EX-99.2 3 ex992q4_2018mda.htm EXHIBIT 99.2 Exhibit
EXHIBIT 99.2






yamanalogo.jpg
 


MANAGEMENT’S DISCUSSION AND ANALYSIS OF
 OPERATIONS AND FINANCIAL CONDITION

 FOR THE YEAR ENDED DECEMBER 31, 2018 


CONTENTS
 
Page
1:
Highlights and Relevant Updates
2:
Core Business, Strategy and Outlook
3:
Review of Financial Results
4:
Operating Segments Performance
5:
Construction, Development and Exploration
6:
Mineral Reserve and Mineral Resource Estimates
7:
Financial Condition and Liquidity
8:
Economic Trends, Business Risks and Uncertainties
9:
Contingencies
10:
Critical Accounting Policies and Estimates
11:
Non-GAAP Financial Measures and Additional Subtotals in Financial Statements
12:
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, 2018 ("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 produced on a co-product and by-product basis, for gold and silver;
Co-product cash costs per pound of copper produced;
All-in sustaining costs per ounce produced on a co-product and by-product basis, for gold and silver;
All-in sustaining co-product costs per pound of copper produced;
Net debt;
Net free cash flow;
Average realized price per ounce of gold/silver sold; and
Average realized price per pound of copper sold.

Definitions and reconciliations associated with the above metrics can be found in Section 11: Non-GAAP Financial Measures and Additional 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.      HIGHLIGHTS AND RELEVANT UPDATES

For the year ended December 31, 2018 (unless otherwise noted)

The Company exceeded production expectations, and achieved this at total production costs for gold, silver, and copper that were either in line with or better than guided ranges for the cost metrics for the full year. Relative to guidance for the Company's six mines ("Yamana mines"), production performance was as follows:
Production
2018 Actual

2018 Guidance (i)

% increase
Total gold production (ounces)
940,619

920,000

2%
Total silver production (ounces)
8,023,046

7,550,000

6%
Total copper production (pounds) - Chapada
129,151,441

125,000,000

3%
(i)
2018 guidance for gold, and copper production reflects the increases that were applied during the year. For gold, it represents an increase of 20,000 ounces to the initially guided 900,000 ounces for Yamana mines. For copper, it represents an increase of 5 million pounds to the initially guided 120 million pounds. Silver reflects the revision applied to El Peñón guidance in the third quarter of 2018 from the initially guided 8.15 million ounces for Yamana Mines.
 
Successful first six months of operations at Cerro Moro mine resulted in gold production above expectations at an average mill feed grade of 15.85 g/t and recovery rate of 93.1%. Silver production was also above expectations at an average mill feed grade of 725 g/t and recovery rate of 89.4%. Additionally, all per unit costs were below guidance for both gold and silver.
Strong operating performance was also attributed to above-expectation gold production at Chapada and El Peñón, and record production at Canadian Malartic and Jacobina.
Completion and advancement of several strategic initiatives during the year including:
Closing of the previously announced transaction with Mineros S.A. ("Mineros") to sell 100% of the Company's interest in the Gualcamayo Mine in Argentina and completion of the option agreement on the La Pepa gold project in Chile.  The transaction was structured to provide both immediate payments and value, and future payments and value (Refer to Note 6: Divestitures to the Company's Consolidated Financial Statements for additional details).

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Completion of the business combination between Leagold Mining Corporation ("Leagold") and Brio Gold Inc. ("Brio Gold"), resulting in the Company’s ownership percentage interest in Leagold of 20.5% and warrants offering upside potential from the combined synergies and strong production platform.
Evaluation of and engagement in discussions relating to various development scenarios for Agua Rica. This includes an integration scenario between Agua Rica and Alumbrera pursuant to which a joint pre-feasibility study has started, and for which results are expected in the first half of 2019. Concurrently, the Company continues the engagement with the other partners of Alumbrera and with various other stakeholders at the national and provincial level.
The Company's exploration programs continue to deliver on mineral resources discovery and mineral reserve replacement and growth. Overall, the exploration program successfully increased mineral reserves to replace 2018 mineral depletion, excluding assets that were disposed of in 2018. Measured and indicated mineral resources and inferred mineral resources increased by 5% and 7%, respectively. For additional details, refer to Section 4: Operating Segments Performance and Section 6: Mineral Reserve and Mineral Resource Estimates of this MD&A.
Cash flows from operating activities of $404.2 million and cash flows from operating activities before net change in working capital during the year of $566.3 million. These amounts include amortization of deferred revenue of $41.7 million in the third quarter and $33.3 million in the fourth quarter, which are related to deferred revenue attributable to deliveries under the Company’s copper advanced sales program during the respective quarters. The Company's copper advanced sales program's deliveries began in the third quarter of 2018 and will continue through the second quarter of 2019. If not for the timing difference of cash proceeds attributable to this transaction, the Company’s cash flows from operating activities before net change in working capital would have been higher by those amounts during the quarters as follows:
(In millions of US Dollars, unless otherwise noted)
For the three months ended
 
Illustration of impact due to copper advanced sales program
March 31, 2018

June 30, 2018

September 30, 2018

December 31, 2018

March 31, 2019 (ii)

June 30, 2019 (ii)

Cumulative impact

Copper pounds to be delivered per contract (millions)
 
 
13.2

10.7

8.2

8.2

40.3

 
 
 
 
 
 
 
 
Cash flows from operating activities before net change in working capital (i)
$
206.4

$
157.5

$
86.6

$
115.8

$

$

$

Impact due to copper advanced sales program
(125.0
)

41.7

33.3

25.1

24.9


Cash flows from operating activities before net change in working capital, normalized for the copper advanced sales program (i)
$
81.4

$
157.5

$
128.3

$
149.1

$

$

$

(i)
A cautionary note regarding non-GAAP financial measures is included in Section 11: Non-GAAP Financial Measures and Additional Subtotals in Financial Statements of this MD&A.
(ii)
For illustration purposes only. The Company intends to provide information each subsequent period reflecting the impact due to copper advanced sales program over its term.
 
The Company's financial position continues to remain strong and is expected to improve further into 2019 with the continuation of strong operating results, planned declines in expansionary capital expenditures, a full year of operations at Cerro Moro, the sale of unrefined gold and silver carried over from 2018, and the mid-year completion of the advanced copper sales agreement.
Lower debt by 5%, compared to December 31, 2017, although affected by one-time payments and the timing of shipments; the Company remains committed to lowering overall debt.

Other Financial Updates

Significant events having a non-cash accounting impact during the fourth quarter that are not reflective of ongoing operations include (Refer to Section 3: Review of Financial Results of this MD&A for additional details):
An impairment reversal of $150.0 million in respect of Jacobina following the significant increase in mineral reserves and mineral resources, which extends the life of the mine, and other operational improvements.
An impairment of $151.0 million in respect of Minera Florida and $45.0 million in respect of goodwill on acquisition of Canadian Malartic.

OPERATING

Gold production for Yamana Mines(viii), as shown in the table below, increased by 14% in 2018, compared to 2017. Individual mine results included increases of 10% at Canadian Malartic, 7% at Jacobina and 1% at Chapada, in addition to the contribution of 92,793 ounces of gold from Cerro Moro, which reached commercial production towards the end of the second quarter of 2018. The aforementioned increases more than offset the lower production at other mines.

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For the three months ended December 31,
For the years ended December 31,
 
2018

2017

2018

2017

Gold
 
 
 
 
Production - Yamana Mines (ounces) (viii)
270,193

214,828

940,619

823,263

Production - Total Yamana (ounces) (i)
292,484

259,606

1,032,903

977,315

Sales - Yamana Mines (ounces) (viii)
261,929

217,754

910,485

818,468

Sales - Total Yamana (ounces)
284,420

261,057

1,004,462

971,148

Sales - consolidated (ounces)
284,420

301,513

1,075,214

1,147,204

Per ounce data (ii)
 
 
 
 
Revenue
$
1,223

$
1,269

$
1,263

$
1,250

Average realized price (iii)(iv)
$
1,226

$
1,286

$
1,267

$
1,264

Average market price (v)
$
1,226

$
1,277

$
1,268

$
1,259

Total cost of sales - Yamana Mines (vi) (viii)
$
999

$
929

$
1,008

$
973

Total cost of sales - Total Yamana (vi)
$
1,010

$
966

$
1,031

$
1,023

Total cost of sales - consolidated (vi)
$
1,010

$
980

$
1,042

$
1,038

Co-product cash costs - Yamana Mines (iii) (viii)
$
570

$
612

$
614

$
621

Co-product cash costs - Total Yamana (iii)
$
610

$
660

$
649

$
672

Co-product AISC - Yamana Mines (iii) (viii)
$
763

$
884

$
816

$
869

Co-product AISC - Total Yamana (iii)
$
801

$
899

$
843

$
888

By-product cash costs - Yamana Mines (iii) (viii)
$
420

$
476

$
445

$
490

By-product AISC - Yamana Mines (iii) (viii)
$
657

$
800

$
696

$
788


Silver production was 60% higher than in 2017, mainly from the contribution of Cerro Moro:
 
For the three months ended December 31,
For the years ended December 31,
 
2018

2017

2018

2017

Silver (vii)
 

 
 
 
Production (ounces)
3,264,695

1,171,042

8,023,046

5,004,761

Sales (ounces)
3,065,102

1,081,731

7,000,887

5,125,689

Per ounce data (ii)
 

 

 
 
Revenue
$
14.59

$
16.46

$
15.37

$
16.80

Average realized price (iii)(iv)
$
14.59

$
16.49

$
15.37

$
16.83

Average market price (v)
$
14.56

$
16.71

$
15.71

$
17.08

Total cost of sales (vi)
$
14.23

$
13.26

$
15.58

$
13.63

Co-product cash costs (iii)
$
7.12

$
8.86

$
8.25

$
10.01

Co-product AISC (iii)
$
9.57

$
11.90

$
10.81

$
13.48

By-product cash costs (iii)
$
4.99

$
7.44

$
5.90

$
8.58

By-product AISC (iii)
$
7.99

$
11.05

$
9.11

$
12.65


Copper production was 1.5% higher than in 2017 and 4% above guidance.
 
