EX-99.2 3 ex9922017mda.htm EXHIBIT 99.2 Exhibit





EXHIBIT 99.2









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MANAGEMENT’S DISCUSSION AND ANALYSIS OF

 OPERATIONS AND FINANCIAL CONDITION

 FOR THE YEAR ENDED DECEMBER 31, 2017

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TABLE OF CONTENTS
 
 
Page
1.
Core Business
 
2.
Highlights and Relevant Updates
 
3.
Outlook and Strategy
 
4.
Summary of Financial and Operating Statistics
 
 
4.1:
Financial Statistics
 
 
4.2:
Operating Statistics
 
5.
Overview of Results
 
 
5.1:
Overview of Financial Results
 
 
5.2:
Overview of Operating Results
 
6.
Operating Mines
 
7.
Construction, Development and Exploration
 
8.
Mineral Reserve and Mineral Resource Estimates
 
9.
Liquidity, Capital Resources and Contractual Commitments
 
10.
Income Taxes
 
11.
Economic Trends, Business Risks and Uncertainties
 
12.
Contingencies
 
13.
Critical Accounting Policies and Estimates
 
14.
Non-GAAP Financial Measures and Additional Line Items or Subtotals in Financial Statements
 
15.
Selected Quarterly Financial and Operating Summary
 
16.
Disclosure Controls and Procedures
 



MANAGEMENT’S DISCUSSION AND ANALYSIS OF OPERATIONS AND FINANCIAL CONDITION
 
This Management’s Discussion and Analysis of Operations and Financial Condition ("MD&A") should be read in conjunction with Yamana Gold Inc.'s (the "Company" or "Yamana") most recently issued annual Consolidated Financial Statements for the year ended December 31, 2017 ("Consolidated Financial Statements"). (All figures are in United States Dollars ("US Dollars") unless otherwise specified and are in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (“IFRS”). 
 
The Company has included certain non-GAAP financial measures, which the Company believes, that together with measures determined in accordance with IFRS, provide investors with an improved ability to evaluate the underlying performance of the Company. Non-GAAP financial measures do not have any standardized meaning prescribed under IFRS, and therefore they may not be comparable to similar measures employed by other companies. The data is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. The non-GAAP financial measures included in this MD&A include:

•
Cash costs per ounce of gold produced on a co-product and by-product basis;
•
Cash costs per ounce of silver produced on a co-product and by-product basis;
•
Co-product cash costs per pound of copper produced;
•
All-in sustaining costs per ounce of gold produced on a co-product and by-product basis;
•
All-in sustaining costs per ounce of silver produced on a co-product and by-product basis;
•
All-in sustaining co-product costs per pound of copper produced;
•
Net debt;
•
Net free cash flow;
•
Average realized price per ounce of gold sold;
•
Average realized price per ounce of silver sold; and
•
Average realized price per pound of copper sold.

Definitions and reconciliations associated with the above metrics can be found in Section 14: Non-GAAP Financial Measures and Additional Line Items or Subtotals in Financial Statements of this MD&A.

Cautionary statements regarding forward-looking information and mineral reserves and mineral resources are included in this MD&A.


1.    CORE BUSINESS

Yamana is a Canadian-based gold producer with significant gold production, gold development stage properties, exploration properties, and land positions throughout the Americas including in Canada, Brazil, Chile and Argentina. Yamana plans to continue to build on this base through existing operating mine expansions and optimization initiatives, development of new mines, the advancement of its exploration properties and, at times, by targeting other gold consolidation opportunities with a primary focus in the Americas. The Company is listed on the Toronto Stock Exchange (trading symbol "YRI") and the New York Stock Exchange (trading symbol "AUY").

The significant subsidiaries over which the Company exercises control or joint control are listed in Note 3(a): Significant Accounting Policies: Basis of Consolidation to the Company's Consolidated Financial Statements.



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2.     HIGHLIGHTS AND RELEVANT UPDATES

For the year ended December 31, 2017 (unless otherwise noted)

Production and Sales

The Company exceeded production expectations, and achieved this at production costs for gold, silver, and copper that were either within or better than guided ranges for the full year. Relative to guidance for the Company's six mines ("Yamana mines"), production performance was as follows:
Production
2017 Actual

2017 Guidance (i)

%

Total gold production (ounces)
977,316

960,000

2
%
Total silver production (ounces)
5,004,761

5,000,000

—
%
Total copper production (pounds) - Chapada
127,333,872

125,000,000

2
%
(i)
2017 guidance for gold, silver, and copper production reflects the increases that were applied in October with the Company's third quarter results. For gold, this was the second increase applied to the original guidance of 920,000 ounces.
For the years ended December 31,
2017

2016

%

Gold
 
 
 
Sales - Yamana mines (ounces)
971,148

997,380

(3
)%
Sales - consolidated (ounces)
1,147,204

1,188,267

(3
)%
Production - Yamana mines (ounces)
977,316

1,009,079

(3
)%
Production - attributable (ounces) (i)
1,096,327

1,197,844

(8
)%
Revenue per ounce
$
1,250

$
1,240

1
 %
Average realized price per ounce (ii)
$
1,264

$
1,251

1
 %
Silver
 
 
Sales (ounces)
5,125,689

6,604,212

(22
)%
Production (ounces)
5,004,761

6,709,250

(25
)%
Revenue per ounce
$
16.80

$
17.06

(2
)%
Average realized price per ounce (ii)
$
16.83

$
17.04

(1
)%
Copper
 
 
Sales (millions of pounds)
120.1

104.9

14
 %
Production (millions of pounds)
127.3

115.5

10
 %
Revenue per pound
$
2.36

$
1.92

23
 %
Average realized price per pound (ii)
$
2.78

$
2.24

24
 %
(i)
Attributable production is determined on a weighted-average basis with respect to ownership of Brio Gold Inc. ("Brio Gold") common shares during the period, which for 2017 was a weighted average of 65.5% (2016 - 100%).
(ii)
A cautionary note regarding non-GAAP financial measures is included in Section 14: Non-GAAP Financial Measures and Additional Line Items or Subtotals in Financial Statements of this MD&A.

Costs
•
For Yamana mines co-product cash costs and all-in sustaining costs ("AISC") were within or below the guided ranges for the all metals in 2017. Strong production and cost management initiatives were partly offset by the appreciation of local currencies. Co-product AISC for all metals were better than expected due mostly to lower sustaining capital expenditures during the year. As previously disclosed, cost of sales per ounce sold were higher than those guided at the beginning of the year, as depreciation, depletion and amortization at certain mines were above plan.
•
By-product costs for gold for the year benefited from the performance of the Chapada mine, which exceeded expectations resulting in higher sales of by-product copper at higher copper prices relative to 2016.
•
Underpinned by several cost containment initiatives, cash costs for gold and silver were at the lowest level in the fourth quarter of 2017.

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For the years ended December 31,
2017

2016

%

Gold
 
 
 
Total cost of sales per ounce sold - Yamana mines (i)
$
1,023

$
991

3
 %
Total cost of sales per ounce sold - consolidated (i)
$
1,038

$
1,008

3
 %
Co-product cash costs per ounce produced - Yamana mines (ii)
$
672

$
650

3
 %
Co-product cash costs per ounce produced - attributable (ii)
$
692

$
665

4
 %
Co-product AISC per ounce produced - Yamana mines (ii)
$
888

$
897

(1
)%
AISC per ounce produced - attributable (ii)
$
916

$
911

1
 %
Silver
 
 
Total cost of sales per ounce sold (i)
$
13.63

$
13.79

(1
)%
Co-product cash costs per ounce produced (ii)
$
10.01

$
8.96

12
 %
Co-product AISC per ounce produced (ii)
$
13.48

$
12.65

7
 %
Copper
 
 
Total cost of sales per pound sold at Chapada (i)
$
1.73

$
1.92

(10
)%
Chapada co-product cash costs per pound produced (ii)
$
1.54

$
1.58

(3
)%
Chapada AISC per pound produced (ii)
$
1.74

$
2.03

(14
)%
For the years ended December 31,
2017

2016

%

By-product cash costs per gold ounce produced - Yamana mines (ii)
$
561

$
611

(8
)%
By-product AISC per gold ounce produced - Yamana mines (ii)
$
820

$
925

(11
)%
By-product cash costs per silver ounce produced (ii)
$
8.58

$
8.45

2
 %
By-product AISC per silver ounce produced (ii)
$
12.65

$
12.93

(2
)%
(i)
Total cost of sales consists of the sum of cost of sales excluding Depletion, Depreciation and Amortization ("DDA") plus DDA.
(ii)
A cautionary note regarding non-GAAP financial measures is included in Section 14: Non-GAAP Financial Measures and Additional Line Items or Subtotals in Financial Statements of this MD&A.

