for it to be valid.

		· proxy form (signed by your intermediary) — typically signed by a facsimile or stamped signature and is restricted to the number of shares you beneficially own. Complete the form and then follow the instructions for returning it. Do not sign the form because it has already been signed by your intermediary.

		Be sure to send back your completed form as soon as possible so your intermediary (the registered shareholder) has enough time to carry out your voting instructions.

Voting in person		If you want to attend the meeting and vote in person, follow the instructions provided by your intermediary.

Changing your vote

Registered shareholders

Non-registered shareholders

You can provide new voting instructions if you change your mind about how you want to vote your shares

Revoke your proxy by sending a notice in writing by you or your authorized attorney (or by a duly authorized officer or attorney if the registered shareholder is a corporation) to our head office:

Yamana Gold Inc.

Royal Bank Plaza, North Tower

200 Bay Street, Suite 2200

Toronto, Ontario M5J 2J3

Attention: Sofia Tsakos, Senior Vice President, General Counsel and Corporate Secretary

You can send the notice up to 4 p.m. (Toronto time) on May 2, 2017, or give it to the Chairman of the meeting on the day of the meeting or in any other manner permitted by law.

Follow the instructions provided by your intermediary to revoke your proxy.

BUSINESS OF THE MEETING

1. Receive the financial statements (www.yamana.com)

You’ll receive management’s report to shareholders, our audited consolidated financial statements and the auditors’ report for the year ended December 31, 2016.

2. Elect the directors (see page 10)

You’ll vote on electing 11 directors to the board for a term of one year. All of the nominated directors are currently on our board and have expressed their willingness to serve another term. Kimberly Keating, a Professional Engineer, was appointed to the board in February 2017 and is standing for election to the board for the first time.

Management recommends you vote for each nominated director

You can vote for or withhold your vote for the following individuals:

1. John Begeman
2. Christiane Bergevin
3. Alexander Davidson
4. Richard Graff
5. Kimberly Keating
6. Nigel Lees
7. Peter Marrone
8. Patrick J. Mars
9. Carl Renzoni
10. Jane Sadowsky
11. Dino Titaro

3. Appoint the auditors (see also our annual information form at www.yamana.com)

You’ll vote on appointing Deloitte LLP, Chartered Professional Accountants (Deloitte) as our external auditors until the end of the next annual meeting.

Management recommends you vote for the appointment of Deloitte as our auditors

The table below shows the fees paid to Deloitte in 2016 and 2015.

Cdn$, year ended December 31	2016		2015
Audit fees	$	2,309,000	$	2,630,000
for the audit of our annual consolidated financial statements and certain statutory audits outside of Canada
Audit-related fees	$	1,759,000	$	1,433,000
for services related to: · Brio Gold related fees · translations · quarterly review engagement · statutory and regulatory filings
Tax fees	$	74,000	$	70,000
· for professional services for tax compliance, tax advice and tax planning
All other fees	$	179,000	$	74,000
· assurance on Conflict-Free Gold Report · assurance on ESTMA report
Total fees	$	4,321,000	$	4,207,000

4. Have a ‘say on pay’ (see page 25)

We hold a shareholder advisory vote on executive compensation because we believe it’s important to receive shareholder feedback on this issue. You’ll find a complete discussion of our executive compensation program, and the board’s decisions on executive pay for 2016 starting on page 25.

At last year’s meeting, 87.11% of the votes were cast in favour of our approach to executive pay, following a comprehensive review of our executive compensation program and governance practices, extensive changes to the compensation program, engaging with approximately 40% of our shareholder base and the compensation committee retaining a new independent advisor.

Results of an advisory vote are non-binding on the board, however if a majority of the shares are not voted for our approach to executive compensation, the board will meet with shareholders to discuss their concerns. The board will disclose the levels of engagement and the outcome of these discussions in the management information circular for the next annual meeting of shareholders.

Management recommends you vote for our approach to executive compensation as described in this circular

ABOUT THE NOMINATED DIRECTORS

According to our articles, our board must have three to 15 directors.

We consider diversity of background, skills, age, culture, geography, experience and gender when reviewing potential director candidates, and the 11 directors nominated this year represent a strong and diverse mix of experience in finance, mining, engineering, sustainability, risk management, metallurgy, mergers and acquisitions and international business — key skills for overseeing our affairs and guiding our strategic growth. Three of the director nominees (27%) are women.

Patrick J. Mars, an independent, seasoned director and specialist in mine finance, serves as our Lead Director.

Directors who are elected will hold office until the end of our next annual meeting, unless they step down for any reason under the terms of our by-laws. Management does not believe that any of them will not be able to serve, but if this happens, your proxyholder can vote for another person using their best judgment.

You can read about the nominated directors beginning on page 10, including information they’ve provided about the Yamana common shares and deferred share units (DSUs) they beneficially own, directly or indirectly, or exercise control or direction over. Holdings are as at February 24, 2017 and the market values are based on Cdn$3.71 per share (the closing price of Yamana shares on the TSX on February 23, 2017), converted using the exchange rate of Cdn$1.00 = US$0.7625 on that date). See page 64 for more information about director share ownership.

Majority voting

Any director who doesn’t receive at least a majority of for votes (50% plus one) must tender his or her resignation to the board within five days following such vote.

The corporate governance and nominating committee will review the vote and the board will accept the resignation unless there are exceptional circumstances. The board will make its decision within 90 days after the relevant shareholders meeting and then promptly issue a press release with the results and the reasons for the decision. The resignation will take effect when accepted by the board. The director does not participate in any committee or board discussions on the matter.

If the board accepts the resignation, it can appoint a new director to fill the vacancy, as allowed by law.

This policy only applies when director elections are uncontested.

Serving together on other boards

We have one board interlock: Nigel Lees and Patrick Mars both sit on the board of SAGE Gold Inc.

John Begeman

Age: 62

South Dakota, United States

Company director

Director since May 2007 / Independent

Areas of expertise

· Natural resources/Energy

· Risk management

· Sustainability

· Finance/Accounting

· Capital markets

· International business

· Project management

John Begeman is a Professional Mining Engineer with over 35 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 Premier Gold Mines Limited and has been the Executive Chairman of the board since 2015.

Mr. Begeman previously served as a director of Aberdeen International Inc., the President and Chief Executive Officer of Avion Gold Corporation, as the Chief Operating Officer of Zinifex Canada Inc. and as 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 endeavors. His past environmental and social licence analysis along with project risk assessment also form a broad base from which the board and management can draw upon.

Mr. Begeman holds a B.S. in Mining Engineering, an M.S. in Engineering Management and an MBA.

	2016 meeting attendance
Board of directors	13 of 13	100	%
Audit committee	4 of 4	100	%
Sustainability committee (Chair)	5 of 5	100	%

	2016 compensation
Total compensation	$	242,000
Amount received as DSUs	$	87,500 / 36	%

		2016 director voting results
% voted for		98.80	%

	Yamana shares	DSUs	Total	Total market value		Total book value
Share ownership	10,431	113,777	124,208	$	351,369	$	675,433
Share ownership guidelines	Currently holds 3.9x the annual board retainer and meets the 3x requirement

Other public company boards and board committees during the last five years

Premier Gold Mines Limited (since May 2006)		Audit (Chair), Compensation
Aberdeen International Inc. (January 2015 to March 2017)		Audit, Compensation
Endeavor Mining Corporation (October 2012 to December 2012)		Safety, Health & Environment (Chair)
Avion Gold Corporation (September 2008 to October 2012)		Audit
Valencia Ventures Inc. (June 2008 to June 2012)		Audit (Chair)

Christiane Bergevin

Age: 54

Quebec, Canada

Company director

Director since September 2014 / Independent

Areas of expertise

· Natural resources/Energy

· Risk management

· Sustainability

· Finance/Accounting

· International business

· Governance

· Project management

Christiane Bergevin is the President of Bergevin Capital, advising infrastructure and energy sector clients. She brings more than 30 years of experience in strategy, project and risk structuring, and financing of resource, transport and infrastructure projects on all continents in addition to experience in the financial sector. 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 a major oil and gas producer. As Executive Vice-President, Desjardins Group (Canadian financial cooperative institution) between 2009 and 2015, she led mergers and acquisitions, strategic partnerships and business development. She was also a member of Desjardins Group’s 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 managing executive 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 is a Director of RATP Dev, an international public transport operator and she chairs the audit committee of the board of AGF Group, a reinforcing steel and scaffolding supplier. She is the First Vice-Chair 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 by the Institute of Corporate Directors.

	2016 meeting attendance
Board of directors	13 of 13	100	%
Corporate governance and nominating committee	4 of 4	100	%
Sustainability committee (appointed August 15, 2016)	0 of 0	—

	2016 compensation
Total compensation	$	216,000
Amount received as DSUs	$	175,000 / 81	%

		2016 director voting results
% voted for		99.15	%

	Yamana shares	DSUs	Total	Total market value		Total book value
Share ownership	—	134,392	134,392	$	380,178	$	327,468
Share ownership guidelines	Currently holds 2.2x the annual board retainer and has until September 2017 to meet the 3x requirement

Other public company boards and board committees during the last five years

Talisman Energy Inc. (April 2009 to May 2015)		Governance & Nominating, Health, Safety, Environment & Corporate Responsibility
Fiera Capital Corporation (September 2010 to May 2013)		Audit (Chair)

Alexander Davidson

Age: 65

Ontario, Canada

Company director

Director since August 2009 / Independent

Areas of expertise

· Natural resources/Energy

· Risk management

· Sustainability

· Capital markets

· International business

· Project management

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 for his team’s discovery of the Lagunas Norte Project in the Alto Chicama District, Peru.

Mr. Davidson received his B.Sc. and his 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 allows 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.