For the three months ended December 31,
For the years ended December 31,
 
2018

2017

2018

2017

Copper
 

 
 
 
Production (millions of pounds)
39.0

34.7

129.2

127.3

Sales (millions of pounds)
35.5

33.2

123.6

120.1

Per pound data (ii)
 

 
 
 
Revenue
$
2.56

$
2.36

$
2.70

$
2.36

Average realized price (iii)(iv)
$
2.90

$
3.02

$
2.99

$
2.78

Average market price (v)
$
2.80

$
3.09

$
2.96

$
2.80

Total cost of sales (vi)
$
1.87

$
1.68

$
1.80

$
1.74

Co-product cash costs (iii)
$
1.50

$
1.51

$
1.51

$
1.54

Co-product AISC (iii)
$
1.86

$
1.85

$
1.90

$
1.89

_____________________________________________

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(i)
Total Yamana includes Gualcamayo's gold production of 22,291 and 92,284 ounces for the fourth quarter of 2018 and year ended December 31, 2018, respectively (44,778 and 154,052 ounces for the fourth quarter and year ended December 31, 2017, respectively).
(ii)
Cost of sales are per ounce/pound sold and cash costs and AISC are per ounce/pound produced.
(iii)
A cautionary note regarding non-GAAP financial measures and their respective reconciliations, as well as additional subtotals in financial statements are included in Section 11: Non-GAAP Financial Measures and Additional Subtotals in Financial Statements of this MD&A.
(iv)
Realized prices based on gross sales compared to market prices for metals may vary due to the timing of the sales.
(v)
Source of information: Bloomberg.
(vi)
Cost of sales consists of the sum of 'cost of sales excluding Depletion, Depreciation and Amortization' ("DDA") plus DDA.
(vii)
Beginning January 1, 2018, silver production and related KPIs for Chapada and Minera Florida no longer meet the minimum significance threshold in accordance with the Company's policy.
(viii)
Yamana Mines includes Chapada, El Peñón, Canadian Malartic, Jacobina, Minera Florida and Cerro Moro.


HEALTH, SAFETY, ENVIRONMENT AND CORPORATE RESPONSIBILITY

The Company's Total Recordable Injury Frequency Rate was 0.6(i) for 2018, which represents a 20% improvement over 2017. A number of mines demonstrated the possibility of achieving the Company's goal of One Team, One Goal: Zero throughout 2018.
In addition to the previously disclosed awards received in 2018, in November, the Company was awarded the "Argentinian Mining Company of the Year" by the industry magazine Panorama Minero at the 3rd International Seminar of Metals and Mining.

(i) Calculated on 200,000 hours worked and includes employees and contractors.


FINANCIAL

For the three months ended December 31, 2018

Revenue for the three-month period ended December 31, 2018 was comparable to that of the same period in 2017, as 5% lower realized gold prices were partly offset by higher silver and copper sales compared to December 31, 2017. Revenue was impacted by lower attributable ounces following the sale of Brio Gold and Gualcamayo. At Cerro Moro, elevated silver grades above plan led to capacity constraints at the mine furnace, resulting in an increase in gold and silver precipitate at the end of the year, which impacted sales volumes. Precipitate inventory levels are expected to be drawn down to normalized levels in the first half of 2019.
Net loss attributable to the Company's equity holders for the three months ended December 31, 2018 was $61.4 million or $0.06 per share basic and diluted, compared to a net loss of $188.6 million or $0.20 per share basic and diluted for the three months ended December 31, 2017. This includes certain non-cash and other items that may not be reflective of current and ongoing operations reducing the Company's earnings by $87.6 million or $0.09 per share and included:
An impairment reversal of $150.0 million in respect of Jacobina following the significant increase in mineral reserves and mineral resources, which extends the life of the mine, and other operational improvements.
The reversal was offset by non-cash accounting impairments of $151.0 million in respect of Minera Florida and $45.0 million in respect of goodwill on acquisition of Canadian Malartic.
A higher income tax expense of $33.3 million due to a non-recurring tax payment made in the quarter.
A non-cash unrealized foreign exchange gain on income taxes resulting from the US Dollar weakening during the quarter against local currencies. (Refer to Note 13: Income taxes to the Company's Consolidated Financial Statements for additional details). Despite the fluctuations in respect of non-cash unrealized foreign exchange loss, cash taxes paid are in line with expectations and benefiting from the annual depreciation of the local currencies.
Other provisions, write-downs and adjustments and other assets. (Refer to Section 3: Review of Financial Results of this MD&A for additional details).
In addition to the Company's ongoing cost reduction efforts, continued weaker local currencies against the US Dollar positively impacted costs.

For the year ended December 31, 2018

Revenue for the year ended December 31, 2018 was lower than December 31, 2017 due to lower consolidated gold sales quantities, as there were more attributable ounces from Brio Gold and Gualcamayo in 2017. This was partly offset by an additional 3.5 million pounds of copper sold at an 8% higher average realized price. As aforementioned, the build up of unsold metal inventory at Cerro Moro also negatively impacted revenue for the year.
Net loss attributable to the Company's equity holders for the year ended December 31, 2018 was $284.6 million or $0.30 per share basic and diluted, compared to net loss of $188.5 million or $0.20 per share basic and diluted for the year ended December 31, 2017.

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This includes certain non-cash and other items that may not be reflective of current and ongoing operations reducing the Company's earnings by $396.5 million or $0.42 per share. The more notable items are related to the non-cash accounting impairment and reversal recorded during the year, the gains on the disposition of Brio Gold and the Canadian exploration properties, the non-cash unrealized foreign exchange loss and provisions, the one-time charge associated with payment to the Brazilian tax authorities described above, and other write-downs and adjustments. (See Section 3: Review of Financial Results of this MD&A for additional details).

 
For the three months ended December 31,
For the year ended December 31,
(In millions of US Dollars; unless otherwise noted)
2018

2017 (i)

2018

2017 (i)

2016

Revenue
$
483.4

$
478.8

$
1,798.5

$
1,803.8

$
1,787.7

Cost of sales excluding DDA
(266.2
)
(264.7
)
(1,010.0
)
(1,042.4
)
(1,029.0
)
Gross margin excluding DDA
$
217.2

$
214.1

$
788.5

$
761.4

$
758.7

Depletion, depreciation and amortization
(130.9
)
(100.9
)
(438.3
)
(426.8
)
(462.3
)
Impairment of mining properties and goodwill, net
(46.0
)
(256.9
)
(149.0
)
(256.9
)
(711.3
)
Mine operating earnings (loss)
$
40.3

$
(143.7
)
$
201.2

$
77.7

$
(414.9
)
General and administrative
(21.0
)
(34.0
)
(91.8
)
(113.6
)
(100.2
)
Exploration and evaluation
(3.6
)
(7.0
)
(13.0
)
(21.2
)
(14.9
)
Share of earnings of associate
4.5


5.5



Other operating (expenses) income, net
(11.0
)
(16.4
)
9.3

(23.6
)
(39.7
)
Impairment of non-operating mining properties
14.0

(99.6
)
(153.0
)
(99.6
)
96.2

Operating earnings (loss)
$
23.2

$
(300.7
)
$
(41.8
)
$
(180.3
)
$
(473.5
)
Finance costs
(32.0
)
(28.7
)
(137.4
)
(110.8
)
(110.2
)
Other costs (income), net
0.2

(7.4
)
2.5

(20.9
)
(32.0
)
Net loss before income taxes
$
(8.6
)
$
(336.8
)
$
(176.7
)
$
(312.0
)
$
(615.7
)
Income tax (expense) recovery, net
$
(52.8
)
$
138.5