Financial Results

•
Net loss from continuing operations, attributable to Yamana Gold Inc. equityholders, for the year ended December 31, 2017 was $194.4 million or $0.21 per share basic and diluted, compared to a net loss of $307.9 million or $0.31 per share basic and diluted for the year ended December 31, 2016. The net loss was attributable to the non-cash impairment losses recognized on the re-measurement of Gualcamayo and related Argentinian exploration in association with their reclassification as assets held for sale totalling $356.5 million ($273.5 million net of tax), partially offset by the income tax recovery in Argentina related to a tax rate change of $216.8 million.
•
Net loss and net loss per share for 2017 were affected by, among other things, the following non-cash or other items that management believes are not reflective of the performance of the underlying operations, which may be used to adjust or reconcile input models in consensus estimates:
For the years ended December 31,
2017
2016
(In millions of US Dollars; unless otherwise noted)
$

Per share

$

Per share

Non-cash unrealized foreign exchange losses
15.0

0.02

33.7

0.04

Share-based payments/mark-to-market of deferred share units
12.8

0.01

14.2

0.01

Mark-to-market on derivative contracts
15.3

0.02

—

—

Mark-to-market on investment and other assets
2.5

—

15.6

0.02

Revision in estimates and liabilities including contingencies
(26.6
)
(0.03
)
17.3

0.02

Impairment of mining and non-operational mineral properties
356.5

0.38

615.1

0.65

Other provisions, write-downs and adjustments (i)
33.9

0.04

(8.9
)
(0.01
)
Non-cash tax unrealized foreign exchange losses/(gains)
9.9

0.01

(20.0
)
(0.02
)
Income tax effect of adjustments and other tax adjustments
(143.4
)
(0.15
)
(332.9
)
(0.35
)
Total adjustments - increase to earnings and earnings per share (ii)
275.9

0.29

334.1

0.35

(i)
The balance includes, among other things, the reversal of certain provisions such as tax credits and legal contingencies.
(ii)
Net loss from continuing operations, attributable to Yamana Gold Inc. equityholders, would be adjusted by an increase of $264.0 million (2016- $334.1 million), while an increase of $11.9 million (2016- $nil) would adjust the earnings attributable to non-controlling interests.


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For the years ended December 31,
 
 
 
(In millions of US Dollars; unless otherwise noted)
2017

2016

%

Financial Results
 
 
 
Revenue from continuing operations
$
1,803.8

$
1,787.7

1
 %
Cost of sales excluding DDA
(1,042.4
)
(1,029.0
)
1
 %
DDA
(426.8
)
(462.3
)
(8
)%
Impairment of mining properties
(256.9
)
(711.3
)
(64
)%
Mine operating earnings/(loss)
$
77.7

$
(414.9
)



•
Revenue for the year ended December 31, 2017, increased from the prior-year comparative period as a result of 24% higher copper prices and higher copper sales quantities.
•
Cost of sales excluding DDA was marginally higher than 2016 as a result of the appreciation of the Brazilian Real and Chilean Peso, higher copper sales quantities partly offset by lower planned sales quantities for gold and silver.
•
DDA expense was lower than the prior year due to lower planned gold and silver sales volumes. This was partially offset by higher copper sales volumes.

Balance Sheet and Liquidity (i)

•
As at December 31, 2017, excluding Brio Gold, the Company had cash and cash equivalents of $129.6 million and available credit of $970.0 million, for total liquidity of approximately $1.1 billion.
•
Cash flows from operating activities and Net Free Cash Flow (a non-GAAP financial measure, see Section 14: Non-GAAP Financial Measures and Additional Line Items or Subtotals in Financial Statements of this MD&A) are presented below.
For the years ended December 31,
 
 
(In millions of US Dollars)
2017

2016

Cash flows from operating activities before income taxes paid and net change in working capital (ii)
$
593.7

$
690.5

Income taxes paid
(19.0
)
(63.9
)
Payments made related to the Brazilian tax matters
(76.7
)
—

Cash flows from operating activities before net change in working capital (ii)
$
498.0

$
626.6

Net change in working capital
(14.0
)
25.3

Cash flows from operating activities
$
484.0

$
651.9

Less: Advance payments received on metal purchase agreement and unearned revenue
(6.6
)
(64.0
)
Add: Payments made related to the Brazilian tax matters (iii)
76.7

—

Add: Other cash payments
6.0

—

Less: Non-discretionary items related to the current period
 
 
   Sustaining capital expenditures
(204.7
)
(280.5
)
   Interest and other finance expenses paid
(103.8
)
(96.2
)
Net free cash flow (i) (ii)
$
251.6

$
211.2

(i)
For further information on the Company's liquidity and cash flow position, refer to Section 9: Liquidity, Capital Resources and Contractual Commitments of this MD&A.
(ii)
A cautionary note regarding non-GAAP financial measures and additional line items or subtotals in financial statements is included in Section 14: Non-GAAP Financial Measures and Additional Line Items or Subtotals in Financial Statements of this MD&A.
(iii)
For further information, refer to Section 10: Income Taxes of this MD&A.

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Additional liquidity and capital information is as follows:
For the years ended December 31,
 
 
 
(In millions of US Dollars; unless otherwise noted)
2017

2016

%

Dividends paid and declared
 
 
 
    Dividend paid (per share)
0.0200

0.0300

(33
)%
    Dividend declared in respect of the year (per share)
0.0200

0.0200

—
 %
Weighted average number of shares outstanding
 
 


Basic (in thousands)
948,187

947,443

—
 %
Diluted (in thousands)
948,187

947,443

—
 %
Capital expenditures
 
 
 
Sustaining
$
204.7

$
280.5

(27
)%
Expansionary
320.3

134.5

138
 %
Exploration
82.5

80.4

3
 %
Total capital expenditures
$
607.5

$
495.4

23
 %

Construction and Development, Strategic Developments and Optimization Initiatives

•
Cerro Moro, Argentina - As at the end of December 2017, construction progress at Cerro Moro is outlined as follows:
•
Construction remains on schedule for completion at the end of the first quarter of 2018. During the fourth quarter of 2017, structural steel erection and mechanical installation of the main process plant areas were completed with piping, electrical and instrumentation installation progressing according to plan.
•
Commissioning of the primary and secondary crushing and conveying circuits as well as the reverse osmosis water treatment facility commenced in December, 2017.
•
For the first quarter of 2018, the focus will move from construction to commissioning and operational readiness, with remaining construction works on piping, electrical, instrumentation installation staged to suit the commissioning plan, and the recruitment, onboarding and training of the operational staff aligned to the ramp-up of operations in the second quarter of 2018.
•
Underground and open pit mine development is now being managed by Operations having transitioned from Technical Services in the fourth quarter of 2017.
◦
Underground development in 2017 progressed according to plan and produced a high-grade stockpile of approximately 16,265 tonnes grading 27 grams per tonne ("g/t") gold and 1,725 g/t silver.
◦
Open pit operations have commenced with mobilization beginning in December and development activities now underway at the high-grade Escondida Central pit, where the ore zone is exposed at surface. Presently, open pit ore is being directed to the high-grade stockpile in preparation for the production start.
•
Expenditures for 2017 totaled approximately $172 million. The Company expects the balance of planned construction expenditures of approximately $61 million to be spent in the first half of 2018.