	2016 meeting attendance
Board of directors	13 of 13	100	%
Compensation committee	9 of 9	100	%
Sustainability committee	5 of 5	100	%

	2016 compensation
Total compensation	$	263,875
Amount received as DSUs	$	109,375 / 41	%

		2016 director voting results
% voted for		89.98	%

	Yamana shares	DSUs	Total	Total market value		Total book value
Share ownership	18,200	143,940	162,140	$	458,674	$	822,162
Share ownership guidelines	Currently holds 4.7x the annual board retainer and meets the 3x requirement

Other public company boards and board committees during the last five years

Perseus Mining Ltd. (since April 2016)		—
Americas Silver Corporation (since December 2014)		Chair
NuLegacy Gold Corporation (since September 2014)		Audit
Orca Gold Inc. (since January 2013)		Technical, Compensation
Capital Drilling Ltd. (since May 2010)		Audit, Safety, health and environment
MBAC Fertilizer Corp. (January 2010 to June 2015)		Compensation, Safety, health and environment
U.S. Silver & Gold Inc. (July 2011 to December 2014)		Compensation
B2 Gold Corp., formerly Volta Resources Inc. (March 2011 to December 2013)		Safety, health and environment
Cupric Canyon Capital, formerly Hanna Mining Ltd. (December 2010 to February 2013)		—
Chantrell Ventures Corp. (December 2010 to February 2013)		—
Kobex Capital Corp., formerly Kobex Minerals Inc. (November 2009 to December 2012)		Audit, Compensation
Namakwa Diamonds Limited (December 2007 to March 2012)		Safety, health and environment

While Mr. Davidson serves on five other public company boards, these include small-cap companies with fewer regular board responsibilities. Mr. Davidson is a highly valuable member and brings significant mining industry and executive leadership experience to Yamana’s board, and he attended all of his board and committee meetings in 2016.

Richard Graff

Age: 70

Colorado, United States

Company director

Director since October 2007 / Independent

Areas of expertise

· Natural resources/Energy

· Risk management

· Finance/Accounting

· Governance

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 U.S. 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 continues to organize 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 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. He currently serves as the lead director and chairman of the audit committee and is a member of the compensation and corporate governance and nominating committees of Alacer Gold Corp. He also serves as chairman of the audit committee and is a member of the corporate governance and nominating committee of DMC Global, Inc. (formerly Dynamic Materials 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.

	2016 meeting attendance
Board of directors	13 of 13	100	%
Audit committee (Chair)	4 of 4	100	%

	2016 compensation
Total compensation	$	242,250
Amount received as DSUs	$	87,500 / 36	%

		2016 director voting results
% voted for		98.02	%

	Yamana shares	DSUs	Total	Total market value		Total book value
Share ownership	33,949	113,777	147,726	$	417,898	$	788,901
Share ownership guidelines	Currently holds 4.5x the annual board retainer and meets the 3x requirement

Other public company boards and board committees during the last five years

Alacer Gold Corp. (since June 2008)

Lead Director

Audit (Chairman), Compensation, Corporate governance and nominating

DMC Global Inc. (formerly Dynamic Materials Corporation) (since June 2007)

Audit (Chairman), Corporate governance and nominating

Kimberly Keating

Age: 44

Newfoundland, Canada

Company director

Director since February 2017 / Independent

Areas of expertise

· Natural resources/Energy

· Risk management

· Sustainability

· International business

· Governance

· Project management

Kimberly Keating is a Professional Engineer with almost 20 years of experience in the Canadian energy sector. She is currently Vice President Fabrication with the Cahill Group, where she has overseen the construction of the accommodation facility for one of the world’s largest offshore oil platforms. Prior to joining the Cahill Group as Director of Projects in 2013, Ms. Keating held a variety of progressive leadership positions, from engineering design through to construction, commissioning, production operations and field development, with Petro-Canada (now Suncor Energy Inc.).

Throughout her career, Ms. Keating has made significant engineering and project management contributions to key projects in the North Atlantic offshore oil and gas industry, bringing a wealth of strategy, risk assessment, policy and technical expertise to the Yamana board.

Ms. Keating has also held numerous volunteer leadership roles, including serving as the current Vice Chair of Memorial University’s Board of Regents where she is also the Chair of the Governance & Pensions Committees, and a board director with the Dr. H. Bliss Murphy Cancer Care Foundation, Opera on the Avalon and the Oil and Gas Development Council of Newfoundland and Labrador. She holds a Bachelor of Civil (Structural) Engineering, a Masters 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.

	2016 meeting attendance
Board of directors	n/a	n/a

		2016 compensation
Total compensation		n/a
Amount received as DSUs		n/a

		2016 director voting results
% voted for		n/a

Yamana shares

DSUs

Total

Total market
value

Total book value

Share ownership

—

Share ownership guidelines

Other public company boards and board committees during the last five years

None

Nigel Lees

Age: 73

Ontario, Canada

President and Chief Executive Officer of SAGE Gold Inc.

Director since June 2005 / Independent

Areas of expertise

· Natural resources/Energy

· Finance/Accounting

· Capital markets

· International business

· Governance

Nigel Lees has over 25 years of experience in the investment banking industry. He has served as a member of the Listings Committee of the Toronto Stock Exchange and on the audit, compensation and special committees of several publicly listed companies.

Mr. Lees has extensive experience in the mining industry particularly in North America and South America as a principal and financier. He was the founder and director of TVX Gold Inc., which merged with Kinross Gold Corporation in 2003.

Mr. Lees is currently the President of C.N. Lees Investments Limited, a private investment and consulting company, and President and Chief Executive Officer of SAGE Gold Inc., a public precious metals exploration and development company.

	2016 meeting attendance
Board of directors	13 of 13	100	%
Compensation committee (Chair)	9 of 9	100	%

	2016 compensation
Total compensation	$	255,000
Amount received as DSUs	$	87,500 / 34	%

		2016 voting results
% voted for		97.14	%

	Yamana shares	DSUs	Total	Total market value		Total book value
Share ownership	15,000	113,777	128,777	$	364,294	$	706,689
Share ownership guidelines	Currently holds 4x the annual board retainer and meets the 3x requirement

Other public company boards and board committees during the last five years

SAGE Gold Inc. (since December 2003)		—
Kenna Capital Corp. (March 2007 to May 2012)		Audit
Augyva Mining Resources Inc. (August 2011 to April 2014)		Corporate governance and nominating, Compensation

Peter Marrone (Chairman and Chief Executive Officer)

Age: 57

Ontario, Canada

Director since July 2003 / Not independent

Areas of expertise

· Natural resources/Energy

· Risk management

· Finance/Accounting

· Capital markets

· Governance

· International business

Peter Marrone founded Yamana in July 2003 and has been instrumental in the company’s strategic development and operational growth. Mr. Marrone currently serves as Chairman and Chief Executive Officer of Yamana.

Mr. Marrone has more than 25 years of mining, business and capital markets experience, bringing an important range of extensive and diverse financial, legal and business experience to the company. He has been on the boards of a number of public companies and advised companies with a strong South American and North American presence.

Prior to Yamana, Peter 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.

	2016 meeting attendance
Board of directors	13 of 13	100	%

	2016 compensation
CEO total compensation	$	1,476,600
Amount received as PSUs/RSUs	$	390,000 / 26	%

		2016 director voting results
% voted for		92.87	%

	Yamana shares	DSUs/ RSUs	Total	Total market value		Total book value
Share ownership	692,920	2,995,162	3,688,082	$	12,613,229	$	37,147,519
CEO share ownership guidelines	Currently holds 25x his annual base salary and exceeds his 3x requirement

Other public company boards and board committees during the last five years

MBAC Fertilizer Corp. (December 2009 to July 2015)

Patrick J. Mars (Lead Director)

Age: 76

Ontario, Canada

Company director

Director since July 2003 / Independent

Areas of expertise

· Natural resources/Energy

· Finance/Accounting

· Capital markets

· International business

· Governance

Patrick Mars is a company director specializing in mine finance and analysis. He benefits from over 30 years of experience in the investment industry and has had extensive involvement in mining research, financing and advisory work. For the majority of his career he was with Alfred Bunting & Co/Bunting Warburg, a Canadian investment dealer and stockbroker where he was President and CEO from 1981 to 1994. During this time he served three-year terms both as a Governor of the Toronto Stock Exchange (TSX) and Director of the Investment Dealers Association. From 1999 to 2001 he was Chairman and a Director of First Marathon Securities (UK)/NBC Financial (UK) Limited.

Mr. Mars is a director of Aura Minerals Inc. and Sage Gold Inc. (Chairman), and is President of P.J. Mars Investments Limited, a private company.

Throughout his career, Mr. Mars was retained as an expert witness by several reputable law firms to provide expertise in the mining industry, including valuations of mining companies and settlement of disputes. In 1995, Mr. Mars was awarded the Robert Elver Mineral Economics Award by the Canadian Institute of Mining and Metallurgy (CIM). He is a Chartered Financial Analyst (CFA) charterholder and holds a Bachelor of Commerce and a Master of Business Administration.

	2016 meeting attendance
Board of directors	13 of 13	100	%
Audit committee	4 of 4	100	%
Compensation committee	9 of 9	100	%
Corporate governance and nominating committee (Chair)	4 of 4	100	%

	2016 compensation
Total compensation	$	274,750
Amount received as DSUs	$	87,500 / 32	%

		2016 director voting results
% voted for		95.52	%

	Yamana shares	DSUs	Total	Total market value		Total book value
Share ownership	46,000	113,777	159,777	$	451,989	$	907,560
Share ownership guidelines	Currently holds 5.2x the annual board retainer and meets the 3x requirement

Other public company boards and board committees during the last five years

Aura Minerals Inc. (since January 2006)		Audit, Nominating, Corporate governance, Compensation
SAGE Gold Inc. (since October 2002)		Audit
Carpathian Gold Inc. (January 2003 to August 2014)		Corporate governance, Compensation, Audit
Selwyn Resources Ltd. (August 2005 to May 2012)		Corporate governance, Compensation

Carl Renzoni

Age: 78

Ontario, Canada

Company director

Director since October 2007 / Independent

Areas of expertise

· Natural resources/Energy

· Finance/Accounting

· Capital markets

· International business

· Governance

Carl Renzoni retired from BMO Nesbitt Burns in 2001, where he was employed since 1969 and most recently served as a Managing Director.