$
(121.0
)
$
113.9

$
324.9

Net loss from continuing operations
$
(61.4
)
$
(198.3
)
$
(297.7
)
$
(198.1
)
$
(290.8
)
Net loss from discontinued operations
$

$

$

$

$
(17.5
)
Net loss
$
(61.4
)
$
(198.3
)
$
(297.7
)
$
(198.1
)
$
(308.3
)
 
 
 
 
 
 
Attributable to:
 
 
 
 
 
Yamana Gold Inc. equity holders
$
(61.4
)
$
(188.6
)
$
(284.6
)
$
(188.5
)
$
(307.9
)
Non-controlling interests
$

$
(9.7
)
$
(13.1
)
$
(9.6
)
$
(0.4
)
 
$
(61.4
)
$
(198.3
)
$
(297.7
)
$
(198.1
)
$
(308.3
)
Per share data
 
 






    Loss per share - basic and diluted (iv)
$
(0.06
)
$
(0.20
)
$
(0.30
)
$

$
(0.32
)
Loss per share from continuing operations -
basic and diluted (iv)
$
(0.06
)
$
(0.20
)
$
(0.30
)
$

$
(0.31
)
    Dividends declared per share
$
0.005

$
0.005

$
0.020

$
0.020

$
0.020

    Dividends paid per share
$
0.005

$
0.005

$
0.020

$
0.020

$
0.030

Weighted average number of common shares outstanding (thousands)
 
 
 
 
 
    Basic and diluted
949,337

948,468

949,030

948,187

947,443

Cash flows (ii)
 
 
 
 
 
Cash flows from operating activities (v)
$
114.7

$
158.5

$
404.2

$
484.0

$
651.9

Cash flows from operating activities
before net change in working capital (iii)
$
115.8

$
122.3

$
566.3

$
498.0

$
626.6

Cash flows used in investing activities
$
(91.4
)
$
(196.9
)
$
(329.6
)
$
(644.2
)
$
(407.7
)
Cash flows (used in) from financing activities
$
(49.3
)
$
68.3

$
(134.3
)
$
217.9

$
(267.5
)
(i)
The Company has initially applied IFRS 15 and IFRS 9 at January 1, 2018. Under the transition methods chosen, comparative information is not restated except for certain hedging requirements. Accordingly, the 2017 comparative periods have been restated for the changes in hedging requirements; however, the 2016 results have not been restated. Refer to Note 5: Recent Accounting Pronouncements to the Company's Consolidated Financial Statements.
(ii)
For further information on the Company's liquidity and cash flow position, refer to Section 7: Financial Condition and Liquidity of this MD&A.
(iii)
A cautionary note regarding non-GAAP financial measures is included in Section 11: Non-GAAP Financial Measures and Additional Subtotals in Financial Statements of this MD&A.
(iv)
Attributable to Yamana Gold Inc. equity holders.

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(v)
Cash flows from operating activities for the three months ended December 31, 2018 include the impact of $37.5 million in non-cash deferred revenue recognized in respect of metal sales agreements, including $33.3 million associated with the copper advanced sales program.
Net free cash flow for the following periods ended December 31, 2018 was as follows:
(In millions of US Dollars)
For the three months ended December 31,
For the year ended December 31,
Net free cash flow (i) (ii)
2018

2017

2018

2017

Cash flows from operating activities before income taxes paid and net change in working capital
$
155.3

$
170.3

$
708.4

$
593.7

Income taxes paid
(6.1
)
(1.4
)
(40.8
)
(19.0
)
Payments made to Brazilian tax authorities
(33.3
)
(46.6
)
(101.3
)
(76.7
)
Cash flows from operating activities before
net change in working capital
(ii)
$
115.9

$
122.3

$
566.3

$
498.0

Net change in working capital (iii)
(1.1
)
36.2

(162.1
)
(14.0
)
Cash flows from operating activities
$
114.8

$
158.5

$
404.2

$
484.0

Adjustments to operating cash flows:
 
 
 
 
Unearned revenue recognized on copper prepay and streaming arrangement net of advance payments received (iv)
37.5

(6.6
)
(28.3
)
(6.6
)
Payments made to Brazilian tax authorities
33.3

46.6

101.3

76.7

Other cash payments
(0.1
)

6.7

6.0

Non-discretionary items related to the current period
 
 
 
 
   Sustaining capital expenditures
(52.5
)
(57.0
)
(187.8
)
(204.7
)
   Interest and other finance expenses paid
(27.6
)
(34.3
)
(80.1
)
(103.8
)
Net free cash flow
$
105.4

$
107.2

$
216.0

$
251.6

(i)
Sustaining; for further information on the Company's liquidity and cash flow position, refer to Section 7: Financial Condition and Liquidity of this MD&A.
(ii)
A cautionary note regarding non-GAAP financial measures is included in Section 11: Non-GAAP Financial Measures and Additional Subtotals in Financial Statements of this MD&A. Net Free Cash Flow is adjusted for payments not reflective of current period operations, advance payments received pursuant to metal purchase agreements, non-discretionary expenditures from sustaining capital expenditures and interest and financing expenses paid related to the current period. 
(iii)
Notable movements in working capital from December 31, 2017 include: the payment of year-end related accruals at the beginning of the first quarter, one-time operational inventory buildup at Cerro Moro and other inventory increases at other mines, timing of regular trade payments for the Company's operating mines throughout 2018, and indirect tax credit buildup at certain of the Company's operations throughout 2018. Refer to Section 7: Financial Condition and Liquidity of this MD&A for further details.
(iv)
Adjustment represents non-cash deferred revenue recognized in respect of metal sales agreements, the cash payments for which were received in previous periods and were similarly reduced for comparability.

Balance Sheet and Liquidity
As at December 31, 2018, the Company had cash and cash equivalents of $98.5 million and available credit of $705.0 million, for total liquidity of $803.5 million.
As at,
(In millions of US Dollars)
December 31,
2018

December 31,
2017

December 31,
2016

Total assets
$
8,012.9

$
8,763.3

$
8,801.7

Total long-term liabilities
$
3,492.5

$
3,535.3

$
3,746.6

Total equity
$
4,024.0

$
4,447.3

$
4,580.0

Working capital (i)
$
(67.2
)
$
58.7

$
77.3

Cash and cash equivalents
$
98.5

$
148.9

$
97.4

Debt (current and long-term)
$
1,758.7

$
1,857.7

$
1,592.4

Net debt (ii)
$
1,660.2

$
1,708.8

$
1,495.0

(i)
Working capital is defined as the excess of current assets over current liabilities, which includes the current portion of long-term debt and assets and liabilities of disposal groups held for sale. Accordingly, working capital is being impacted by the deferred revenue balance from the advanced copper sales agreement of $52.3 million, which is classified as a current liability; however, this balance will decline in future reporting periods with remaining copper deliveries scheduled in March 2019 and June 2019. The Company also has $192.0 million in stockpile inventory classified as other non-current assets as it is not expected to be processed within one year, but is readily available for processing.
(ii)
A cautionary note regarding non-GAAP financial measures is included in Section 11: Non-GAAP Financial Measures and Additional Subtotals in Financial Statements of this MD&A.


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CAPITAL EXPENDITURES

Capital expenditures for the three months ended December 31, 2018 were consistent with plan, broken down as follows:
For the three months ended December 31,
2018

2017

2018

2017

2018

2017

2018

2017

 
Sustaining and other
Expansionary
Exploration
Total (ii)
Chapada
$
9.4

$
5.6

$
2.4

$
3.4

$
1.3

$
1.6

$
13.1

$
10.6

El Peñón
7.4

8.1

1.1


4.7

2.3

$
13.2

$
10.4

Canadian Malartic
11.4

15.6

8.9

20.2

0.4

2.6

$
20.7

$
38.4

Jacobina
5.1

7.0

9.4

5.7

1.7

1.8

$
16.2

$
14.5

Cerro Moro
9.4


1.7

48.3

3.0

2.2

$
14.1

$
50.5

Minera Florida
4.4

5.4

10.5

3.0

3.9

3.3

$
18.8

$
11.7

Other (i)
5.4

15.3

2.2

24.1

3.5

4.1

$
11.1

$
43.5

 
$
52.5

$
57.0

$
36.2

$
104.7

$
18.5

$
17.9

$
107.2

$
179.6

(i)
Included in Other are capital expenditures relating to Gualcamayo and Brio Gold, which were separately disclosed in the comparative period, as well as capitalized interest in 2017 of $4.1 million. Comparatives have been reclassified to reflect the change in presentation adopted in the current period.
(ii)
Net of movement in accounts payable, as applicable, for projects under construction and including applicable borrowing costs. Totals do not include the costs to add to the low-grade long-term ore stockpiles at Chapada of $15.0 million, Canadian Malartic of $6.8 million and Jacobina of $1.4 million for the three months ended December 31, 2018.