•
Agua Rica, Argentina - The Company continues to advance its alternatives for the development of the Agua Rica project.  These alternatives include technical work and analysis for project development options for Agua Rica, as well as the review and consideration of various strategic alternatives all in an effort to maximize value.  In terms of the technical reviews, considerable effort has been undertaken to advance the two development scenarios, one a large-scale open pit and the other a smaller scale underground mine.  The large-scale open pit scenario contemplates an integration with the neighboring Alumbrera mine in which the Company holds a 12.5% interest. Under this scenario, the Company projects a mine life in excess of 22 years at average annual production levels of approximately 440 million pounds of copper, 109 thousand ounces of gold, 14 million pounds of molybdenum and 1.6 million ounces of silver for the first 10 years post ramp up.  The smaller scale underground scenario employs the application of sub-level caving.  For this scenario, based on conceptual level studies, the Company currently projects a mine life in excess of 28 years at average annual production levels of approximately 149 million pounds of copper, 43.4 thousand ounces of gold, 3.9 million pounds of molybdenum and 363 thousand ounces of silver for the first 10 years post ramp up.  A feasibility study update was completed for the open pit scenario in 2016 and, as such, this scenario is technically advanced and development ready. Technical work continue to advance the more recently studied underground scenario, as it presents a compelling development opportunity, notably with a marked decrease in development capital while still maintaining the longer term optionality for a large-scale open pit operation in due course.

Based on its own evaluation, and feedback from the strategic alternatives process, the Company believes that the underground scenario represents a viable alternative that should be advanced as soon as possible towards a pre-feasibility level, while concurrently pursuing various strategic alternatives.  As such, the Company has determined that it will undertake the work required to conduct a preliminary economic assessment during 2018, with a pre-feasibility study to follow in 2019.

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•
Gualcamayo, Argentina - The Company is pursuing alternatives to maximize value at Gualcamayo. These include the rationalization of the mine’s production platform and cost structure, the extension of mine life from exploration efforts focused on oxide resource delineation and additions, and the advancement of the Deep Carbonate project. Similar to the strategy leading to the sale of the Mercedes mine in Mexico during 2016, the Company has also considered the continuum of options for value maximization. Such options weigh the prospect for internal advancement and management time and resources required against the opportunity for monetization, which would leave management and resources unencumbered for the pursuit of other internal projects. As the Company has decided to focus its efforts on assets that are better aligned with its strategic objectives, Gualcamayo has been classified as an asset held for sale.

The Company has initiated efforts to right-size production at Gualcamayo to deliver a more sustainable production base, better cost structure and to generate a more significant contribution to free cash flows. This optimization plan is similar to the successful strategy that was executed at El Peñón during 2017 and that is currently underway at Minera Florida, leading initially to less ounces of production, although at a higher quality. A more optimal alignment between the current oxide mineral base and the production run-rate will result in an extended time frame to explore the prospective near-mine and regional oxide targets in order to extend mine life. Further testing and evaluation of the Deep Carbonate project and expansion of the sulphide mineral resources of the project will also be pursued. A transition of uninterrupted production from the Gualcamayo mine to the longer-term Deep Carbonate project is currently dependent on the exploration of near mine targets at Gualcamayo and the addition of new oxide resources leading to the extension of the mine life.

•
Kirkland Lake, Canada - On December 21, 2017, the Company announced an agreement to sell certain jointly owned exploration properties of the Canadian Malartic Corporation (“CMC”) including the Kirkland Lake and Hammond Reef properties (the “Transaction”).  The Transaction is structured as a sale of assets by CMC (in which Yamana holds a 50% indirect interest) pursuant to which Agnico Eagle Mines Limited will acquire all of the Company’s indirect 50% interest in the Canadian exploration assets of CMC in consideration of cash proceeds to Yamana of $162.5 million.  The Transaction, which is scheduled to close in the first quarter of 2018, does not affect the Canadian Malartic mine and related assets including Odyssey, East Malartic, Midway, and East Amphi. The Transaction is consistent with the Company’s stated objective to improve its financial position. The assets have been reclassified to assets held for sale in the Company's Consolidated Financial Statements as at December 31, 2017.

•
Suruca, Brazil - The Company continues to advance development efforts at the Suruca oxides project including the additional consideration of recent drill results at Suruca Southwest and Suruca Sulphide (located beneath the oxide deposit). Suruca Oxides is a gold-only standalone project with synergies with the existing Chapada infrastructure. The Company is assessing a broader Suruca complex to maximize value, and expects to provide an update on the preliminary plans for the Suruca oxides and the underlying sulphides in the second quarter of 2018.

•
Chapada, Brazil - Opportunities for a plant expansion at Chapada are being studied for the treatment of Sucupira mineralization and low-grade ore stockpiles. These studies are being undertaken in parallel to the Suruca assessments.  In 2017 for Sucupira, mineral reserves of 46 million tonnes at 0.27 g/t gold and 0.31% copper grades were reclassified from mineral resources.  While prioritizing among the several opportunities at Chapada, mine management is assessing the impact of bringing forward production from the Sucupira deposit into the mine plan.

•
Canadian Malartic, Canada - The Canadian Malartic Extension Project is continuing according to plan and on budget. Expansionary expenditures for the mine extension in 2017 were $17.0 million (on a 50% basis). Another, approximately $36.5 million (on a 50% basis) is expected to be spent in 2018. 

Mineral Reserves and Mineral Resources

The Company's exploration programs continue with the focus of mineral resource discovery and mineral reserve replacement and growth at all mines. For additional details, refer to Section 6: Operating Mines and Section 8: Mineral Reserve and Mineral Resources of this MD&A.

Subsequent Events

Shareholder Supported Take-over Bid for Brio Gold Inc.

In January 2018, Leagold Mining Corporation ("Leagold") announced that it intended to make an offer to acquire all of the issued and outstanding shares of Brio Gold Inc. (“Brio Shares”) on or before February 28, 2018 (the “Offer”). Pursuant to the Offer, holders of Brio Shares would receive

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0.922 of a share of Leagold for each Brio Share held. Based on the share exchange ratio to be provided under the Offer, the Company would receive 58,115,953 shares of Leagold, representing approximately 22% ownership in the combined entity. The Company entered into a support agreement endorsing a transaction with Leagold. Pursuant to the agreement, the Company agreed to tender all of its Brio Shares and to hold the Leagold shares it receives pursuant to the Offer for a minimum period of 12 months, subject to certain exceptions. The Offer provides the Company the opportunity to derive value from Brio and the underlying Brio assets as the combined entity has considerable present value and upside potential.
  
Copper Advanced Sales Program

The Company entered into a copper advanced sales program pursuant to which the Company received $125.0 million on January 12, 2018 in exchange for approximately 40.3 million pounds of copper to be delivered in the second half of 2018 and first half of 2019. This production represents approximately one third of planned production in the period of the program or approximately 16 per cent of the total production for 2018 and 2019. Copper is expected to be delivered against these prepaid volumes coincident with planned shipments of concentrate from the Chapada mine. The cash consideration will be treated as deferred revenue to be amortized, and the revenue recognized, over the second half of 2018 and first half of 2019 when the physical deliveries of copper occur under the prepaid sales. The cash consideration will be included in operating cash flow for the first quarter of 2018.

Refinancing of Debt - Redemption of 2019 Notes

During the fourth quarter of 2017, the Company completed an offering of $300 million of 4.625% senior notes due December 2027. With these funds, on January 29, 2018, the Company redeemed $181.5 million of 6.97% senior notes due December 2019 at a make-whole price of 108.12. These items have extended the tenor of the Company’s fixed term debt profile at lower average interest rates and improved financial flexibility. During the first and second quarter of 2018, the Company has senior notes maturities of $73.6 million and $35.0 million, respectively, that will be retired as they come due. Following the 2018 maturities, the Company’s next scheduled maturity of fixed rate debt of $84 million is not until March 2020.