Mr. Renzoni brings over 30 years of experience in the securities business specializing in the mining sector, where he advised companies on capital market transactions, mergers and acquisitions and project financing. He previously served on the boards of International Molybdenum Ltd., Peru Copper Inc. and Meridian Gold Inc., and also served on the Audit Committee of Meridian Gold Inc. Mr. Renzoni has gained extensive board-level experience as a member and chair of a number of audit, governance and special committees.

Mr. Renzoni is currently a director of Copper Mountain Mining Corp. and holds an Honors B.Sc. (Geology) degree from Queen’s University.

	2016 meeting attendance
Board of directors	13 of 13	100	%
Audit committee	4 of 4	100	%
Corporate governance and nominating committee	4 of 4	100	%

	2016 compensation
Total compensation	$	224,250
Amount received as DSUs	$	87,500 / 39	%

		2016 director voting results
% voted for		99.14	%

	Yamana shares	DSUs	Total	Total market value		Total book value
Share ownership	18,938	122,436	141,374	$	399,929	$	716,617
Share ownership guidelines	Currently holds 4.1x the annual board retainer and meets the 3x requirement

Other public company boards and board committees during the last five years

Copper Mountain Mining Corp. (since March 2008)

Corporate governance (Chair), Audit

Jane Sadowsky

Age: 55

New York, United States

Company director

Director since September 2014 / Independent

Areas of expertise

· Natural resources/Energy

· Risk management

· Finance/Accounting

· Capital markets

· International business

· Governance

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 & 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 predominantly in the electricity power sector to public and private sector clients in the United States and abroad. 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 a National Association of Corporate Directors (NACD) Governance Fellow.

	2016 meeting attendance
Board of directors	13 of 13	100	%
Audit committee	4 of 4	100	%

	2016 compensation
Total compensation	$	219,750
Amount received as DSUs	$	175,000 / 80	%

		2016 director voting results
% voted for		99.14	%

	Yamana shares	DSUs	Total	Total market value		Total book value
Share ownership	—	134,392	134,392	$	380,178	$	327,468
Share ownership guidelines	Currently holds 2.2x the annual board retainer and has until September 2017 to meet the 3x requirement

Other public company boards and board committees during the last five years

Petrofac Limited (since November 2016)

Nominations, Audit

Dino Titaro

Age: 65

Ontario, Canada

Company director

Director since August 2005 / Independent

Areas of expertise

· Natural resources/Energy

· Risk management

· Sustainability

· Capital markets

· International business

· Governance

· Project management

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 currently sits on the board of directors of Avidian Gold Inc., Tethyan Resource Inc., and Mincor Inc., each being a private mineral resource company, and 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.

	2016 meeting attendance
Board of directors	13 of 13	100	%
Compensation committee	9 of 9	100	%
Corporate governance and nominating committee	4 of 4	100	%
Sustainability committee	5 of 5	100	%

	2016 compensation
Total compensation	$	254,250
Amount received as DSUs	$	87,500 / 34	%

		2016 director voting results
% voted for		97.36	%

	Yamana shares	DSUs	Total	Total market value		Total book value
Share ownership	21,000	113,777	134,777	$	381,267	$	711,885
Share ownership guidelines	Currently holds 4.1x the annual board retainer and meets the 3x requirement

Other public company boards and board committees during the last five years

Carpathian Gold Inc. (January 2003 to August 2014)		—
Royal Coal Corporation (August 2010 to May 2012)		Safety, health and environment, Corporate governance, Compensation, Nomination

Director meeting attendance

The table below shows director attendance in 2016. All of the directors also attended the 2016 annual meeting of shareholders. Ms. Keating is not included in the table as she was appointed to the board in February 2017.

	Board			Audit committee			Compensation committee			Corporate governance and nominating committee			Sustainability committee
Director	Number	%		Number	%		Number	%		Number	%		Number		%
John Begeman	13/13	100		4/4	100		—	—		—	—		5/5		100
Christiane Bergevin	13/13	100		—	—		—	—		4/4	100		0/0	1	—
Alexander Davidson	13/13	100		—	—		9/9	100		—	—		5/5		100
Richard Graff	13/13	100		4/4	100		—	—		—	—		—		—
Nigel Lees	13/13	100		—	—		9/9	100		—	—		—		—
Peter Marrone	13/13	100		—	—		—	—		—	—		—		—
Patrick Mars	13/13	100		4/4	100		9/9	100		4/4	100		—		—
Carl Renzoni	13/13	100		4/4	100		—	—		4/4	100		—		—
Jane Sadowsky	13/13	100		4/4	100		—	—		—	—		—		—
Dino Titaro	13/13	100		—	—		9/9	100		4/4	100		5/5		100
Overall attendance		100	%		100	%		100	%		100	%			100	%

Notes

(1) Ms. Bergevin was appointed a member of the sustainability committee on August 15, 2016, and there were no sustainability committee meetings after this date.

The board has a policy of meeting in camera with the independent directors at the end of each board meeting. The independent directors met 13 times in 2016.

Other information about the nominated directors

Mr. Titaro resigned as director of Royal Coal Corp. on May 9, 2012. On May 17, 2012, Royal Coal Corp. announced it received notice that the TSX Venture Exchange had suspended trading its securities because the Ontario Securities Commission had imposed a cease trade order for failure to file financial statements. The cease trade order was still in effect on the date this circular was printed.

On April 16, 2014, the Ontario Securities Commission issued a management cease trade order against the Interim Chief Executive Officer and the Chief Financial Officer of Carpathian Gold Inc. (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 Carpathian’s filing of the required continuous disclosure documents. Mr. Mars and Mr. Titaro are former directors of Carpathian. They were directors during the period of the management cease trade order, but they did not stand for re-election and were no longer directors on August 12, 2014.

None of the other nominated directors is, or has been in the last 10 years, a director, chief executive officer or chief financial officer of any company (including Yamana) that during their term or within a year of leaving the role has been subject to a penalty, sanction or bankruptcy, insolvency or any other issue that likely would be considered important to a reasonable shareholder in deciding whether to vote for the nominated director.

2016 BOARD COMMITTEE REPORTS

Audit committee

Richard Graff (Chair), John Begeman, Patrick Mars, Carl Renzoni, Jane Sadowsky

100% independent, met 4 times in 2016

All members are financially literate. Richard Graff’s strong accounting background and experience qualify him to be the committee’s financial expert and meet the requirements under U.S. securities laws.

Primary responsibilities

Assists the board in fulfilling its financial reporting and control responsibilities to shareholders and the investment community:

· oversees our accounting and financial reporting processes and the audit of our financial statements, including the integrity of our financial statements, our compliance with legal and regulatory requirements and the qualifications and independence of the external auditors

· monitors our financial reporting processes and internal control systems

· oversees the external auditors and approves the annual audit plan

· meets regularly with management and the external auditors

· reviews its committee charter at least once a year

The committee has approved this report and is satisfied that it fulfilled the responsibilities of its mandate in 2016.

See page 8 for the fees paid to the external auditors in 2016 and 2015.

You can find more information about the audit committee in our 2016 annual information form under the heading Audit Committee, available on our website (www.yamana.com) and on SEDAR (www.sedar.com).

2016 highlights

· reviewed and approved the quarterly and annual financial results for recommendation to the board

· reviewed our procedures for complying with The Sarbanes-Oxley Act

· reviewed our insurance programs and any potential impact on financial reporting

· monitored risk activity including tax issues, uninsured risks, counterparty risk, treasury risk, information technology risk and other business risks

· reviewed carrying value of mineral properties

· conducted an evaluation of the qualifications, performance and independence of the external auditors

Compensation committee

Nigel Lees (Chair), Alexander Davidson, Patrick Mars, Dino Titaro

100% independent, met 9 times in 2016

Primary responsibilities

Responsible for recommending strategy, policies and programs for compensating directors and senior management:

· oversees Yamana’s compensation program including the incentive and retirement plans

· reviews the CEO’s total compensation package including equity compensation, Yamana’s performance against its business goals and objectives, CEO salary levels in the mining and other relevant industries and makes recommendations to the board

· considers the CEO’s compensation recommendations for the other named executives, our peer group and industry data and makes recommendations to the board

· prepares a report on executive compensation every year for developing the management information circular and reviews all executive compensation disclosure before it is publicly disclosed

· reviews and recommends director compensation

· reviews its committee charter at least once a year

The committee has approved this report and is satisfied that it fulfilled the responsibilities of its mandate in 2016.

2016 highlights

· evaluated the new compensation program to ensure the framework continues to be in line with good compensation practices

· reviewed trends in executive and director compensation and governance including policies of various governance organizations, including the Canadian Coalition for Good Governance, Institutional Shareholder Services and Glass Lewis

· set target compensation for the CEO and other named executives and recommended decisions for 2016 compensation to the board for approval

· reviewed the compensation discussion & analysis section of the management information circular

· continued to monitor the development of clawback policies in Canada and the U.S.