Capital expenditures for the year ended December 31, 2018 were consistent with plan, broken down as follows:
For the year ended December 31,
2018

2017

2018

2017

2018

2017

2018

2017

 
Sustaining and other
Expansionary
Exploration
Total (ii)
Chapada
$
35.2

$
27.9

$
4.1

$
13.4

$
4.8

$
5.4

$
44.1

$
46.7

El Peñón
31.8

38.5

1.1


17.9

17.8

$
50.8

$
56.3

Canadian Malartic
46.4

48.2

31.4

31.0

4.0

10.2

$
81.8

$
89.4

Jacobina
21.0

21.7

20.6

17.6

5.9

5.8

$
47.5

$
45.1

Minera Florida
14.5

24.6

32.2

17.8

14.0

10.2

$
60.7

$
52.6

Cerro Moro
15.0


61.3

172.0

11.3

7.7

$
87.6

$
179.7

Other (i)
23.9

43.8

33.0

68.5

17.5

25.4

$
74.4

$
137.7

 
$
187.8

$
204.7

$
183.7

$
320.3

$
75.4

$
82.5

$
446.9

$
607.5

(i)
Included in Other are capital expenditures relating to Gualcamayo and Brio Gold, which were separately disclosed in the comparative period, as well as capitalized interest of $8.3 million (2017: $11.3 million). Comparatives have been reclassified to reflect the change in presentation adopted in the current period.
(ii)
Net of movement in accounts payable, as applicable, for projects under construction and including applicable borrowing costs. Totals do not include the costs to add to the low-grade long-term ore stockpiles at Chapada of $43.0 million, Canadian Malartic of $27.0 million and Jacobina of $1.4 million for the year ended December 31, 2018.


2.    CORE BUSINESS, STRATEGY AND OUTLOOK

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

The Company’s principal mining properties comprise the Chapada and Jacobina mines in Brazil, the Canadian Malartic mine (50% interest) in Canada, the Cerro Moro mine in Argentina, and the El Peñón and Minera Florida mines in Chile. The Company’s portfolio also includes a 20.5% interest in Leagold Mining Corporation ("Leagold") with mining properties in Brazil and Mexico, as well as a 100% interest in Agua Rica, a large-scale copper, gold, silver and molybdenum deposit located in the province of Catamarca, Argentina. 

Over the years, the Company has grown through phases of strategic acquisitions to upgrade its portfolio and by pursuing organic growth to increase cash flows and unlock value at both existing mines and non-producing assets. Looking ahead, the Company’s primary objectives include the following:
Continued focus on the Company’s operational excellence program, advancing near-term and ongoing optimizations related to production, operating costs, and the Company’s key performance objectives in health, safety, environment and community;
Maximizing per share metrics related to the Net Asset Values ("NAV"), profitability and free cash flow of Yamana Mines, and cash returns on invested capital, first on producing and then non-producing assets:

yamanalogo.jpg | 8



Within the producing portfolio, attention remains on per share metrics related to the growth and quality of mineral reserves and mineral resources. Primary objectives include mine life extensions, scope for throughput increases, metal grade and recovery improvements, and cost reductions that are expected to improve margins and cash flow returns;
For non-producing assets, the focus is on improving NAV through exploration, drilling and technical/financial reviews, the advancements of exploration and mining permits, and community engagement. Over time, the Company will also consider strategic alternatives to enhance returns from the non-producing assets. This may include advancing the projects to producing assets, developing the assets through a joint venture or other strategic arrangements, or through monetization;
Continuing balance sheet and financial performance improvements, with a targeted Net Debt leverage ratio of 1.5 or better with a coincident reduction in gross debt to $1.2 to $1.3 billion or better. The Company’s revolver is to be addressed first and fully repaid. In time, the objective is to reduce Net Debt further with a targeted Net Debt leverage ratio at or below 1.0. The Company also focuses on tenor of debt preferring long-term debt that is consistent with life of mines;
Optimizing and increasing mine life at the Company’s existing operating mines through exploration targeted on the most prospective properties, including:
Chapada, Canadian Malartic, Cerro Moro, Jacobina, and Minera Florida as a result of exploration success and prospective geological settings;
Minera Florida, El Peñón, Chapada, and Jacobina with the objectives of increasing mine life while also improving grade and delivering potential for production increases through further delineation and infill drilling;
Maximizing value from the long-life Chapada mine and the vast exploration opportunities through the evaluation of a phased approach to a plant expansion and the targeting of higher grades and higher plant recoveries;
Advancing several value realization and monetization initiatives over the guidance period, through the ongoing strategic and technical reviews of its asset portfolio; and 
Pursuing the above with health and safety at the core to the Company's values, evidenced by the Company's continued commitment to the "One Team, One Goal: Zero" vision for sustainability, which reflects the Company's commitment to zero harm to employees, the environment and communities near mine operations.

In 2018, Yamana delivered on a number of strategic objectives, including:
the development and ramp up of the high-grade Cerro Moro gold and silver mine in Argentina,
further progress with Company portfolio rationalization initiatives with the sale of the Kirkland Lake exploration and assets, and Gualcamayo mine, the latter of which achieved various corporate objectives and provides both immediate and periodic future payments. Future payments from currently identified opportunities, new discoveries, mine life extensions and higher metal prices, are expected to provide upside in value in relation to its current carrying value.
the transaction with Leagold Mining Corporation for the purchase of Brio Gold Corp which provides Yamana with exposure to a combined equity with greater scale in terms of production and market capitalization.

These changes, together with a right-sized production platform, strong cash flows from operations, and the transition to a period of lower capital requirements will position the Company to achieve one of its main objectives, which is to strengthen the balance sheet. With the completion of Cerro Moro and after completion of the Canadian Malartic Extension project, which is in progress, there will be a reduction in expansionary capital. This, when considered with the outlook for continued strong operating results, positions the Company well to deliver near-term step up changes in cash flow and net free cash flow with this effect becoming more pronounced in mid-2019 with the completion of the advanced copper sales agreement.

The Company is focused on increasing value through improving cash flows and returns on invested capital and increasing net asset value. In that context, the Company’s development opportunities will be managed towards such increases and improvements, although within the framework of the Company's balance sheet objectives. In addition to the usual project gating items, project scheduling and expenditures will be largely sequential so as not to interfere with the Company’s balance sheet objectives and also the period of cash flow harvesting referred to above. Monetization of certain assets or other strategic alternatives may ultimately provide additional flexibility to both the balance sheet and project timing. Agua Rica and the Company’s interest in Leagold are two notable examples of opportunities over the 2019-2021 guidance period. The Company expects that progress on technical studies, stakeholder contributions and other factors such as commercial agreements will contribute to enhance the value of Agua Rica. The Company also expects that Leagold will continue to deliver on its development assets and business plan, ultimately generating value accretion to the Company.

In terms of the Company’s approach to capital allocation, priority is to be given to the aforementioned balance sheet objectives. At current spot metal prices, both the leverage ratio and gross debt targets are expected to be met during the guidance period, excluding consideration from any potential monetization. Going forward, the Company’s strategic objective is to maintain these balance sheet targets through the metal price cycle as a means to enhance financial flexibility. Importantly, this approach also affords the Company the ability to be opportunistic, such as to build or buy assets off cycle, with consideration to shareholder returns including dividends and buy-backs, while balancing these initiatives with the sustainability of cash flows through portfolio optimizations.


yamanalogo.jpg | 9



In the evaluation and assessment of projects, the Company’s approach is to target projects for which it has the technical expertise to develop and operate. The Company is targeting after-tax returns of a multiple of its weighted average cost of capital and, as a rule of thumb, approximately 15%. These returns may be adjusted to reflect the complexity of the construction and operation, whether technical or geopolitical. The timing of any construction activity would follow detailed engineering to mitigate against late-cycle design and scope changes. This approach was fundamental to the success of Cerro Moro and remains the template for the Company going forward.

As aforementioned, the Company is an Americas company operating in mining friendly jurisdictions with adherence to best practices for mining. Presently, Yamana operates in Canada, Brazil, Chile, and Argentina. Consideration will be given to operating in other jurisdictions in North and South America, so long as there are established protocols for permitting and adherence to best practices. Given the significant exploration and expansion opportunities, along with advancing projects in jurisdictions in which the Company presently operates it is unlikely that Yamana will be in other jurisdictions in the foreseeable future.

Yamana intends to remain a significant intermediate-sized company. It considers an optimal portfolio consisting of six to eight mines with a production platform of 1 to 2 million ounces. In that context, Yamana considers copper production as an equivalent only for determination of size and scale. Presently, Yamana produces approximately 1.4 million gold equivalent ounces on this basis from six mines. This means that the Company remains a dominant intermediate-sized company, and has room for substantial further growth.

On size of mines, Yamana prefers each mine to produce at least 130,000 ounces as that represents sufficient size and scale by mine. Presently, four mines exceed 200,000 gold equivalent ounces (again, treating copper as a gold equivalent on for purposes of determining scale) and two of those are over 300,000 gold equivalent ounces. Five mines exceed, or soon will exceed, 150,000 gold equivalent ounces. Only one mine produces below a threshold of 130,000 ounces, although with exploration success, this may change.