3.    OUTLOOK AND STRATEGY

Over the years, the Company has grown through phases of strategic acquisitions to upgrade its portfolio and by pursuing organic growth to increase production and cash flow. The Company is currently focusing on numerous internal value generating opportunities and the Company’s current key objectives include:

•
Delivering operational results and execution, and advancing near-term and ongoing optimizations at Yamana’s five remaining mines, soon to be six producing mines
•
Maximization of cash return on invested capital, first on producing and then non-producing assets.
•
Within its producing portfolio, the Company’s focus remains on the growth of mineral reserves and mineral resources resulting in mine life extensions. Similarly, throughput increases, grade and recovery improvements and cost reductions which are expected to improve returns on invested capital.
•
For those assets in the non-producing category, value and return maximization and the ultimate generation of a more than commensurate return on that capital base will be dependent on the advancement of development opportunities. Such opportunities will be supported by technical/financial reviews, development through construction and operational efforts. The Company will also consider alternative options for generating returns on the non-producing portion of its portfolio from the monetization of those assets, for example, as in the case of the Kirkland Lake transaction.
•
Advancing Cerro Moro to construction completion in the first quarter of 2018, with the production ramp-up to commence thereafter;
•
Advancing the Company’s organic pipeline through exploration targeted on the most prospective properties, including:
◦
Chapada, Minera Florida, Canadian Malartic (Odyssey) and Cerro Moro as a result of new discoveries at each site,
◦
Minera Florida, El Peñón, Chapada, and Jacobina with the objective to increase mine life and to deliver potential for production increases through further delineation and infill drilling; and
•
Maximizing value from the long-life Chapada mine and vast exploration opportunities by pursuing expansion initiatives.
•
Continuing balance sheet and financial performance improvements. The Company continues to target a leverage ratio of 1.5 or better;
•
Improving the efficiency of all operations with a focus on optimizing free cash flow from mine plans that can deliver consistent and predictable results and, in the case of Canadian Malartic, Jacobina, and Minera Florida, a focus on production growth opportunities; and
•
Increasing overall mineral reserves and mineral resources.

The Company made significant progress against all of these objectives through the end of the fourth quarter.

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Consistent with the above objectives, the Company continues to evaluate its medium-term development opportunities. The Company foresees that after the completion of Cerro Moro, and the Canadian Malartic Extension, there will be a significant reduction in expansionary capital. With Cerro Moro, coupled with an increase in production as existing projects are completed, the Company expects to deliver significant increases in cash flow and net free cash flow beginning in 2018. This would also increase the Company's cash return on invested capital.

The Company remains committed to maintaining financial flexibility and strengthening its balance sheet. Recent and current initiatives, which have or will further advance this commitment, include the following:

•
First and foremost are planned cash flow increases which are expected as the Company continues to deliver operational improvements and advance its development stage projects, most notably Cerro Moro which remains on budget and on schedule for start-up in early 2018.  With Cerro Moro contributing to production in 2018 and with its projected low cost profile, the Company expects meaningful increases to EBITDA and cash flow for 2018 and beyond.

•
Secondly, the recent offering of senior notes, and copper advanced sale program provide further financial flexibility over the medium term with a focus on repaying outstanding indebtedness.  Additionally, the Company expects to use this enhanced flexibility to replace and upgrade mine cash flows and to target further optimization and other opportunities.  Yamana is committed to advancing its project pipeline with the sequencing established to manage balance sheet strength while also ensuring the pipeline is well positioned in those countries and jurisdictions where the Company has the most familiarity.

•
Thirdly, the Company is advancing on several monetization initiatives as part of ongoing strategic and technical reviews of its asset portfolio. Following such a review, the Company entered into a transaction for the sale of certain exploration assets including the Kirkland Lake and Hammond Reef properties. Another previously announced and similar strategic review relates to the alternatives for development of Agua Rica which is a feasibility stage copper-gold asset wholly owned by Yamana. In the case of other assets, the Company considers the contribution to cash flows from those assets and whether or not the possible monetization of or other strategic alternatives for those assets may deliver more value than the immediate cash flows that they generate.  In 2016, the Company sold its Mercedes mine on this basis and after such a review. Following a similar review of Gualcamayo, the Company has initiated a plan of sale for its Gualcamayo mine in Argentina.

The Company is committed to delivering production from quality mines/projects thereby maximizing returns, improving its cash balances and cash return on invested capital, reducing its net debt, and properly managing its balance sheet and overall financial position.  Monetization initiatives, the recent issue of the senior notes, and the recently entered into copper advanced sale program considerably advance these goals.  Continued operational and financial performance from the Company’s continuing five mines along with the contribution to be provided by Cerro Moro, beginning in 2018, will further advance these goals.

2018 - 2020 Production Guidance

The following table presents the Company's total production expectations for its mines for 2018, 2019 and 2020.

 
2017 Actual

2018 E

2019 E

2020 E

Total Gold Production (ounces) (i)
823,264

900,000

940,000

970,000

Total Silver Production (ounces)
5,004,761

8,150,000

10,400,000

12,950,000

Total Copper Production (millions of pounds) - Chapada
127.3

120.0

120.0

120.0

(i)
Excluding any attribution from Yamana’s interest in Brio Gold and Gualcamayo which is an asset held for sale. For 2017, total gold production including Gualcamayo is 977,316 ounces. Gualcamayo is expected to produce 110,000 ounces in 2018, additional details are provided below.

The following table presents per unit cost expectations for 2018:

yamanalogo.jpg | 8


2017 Actuals, excluding Brio (ii)
Gold


Silver


Copper
(Chapada)

Total cost of sales per ounce or pound sold
$
1,023

$
13.63

$
1.73

Co-product cash costs per ounce or pound produced (i)
$
672

$
10.01

$
1.54

Co-product AISC per ounce or pound produced (i)
$
888

$
13.48

$
1.74

By-product cash costs per ounce or pound produced (i)
$
561

$
8.58

—

By-product AISC per ounce or pound produced (i)
$
820

$
12.65

—

 
 
 
 
2018 Guidance, excluding Brio (ii)
 
 
 
Total cost of sales per ounce or pound sold
$1,010 - $1,030

$15.00 - $15.25

$1.80 - $1.85

Co-product cash costs per ounce or pound produced (i)
$630 - $650

$9.00 - $9.25

$1.60 - $1.65

Co-product AISC costs per ounce or pound produced (i)
$850 - $870

$12.25 -$12.50

$1.80 - $1.85

By-product cash costs per ounce or pound produced (i)
$460 - $480

$6.75 - $7.00

—

By-product AISC costs per ounce or pound produced (i)
$725 - $745

$10.50 - $10.80

—

(i)
A cautionary note regarding non-GAAP financial measures and additional line items or subtotals in financial statements is included in Section 14: Non-GAAP Financial Measures and Additional Line Items or Subtotals in Financial Statements of this MD&A.
(ii)
2017 actuals include Gualcamayo, while 2018 guidance excludes Gualcamayo as it is an asset held for sale.

Gold production is expected to increase in the guidance period in each of 2019 and 2020 mostly as a result of increases in production at Canadian Malartic, Jacobina, Minera Florida, and with new production from Cerro Moro. Silver production is expected to increase more significantly, in percentage terms, than gold production almost entirely as a result of the ramp up of Cerro Moro. Copper production, all of which is from Chapada, is expected to remain constant throughout the guidance period.

The Company is now concentrating its efforts on five producing mines, which, beginning in early 2018, will increase to six with the planned start of production from Cerro Moro in the second quarter. The Company’s Gualcamayo mine has been classified as an asset held for sale and, as such, is not included in total production and cost expectations for the guidance period. See “Gualcamayo” section below for additional details.

The following table presents mine-by-mine production expectations for 2018.
 