Corporate governance and nominating committee

Patrick Mars (Chair), Carl Renzoni, Dino Titaro, Christiane Bergevin

100% independent, met 4 times in 2016

Primary responsibilities

Develops Yamana’s corporate governance policies and practices, assesses board and committee effectiveness, and leads the process for recruiting and appointing directors and ensuring their ongoing development

· recommends corporate governance policies, practices and procedures

· reviews the code of conduct and other corporate governance policies, and ensures the effectiveness of management’s system for enforcing and monitoring compliance

· assesses shareholder proposals to be included in the management information circular and make recommendations to the board

· assesses board and committee effectiveness and the contribution of individual directors

· ensures the board has an appropriate number of independent directors and that its size and composition are appropriate for effective decision-making

· recommends selection criteria for director searches and for those nominated for election each year

· leads director searches including retaining a search firm when necessary

· oversees the director orientation and continuing education programs

· reviews its committee charter at least once a year

The committee has approved this report and is satisfied that it fulfilled the responsibilities of its mandate in 2016.

2016 highlights

· conducted the 2016 director assessment and review

· reviewed current trends in corporate governance

· monitored policies distributed by various governance organizations, including the Canadian Coalition for Good Governance, Institutional Shareholder Services and Glass Lewis

· selected educational topics for the board

· reviewed the governance section of the management information circular

· considered executive, CEO and director succession planning

Sustainability committee

John Begeman (Chair), Alexander Davidson, Dino Titaro, and Christiane Bergevin (appointed August 15, 2016)

100% independent, met 5 times in 2016

Primary responsibilities

Assists the board in overseeing sustainability, environmental, health and safety matters:

· helps the board develop a corporate culture of environmental responsibility and awareness about the importance of health and safety

· identifies the principal risks and impacts related to health, safety and the environment, and ensures sufficient resources are allocated to address them

· oversees our corporate health, safety and environment policies and management systems to ensure compliance with applicable laws and best management practices

· counsels management in developing policies and standards as appropriate

· reviews management’s activities in maintaining appropriate internal and external operational, health, safety and environment audits and reviews the results

· reviews any compliance issues and incidents to determine, on behalf of the board, that we are taking all necessary action and have been duly diligent in carrying out our responsibilities and activities

· investigates or arranges an investigation of any unusual health, safety and environmental performance

· reviews monthly and annual sustainability, health, safety and environment reports

· reviews and approves annual disclosure relating to our sustainability, health, safety and environment policies and activities

· reviews its committee charter at least once a year

The committee has approved this report and is satisfied that it fulfilled the responsibilities of its mandate in 2016.

2016 highlights

· conducted monthly reviews and monitored reports by the safety, health, environment and community department

· conducted site visits

· reviewed the annual sustainability report, available on our website

· reviewed the sustainability section of the management information circular

· completed:

· a detailed assessment of Monument Bay

· an in-depth review of health, safety and sustainability, including tailings management

· a peer review of C1-Santa Luz

2. Executive compensation

Message from the Chairman of the Compensation Committee	25

Compensation discussion and analysis	28
· Executive compensation framework	28
· Compensation governance	29
· Compensation philosophy	34
· Compensation benchmarking	35
· Elements of executive compensation and decisions for 2016	36
· Chairman and CEO compensation profile	49
· Share performance	51

2016 Compensation details	53
· Summary compensation table	53
· Cost of management analysis	54
· Outstanding share-based and option-based awards	55
· Retirement benefits	59
· Termination and double trigger change of control	60

Message from the Chairman of the Compensation Committee

On behalf of the board of directors and compensation committee, I want to thank you for your support of our approach to executive compensation at last year’s annual general meeting, with a say on pay score of 87%.

We believe that this advisory vote is important because it provides regular feedback on the matter. The committee is also committed to engaging directly with shareholders. In early 2016, I met with shareholders in Canada, the United States and Europe, representing approximately 40% of our shareholder base, to discuss topics including business strategy, executive compensation and board governance. We initiated a second round of shareholder meetings in early 2017, representing approximately 40% of our shareholder base, to discuss any shareholder concerns and to receive feedback on the executive compensation framework that we applied for 2016.

Performance results for 2016

In 2016, management continued to position Yamana for long-term growth, with a focus on safety and environment objectives, delivering on operational expectations, generating sustainable and increasing cash flow and free cash flow, further strengthening Yamana’s financial position and advancing the company’s development projects and growth objectives. Performance highlights for the year include:

· Delivered full year gold, sliver and copper production in line or above expectations

· Delivered significant financial results, including increased cash flow and free cash flow, and expanded margins

· Achieved record safety and environment performance

· Improved mine plans for better, more sustainable production going forward

· Made important new exploration discoveries at existing operations and advanced earlier stage exploration projects

· Advanced the development of Cerro Morro and Suruca, a gold only deposit at Chapada, as well as permitting for the Barnat extension at Canadian Malartic

· Returned value to shareholders with a one-year total shareholder return of 49.44%.

Aligning compensation with performance

Applying the executive compensation framework, corporate performance measures in the short-term incentive plan determined a score of 135.8% of target for the named executives. The compensation committee and board agreed that this score appropriately reflected overall company performance and did not adjust the calculated result. Together with individual performance results, short-term incentive awards for named executives ranged from 89% to 135.8% of target.

Looking forward, the compensation committee and board believed that the Chairman and CEO (CEO) and senior management team successfully achieved objectives in 2016 that position the company for longer-term success. Aligned with this performance, the board approved long-term incentive grant values for named executives, equal to 100% of their defined target levels.

Chairman & CEO compensation

Target total compensation structure

For 2016, Mr. Marrone was eligible for target total compensation (base salary, short-term and long-term incentives, pension and other compensation) of $7,278,099, which is positioned around the median of our industry peer group.

Calculated and actual total compensation for 2016

In determining total compensation to be awarded, the board considered Yamana’s performance and the CEO’s total compensation on both an absolute basis and relative to peers, over multiple time periods. In addition to the summary of 2016 performance results above, considerations included:

· financial, operational and share price performance for the past one, three and five-year cycles, relative to both actual CEO total compensation, and total compensation realized over the respective periods

· share price performance since Yamana’s inception in July 2003, including particular periods of exceptional share price performance and total shareholder return.

Applying the compensation framework for 2016, Mr. Marrone’s calculated total compensation would have been $8,220,582, including a short-term incentive award equal to 135.8% of the 125% CEO target (170% of salary) and a target long-term incentive grant equal to 100% of the 225% CEO target (225% of salary).

However, following a comprehensive review of company performance and acknowledging total shareholder return over the past three years, Mr. Marrone elected to receive, and the board approved, actual compensation for 2016 including:

· a short-term incentive award of $1,503,585 (down from a calculated bonus of $2,505,975), thereby reducing his total cash compensation and the company’s annual contribution to his defined contribution pension plan

· a long-term incentive award of $390,000 (down from a calculated grant value of $3,982,575), which was received in PSUs ($195,000) that vest based on three-year relative total shareholder return, and RSUs ($195,000) that vest over three to five years.

As a result, Mr. Marrone’s actual 2016 total compensation was $4,135,484, which was 50% below the calculated value ($8,220,582) and 43% below the target value ($7,278,099). Comparisons of the three values are illustrated below:

The board considered the low price environment of the company’s share price in determining the value of the long-term incentive award in order to minimize the potential windfall gains arising from volatility in the mining industry, as well as the company’s share price. The board also noted that Mr. Marrone is well incentivized and his significant equity ownership in Yamana aligns with shareholder interests, hence the reduced weighting of his long-term incentive this year.

Alignment with shareholders

Mr. Marrone’s interests as founder, Chairman, CEO and a significant shareholder continue to directly align with other Yamana shareholders.

As of February 15, 2017, Mr. Marrone’s shareholdings of common shares, RSUs and DSUs total $12,613,229, down 66% from a book value of $37,147,519. The majority of his equity holdings are in DSUs and their value is directly tied

COMPENSATION GOVERNANCE

The compensation committee, on behalf of the board, is responsible for executive compensation at Yamana, including recommending the strategy, policies and programs for developing and compensating senior management.

Qualified and independent committee members

The committee is made up of four independent directors with experience in five key areas:

	Human resources/ compensation	Governance	Finance	Operations/ mining	Senior business executive
Nigel Lees (Chair)	ü	ü	ü	ü	ü
Alexander Davidson	ü			ü	ü
Patrick Mars (Lead Director)	ü	ü	ü		ü
Dino Titaro	ü	ü		ü	ü

All of the committee members are experienced business professionals who have the skills and experience necessary to make decisions about our executive compensation policies and practices. All have human resources and compensation experience as members of the compensation committees of other corporations, and all have had experience working as senior executives of other mining companies.

A continuing focus on compensation governance

What we do

ü Benchmark to industry peers. We benchmark compensation to a group of peer companies in the mining industry to ensure compensation is fair and competitive with the market

ü Position target compensation around market median. We target compensation at the median of our compensation peer group for expected levels of performance

ü Align executive and shareholder interests. We require senior executives (senior vice presidents and above) to own Yamana equity to align their interests with those of our shareholders

ü Deliver the majority of total compensation in ‘at risk’ elements. Most of what we pay our executives is variable (at-risk) and not guaranteed (all but base salary)

ü Pay for performance. We link compensation to corporate, individual and share price performance over multiple time horizons. At least 50% of the long-term incentive is granted as PSUs

ü Use a disciplined approach to assess performance. We use specific measures and a pre-defined range of performance to calculate short-term awards and determine long-term incentive grants

ü Cap the value of incentive compensation. We have caps in place to limit payouts of incentive awards

ü Retain an independent compensation advisor. The compensation committee is made up of independent directors and retains an independent advisor for third party advice

ü Use informed judgment. The committee and board can use reasonable judgment to adjust the performance factors for the short and long-term incentive awards, including downward to ensure alignment with shareholder interests

ü Focus on long-term performance. We extended the vesting of RSUs and stock options to align better with shareholders’ interests and focus executives on the longer term

ü Engage directly with shareholders. We engage directly with shareholders on executive compensation and other matters

ü Provide shareholders with a ‘say on pay’. We hold an annual advisory shareholder vote on executive compensation to receive feedback on this important issue

What we don’t do (see page 31 for details)

x No hedging. We do not allow hedging of Yamana securities by any director, officer or employee

x No re-pricing. We do not re-price stock options or other equity incentives

x No clawback policy. We continue to monitor regulatory developments, but do not currently have a policy. As a foreign private issuer, we will implement a clawback policy aligned with the requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, once final guidelines have been confirmed

Independent and objective advice

The committee retains an independent advisor to attend committee meetings and provide ongoing support, including research and analysis, insights into market and compensation trends, and advice related to executive compensation. The committee takes the advisor’s reports and recommendations into consideration when assessing compensation structure and awards, but makes its own decisions and recommendations to the board.