PERFORMANCE MEASURES - Going forward

Beginning January 1, 2019, the Company has realigned its performance measures or key performance indicators ("KPIs"), in particular, non-GAAP financial measures, other financial measures and non-financial/operational measures to support its objective of financial and operating predictability, transparency, and comparability. In line with these objectives, the Company's performance measures will be reported using the voluntary guidance provided by the Accounting Standards Board's "Framework for Reporting Performance Measures" (First Edition; December 2018). Additionally, as an active member of the World Gold Council, the Company has adopted the updated version of the Guidance Note on All-in Sustaining Costs ("AISC").

With this realignment, the significant changes to the KPIs or revised methodology includes:
Production - Silver production will be treated as a gold equivalent in determining a combined precious metal production unit commonly referred to as gold equivalent ounces ("GEO"). Specifically, guidance GEO produced are calculated by converting silver production to its gold equivalent using relative gold/silver metal prices at an assumed ratio and adding the converted silver production expressed in gold ounces to the ounces of gold production. Actual production GEO calculations are based on an average realized gold to silver price ratio for the current quarter.
Cash costs - Calculated on a per GEO sold basis. Following the Company's objective of more closely aligning with GAAP financial measures, the total costs used as the numerator of the unitary calculation represent Cost of Sales excluding DDA, net of treatment and refining charges. In the case of Chapada, costs directly attributable to GEO and copper will be allocated on that attributable basis. Non-attributable costs will be allocated based on the relative value of revenues for each metal, which will be determined annually at the beginning of each year.
AISC - calculated on a per GEO sold basis (and in the case of Chapada, also calculated for copper) and reflects the changes in the recently updated Guidance Note. A complete listing of such changes, and a reconciliation to current AISC metrics is noted below.

Production Guidance


yamanalogo.jpg | 10



The following table presents the Company's total gold equivalent ounces ("GEO"), gold, silver and copper production expectations for Yamana Mines in 2019, 2020 and 2021.
 
2018 Actual (ii)

2019 Guidance

2020 Guidance

2021 Guidance

Total GEO production (ounces) (i)
1,041,350

1,060,000

1,100,000

1,100,000

Total gold production (ounces)
940,619

940,000

955,000

955,000

Total silver production (ounces)
8,023,046

10,000,000

12,000,000

12,000,000

Total copper production (millions of pounds) - Chapada
129.2

120.0

120.0

120.0

(i)
Includes gold plus silver at a ratio of 79.6 for 2018 and a ratio of 82.5 for 2019, 2020 and 2021.
(ii)
Excluding any attribution from Yamana’s interest in Leagold Mining Corporation and Gualcamayo (sold during the year).

With the development and ramp-up in 2018 of the high-grade Cerro Moro project, the Company’s newest mine, in the near and medium-term the Company remains focused on optimizing the existing portfolio of six operating mines while also advancing studies for various expansion projects and longer term development assets.

Gold and silver production are expected to increase in the guidance period, increasing to 955,000 ounces and 12 million ounces, respectively, by 2020. Gold production is expected to benefit from continued strong performance across the portfolio, led by production increases at Canadian Malartic, while silver production is expected to benefit from grade and production increases at Cerro Moro, in line with current mine plans. Copper production, all of which is from Chapada, is expected to remain constant throughout the guidance period.

The Company 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.

The following table presents mine-by-mine production results for 2018 and expectations for 2019.
Production Expectation by Mine
GEO
Gold
Silver
2018 Actual

2019 E

2018 Actual

2019 Guidance

2018 Actual

2019 Guidance

Chapada
121,003

100,000

121,003

100,000



Canadian Malartic (50%)
348,600

330,000

348,600

330,000



El Peñón
201,065

198,500

151,893

150,000

3,903,961

4,000,000

Cerro Moro
144,352

203,000

92,793

130,000

4,119,085

6,000,000

Jacobina
144,695

145,000

144,695

145,000



Minera Florida
81,635

85,000

81,635

85,000




Cost Outlook

Costs are forecasts to remain in the indicated ranges through the guidance period. Despite the changes to unitary costs as previously described, cash flows of the operations would not be affected as these items have always impacted cash flows. To facilitate year-on-year comparisons of cost guidance 2018 actuals have been adjusted for these changes guidance:
 
Total Cost of Sales per unit sold
By-Product Cash Costs
per GEO sold
By-Product AISC
per GEO sold
Cash Costs
per unit sold
AISC
per unit sold
 
2018
Actual

2019
Guidance
2018 Actual

2019
Guidance

2018 Actual

2019
Guidance

2018 Actual

2019
Guidance
2018
Actual

2019
Guidance
Gold Equivalent (i)

$
1,028

$1,020 - $1,060
$
501

$510 - $550

$
835

$850 - $890

$
656

$640 - $680
$
931

$920 - $960
Copper (Chapada) (ii)
$
1.78

$1.75 - $1.95




$
1.74

$1.60 - $1.80
$
2.06

$1.90 - $2.10
(i)
A cautionary note regarding non-GAAP financial measures and additional subtotals in financial statements are included in Section 11: Non-GAAP Financial Measures and Additional Subtotals in Financial Statements of this MD&A. Excluding any attribution from Yamana’s interest in Leagold Mining Corporation and Gualcamayo (sold during the year).
(ii)
Cash costs and AISC for Copper are on a co-product basis.

The following tables provide the adjustments to reconcile Cash Costs and All-in Sustaining as defined in 2018, to the revised methodology:

yamanalogo.jpg | 11



 
2018 Actual
$/GEO oz sold

2018 Actual
$/copper lb sold

Cash Costs (co-product, current methodology, per ounce/lb produced)
614

1.51

  Production vs. sales
11

0.07

  Inventory movement and adjustments
13

0.01

  Commercial costs
3

0.09

  Sales tax
11

0.06

  Others
4


Subtotal
42

0.23

Cash Costs (co-product, revised methodology)
656

1.74

  Less: by-product credit
(155
)
 
Cash Costs (by-product, revised methodology)
501

 
 
2018 Actual
$/GEO oz sold

2018 Actual
$/copper lb sold

All-in Sustaining Costs (co-product, current methodology, per ounce/lb produced)
816

1.76

  Production vs. sales
17

0.08

  Inventory movement and adjustments
13

0.01

  Commercial costs
3

0.09

  Sales tax
11

0.06

  G&A stock based comp
4


  Exploration CAPEX
59

0.03

  Community social programs
1


  Closure related expenses
6

0.03

  Closure depletion
5


  Others
(5
)

Subtotal
114

0.30

All-in Sustaining Costs (co-product, revised methodology)
931

2.06

  Less: by-product credit
(96
)
 
All-in Sustaining Costs (by-product, revised methodology)
835

 

The following table presents cost of sales, cash costs and AISC results in 2018 and guidance by mine for 2019. 2018 actuals are adjusted to reflect changes to the reporting methodology to facilitate direct comparisons:
Reflecting new methodology
Total cost of sales per GEO sold (ii)
Cash costs per GEO sold (i)
AISC per GEO sold (i) (ii)
2018 Actual

2019 Guidance

2018 Actual

2019 Guidance

2018 Actual

2019 Guidance

Chapada
$
420

$
490

$
388

$
430

$
473

$
525

Canadian Malartic (50%)
$
967

$
965

$
573

$
560

$
732

$
730

El Peñón
$
1,314

$
1,100

$
851

$
800

$
1,117

$
1,050

Cerro Moro (iii)
$
1,096

$
1,240

$
629

$
690

$
848

$
890

Jacobina
$
967

$
1,005

$
675

$
700

$
891

$
890

Minera Florida
$
1,398

$
1,225

$
917

$
760

$
1,327

$
990

(i)
A cautionary note regarding non-GAAP financial measures and additional subtotals in financial statements are included in Section 11: Non-GAAP Financial Measures and Additional Subtotals in Financial Statements of this MD&A. Also included is a reconciliation of 2018 actuals for cash costs and AISC per GEO demonstrating the full adoption the World Gold Council methodology for AISC. Additionally, the Argentinean export tax in respect of Cerro Moro and certain Brazilian export taxes are included as components of cost of sales. Previously, these items were treated as deductions to sales and not reflected in either cash costs or AISC.
(ii)
Mine site AISC includes cash costs, mine site general and administrative expense, sustaining capital capitalized exploration and expensed exploration. Consolidated AISC incorporates additional non-mine site costs including corporate general and administrative expense.
(iii)
For 2019, the most notable increase in Cerro Moro unitary costs is related to the introduction of the export tax of approximately $130 per GEO sold and the historical Bocamina tax of approximately $40 per GEO sold, now both disclosed as part of Cost of Sales reflecting the Company's new methodology for cost reporting.


yamanalogo.jpg | 12



The following table presents sustaining capital and exploration spend results for 2018 and expectations by mine for 2019:
 
Expansionary capital
Sustaining capital
Total exploration (i)
(In millions of US Dollars)
2018 Actual

2019 Guidance

2018 Actual

2019 Guidance

2018 Actual

2019 Guidance

Chapada
$
4.1

$
13.0

$
35.2

$
35.0

$
7.8

$
4.0

Canadian Malartic (50%)
31.4

37.0

46.4

47.0

4.3

2.0

El Peñón
1.1

2.0

31.8

27.0

17.9

17.0

Cerro Moro
61.3

2.0

15.0

28.0

11.3

15.0

Jacobina
20.6

28.0

21.0

21.0

6.1

5.0

Minera Florida
32.2

10.0

14.5

14.0

14.0

5.0

Other capex
18.6

3.0

3.4

10.0



Other exploration and overhead




17.1

20.0

Total
$
169.3

$
95.0

$
167.3

$
182.0

$
78.5

$
68.0

(i)
The Company expects approximately 77% of exploration spending will be capitalized in 2019.