Gold
Silver
Production Expectation by Mine (i)
2017 Actual

2018 E

2017 Actual

2018 E

Chapada
119,852

110,000

—

—

El Peñón
160,509

145,000

4,282,339

4,400,000

Canadian Malartic (50%)
316,731

325,000

—

—

Jacobina
135,806

135,000

—

—

Minera Florida
90,366

90,000

—

—

Cerro Moro
—

85,000

—

3,750,000

(i)
Excluding Gualcamayo production which is an asset held for sale.

The Company’s 2018 total gold production guidance of 900,000 ounces implies a bias to the upside over the sum of mine production expectations presented above. This takes into consideration that certain mines, based on historical performance and potential benefits of planned optimizations, are expected to achieve higher levels of gold production in 2018 while not attributing those production ounces to specific mines at this time.

At Cerro Moro, the Company has undertaken studies to optimize mine sequencing and the mix of gold and silver production, balancing efforts to front-end load gold and silver production in the early years while taking into account the underground and open-pit sequencing to execute on the plan. With the planned changes and new sequencing, the consequence is a higher proportion of gold dominant stopes over the guidance period. While this provides more flexibility in the mine plan to maximize gold production above current guidance levels, a consequence is that silver grades are lower and silver production is slower to ramp up as compared to prior guidance. With the new sequencing, the Company forecasts silver production over 8 million ounces in 2020.

For its existing mines, Yamana expects to continue its established trend of delivering stronger production in the second half of the year compared to the first half of the year. In 2018, the Company expects approximately 47 per cent of total gold production and 46 per cent of total copper production to be delivered in the first half, excluding Cerro Moro. For Cerro Moro, the Company expects approximately 25 to 30 per cent of the mine’s gold and silver production to be produced in the first half.


yamanalogo.jpg | 9




Cost Outlook

With the contribution from Cerro Moro, the Company’s all-in sustaining costs (“AISC”) are expected to decrease from 2017 levels into 2018 and 2019.
 
The following table presents cost of sales, cash costs and AISC guidance by mine for gold and silver for 2018:
 
Total cost of sales
per ounce sold (ii)
Co-product cash costs
per ounce produced (i) (ii)
Co-product AISC
per ounce produced (i) (ii)
 
2017 Actual

2018 E

2017 Actual

2018 E

2017 Actual

2018 E

Gold
 
 
 
 
 
 
Chapada
$
384

$
450

$
334

$
385

$
384

$
430

El Peñón
$
1,089

$
1,065

$
751

$
790

$
928

$
965

Canadian Malartic (50%)
$
1,000

$
1,000

$
576

$
590

$
742

$
760

Jacobina
$
1,057

$
1,100

$
701

$
730

$
867

$
910

Minera Florida
$
1,248

$
1,275

$
812

$
750

$
1,090

$
930

Cerro Moro
$
—

$
1,100

$
—

$
510

$
—

$
650

 
 
 
 
 
 
 
Silver
 
 
 
 
 
 
El Peñón
$
14.57

$
14.75

$
10.30

$
10.75

$
12.77

$
13.25

Cerro Moro
$
—

$
15.25

$
—

$
7.10

$
—

$
9.15

(i)
A cautionary note regarding non-GAAP financial measures and additional line items or subtotals in financial statements is included in Section 14: Non-GAAP Financial Measures and Additional Line Items or Subtotals in Financial Statements of this MD&A.
(ii)
Excluding any attribution from Yamana’s interest in Brio Gold and Gualcamayo which is an asset held for sale.

With respect to Cerro Moro, the Company is expecting average 2018 to 2019 co-product cash costs of $500 per ounce gold and $6.70 per ounce silver, and co-product AISC of $650 per ounce gold and $8.85 per ounce silver.

The following table presents sustaining capital and exploration spend expectations by mine for 2018, excluding any attribution from Brio Gold:
 
Sustaining capital
Total exploration
(In millions of US Dollars)
2017 Actual

2018 E

2017 Actual

2018 E

Chapada
$
27.9

$
25.0

$
8.2

$
8.0

El Peñón
$
38.5

$
35.0

$
17.8

$
12.0

Canadian Malartic (50%)
$
48.2

$
50.0

$
10.2

$
5.0

Minera Florida
$
24.6

$
16.0

$
12.4

$
10.0

Jacobina
$
21.7

$
20.0

$
5.9

$
6.0

Cerro Moro
$
—

$
21.0

$
7.7

$
9.0

Monument Bay
$
—

$
—

$
3.3

$
6.0

Discretionary
$
—

$
—

$
—

$
16.0

Other sustaining
$
2.1

$
3.0

$
—

$
—

Generative exploration and overhead
$
—

$
—

$
18.3

$
17.0

Total
$
163.0

$
170.0

$
83.8

$
89.0


The Company expects approximately 75% of exploration spending will be capitalized in 2017.

In 2017, the Company provided guidance that approximately $21 million dollars of exploration spending was considered discretionary and would be allocated on a success basis. Yamana expects to use a similar approach in 2018 to allocate $16 million dollars of discretionary exploration spending based on results at the Company’s various mines and assets. The potential for a portion of the 2018 discretionary spending offsets some of the change in expected exploration spending compared to 2017 actuals seen at certain mines, such as El Peñón, in the table above.
At Minera Florida, the Company is projecting lower sustaining capital and exploration expenditures in 2018 as previously planned expenditures are expected to be spread across a number of years. This approach is consistent with the transformational strategy implemented in 2017, which

yamanalogo.jpg | 10


is expected to result in lower production in the immediate term while the Company expects production to increase to 120,000 ounces of gold per year by 2021. The Company continues to target a longer-term strategic production objective of 130,000 ounces of gold per year at Minera Florida.

The following table presents other expenditure expectations for 2018, excluding Gualcamayo and any attribution from Brio Gold:
(In millions of US Dollars, unless otherwise noted)
2017 Actual (i)

2018 E (i)

Total expansionary capital
$
279.9

$
192.3

Total DDA
$
384.3

$
450.0

Total general and administrative expenses ("G&A")
$
90.6

$
94.0

Cash based G&A
$
82.9

$
85.0

Stock-based G&A
$
7.7

$
9.0

(i)
2017 actuals include Gualcamayo, while 2018 guidance excludes Gualcamayo as it is an asset held for sale.

A significant portion of the expansionary capital budget for 2018 relates to Cerro Moro, which, as previously noted, will begin planned operations in 2018, and to the Canadian Malartic Extension Project (formerly the Barnat extension).

At Chapada, the Company has various development, optimization and expansion opportunities under consideration that are not included in the current 2018 expansionary capital expenditures. These opportunities include plant throughput increases, and the broader Suruca complex. Sucupira and Baru are immediately adjacent to the existing pit, and the potential to bring forward production from these deposits is currently being evaluated. Opportunities to expand the mill capacity to treat Sucupira/Baru mineralization, and potentially low-grade ore stockpiles, which are expected to grow further in 2018 by approximately 15 million tonnes, are also being evaluated. The Company is also advancing development efforts at the Suruca oxide project while considering recent drill results from Suruca Southwest and Suruca sulphide (located beneath the oxide deposit). The Company is now assessing a broader Suruca complex and expects to complete studies of a comprehensive scenario in 2018. Additional detail on the range of development opportunities and related plans for Chapada is expected to be provided in the second quarter of 2018.

At Cerro Moro, the Company expects to spend approximately $61 million in remaining construction costs in 2018.  The planned expenditures at Cerro Moro include previously planned 2018 spending of approximately $55 million plus $6 million carried forward from 2017.

At Canadian Malartic, the Company expects to spend approximately $52 million (50%-basis) in expansionary capital in 2018. The majority, or approximately $37 million, relates to the Canadian Malartic Extension Project. The remainder predominantly includes capital expenditures for studies relating to the Odyssey and East Malartic projects.