In November 2015 the committee retained Willis Towers Watson as its new independent advisor following an extensive review. They are independent of management, well qualified in human resources and compensation matters, and represent the interests of shareholders when working with committees and boards.

The committee reviews the advisor’s independence every year. The committee confirmed Willis Towers Watson’s independence after reviewing the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and the six factors set out by the U.S. Securities and Exchange Commission that compensation committees should consider when selecting and monitoring the independence of their compensation advisors.

The committee based its 2016 decision on the following:

· Members of the executive compensation consulting team are not responsible for selling other Willis Towers Watson services to Yamana and receive no incentive or other compensation based on the fees charged to Yamana for other services provided by Willis Towers Watson or any of its affiliates.

· Willis Towers Watson’s executive compensation consulting team is separate and distinct from a team that assists Yamana’s management with the bi-annual employee engagement survey.

· The executive compensation consultants do not have a business or personal relationship with any of the compensation committee members or management, and do not own Yamana shares other than possibly through mutual funds.

· Willis Towers Watson has strict protocols and processes to mitigate conflicts of interests and all consultants are required to adhere to a code of conduct.

The table below shows the fees paid to Willis Towers Watson in 2016 and 2015. The committee chair must pre-approve all services provided to management by the independent advisor.

Compensation advisory services	2016		2015
Executive compensation-related fees	$	264,665	$	107,364
Other compensation-related fees	—		—
All other fees (prior to retaining Willis Towers Watson as the independent advisor)	—		$	290,034
Total fees	$	264,665	$	397,398

Executive compensation fees in 2016 were for advising the committee during its review of executive compensation, including the compensation peer group, benchmarking compensation for the Chairman and CEO and other named executives and senior officers. Fees in 2015 were for advising the committee during its comprehensive review of executive compensation, including the compensation peer group, benchmarking compensation for the Chairman and CEO, named executives and other senior executives, and changes to incentive plan designs.

Willis Towers Watson did not provide any other services to Yamana or the committee in 2016. Any services provided to Yamana or management must be pre-approved by the committee to make sure the work does not compromise its independence and work with the committee.

All other fees in 2015 were for our bi-annual employee engagement survey and were incurred before the committee retained Willis Towers Watson as its independent compensation advisor.

Compensation risk management

As part of its role in overseeing the risk associated with executive compensation, the committee works with the independent advisor to review our compensation program to make sure it reflects good business practices, is in line with regulatory expectations, and is structured so executives are not encouraged to take excessive risks.

· We benchmark compensation for our senior executives against a group of industry peers that are similar in structure, size and type of business to make sure our compensation levels are appropriate.

· Our short-term incentive is based on corporate and individual performance. We use a balanced scorecard to assess corporate performance with pre-determined corporate performance measures and weightings, and threshold, target, stretch and maximum levels to cap the calculated scores and not encourage excessive risk-taking.

· Long-term incentive awards are based on a suite of leading performance and a number of other considerations to determine the size of grant. The award is allocated at least 50% to performance share units (PSUs) and the balance to restricted units and/or options so awards vest and pay out at different times.

· The board can use informed judgment to adjust the compensation awards up or down based on its review and assessment as it deems appropriate.

· All decisions about executive pay must be approved by the board. The Chairman and CEO recuses himself from any board discussions about CEO pay.

· We do not allow a Yamana director, officer or employee to hedge Yamana securities. We do not re-price stock options or other equity incentive awards. We continue to monitor regulatory developments on clawbacks. As a foreign private issuer, we will implement a clawback policy aligned with the requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, once final guidelines have been confirmed.

In 2014, the committee completed a comprehensive review of compensation-related risks. Based on this review and the new executive compensation framework introduced in 2015 (which aligns with governance best practices), the committee believes that the structure and design of executive compensation do not incent the named executives or any employee who works in a principal business unit or division to take inappropriate or excessive risks, are not reasonably likely to have a material adverse effect on the company, and that our overall compensation framework is in line with standard principles and practices.

Share ownership

We require senior vice presidents and above, including the named executives, to own at least two times their annual salary in Yamana equity to reinforce our focus on the long term and align business decisions with shareholders’ interests. The Chairman and CEO must hold three times his annual salary. Executives can count common shares and RSUs (and DSUs for the Chairman and CEO) for meeting the guidelines.

Executives are required to meet the guidelines by December 31, 2020 (five years from the date the policy was implemented) or within five years of assuming the position, and must maintain the minimum requirement throughout their tenure as a senior executive. Our Chairman and CEO currently holds 25 times his base salary in common shares, DSUs and RSUs (see page 52 for details).

The compensation committee reviews compliance at least once a year, usually in the first fiscal quarter following year-end. It uses the current market value or the book value, whichever is higher, to calculate the values for compliance.

We do not currently require the CEO and other named executives to maintain their share ownership after retiring or leaving the company, but the committee may introduce this requirement in the future.

The table below shows each named executive’s share ownership as at February 15, 2017. All of them had met their ownership requirement except Daniel Racine, who started with Yamana in May 2014 and has until December 31, 2020 to meet the requirement. Turn to page 52 to read more about Mr. Marrone’s equity holdings.

Target

Salary
($)

Common
shares held
(# / $)1

RSUs /
DSUs held
(# / $)2

Market value
of holdings
($)3

Book value
of holdings
($)

Meets
requirements

Current
holdings (as
a multiple of
base salary)

Peter Marrone

Chairman and Chief Executive Officer

1,476,600

692,920/ 5,589,133

2,995,162/ 31,558,386

12,613,229

37,147,519

yes

25x

Charles Main

Executive Vice President, Finance and Chief Financial Officer

451,217

267,023/ 1,622,136

165,064/ 667,688

1,477,736

2,289,824

yes

5.1x

Daniel Racine

Executive Vice President and Chief Operating Officer

450,000

28,781/ 87,273

154,904/ 555,479

628,202

642,752

no4

1.4x

Darcy Marud,

Executive Vice President, Enterprise Strategy

450,000

396,222/ 1,866,017

148,223/ 513,982

1,862,000

2,399,999

yes

5.3x

Greg McKnight

Executive Vice President, Business Development

450,000

261,409/ 2,210,582

168,634/ 652,564

1,470,746

2,863,146

yes

6.4x

Average executive holdings as a multiple of annual salary

8.7x

Notes

(1) The value of common shares has been calculated using book value.

(2) The value of RSUs and DSUs has been calculated using book value.

(3) The market value of holdings is the total holdings multiplied by Cdn$4.47, the closing price of Yamana shares on the TSX on February 14, 2017. The values have been converted to US dollars using the Bank of Canada closing exchange rate of Cdn$1.00 = $0.7651 on that date.

(4) Daniel Racine has until December 31, 2020 to comply with shareholding requirements.

Decision-making process

Beginning of the year

Our compensation decision-making process starts at the beginning of each year, when we assess and confirm our compensation philosophy, program guidelines and structure. We also choose performance measures and set targets for the short-term incentive plan that aligns with our strategy.

1. Review compensation structure	· Review our overall compensation philosophy and structure for the named executives · The compensation committee recommends any changes to the board for approval

2. Confirm the peer group	· Review and confirm the selection criteria used to determine peer companies · Review and confirm the composition of the compensation peer group, applying the selection criteria

3. Establish performance measures	· Choose performance measures and set targets used to assess corporate performance for the short-term incentive plan and to determine the grant value of long-term incentive awards · Monitor corporate performance against these measures throughout the year · Individual objectives are also established for each named executive to assess their annual performance

4. Assess risk and confirm approach	· Review the design of incentive plans and the selected performance measures to: · consider potential payouts under different performance scenarios · make sure our decision-making process, incentive plans and compensation levels do not give executives an incentive to take excessive risks or make inappropriate decisions

COMPENSATION BENCHMARKING

Target and actual compensation for the Chairman and CEO and other named executives are reviewed annually against a group of peer companies and benchmarked based on position, organizational role and overall scope of responsibility.

We target total direct compensation (base salary + target short-term incentive + target long-term incentives) around the median of our mining industry peers for expected levels of performance. Actual total direct compensation may be above or below the market median based on actual levels of performance.

The committee reviews and approves the peer group every year to make sure it continues to be appropriate. It bases its review on the following:

Criteria	Screening	Rationale
Corporate structure	Publicly traded companies headquartered in Canada or the US. All peers are publicly traded; 92% Canada / 8% U.S.	Our market for talent includes peer companies in Canada and the US

Industry	‘Gold’ or ‘Diversified Metals & Mining’ industries and focused primarily on gold mining All peers are within the mining industry: 75% Gold companies; 25% Diversified Metals & Mining companies	We typically source and lose talent from within the mining industry, and our gold mining peers face the same market environment and volatility challenges

Size	Similar in size to Yamana by revenue, market capitalization, assets and gold production Across the various measures, Yamana is positioned around the median of the peer group	We position target compensation at the median to be competitive with the market

Type of business	Similar in organizational complexity and international scope according to the number, life cycle and location of operating mines and exploration projects All peers have complex operations with international mine sites (operating and / or exploration projects) outside North America	We benchmark executive compensation to roles with similar scope of complexity and responsibility

Compensation peer group

The committee applied the selection criteria for 2016, which resulted in the 2016 compensation peer group consisting of the following 12 mining industry peers, unchanged from 2015:

Agnico-Eagle Mines Limited,

Barrick Gold Corporation,

Centerra Gold Inc.,

Eldorado Gold Corporation

First Quantum Minerals Ltd.