Capital expenditure totals for 2019 do not include costs to add to long-term ore stockpiles, as part of the mine sequencing, at Chapada and Canadian Malartic (50%).  These costs are estimated at $57 million and $40 million, respectively, for 2019, compared to expenditures of $43.0 million and $27.0 million for the year ended December 31, 2018. 

The lower-grade stockpile at Chapada measures approximately 99 million tonnes grading 0.22% copper and 0.16 g/t gold for contained pre-recovery metal of 513,880 ounces of gold and 487 million pounds of copper. With mining costs already incurred and metallurgical recoveries enhanced as a result of recent improvements to the processing plant, the economic potential of the stockpile material has improved, and as such, the existing stockpile and planned increases are expected to improve the development studies being reviewed at Chapada, specifically be considered for the plant expansion.

The following table presents other expenditure results in 2018 and expectations for 2019:
(In millions of US Dollars, unless otherwise noted)
2018 Actual (i)

2019 Guidance

Total DDA (ii)
$
412.0

$
475.0

Total general and administrative expenses ("G&A")
$
83.4

$
87.0

Cash based G&A
$
77.8

$
75.0

Stock-based G&A
$
5.6

$
12.0

(i)
Excluding any attribution from Yamana’s interest in Leagold Mining Corporation and Gualcamayo (sold during the year).
(ii)
The Company expects higher DDA in 2019 compared to 2018 mainly due to a full year of production at Cerro Moro and the draw down and unrefined inventory of gold and silver carried over from 2018, mostly from Cerro Moro. Cerro Moro DDA reflects both the costs of construction as well as the historical acquisition costs.
 
Guidance Assumptions

Key assumptions, in relation to the above guidance, are presented in the table below.
 
2018
Actual (i)

2019 Guidance
Assumptions

GEO Ratio
79.6

82.5

Gold
$
1,264

$
1,275

Silver
$
15.87

$
15.50

Copper
$
2.99

$
2.75

C$/US$
$
1.30

$
1.31

BRL/US$
3.65

3.60

CLP/US$
641.00

680.00

ARS/US$
28.09

37.00

(i)
2018 metal prices and exchange rates shown in the table above are the average realized metal prices and exchange rates for the year ended December 31, 2018. Excludes Yamana’s interest in Leagold Mining Corporation and Gualcamayo (sold during the year).



yamanalogo.jpg | 13



3.    REVIEW OF FINANCIAL RESULTS

IMPAIRMENT AND REVERSAL OF IMPAIRMENT

In the fourth quarter of 2018, in accordance with policy, operating mine sites were reviewed for indicators of impairment or reversal and the Company performed the annual goodwill impairment test. The Company observed an increase in the recoverable amount of our Jacobina mine in Brazil that resulted in a reversal of the impairment loss recorded in 2014, totalling $150.0 million. This reversal was offset by an impairment at Minera Florida of $151.0 million and a $45.0 million impairment of goodwill recorded on the acquisition of the Canadian Malartic mine. No indicators of impairment or reversal were identified for the other operating mine sites.

Under IFRS, an impairment loss is recognized when the carrying value of an asset (or cash-generating unit ("CGU")) is above the recoverable amount, being the higher of ‘fair value less costs of disposal’ or its ‘value in use’. When the inverse is true, a reversal of impairment is recognized.  Based on the continuous application of this current fair value principle and updating of discounted cash flow models for changes in macro-economic and mine specific operational assumptions and triggers, it is more likely that under IFRS compared to other accounting standards, an asset will be impaired or have an impairment reversal occur earlier and/or more frequently.


Jacobina

The Company recorded an impairment of its Jacobina mine in 2014. The impairment was the result of the average processing rate declining to below 4,000 tonnes per day with life of mine plans contemplating a processing rate at less than 60% of capacity. Additionally, the mine experienced dilution controls issues resulting in lower than expected grades and higher costs leading to an impairment charge. Following several years of remediation plans, the Company considered the following factors to be an indicator of reversal of the previous impairment charge:
A significant increase in mineral reserves and mineral resources for 2018, which both extended the life of the mine and improved the life of mine models.
A second consecutive year of meaningful improvements, leading to a record production closer to long-term goal of 150,000 ounces per year.
A reduction in costs to expected levels benefiting from the higher production and continuous cost reduction initiatives.
Milling rates in excess of 95% of plant capacity reaching a sustainable level, following plant optimization initiatives including the commissioning of the advanced control system in the third quarter, which enhanced plant stability. A modest investment in 2019 is expected to increase processing capacity further.
During the year, the Company developed underground areas and surface stockpiling, and achieved the goals of one month ahead of ready-to-blast tonnage and additional five months of ready to drill ore.

The Company concluded that the recoverable amount for the Jacobina Cash Generating Unit ("CGU"), representing the CGU’s FVLCD, exceeded the carrying amount. This resulted in a reversal of the impairment charge recorded in 2014, which was limited to the carrying amount of the Jacobina CGU that would have been determined had no impairment charge been recognized in prior years, net of depletion, depreciation and amortization charges.

Minera Florida

During 2018, the Minera Florida mine experienced lower production at higher than expected unit costs.  Similar to the approach taken at El Peñón and Jacobina in the past, the focus of the updated life of mine plan at Minera Florida is to right size the operation at a sustainable production level. The focus is to maximize operating margins and to advance mine development and mineral reserve delineation to deliver mine flexibility and scope for future potential production increases, driven by either throughput or grade.  
In consideration of the above, at Minera Florida, a non-cash accounting impairment of $151.0 million was recognized, which resulted from: 
decreased life of mine profitability from an updated life of mine plan, developed in the fourth quarter of 2018 as part of the Company’s annual process, 
the impact of the plan on the value of exploration potential and land interest, and 
the anticipated disposal of certain exploration land holdings of the Minera Florida CGU not contiguous to the area of the mine.  


yamanalogo.jpg | 14



Studies considering the decommissioning of the PTR plant will be evaluated during 2019 and several retrofits completed on the main processing plant to be able to process approximately 900,000 tonnes per year or approximately 9% higher than current levels.

For 2019, mining activity has transitioned to the higher-grade zones of Pataguas and PVS, which will enable a higher production level compared to 2018 and at an anticipated lower cost structure. A lower exploration budget and reduced drilling activity is planned while the optimization progresses. Drilling at Los Patos zone in 2018 returned impressive assay results extending the zone, which will be followed up further in 2019. In addition, Don Leopoldo was tested at depth, with results confirming mineralization is open at depth. In general, the Company has applied more restrictive controls around the mineral resource modelling potential and continues to perform additional work to have a better understanding of ore shoots.

The optimization of operations also prompted the review of a detailed plan for future exploration during the fourth quarter, both from a budget and a strategic perspective.  As the land holdings of the Minera Florida CGU are significant in size and breadth, rationalization of the portfolio presented the opportunity to save on the ongoing maintenance and licensing costs that are currently incurred. The value attributable to the land arose from a purchase price allocation associated with its acquisition.  
Canadian Malartic

On June 16, 2014, the Company acquired a 50% interest in the Canadian Malartic mine. Goodwill of $427.6 million was recognized. As a result of the deferred income tax liability recognized in purchase accounting, an additional  "gross up" of the fair value of the acquired assets is required, which resulted in the recognition of goodwill. Goodwill is not amortized and may be impaired in future periods, pending the identification of additional mineral reserves and mineral resources. As goodwill is tested annually for impairment and not amortized, unless the mine as a CGU can continuously replenish mineral reserves and mineral resources, it may result in the gradual impairment of goodwill. As at December 31, 2018, the FVLCD of Canadian Malartic exceeded the mine's book value. However, the sum of the carrying value of the Canadian Malartic CGU and goodwill from its acquisition was deemed to be in excess of the FVLCD of the Canadian Malartic CGU by $45.0 million, due to the 2018 mineral depletion. The impairment represents approximately 10% of the total goodwill balance.
 
For the year ended December 31, 2018, the Company recorded net impairment losses of $302.0 million (2017: $356.5 million) including the above and the impairments previously recognized during the year with respect to sales transactions.