At Minera Florida, the Company expects to spend approximately $28 million in expansionary capital in 2018. This includes approximately $10 million for the last payment relating to the land concessions acquired in 2016 with the majority of the remainder allocated to expansionary mine development in the Hornitos and Pataguas tunnels. The Company will spread expansionary mine development capital and exploration expenditures across a number of years.

The Company expects higher DDA in 2018 compared to 2017 mainly due to the start-up of production at Cerro Moro. DDA at Cerro Moro is expected to decrease to lower levels as the exploration program advances toward its target of adding 1.0 million ounces of mineral resources by 2021. Cerro Moro DDA reflects both the costs of construction as well as the historical acquisition costs.

Gualcamayo

As aforementioned, Gualcamayo is an asset held for sale and the efforts to right-size production at Gualcamayo are reflected in the 2018 guidance as follows:
 
2017 Actual

2018 E

Gold production (ounces)
154,052

110,000

Total cost of sales per gold ounce sold
$
1,293

$
1,050

Co-product cash costs per gold ounce produced (i)
$
942

$
1,080

Co-product AISC per gold ounce produced (i)
$
990

$
1,145

Sustaining capital (in millions of US Dollars)
$
6.6

$
6.8

Exploration (in millions of US Dollars)
$
10.7

$
8.0


yamanalogo.jpg | 11


(i)
A cautionary note regarding non-GAAP financial measures and additional line items or subtotals in financial statements is included in Section 14: Non-GAAP Financial Measures and Additional Line Items or Subtotals in Financial Statements of this MD&A.

Based on mineral reserves and reasonable conversion of mineral resources, the Company expects Gualcamayo’s production platform to be in excess of 100,000 ounces of gold for the next several years following 2018. The production outlook for Gualcamayo excludes the sizeable district exploration potential and the Deep Carbonates project.

Assumptions

Key assumptions, in relation to the above guidance, are presented in the table below.
 
2017
Actual (i)

2018 Assumptions

Gold (USD per ounce)
$
1,264

$
1,300

Silver (USD per ounce)
$
16.83

$
18.00

Copper (USD per pound)
$
2.78

$
3.25

Canadian Dollar/US Dollar
1.30

1.28

Brazilian Real/US Dollar
3.19

3.25

Argentine Peso/US Dollar
16.56

21.00

Chilean Peso/US Dollar
649.01

615.00

(i)
2017 exchange rates are the average realized exchange rates for the 12 months ended December 31, 2017.


4.             SUMMARY OF FINANCIAL AND OPERATING STATISTICS


yamanalogo.jpg | 12


4.1    Financial Statistics
 
For the three months ended 
 December 31,
For the years ended
 December 31,
(In millions of US Dollars; unless otherwise noted)
2017

2016

2017

2016

2015

Revenue
$
478.8

$
484.4

$
1,803.8

$
1,787.7

$
1,720.6

Cost of sales excluding DDA
(264.7
)
(284.1
)
(1,042.4
)
(1,029.0
)
(1,015.1
)
Gross margin excluding DDA
$
214.1

$
200.3

$
761.4

$
758.7

$
705.5

Depletion, depreciation and amortization
(100.9
)
(128.3
)
(426.8
)
(462.3
)
(503.9
)
Impairment of mining properties
(256.9
)
(711.3
)
(256.9
)
(711.3
)
(1,469.0
)
Mine operating (loss)/earnings
$
(143.7
)
$
(639.3
)
$
77.7

$
(414.9
)
$
(1,267.4
)
General and administrative
(34.0
)
(29.9
)
(113.6
)
(100.2
)
(110.1
)
Exploration and evaluation
(7.0
)
(3.0
)
(21.2
)
(14.9
)
(18.7
)
Equity loss from associate
—

—

—

—

(17.5
)
Other expenses
(16.4
)
(19.0
)
(23.6
)
(39.7
)
(69.6
)
(Impairment)/reversal of non-operating mining properties
(99.6
)
96.2

(99.6
)
96.2

(567.1
)
Net finance expense
(37.5
)
(29.6
)
(137.7
)
(142.2
)
(112.6
)
Net loss before income taxes
$
(338.2
)
$
(624.6
)
$
(318.0
)
$
(615.7
)
$
(2,163.0
)
Income tax recovery, net
138.5

269.2

113.9

324.9

476.3

Net loss from continuing operations
$
(199.7
)
$
(355.4
)
$
(204.1
)
$
(290.8
)
$
(1,686.7
)
Net loss from discontinued operations
—

(12.6
)
—

(17.5
)
(428.1
)
Net loss
$
(199.7
)
$
(368.0
)
$
(204.1
)
$
(308.3
)
$
(2,114.8
)
 
 
 
 
 
 
Attributable to:
 
 
 
 
 
Yamana Gold Inc. equityholders
$
(191.0
)
$
(367.6
)
$
(194.4
)
$
(307.9
)
$
(2,114.8
)
Non-controlling interests
$
(8.7
)
$
(0.4
)
$
(9.7
)
$
(0.4
)
$
—

 
$
(199.7
)
$
(368.0
)
$
(204.1
)
$
(308.3
)
$
(2,114.8
)
 
 
 






Loss per share - basic and diluted (i)
$
(0.20
)
$
(0.39
)
$
(0.21
)
$
(0.32
)
$
(2.26
)
  Loss per share from continuing operations - basic and diluted (i)
$
(0.20
)
$
(0.37
)
$
(0.21
)
$
(0.31
)
$
(1.80
)
Dividends declared per share
$
0.005

$
0.005

$
0.020

$
0.020

$
0.060

Dividends paid per share
$
0.005

$
0.005

$
0.020

$
0.030

$
0.060

Weighted average number of common shares outstanding - basic
(in thousands)
948,468

947,590

948,187

947,443

936,606

Weighted average number of common shares outstanding - diluted
(in thousands)
948,468

947,590

948,187

947,443

936,606

(i)
Attributable to Yamana Gold Inc. equityholders.


yamanalogo.jpg | 13


Net earnings/(loss) and net earnings/(loss) per share were affected by, among other things, the following non-cash and certain items that may not be reflective of current and ongoing operations. The Company refers to the following items, which may be used to adjust or reconcile input models in consensus estimates:
 
For the three months ended 
 December 31,
 
For the years ended
December 31,
(In millions of US Dollars; unless otherwise noted)
2017

2016

 
2017

2016

Non-cash unrealized foreign exchange (gains)/losses
$
(1.2
)
$
8.8

 
$
15.0

$
33.7

Share-based payments/mark-to-market of deferred share units
3.7

(2.3
)
 
12.8

14.2

Mark-to-market on derivative contracts
14.2

—

 
15.3

—

Mark-to-market on investment and other assets
(0.5
)
4.2

 
2.5

15.6

Revision in estimates and liabilities including contingencies
1.9

8.2

 
(26.6
)
17.3

Impairment of mining and non-operational mineral properties
356.4

615.1

 
356.5

615.1

Other provisions, write-downs and adjustments (i)
5.9

2.3

 
33.9

(8.9
)
Non-cash tax unrealized foreign exchange losses/(gains)
11.6

50.8

 
9.9

(20.0
)
Income tax effect of adjustments
(141.3
)
(325.0
)
 
(143.4
)
(332.9
)
Total adjustments - increase to earnings(ii)
$
250.7

$
362.1

 
$
275.9

$
334.1

Total adjustments - increase to earnings per share

$
0.26

$
0.38

 
$
0.29

$
0.35

(i)
The balance includes, among other things, the reversal of certain provisions such as tax credits and legal contingencies.
(ii)
For the three months ended December 31, 2017, net earnings from continuing operations, attributable to Yamana Gold Inc. equityholders, were impacted by an increase of $244.2 million (2016- $362.1 million), while an increase of $6.5 million (2016- $nil) relates to non-controlling interests. For the twelve months ended December 31, 2017, net earnings from continuing operations, attributable to Yamana Gold Inc. equityholders, were impacted by an increase of $264.0 million (2016- $334.1 million), while an increase of $11.9 million (2016- $nil) relates to non-controlling interests.