Goldcorp Inc.

IAMGOLD Corporation

Kinross Gold Corporation

Lundin Mining Corporation

New Gold, Inc.

Newmont Mining Corporation

Teck Resources Limited

The table below compares Yamana’s size relative to the peer group on four criteria. All financial information was collected from S&P Capital IQ.

Percentile	Revenue (last fiscal year) ($M)		Market capitalization (3 month average) ($M)		Assets (last fiscal year) ($M)		Gold production (last fiscal year) (000)
75th percentile	$	5,911	$	17,259	$	21,381	2,873
50th percentile	$	2,406	$	7,185	$	7,544	806
25th percentile	$	894	$	3,111	$	4,327	382
Yamana	$	1,788	$	5,353	$	8,802	1,275

ELEMENTS OF EXECUTIVE COMPENSATION AND DECISIONS FOR 2016

Element

Objective and design features

Term / vesting

Form

Total direct compensation

FIXED

SHORT-TERM

Base salary

Basis for attracting talent and remaining competitive. Rewards individual experience, responsibilities and past performance

· Established at the beginning of the year based on compensation survey data from the previous year

· Used to determine other elements of compensation and benefits

1 year

Cash

AT RISK

Short-term Incentive

Rewards achievement of specific annual goals and aligns performance with corporate strategy

· Corporate performance (70% weight):
Operational (25%), Financial (25%), Exploration (15%), HSEC (15%), Business Development (20%)

· Individual performance (30% weight): Vary by role

· + / - 15% of score based on informed judgment of the board

· Not paid if performance results are below threshold

· Awards are capped at 200% of the executive’s target award

1 year

Cash

LONG-TERM

Performance share units (PSUs)

At least 50% of LTI

Align the interests of executives and shareholders and reward achievement of sustained long-term performance

· Performance factor based on our 3-year TSR compared to the S&P/TSX Global Gold Index

· Payout ranges from 0% to 200% of target

3 years

Vesting contingent on performance at the end of the 3-year performance period

Cash

Restricted share units (RSUs)

Up to 50% of LTI

Incentivize long-term performance and promote retention of executives

· RSUs vest based on time and are exchanged for Yamana common shares on vesting

Up to 5 years as determined by the board

One-third vest each year over 3 years

Equity

Stock options

Provide executives with greater leverage for outperformance and align compensation with the creation of shareholder value

· Options give the holder the right to buy Yamana common shares at a pre-determined price in the future

7 years

One-third vest on the first, second and third anniversary of the grant

Equity

Deferred share units (DSUs)

(CEO only)

Align the interests of executives with Yamana’s long-term performance, since units are held until the participant leaves the company

· DSUs are notional shares that have the same value as our common shares. The board can use informed judgment to grant DSUs to the Chairman and CEO as part of his long-term incentive awards

Vest immediately, hold until termination of employment

Cash

Indirect compensation

Pension and perquisites

· Executive defined contribution pension plan

· Supplementary life, medical, dental and disability insurance

· Taxable cash allowance for specific perquisites

Designed to be competitive overall with equivalent positions, to promote greater executive satisfaction, and to manage program and administrative costs

· Awarded based on the executive’s position and relative to our peers

—

Base salary

2016 salaries for Peter Marrone and Charles Main are unchanged from 2015. Increases for Daniel Racine and Greg McKnight are a result of their promotion to Executive Vice President, while Darcy Marud’s increase reflects an adjustment for internal alignment. Mr. Racine’s salary was also adjusted to US dollars in 2016 for internal alignment.

The committee benchmarked executive vice president salaries to the market, and validated its findings and recommendations for salary adjustments with its external compensation consultant (see page 35).

	2015 base salary ($)	2016 base salary ($)
Peter Marrone	1,476,600	1,476,600
Charles Main	451,217	451,217
Daniel Racine	Cdn 300,000	450,000
Darcy Marud	410,000	450,000
Greg McKnight	380,055	450,000

See the summary compensation table on page 53 for details.

Short-term incentive awards

Short-term incentive awards are based on an assessment of corporate and individual performance, within a range of 0% to 200% of a named executive’s target award, calculated as a percentage of base salary.

The following formula is used to calculate each executive’s short-term incentive award:

Calculating the performance score for 2016

At the beginning of the year, corporate and individual performance measures and targets are set, and these support our corporate strategy. At the end of the year, performance is assessed against those measures and targets to calculate the performance multiplier, as described below. The board approves the final corporate score.

2016 corporate score

Corporate performance is measured across five categories. Specific measures within each category are expected to be generally the same from year to year, although the business and corporate development measures will change depending on our annual business objectives. Threshold, target, stretch and maximum levels of performance are defined for the various measures at the start of the year as part of the annual budget process.

2016 corporate performance was evaluated for each of the performance categories and measures, by reviewing actual results within a pre-defined performance scale. Target and actual results reflect our consolidated operations including

Mercedes up to the third quarter of 2016 to capture year to date performance until the sale. Results do not include the Riacho dos Machados gold mine, which we acquired in 2016 after corporate targets had been established.

The 2016 corporate performance score was calculated at 135.8%, based on the achievement of specific goals in five key areas: operational, financial, exploration, HSEC and business development.

After an additional review of company performance, market conditions and share price performance, the committee and board chose not to adjust the score because they felt the calculated score appropriately reflected 2016 performance.

Performance scale

Each performance measure was reviewed within a performance scale, ranging from 0% for below threshold performance, up to 200% for maximum performance.

See page 40 for a discussion of this year’s performance measures and results.

Performance scale (% of target)

	200		maximum
	150		stretch
	100		at target
	50		threshold
	0		below threshold

2016 scorecard

The table below summarizes the weighted categories and measures to evaluate performance for 2016.

	Measure	Weight		Description	Rationale
Operational *25% weight*	Gold production	19	%	Total ounces of gold produced	Meeting production targets is the company’s baseline to achieving its financial performance and demonstrates strength in our planning/execution cycle.
	Silver production	1	%	Total ounces of silver produced
	Copper production	5	%	Total pounds of copper produced
Financial *25% weight*	Cash flow · from operations before net change in working capital · from operations after working and sustaining capital · from operations after working and sustaining capital, interest and dividends	12.5	%	Total cash flow from operations before net working capital changes Total cash flow from operations after net working capital changes and sustaining capital Total cash flow from operations after net working capital changes and sustaining capital, interest and dividend payments	The ability to produce strong operating cash flow throughout the commodity price cycle ensures sustainability of the company’s business model and further guarantees that capital is consistently available to reinvest in the business and return to shareholders. Cash flow will be impacted by changes in metal prices, which are outside of the company’s control.

	Co-product all-in sustaining cash costs	6.25	%	Co-product all-in sustaining cash costs from continuing operations per ounce of gold, excluding hedges	The company believes that co-product all-in sustaining cash costs represent the primary metric defining the company’s efficiency and ability to adjust to changing commodity prices. Maintaining a low all-in sustaining cost structure and adjusting costs to market conditions to maintain positive margins will drive shareholder value.

	Balance sheet improvement	6.25	%	Balance sheet improvement	A strong balance sheet will enable the company to more freely pursue corporate objectives and strategic interests.

Exploration *15% weight*	Mineral reserve replacement	15	%	Mineral reserves replacement target includes the total proven and probable gold mineral reserves for all operations, including Brio Gold Projects but excluding Alumbrera set at December 31, 2015 values. It is recognized that not all gold ounces have equal rating, such as the discovery and conversion of new ounces at producing mines may have more bearing than new proven and probable mineral reserves elsewhere. The board will take into account the quality of the ounces, where they occur in relation to where they have been depleted, as well as the disposition of ounces that may be associated with any business development opportunities such as the potential acquisition or sale of assets.	Mineral reserve replacement and mineral reserve growth is key to maintaining and improving shareholder value. Mineral reserve replacement is an annual goal that is measured by the development of new resources which are evaluated for mineral reserve classification. It is common that mineral reserve growth may occur at one or several mines in one year and at other mines in subsequent years due to available new resources to convert, development plans and capital deployment decisions. As such, mineral reserve replacement on a corporate reporting scale is a notable achievement, and growth beyond that is aptly considered a “stretch” goal.
Health, safety, environment, community (HSEC)	Health and safety	10	%	Total recordable injury frequency rate (includes loss time, modified duty and medical aid incidents). A fatality will result in a zero score.	Our vision of zero significant incidents to our people and the environment and enhancing our social license is measured through our management systems and HSEC performance.
*15% weight*	HSEC performance	5	%	Achievement of HSEC indicators. Performance is determined based on the number of indicators completed: · 8 out of 8 is considered maximum performance · 7 out of 8 is considered stretch performance · 6 out of 8 is considered target performance · 5 out of 8 is threshold performance 2016 indicators: 1. Achieve 18001 certification 2. Completion of audit action plan OHSAS 18001 3. No level 4 or higher environment incidents (incidents that extend beyond site boundary, requires informing the public, remediation would take longer than 1 year) 4. Achieve 14001 certification 5. Completion of audit action plan ISO 14001 6. No level 4 or higher community incidents (incidents in which social license is threatened, severe community reaction, requires support from third party) 7. 100% community complaints investigated and closed 8. Completion of Yamana Health and Safety Management System (YMS) audit action plan
Business corporate development *20% weight*	Strategic initiatives	20	%	Demonstrate value accretion	Business corporate development initiatives support the corporate strategy for 2016.