FINANCIAL RESULTS FOR THE THREE MONTHS ENDED DECEMBER 31, 2018

Net loss

Net loss attributable to Yamana Gold Inc. equity holders, for the three months ended December 31, 2018 was $61.4 million or $0.06 per share basic and diluted, compared to a net loss of $188.6 million or $0.20 per share for the three months ended December 31, 2017. Significant events having an accounting or cash flow impact during the fourth quarter that are not reflective of ongoing operations include (Refer to Section 3: Review of Financial Results of this MD&A for additional details):
An impairment reversal in respect of Jacobina following the significant increase in mineral reserves and mineral resources, which extends the life of the mine, and other operational improvements, as described above.
The reversal was offset by non-cash accounting impairments in respect of Minera Florida and in respect of goodwill on acquisition of Canadian Malartic.
A higher income tax expense of $33.3 million due to a non-recurring tax payment made in the quarter.
Approximately $6.4 million in export taxes that were recently enacted by the Argentine Executive Branch. In December, there was a favourable judgment on proceedings challenging the constitutionality of the export tax in respect of the amounts paid prior to December 3, 2018. The Company had paid $3.5 million in export taxes incurred prior to December 3, 2018.
A $43.2 million non-cash unrealized foreign exchange gain, recorded in income taxes, resulting from the US dollar weakening during the quarter against local currencies.

yamanalogo.jpg | 15



Certain non-cash and other items that may not be reflective of current and ongoing operations were $87.6 million or $0.09 per share. The Company refers to the following items, which may be used to adjust or reconcile input models in consensus estimates, the most notable of which, being the aforementioned net impairment as discussed in Section 1: Highlights and Relevant Updates of this MD&A:

For the three months ended December 31,
(In millions of US Dollars; unless otherwise noted)
2018

2017
(restated)

Non-cash unrealized foreign exchange losses (gains)
$
3.2

$
(1.2
)
Share-based payments/mark-to-market of deferred share units
(0.5
)
3.7

Mark-to-market (gains) losses on derivative contracts (ii)
(2.6
)
12.8

Net mark-to-market losses (gains) on investments and other assets
0.9

(0.5
)
Revision in estimates and liabilities including contingencies
0.3

1.9

Gain on sale of subsidiaries
(2.7
)

Impairment (reversal) of mining and non-operational mineral properties, and properties held for sale
(13.0
)
356.4

Impairment of goodwill
45.0


Reorganization costs
2.2

1.2

Other provisions, write-downs and adjustments (i)
16.4

(0.5
)
Non-cash tax on unrealized foreign exchange losses
(43.2
)
11.6

Income tax effect of adjustments and other one-time tax adjustments (iii)
81.6

(141.3
)
Total adjustments - increase to earnings attributable to Yamana Gold Inc. equity holders
$
87.6

$
244.1

Total adjustments - increase to earnings per share attributable to Yamana Gold Inc. equity holders
$
0.09

$
0.26

(i)
The balance includes, among other things, the reversal of certain provisions such as tax credits and legal contingencies.
(ii)
On January 1, 2018, the Company adopted IFRS 9 Financial Instruments. Under the transitional provisions of IFRS 9, the Company has restated the comparative period for certain hedging requirements. Specifically, under IFRS 9, changes in time value on the Company's zero cost collars, which were taken to profit or loss under IAS 39: Financial Instruments: Recognition and Measurement, are now recognized in OCI as a cost of hedging rather than in profit or loss. Accordingly, the results of the comparative period have been adjusted to remove time value movements from profit or loss, and the comparative adjustments above have been adjusted accordingly.
(iii)
Other one-time tax adjustments includes $50.1 million in deferred tax recognized as a result of foreign exchange in the period.

Revenue

Revenue for the three months ended December 31, 2018 was $483.4 million, compared to $478.8 million in the same period in 2017; as 5% lower realized gold prices were partly offset by higher silver and copper sales. Revenue was also impacted by lower consolidated gold quantities sold, as there were attributable ounces from Brio Gold in 2017. At Cerro Moro, elevated silver grades above plan led to capacity constraints at the mine furnace, resulting in an increase in gold and silver precipitate. This impacted sales volumes. Precipitate inventory levels are expected to be drawn down to normalized levels the first half of 2019.

yamanalogo.jpg | 16



For the three months ended December 31,
2018
2017

 
Quantity
sold

 
Revenue per ounce/pound

Revenue
(In millions of US Dollars)

Revenue
(In millions of US Dollars)

Gold (i)
284,420

oz
$
1,223

$
347.9

$
382.6

Silver
3,065,102

oz
$
14.59

44.7

17.8

Copper (i)
35,509,168

lbs
$
2.56

90.8

78.4

Revenue
 
 
 
$
483.4

$
478.8

For the three months ended December 31,
2018
2017

 
Quantity
sold

 
Average realized price

Revenue
(In millions of US Dollars)

Revenue
(In millions of US Dollars)

Gold (i)
284,420

oz
$
1,226

$
348.7

$
387.8

 
 
 
 
 
 
Silver
3,009,473

oz
$
14.54

43.7

16.9

Silver subject to metal sales agreement (ii)
55,629

oz
$
17.26

1.0

0.9

 
3,065,102

oz
$
14.59

 


 
 
 
 
 
 
Copper (i)
22,701,830

lbs
$
2.79

63.4

95.4

Copper subject to metal sales agreements (ii)
12,807,338

lbs
$
3.08

39.4

4.8

 
35,509,168

lbs
$
2.90

 
 
Gross revenue
 
 
 
$
496.2

$
505.8

(Deduct) add:
 
 
 
 
 
- Treatment and refining charges of gold and copper concentrate
 
 
 
(10.0
)
(10.9
)
- Sales taxes (iii)
 
 
 

(5.5
)
- Metal price, MTM, and derivative settlement adjustments
 
 
 
(2.8
)
(10.7
)
- Other adjustments
 
 
 

0.1

Revenue (iii)(iv)
 
 

$
483.4

$
478.8

(i)
Includes payable gold and copper contained in concentrate.
(ii)
Balances represent the metals sold under the metal sales agreements and the advanced copper sales program.
(iii)
Beginning on January 1, 2018, the Company is presenting revenue gross of certain sales taxes.
(iv)
As discussed in Note 5: Recent Accounting Pronouncements to the Company's Consolidated Financial Statements, the Company adopted IFRS 15 Revenue from Contracts with Customers on January 1, 2018. Under IFRS 15, the Company is required to account for the financing component on its streaming arrangements, under which, revenue is increased by an imputed interest amount, with a corresponding increase to finance expense each period. The amount of this adjustment in the three months ended December 31, 2018 was $4.2 million. In accordance with the transition provisions of IFRS 15, revenue in the comparative period has not been restated.

Cost of Sales

Lower unit costs of production more than offset higher production volumes during the three months ended December 31, 2018.
Cost of sales excluding DDA for the three months ended December 31, 2018 was $266.2 million, in line with $264.7 million for the same period in 2017. The cost associated with higher silver and copper sales were offset by the depreciation of local currencies against the US Dollar.
Total DDA expense for the three months ended December 31, 2018 was $130.9 million, comparable to the $100.9 million for the same period in 2017. DDA expense is higher mainly due to the higher production on the completion of ramp up at Cerro Moro, partially offset by no DDA from Brio Gold or Gualcamayo.

Expenses and Other Income

General and administrative expenses were $21.0 million for the three months ended December 31, 2018, 38% lower compared to $34.0 million for the same period in 2017.
Exploration and evaluation expenses were $3.6 million for the three months ended December 31, 2018, compared to $7.0 million for the same period in 2017, in line with lower planned greenfield exploration during the period.
Share of earnings of associate totalled $4.5 million for the three months ended December 31, 2018, representing the equity pick up from the Company's interest in Leagold, which was acquired in May 2018.
The Company recorded other expenses of $11.0 million for the three months ended December 31, 2018, compared to other expenses of $16.4 million for the same period in 2017.

yamanalogo.jpg | 17



Finance costs were $32.0 million for the three months ended December 31, 2018, compared to $28.7 million for the same period in 2017, primarily attributable to the non-cash interest expense of $3.6 million related to the financing component of deferred revenue contracts recorded in the current period. Interest expense on outstanding debt remained reasonably consistent with the prior period.
Other income was $0.2 million in the three months ended December 31, 2018 compared to other costs of $7.4 million in the comparative period. This account is comprised primarily of unrealized gains and losses on derivatives and foreign exchange and, given the nature of these accounts, is expected to fluctuate from year to year.