The following table lists revenue per ounce or pound sold, average realized prices and average market prices:
 
For the three months ended 
 December 31,
 
For the years ended
December 31,
 
2017

2016

%

 
2017

2016

%

Gold
 
 
 
 
 
 
 
Revenue per ounce of gold
$
1,269

$
1,196

6
 %
 
$
1,250

$
1,240

1
 %
Average realized gold price per ounce (i)(ii)
$
1,286

$
1,210

6
 %
 
$
1,264

$
1,251

1
 %
Average market gold price per ounce (iii)
$
1,277

$
1,222

5
 %
 
$
1,259

$
1,251

1
 %
Silver
 
 
 
 
 
 
 
Revenue per ounce of silver
$
16.46

$
17.11

(4
)%
 
$
16.80

$
17.06

(2
)%
Average realized silver price per ounce (i)(ii)
$
16.49

$
17.17

(4
)%
 
$
16.83

$
17.04

(1
)%
Average market silver price per ounce (iii)
$
16.71

$
17.19

(3
)%
 
$
17.08

$
17.14

—
 %
Copper
 
 
 
 
 
 
 
Revenue per pound of copper
$
2.36

$
2.02

17
 %
 
$
2.36

$
1.92

23
 %
Average realized copper price per pound (i)(ii)
$
3.02

$
2.48

22
 %
 
$
2.78

$
2.24

24
 %
Average market copper price per pound (iii)
$
3.09

$
2.39

29
 %
 
$
2.80

$
2.21

27
 %
(i)
A cautionary note regarding non-GAAP financial measures and their respective reconciliations, as well as additional line items or subtotals in financial statements are included in Section 14: Non-GAAP Financial Measures and Additional Line Items or Subtotals in Financial Statements of this MD&A.
(ii)
Realized prices based on gross sales compared to market prices for metals may vary due to the timing of the sales.
(iii)
Source of information: Bloomberg.

Cash flows from operating activities and Net Free Cash Flow (a non-GAAP financial measure, see Section 14: Non-GAAP Financial Measures and Additional Line Items or Subtotals in Financial Statements of this MD&A) are presented below:
 
For the three months ended
December 31,
For the years ended
December 31,
(In millions of US Dollars)
2017

2016

2017

2016

2015

Cash flows from operating activities of continuing operations (i)
$
158.5

$
163.0

$
484.0

$
651.9

$
514.0

Cash flows from operating activities before net change in working capital (i), (ii)
$
122.3

$
147.7

$
498.0

$
626.6

$
654.8

Cash flows used in investing activities of continuing operations
$
(196.9
)
$
(160.2
)
$
(644.2
)
$
(407.7
)
$
(367.2
)
Cash flows from/(used in) financing activities of continuing operations
$
68.3

$
(147.0
)
$
217.9

$
(267.5
)
$
(204.6
)

yamanalogo.jpg | 14


(i)
Cash flows from operating activities were higher in 2016 due to the receipt of advanced consideration in relation to the Company's metal purchase agreements. Cash flows from operating activities in 2017 were affected by payments of $76.7 million made in relation to the Brazilian Tax Matters. Refer to Section 10: Income Taxes of this MD&A for further discussion relating to the Brazilian Tax Matters.
(ii)
A cautionary note regarding non-GAAP financial measures is included in Section 14: Non-GAAP Financial Measures and Additional Line Items or Subtotals in Financial Statements of this MD&A.
 
For the three months ended
December 31,
For the years ended
December 31,
(In millions of US Dollars)
2017

2016

2017

2016

Cash flows from operating activities before income taxes paid and net change in working capital (ii)
$
170.3

$
161.2

$
593.7

$
690.5

Income taxes paid
(1.4
)
(13.5
)
(19.0
)
(63.9
)
Payments made related to the Brazilian tax matters
(46.6
)
—

(76.7
)
—

Cash flows from operating activities before net change in working capital (ii)
$
122.3

$
147.7

$
498.0

$
626.6

Net change in working capital
36.2

15.3

(14.0
)
25.3

Cash flows from operating activities
$
158.5

$
163.0

$
484.0

$
651.9

Less: Advance payments received on metal purchase agreement and unearned revenue
(6.6
)
—

(6.6
)
(64.0
)
Add: Payments made related to the Brazilian tax matters
46.6

—

76.7

—

Add: Other cash payments
—

—

6.0

—

Less: Non-discretionary items related to the current period
 
 
 
 
   Sustaining capital expenditures
(57.0
)
(77.7
)
(204.7
)
(280.5
)
   Interest and other finance expenses paid
(34.3
)
(30.1
)
(103.8
)
(96.2
)
Net free cash flow (i)
$
107.2

$
55.2

$
251.6

$
211.2

(i)
For further information on the Company's liquidity and cash flow position, refer to Section 9: Liquidity, Capital Resources and Contractual Commitments of this MD&A.
(ii)
A cautionary note regarding non-GAAP financial measures and additional line items or subtotals in financial statements is included in Section 14: Non-GAAP Financial Measures and Additional Line Items or Subtotals in Financial Statements of this MD&A.

Balance sheet highlights
As at December 31,
(In millions of US Dollars)
2017

2016

2015

Total assets
$
8,763.3

$
8,801.7

$
9,518.1

Total long-term liabilities
$
3,535.3

$
3,746.6

$
4,111.4

Total equity
$
4,447.3

$
4,580.0

$
4,864.6

Working capital (i)
$
58.7

$
77.3

$
106.9

(i)
Working capital is defined as the excess of current assets over current liabilities, which includes the current portion of long-term debt. Notable movements in working capital from the prior year include decreases of $91.4 million resulting from the increase in the current portion of long-term debt and $87.0 million resulting from the increase of income taxes payable mainly related to the Brazilian Tax Matters and timing of payments.


yamanalogo.jpg | 15


4.2    Operating Statistics
Ounces of production
Gold
 
Silver
 
For the years ended December 31,
2017

2016

%

2017

2016

%

Chapada
119,852

107,301

12
 %
252,748

259,444

(3
)%
El Peñón
160,509

220,209

(27
)%
4,282,339

6,020,758

(29
)%
Canadian Malartic (i)
316,731

292,514

8
 %
—

—

—
 %
Jacobina
135,806

120,478

13
 %
—

—

—
 %
Minera Florida
90,366

104,312

(13
)%
469,674

429,048

9
 %
Gualcamayo
154,052

164,265

(6
)%
—

—

—
 %
Total production, Yamana mines
977,316

1,009,079

(3
)%
5,004,761

6,709,250

(25
)%
Brio Gold (attributable to the Company) (iii)
119,011

188,765

(37
)%
—

—

—
 %
Total production, attributable to the Company
1,096,327

1,197,844

(8
)%
5,004,761

6,709,250

(25
)%
Brio Gold (attributable to non-controlling interest)
59,014

897

n/a

—

—

n/a

Total production (v), (vi)
1,155,341

1,198,741

(4
)%
5,004,761

6,709,250

(25
)%
Cost of sales excluding DDA per ounce sold, Yamana mines
$
682

$
664

3
 %
$
10.00

$
9.07

10
 %
Cost of sales excluding DDA per ounce sold
$
712

$
677

5
 %
$
10.00

$
9.07

10
 %
DDA per ounce sold, Yamana mines
$
341

$
327

4
 %
$
4.35

$
4.72

(8
)%
DDA per ounce sold
$
326

$
331

(2
)%
$
4.35

$
4.72

(8
)%
Total cost of sales per ounce sold (vii)
 
 
 
 
 