The following pages summarize the calculation of our corporate performance for 2016, which resulted in a total score of 135.8%.

Target and actual results reflect our consolidated operations including Mercedes up to the third quarter of 2016 to capture year to date performance until the sale. Results do not include the Riacho dos Machados gold mine (MRDM) which we acquired in 2016, after corporate targets had been established.

Operational
(25%)

Financial
(25%)

Exploration
(15%)

Health, safety,
environment and
community (15%)

Business
corporate
development (20%)

Total
(100%)

Score

25.1

31.5

21.6

27.6

30.0

135.8

	Threshold	Target	Stretch	Maximum
	50%	100%	150%	200%	Result	Achievement			Weight			Score
Operational (25% weight)												25.1	%
Gold production (000 ounces)	1,207	1,270	1,302	1,334	1,237	74.3	%	x	19	%	=	14.1	%
Silver production (000 ounces)	6,695	7,048	7,224	7,400	7,036	98.3	%	x	1	%	=	1.0	%
Copper production (000 pounds)	104,500	110,000	112,750	115,500	115,548	200	%	x	5	%	=	10.0	%

In relation to the STI scorecard, gold production was slightly below the target, which was more aggressive than the consolidated full year guidance. Consolidated production was above target for 2016 as production at most mines was in line with or above target.

For copper production, also taken into account was the significant over performance of Chapada in the third and fourth quarters of 2016 to recuperate lost production due to several non-management related factors including a mechanical failure and weather related issues.

As part of ongoing analysis, the relative weighting of gold, silver and copper production will be evaluated in future years to ensure that production of various metals is reflective of their contributions to the company.

Financial (25% weight)												31.5	%
Cash flows ($000s):						200.0	%	x	12.5	%	=	25.0	%
from operations before net change in working capital 1,2	596,133	627,508	643,196	658,883	667,295	226.8	%
from operations after working and sustaining capital 1,2	342,948	360,997	370,022	379,047	381,612	214.2	%
from operations after working and sustaining capital, interest and dividends 1,2	239,158	251,745	258,039	264,333	259,284	159.9	%
Co-product all-in sustaining cash costs ($ per ounce) 3	876	834	814	793	903	0	%	x	6.25	%	=	0.0	%
Balance sheet improvement $300M over two years	75,000	150,000	225,000	300,000	160,000	104.0	%	x	6.25	%	=	6.5	%

Cash flow is viewed from a number of different perspectives, as the company takes various approaches in its assessment of financial performance related to cash flow. While comparing cash flows to target, the comparison is impacted by the assumed metal prices included in the target calculation versus the actual realized prices which will differ in the comparison. While cash flows are impacted by metal prices, co-product all-in sustaining costs is a measure that is more within the company’s control as it is not impacted by metal prices. All-in sustaining cost metrics reflect the ability of the company to maintain a low cost structure and the flexibility to adjust to market conditions, resulting in a positive margin to drive shareholder value. Increases in cash flows reflect improvements made across the portfolio to reduce costs as part of a focus on margin expansion. Cash flow increases have been supplemented by various monetization initiatives to further strengthen Yamana’s financial position.

While 2016 co-product all-in sustaining cash costs met consolidated full year guidance, they were below the more aggressive STI targets resulting in the final results being below our performance threshold. Yamana continues to pursue net debt reduction to further strengthen and sustain a robust financial position, sourced from operating cash flows and from monetization initiatives pursued by the company in line with the previously stated objective of debt reduction. In 2016 the company completed debt reduction and balance sheet improvement initiatives, which enhanced our financial position and flexibility. Monetization initiatives included the purchase rights offering which generated proceeds of $40.7 million, the sale of the Mercedes mine for cash proceeds of $122.5 million and the sale of certain other securities for proceeds of $33.6 million. The foregoing resulted in a net debt reduction of $160 million comprised most notably of the following: early repayment of senior debt notes of $17.8 million; scheduled repayment of senior debt notes of $73.5 million; and net repayment of revolver debt of $70.0 million.

(1) Non-GAAP measures. See page 78 for more information.

(2) Cash flows from operating activities before net change in working capital for 2016 was $ 626.6 million, cash flows from operating activities after sustaining capital was $371.4 million and cash flows from operating activities after sustaining capital, interest and dividends was $247.2 million. For the purposes of targets established in the beginning of 2016, the company had included cash flows from Mercedes and, as such, cash flow results reflected in the scorecard include Mercedes cash flows to third quarter 2016 which were reported as discontinued operations for the year. Cash flows from operating activities includes cash flows generated by MRDM, which are removed from scorecard cash flow results. The company was above target for all three cash flow metrics, including achieving above the maximum for two of the three metrics, resulting in an awarded score of 25%.

(3) The resulting co-product all-in sustaining cash costs for 2016 were $903 per ounce, inclusive of Mercedes until the date of disposition and exclusive of MRDM in accordance with our scorecard methodology. Financial results report co-product all-in sustaining cash costs of $911 per ounce from continuing operations, inclusive of MRDM. In both cases, the company did not score in this metric.

Exploration (15% weight)																				21.6	%
Mineral Reserve replacement		15,064		15,857		16,253		16,650		16,206		144.0	%	x		15	%	=		21.6	%

Mineral reserve growth is largely due to new mineral reserve additions at Upper Beaver and C1-Santa Luz mineral reserves. Reduction of mineral reserves due to mining depletion was experienced at Canadian Malartic, Gualcamayo, Jacobina and Minera Florida. Depletion of mineral reserves at El Peñon was due to mine depletion and, more importantly, to the use of a more stringent criteria for incremental ore and mineral reserves categorization in light of the current configuration of vein zones which is expected to improve the reliability of mine plans. The company also considered significant exploration successes at Canadian Malartic, Gualcamayo, Jacobina and Minera Florida, and going forward, will consider mineral reserves on an asset by asset basis in addition to total aggregate performance.

See our website for details about our mineral reserves and mineral resources as at December 31, 2016.

Health, safety, environment and community (HSEC) (15% weight)												27.6	%
Health and safety Total Recordable Injury Frequency rate reduction (a fatality will result in a zero score)	1.089	0.990	0.891	0.792	0.84	176.0	%	x	10	%	=	17.6	%
HSEC performance Achievement of HSEC indicators	100% of 5 indicators	100% of 6 indicators	100% of 7 indicators	100% of 8 indicators	8 indicators	200.0	%	x	5	%	=	10.0	%

Our vision of “One Team, One Goal: Zero” is a clear indication that creating value includes managing any potential impacts we may have on our employees, our communities and the environment, and enhancing our social license. We believe that well implemented HSEC systems will reduce risk and improve our HSEC performance. In 2016, we maintained our OHSAS 18001 and ISO 14001 certifications, and met all of our HSEC systems implementation targets as measured by internal audits. The company includes performance of its contractors in assessing its overall health and safety performance.

Yamana achieved its target of an overall reduction of the Total Recordable Injury Rate (TRIR) in 2016. In this measure, a fatality based on an industrial event at the mine, plant or otherwise related to operations would automatically score a zero on this measure. Factors that are outside the control of the company and not related to operations would not be considered. In 2016, we regret that a fatality occurred at one of our mines during an

armed robbery with a significant show of force that overwhelmed our security. Our people are instructed in these situations not to respond with force and to fully comply. Taken into consideration was that these protocols were fully followed and our people acted appropriately and fully complied with their training and the demands of their assailants. The fatality resulted from the apparent accidental discharge of the firearm of one of the assailants while our people complied with their demands. While these events are rare, we regret the loss of life which occurred.

We had a number of other notable achievements last year and put in place some important measures that will help advance our HSEC performance measures in the future. Namely, our exploration projects throughout Latin America as well as our Cerro Moro development project operated for a full year without serious injury to employees or contractors (no injuries, no restricted work cases and no medical aids). Our number of Lost Time Incidents also decreased by approximately 20%, with some of our largest mines completing the year with only 1 or 2 occurrences.

Business corporate development (20% weight)				30.0	%
Successful completion of the acquisition and integration of Riacho dos Machados (MRDM) into Brio Gold Division (high impact)	Achieved	150	%	30.0	%
Advance efforts on Brio Gold to best position Yamana for a possible monetization event	Partially achieved
· Demonstrated increase in internal views on value from US$300 million pre-money value contemplated in December 2015 (medium impact)
· Demonstrated increase in consensus street views on value from year-end 2015 to year-end 2016 (medium impact)
Successful monetizations of non-core assets (high impact)	Achieved
Overall score (out of 100)				135.8	%

You can find more details about our performance in our management’s discussion and analysis (MD&A) on our website (www.yamana.com). Some of our measures are not calculated according to generally accepted accounting principles (GAAP).

[sidenote]

Performance is considered on a per share measure

Yamana considers performance under its short-term incentive plan on a per share measure. Our share count was unchanged in 2016 (other than very modest changes based on approved share compensation) and, as such, per share performance and aggregate performance are the same. Information is presented in aggregate rather than per share in the scorecard for the short-term incentive plan for comparison purposes to the prior year although the measure was considered, and will be considered, per share. There may be occasions in certain circumstances in which per share measures will not accurately reflect performance. An example would be an acquisition of a pre-production asset for shares which would increase the share count although decrease certain measures such as cash flows per share. In those situations, while the per share measure will be taken into account, some consideration will be given to the aggregate. Mostly, per share measuring is used in production, cash flows and mineral reserves.

2016 individual performance

We assess individual performance against quantitative and qualitative goals using our performance management system. The goals are set at the beginning of the year and are designed to support our strategy and help assess the executive’s individual performance in their role.