 
Chapada
$
384

$
489

(21
)%
$
7.11

$
7.05

1
 %
El Peñón
$
1,089

$
1,019

7
 %
$
14.57

$
13.84

5
 %
Canadian Malartic (i)
$
1,000

$
1,025

(2
)%
$
—

$
—

—
 %
Jacobina
$
1,057

$
1,072

(1
)%
$
—

$
—

—
 %
Minera Florida
$
1,248

$
1,046

19
 %
$
13.72

$
13.81

(1
)%
Gualcamayo
$
1,293

$
1,038

25
 %
$
—

$
—

—
 %
Total cost of sales per ounce sold, Yamana mines (vii)
$
1,023

$
991

3
 %
$
13.63

$
13.79

(1
)%
Brio Gold (iii)
$
1,117

$
1,098

2
 %
$
—

$
—

—
 %
Total cost of sales per ounce sold (vii)
$
1,038

$
1,008

3
 %
$
13.63

$
13.79

(1
)%
Co-product cash costs per ounce produced (iv)
 
 
 
 
 
 
Chapada
$
334

$
359

(7
)%
$
3.38

$
3.20

6
 %
El Peñón
$
751

$
678

11
 %
$
10.30

$
9.14

13
 %
Canadian Malartic (i)
$
576

$
606

(5
)%
$
—

$
—

—
 %
Jacobina
$
701

$
692

1
 %
$
—

$
—

—
 %
Minera Florida
$
812

$
735

10
 %
$
10.95

$
9.90

11
 %
Gualcamayo
$
942

$
796

18
 %
$
—

$
—

—
 %
Co-product cash costs per ounce produced, Yamana mines (iv)
$
672

$
650

3
 %
$
10.01

$
8.96

12
 %
Brio Gold (iii)
$
846

$
746

13
 %
$
—

$
—

—
 %
Co-product cash costs per ounce produced, attributable (iv)
$
692

$
665

4
 %
$
10.01

$
8.96

12
 %
By-product cash costs per ounce produced, Yamana mines (iv)
$
561

$
611

(8
)%
$
8.58

$
8.45

2
 %
Co-product AISC per ounce produced, Yamana mines (iv)
$
888

$
905

(2
)%
$
13.48

$
12.65

7
 %
By-product AISC per ounce produced, Yamana mines (iv)
$
820

$
925

(11
)%
$
12.65

$
12.93

(2
)%
AISC per ounce produced, attributable (iv)
$
916

$
911

1
 %
$
13.48

$
12.65

7
 %
Concentrate production
 
 
 
2017

2016

 
Chapada concentrate production (tonnes)
 
 
 
242,126

216,332

12
 %
Chapada copper contained in concentrate production (millions of pounds)
 
 
 
127.3

115.5

10
 %
Cost of sales excluding DDA per copper pound sold
 
 
 
$
1.47

$
1.57

(6
)%
DDA per copper pound sold
 
 
 
$
0.25

$
0.36

(31
)%
Total cost of sales per copper pound sold
 
 
 
$
1.73

$
1.93

(10
)%
Chapada co-product cash costs per pound of copper produced (iv)
 
 
 
$
1.54

$
1.58

(3
)%
Chapada AISC per pound of copper produced (iv)
 
 
 
$
1.74

$
2.03

(14
)%
Sales included in revenue
 
 
 
2017

2016

 
Gold (ounces)
 
 
 
1,147,204

1,188,267

(3
)%
Silver (ounces)
 
 
 
5,125,689

6,604,212

(22
)%
Chapada concentrate (tonnes)
 
 
 
242,536

217,180

12
 %
Chapada payable copper contained in concentrate (millions of pounds)
 
 
 
120.1

104.9

14
 %

yamanalogo.jpg | 16



Ounces of production
Gold
 
Silver
 
For the three months ended December 31,
2017

2016

%

2017

2016

%

Chapada
36,578

40,358

(9
)%
71,520

78,020

(8
)%
El Peñón
39,401

55,764

(29
)%
1,052,423

1,454,293

(28
)%
Canadian Malartic (i)
80,743

69,971

15
 %
—

—

—
 %
Jacobina
34,566

32,180

7
 %
—

—

—
 %
Minera Florida
23,540

25,675

(8
)%
47,099

94,738

(50
)%
Gualcamayo
44,778

44,840

—
 %
—

—

—
 %
Total production, Yamana mines
259,606

268,788

(3
)%
1,171,042

1,627,051

(28
)%
Brio Gold (attributable to the Company) (ii)
22,435

49,580

(55
)%
—

—

—
 %
Total production, attributable to the Company
282,041

318,368

(11
)%
1,171,042

1,627,051

(28
)%
Brio Gold (attributable to non-controlling interest)
17,915

897

n/a

—

—

n/a

Total production (v)
299,956

319,265

(6
)%
1,171,042

1,627,051

(28
)%
Cost of sales excluding DDA per ounce sold, Yamana mines
$
661

$
634

4
 %
$
9.42

$
10.41

(10
)%
Cost of sales excluding DDA per ounce sold
$
694

$
668

4
 %
$
9.42

$
10.41

(10
)%
DDA per ounce sold, Yamana mines
$
305

$
301

1
 %
$
4.72

$
5.17

(9
)%
DDA per ounce sold
$
286

$
336

(15
)%
$
4.72

$
5.17

(9
)%
Total cost of sales per ounce sold (vii)
 
 
 
 
 
 
Chapada
$
326

$
335

(3
)%
$
5.14

$
4.79

7
 %
El Peñón
$
1,069

$
1,075

(1
)%
$
14.58

$
16.08

(9
)%
Canadian Malartic (i)
$
995

$
1,056

(6
)%
$
—

$
—

—
 %
Jacobina
$
1,027

$
1,123

(9
)%
$
—

$
—

—
 %
Minera Florida
$
1,198

$
924

30
 %
$
13.28

$
13.37

(1
)%
Gualcamayo
$
1,149

$
953

21
 %
$
—

$
—

—
 %
Total cost of sales per ounce sold, Yamana mines (vii)
$
966

$
935

3
 %
$
13.26

$
15.58

(15
)%
Brio Gold (ii)
$
1,072

$
1,384

(23
)%
$
—

$
—

—
 %
Total cost of sales per ounce sold (vii)
$
980

$
1,004

(2
)%
$
13.26

$
15.58

(15
)%
Co-product cash costs per ounce produced (iv)
 
 
 
 
 
 
Chapada
$
291

$
275

6
 %
$
3.25

$
3.17

3
 %
El Peñón
$
707

$
714

(1
)%
$
9.19

$
10.40

(12
)%
Canadian Malartic (i)
$
628

$
634

(1
)%
$
—

$
—

—
 %
Jacobina
$
703

$
742

(5
)%
$
—

$
—

—
 %
Minera Florida
$
765

$
730

5
 %
$
9.96

$
10.63

(6
)%
Gualcamayo
$
891

$
734

21
 %
$
—

$
—

—
 %
Co-product cash costs per ounce produced, Yamana mines (iv)
$
660

$
635

4
 %
$
8.86

$
10.07

(12
)%
Brio Gold (ii)
$
806

$
832

(3
)%
$
—

$
—

—
 %
Co-product cash costs per ounce produced, attributable (iv)
$
672

$
667

1
 %
$
8.86

$
10.07

(12
)%
By-product cash costs per ounce produced, Yamana mines (iv)
$
548

$
553

(1
)%
$
7.44

$
8.90

(16
)%
Co-product AISC per ounce produced, Yamana mines (iv)
$
899

$
900

—
 %
$
11.90

$
14.48

(18
)%
By-product AISC per ounce produced, Yamana mines (iv)
$
829

$
870

(5
)%
$
11.05

$
14.18

(22
)%
AISC per ounce produced, attributable (iv)
$
925

$
928

—
 %
$
11.90

$
14.48

(18
)%
Concentrate production
 
 
 
2017

2016

 
Chapada concentrate production (tonnes)
 
 
 
66,104

68,375

(3
)%
Chapada copper contained in concentrate production (millions of pounds)
 
 
 
34.7

36.9

(6
)%
Cost of sales excluding DDA per copper pound sold
 
 
 
$
1.39

$
1.48

(6
)%
DDA per copper pound sold