The compensation committee assesses the Chairman and CEO’s performance and recommends an individual score to the board for approval. The CEO assesses the performance of the other named executives and recommends the individual scores to the compensation committee for review and approval.

The table below summarizes the individual achievements of each named executive and their individual performance score, used to determine 30% of the short-term incentive award for 2016.

Achievements in 2016		Score (%)
Peter Marrone	· Provided leadership in ensuring a strategy of strong mine diversity, overall low geopolitical risks, favorable cost position, multi-metal exposure and good liquidity · Progressed the company’s strategy and ensured its alignment with senior management key performance measures · Consolidated Yamana’s efforts at improving management talent and optimizing the management construct · Improved mine plans for all mines for more sustainable production · Prioritized significant new exploration discoveries and advanced previous discoveries · Spearheaded the continued advancement of the development of Cerro Moro and Suruca at Chapada · Provided leadership for significant improvement in financial performance, including increased cash flow and free cash flow and margin expansion · Led the strengthening of the company’s balance sheet and reduced net debt	135.8% Between meets and exceeds expectations
Charles Main	· Managed a strengthened balance sheet including improved financial liquidity · Oversaw continued reductions in general and administrative expenses · Successfully transitioned responsibilities and appropriately stepped back from full accountabilities due to retirement, as they were taken over by the incoming CFO	100% Meets expectations
Daniel Racine	· Oversaw significant production improvements across the mine portfolios. The company met and exceeded its production expectations in Chapada and Gualcamayo and more ore was mined at El Peñon. Canadian Malartic continues to deliver record production · Revised the process used to complete mine plans and budgets for alignment to production expectations · Established a formal continuous improvement function, resulting in improved throughput and recovery at Chapada, revised costs and mining methodology at Jacobina, new sustainable mining plans and narrow vein mining at El Peñon, mill optimization and exploration at Minera Florida and cost reduction and greater exploration at Gualcamayo · In partnership, provided leadership for Yamana relative to the permitting for Barnat at Canadian Malartic · Appointed a dedicated supply chain vice president and maintenance officer to drive further operational efficiencies and optimizations · Simplified the operations structure to improve communication and efficiencies	135.8% Between meets and exceeds expectations
Darcy Marud	· Continued to oversee the implementation of the updated protocol for corporate mineral reserves and mineral resources with new procedure manual, clarification of accountabilities and timely reporting (in progress) · Increased the strength of the Technical Services group in Toronto · Ensured that Cerro Moro has continued to progress on time and on budget (in progress) · Revamped the El Peñon exploration strategy by ensuring high priority targets are explored and appropriate talent is in place (in progress) · Coordinated review of internal dormant NAV opportunities with the Senior Vice Presidents of Operations, Exploration, Technical Services and Business Development (in progress)	100% Meets expectations
Greg McKnight	· Successfully completed the reorganization of Brio and the preparation of a value creation transaction · Successfully completed the metal purchase agreement with Altius, which funded the Riacho dos Machados acquisition · Successfully completed a positive first step in monetization of Brio Gold by completing an IPO via a rights offering despite facing significant headwinds in the gold market with gold declining approximately $150 per ounce during the execution of the transaction · Successfully managed the negotiations to sell Mercedes, in a transaction that raised approximately $164 million in consideration, including $122.5 million in cash and approximately $20 million in VAT receivables	135.8% Between meets and exceeds expectations

2016 short-term incentive awards

Applying the compensation framework, including a corporate performance score of 135.8% of target, together with individual scores (above), actual short-term incentive awards for named executives ranged from 89% to 135.8% of target.

For 2016, consistent with other named executives, Mr. Marrone’s calculated short-term incentive award was $2,505,975, equal to 135.8% of the 125% CEO target (170% of salary). However, following a comprehensive review of company performance, in particular TSR over the past three years, Mr. Marrone elected to receive, and the board approved, an actual short-term incentive award of $1,503,585. This award value also reduced his actual total cash compensation and the company’s annual contribution to his defined contribution pension plan.

	Base salary ($)	x	Incentive target (% of base)	x	Corporate score (see page 40)				+	Individual score (see page 43)				=	Calculated award value ($)	=	Actual award value ($)
Peter Marrone	1,476,600		125	%	135.8	%	x 70%	95.0	%	135.8	%	x 30%	40.7	%	2,505,975		1,503,585
Charles Main	451,217		100	%	135.8	%	x 70%	95.0	%	100	%	x 30%	30.0	%	612,617		400,000
Daniel Racine	450,000		100	%	135.8	%	x 70%	95.0	%	135.8	%	x 30%	40.7	%	610,965		610,965
Darcy Marud	450,000		100	%	135.8	%	x 70%	95.0	%	100	%	x 30%	30.0	%	610,965		450,000
Greg McKnight	450,000		100	%	135.8	%	x 70%	95.0	%	135.8	%	x 30%	40.7	%	610,965		610,965

The board can use informed judgment to adjust the calculated compensation amounts for the named executives:

· Mr. Marud: 80% of his calculated value was awarded. While performance is on track, outcomes for some deliverables remain in progress for a number of key objectives.

· Mr. Main: as 2016 was a year of transition due to his retirement, the plan framework was not applied. The board determined that an award of approximately 70% of the calculated short-term incentive value was appropriate.

Long-term incentive awards

Target grant values are defined for each named executive (expressed as a percentage of base salary), with reference to the market median of our industry peer group for expected levels of performance.

Each year, grant values may be adjusted within a range of 50% to 150% of target based on four categories of leading performance indicators that are critical to our sustained long-term success: Financial, Operational, People and Growth.

We expect these categories to remain consistent each year, but the specific goals and achievements in each category may change based on our priorities and as our corporate strategy evolves.

We use the following formula to determine the value of each executive’s long-term incentive grant. Historically the board has not considered the value of outstanding awards when setting the value for new grants:

Determining the awards

The board set the grant value of long-term incentives at 100% of target, citing the following achievements, all of which are expected to increase shareholder value over a longer-term horizon:

· improvements in debt and working capital realized in total at the end of 2016

· improvements in mine plans for more sustainable production

· advancements in the development of Cerro Moro and Suruca, a gold only deposit at Chapada, as well as permitting for the Barnat extension at Canadian Malartic

· significant new exploration discoveries that will have longer-term impacts on value creation

· significant financial performance including increased cash flow and free cash flow and expanded margins.

Financial

Operational

· Improvement in margins resulting from a continued focus on quality production and liquidity was maintained as a result of debt repayment efforts.

· Multi-year generation of free cash flow from $119.3 million in fiscal 2014 to $202.6 million in fiscal 2016 demonstrates our ability to generate cash for discretionary purposes.

· Year over year improvement in adjusted return on equity from 7% in fiscal 2014 to 12% in fiscal 2016, indicates a positive trend.

Work in progress

· Achievement in operating cash flow (excluding cash generated by metal purchase agreements) of $673 million reflected the production of high quality ounces and subsequent improvement of Yamana’s balance sheet. Further increases in free cash flow will enhance our balance sheet and allow for increased financial flexibility.

· Several aspects of returns on invested capital were considered, and the board concluded cash return on invested capital was most representative. We have seen periods of cash return on invested capital of over 10% historically, and it moved from 5% in fiscal 2014 to 9% in fiscal 2016. Although this is lower than previous years, Yamana is well positioned for further improvement.

· Implemented a strategy to reduce our debt position to provide greater financial flexibility and to pursue organic growth. We have a stated objective of reducing debt by at least $300M between 2016 and 2017. Over the course of 2016, Yamana reduced its debt by $159M. While on track, this key objective is an important ‘work in progress’ into 2017. Debt reduction initiatives in 2016 include:

· Sold Mercedes for $122.5M in cash plus $26M in shares, warrants, and a Net Smelter Return. We expect to recover a further $22M over the next 12 months from income tax and VAT recoveries

· Sold Sandstorm warrants for $33.6M

· Raised $41M via Brio Gold Purchase Rights offering

· We maintained the strength of our operations and reputation in our operating regions.

· We continued our efforts to improve plant reliability, mining methods, contractor engagement, waste management and tailings management.

· We continued our efforts and successes for strong community relations and effectively managing our social license to operate.

· We achieved continuing success and improvement in the mine plans to create consistency, reliability and predictability of production.

· We continue to refine our standards and protocols relating to health and safety, with particular emphasis on training both employees and contractor employees. We achieved a Total Recordable Injury Frequency result between Stretch and Maximum for 2016.

· We maintained our reputation as a responsible corporate citizen:

· Yamana was named one of the Best 50 Corporate Citize

By order of the board of directors,
“Peter Marrone”
Peter Marrone
Chairman and Chief Executive Officer

Yamana Gold Inc.
Toronto, Ontario
March 28, 2017

Sincerely,

“Peter Marrone”

Peter Marrone
Chairman and Chief Executive Officer
Yamana Gold Inc.

5. Review performance	· Review corporate performance mid-year and at the end of the year. The compensation committee assesses the performance of the named executives throughout the year during specific business reviews and committee meetings · The Chairman and CEO completes a review of each named executive’s individual performance against their objectives

6. Review competitive position	· The independent advisor prepares a comprehensive report that includes the following: · a review of our compensation peer group · a comparison of named executive compensation relative to peers to determine the market positioning of: · base salary · target total cash compensation · target total direct compensation · target pay mix

7. Review past pay levels	· Review historical pay for performance for the named executives for the previous three years

8. Award compensation	· The committee reviews the Chairman and CEO’s performance, competitive positioning and past pay levels, consults with its independent advisor, and makes recommendations to the board for approval · The Chairman and CEO reviews the performance and compensation of the other named executives, and recommends short-term incentive awards, long-term incentive grants, and the following year’s salary for review and approval by the chair of the compensation committee (as delegated by the board)