Income Tax Expense (Recovery)

The Company recorded an income tax expense of $52.9 million for the three months ended December 31, 2018 (2017: income tax recovery of $138.5 million). The income tax provision reflects a current income tax expense of $51.6 million and a deferred income tax expense of $1.3 million. The current quarter includes an income tax expense of $33.3 million incurred and payable at the end of the year, following an administrative interpretation of relevant tax legislation and approach by Brazilian tax authorities under that tax legislation in December. The expense was unexpected, not consistent with the Company's interpretations of the tax legislation and inconsistent with past practice. The Company has made the payment so as to avoid penalties and interest but in respect of which, the Company is pursuing its legal recourse and remedies. The prior year income tax recovery includes deferred income tax liability reversals of $83.0 million in Argentina related to the non-cash impairment loss recognized on the re-measurement of Gualcamayo in association with its reclassification as a disposal group held for sale, and the impact of a tax rate change in the fourth quarter of $216.8 million.

FINANCIAL RESULTS FOR THE YEAR ENDED DECEMBER 31, 2018

Net Loss

Net loss attributable to Yamana Gold Inc. equity holders, for the year ended December 31, 2018 was $284.6 million or $0.30 per share basic and diluted, compared to a net loss of $188.5 million or $0.00 per share for the year ended December 31, 2017. The net loss resulted mainly from non-cash accounting impairments previously discussed.
Certain non-cash and other items that may not be reflective of current and ongoing operations were $396.5 million or $0.42 per share. The Company refers to the following items, which may be used to adjust or reconcile input models in consensus estimates:
 
For the year ended December 31,
(In millions of US Dollars; unless otherwise noted)
2018

2017

Non-cash unrealized foreign exchange losses
$
9.5

$
15.0

Share-based payments/mark-to-market of deferred share units
5.3

12.8

Mark-to-market (gains) losses on derivative contracts (ii)
(9.4
)
9.3

Net mark-to-market loss on investments
9.8

2.5

Revision in estimates and liabilities including contingencies
12.9

(26.6
)
Gain on sale of subsidiaries
(73.7
)

Impairment (reversal) of mining and non-operational mineral properties, and properties held for sale
250.0

356.5

Impairment of goodwill
45.0


Financing costs paid on early note redemption
14.7


Reorganization costs
10.1

4.8

Other provisions, write-downs and adjustments (i)
34.9

18.5

Non-cash tax on unrealized foreign exchange losses (gains)
151.9

9.9

Income tax effect of adjustments and other one-time tax adjustments
(64.4
)
(143.4
)
Total adjustments - increase to earnings attributable to Yamana Gold Inc. equity holders
$
396.5

$
259.3

Total adjustments - increase to earnings per share attributable to Yamana Gold Inc. equity holders
$
0.42

$
0.27

(i)
The balance includes, among other things, the reversal of certain provisions such as tax credits and legal contingencies.
(ii)
On January 1, 2018, the Company adopted IFRS 9 Financial Instruments. Under the transitional provisions of IFRS 9, the Company has restated the comparative period for certain hedging requirements. Specifically, under IFRS 9, changes in time value on the Company's zero cost collars, which were taken to profit or loss under IAS 39: Financial Instruments: Recognition and Measurement, are now recognized in OCI as a cost of hedging rather than in profit or loss. Accordingly, the results of the comparative period have been adjusted to remove time value movements from profit or loss, and the comparative adjustments above have been adjusted accordingly.


yamanalogo.jpg | 18



Revenue

Revenue for the year ended December 31, 2018 was $1,798.5 million, compared to $1,803.8 million for the year ended December 31, 2017. Lower revenue resulted from lower consolidated gold quantities sold, as there were more attributable ounces from Brio Gold and Gualcamayo in 2017. This was partly offset by an additional 3.5 million pounds of copper sold at 8% higher average realized copper prices and revenue from Cerro Moro. As aforementioned, the inventory build-up at Cerro Moro also affected revenue for the year.
For the years ended December 31,
2018
2017

 
Quantity
sold

 
Revenue per ounce/pound

Revenue
(In millions of US Dollars)

Revenue
(In millions of US Dollars)

Gold (i)
1,075,214

oz
$
1,263

$
1,357.5

$
1,433.9

Silver
7,000,887

oz
$
15.37

107.6

86.1

Copper (i)
123,555,941

lbs
$
2.70

333.4

283.8

Revenue
 
 
 
$
1,798.5

$
1,803.8

For the years ended December 31,
2018
2017

 
Quantity
sold

 
Average realized price

Revenue
(In millions of US Dollars)

Revenue
(In millions of US Dollars)

Gold (i)
1,075,214

oz
$
1,267

$
1,362.8

$
1,450.1

 
 
 
 
 
 
Silver
6,759,000

oz
$
15.29

103.3

83.0

Silver subject to metal sales agreement (ii)
241,887

oz
$
17.69

4.3

3.2

 
7,000,887

oz
$
15.37

 
 
 
 
 
 
 
 
Copper (i)
91,182,021

lbs
$
2.99

272.9

317.0

Copper subject to metal sales agreements (ii)
32,373,920

lbs
$
2.99

96.9

16.9

 
123,555,941

lbs
$
2.99

 
 
Gross revenue
 
 
 
$
1,840.2

$
1,870.2

(Deduct) add:
 
 
 
 
 
- Treatment and refining charges of gold and copper concentrate
 
 
 
(34.6
)
(38.2
)
- Sales taxes (iii)
 
 
 

(18.6
)
- Metal price, MTM, and derivative settlement adjustments
 
 
 
(6.8
)
(10.1
)
- Other adjustments
 
 
 
(0.2
)
0.5

Revenue (iii)(iv)
 
 

$
1,798.5

$
1,803.8

(i)
Includes payable copper and gold contained in concentrate.
(ii)
Balances represent the metals sold under the metal sales agreements and the advanced copper sales program.
(iii)
Beginning on January 1, 2018, the Company is presenting revenue gross of certain sales taxes.
(iv)
As discussed in Note 5: Recent Accounting Pronouncements to the Company's Consolidated Financial Statements, the Company adopted IFRS 15 Revenue from Contracts with Customers on January 1, 2018. Under IFRS 15, the Company is required to account for the financing component on its streaming arrangements, under which, revenue is increased by an imputed interest amount, with a corresponding increase to finance expense each period. The amount of this adjustment in the year ended December 31, 2018 was $13.8 million. In accordance with the transition provisions of IFRS 15, revenue in the comparative period has not been restated.

Cost of Sales

Cost of sales excluding DDA for the year ended December 31, 2018 was $1,010.0 million, compared to $1,042.4 million for the year ended December 31, 2017. Cost of sales excluding DDA for the year was lower than in 2017, on lower sale quantities and lower unit costs of production from several ongoing operational efficiencies. In addition, costs were lower due to the exclusion of Brio Gold cost of sales from late May, 2018, partially offset by the addition of Cerro Moro cost of sales starting the third quarter of 2018.
Total DDA expense for the year ended December 31, 2018 was $438.3 million, compared to $426.8 million for the year ended December 31, 2017. DDA expense is higher mainly due to the higher production on the completion of ramp up at Cerro Moro, partially offset by the DDA that ceased to be recorded following the classification of Brio Gold and Gualcamayo as held for sale.
 

yamanalogo.jpg | 19



Expenses and Other Income

General and administrative expenses were $91.8 million for the year ended December 31, 2018, compared to $113.6 million for the year ended December 31, 2017. General and administrative expenses are 19% lower than the comparative year. General and administrative expenses were $83.4 million excluding Brio Gold and Gualcamayo and below guidance of $94.0 million for the year.
Exploration and evaluation expenses were $13.0 million for the year ended December 31, 2018, compared to $21.2 million for the year ended December 31, 2017, in line with lower planned greenfield exploration.
Share of earnings of associate totalled $5.5 million for the year ended December 31, 2018, representing the equity pick up from the Company's interest in Leagold.
The Company recorded other operating income of $9.3 million for the year ended December 31, 2018, compared to other expenses of $23.6 million for the year ended December 31, 2017. The change is primarily due to the gains on sale of certain Canadian exploration properties, the Brio Gold transaction and Gualcamayo recorded in the current year, partly offset by increases in provisions. Refer to Note 6: Divestitures to the Company's Consolidated Financial Statements for further discussion on the sale transactions.
Finance costs were $137.4 million for the year ended December 31, 2018, compared to $110.8 million for the year ended December 31, 2017. The increase in finance costs is attributable to the impact of the one-time financing cost of $14.7 million on the early debt redemption that occurred in the first quarter and the non-cash interest expense of $16.0 million related to the financing component of deferred revenue contracts recorded in the current year. Interest expense on outstanding debt remained reasonably consistent with the prior year.
Other costs generated a gain of $2.5 million in the current year compared to costs of $20.9 million in the prior year. Other costs is comprised primarily of unrealized gains and losses on derivatives and foreign exchange and, given the nature of these accounts, is expected to fluctuate from year to year.

Income Tax Expense

The Company recorded an income tax expense of $121.0 million for the year ended December 31, 2018 (2017: $113.9 million income tax recovery). The income tax provision reflects a current income tax expense of $138.8 million and a deferred income tax recovery of $17.8 million, compared to a current income tax expense of $239.2 million and a deferred income tax recovery of $353.1 million for the year ended December 31, 2017.
The effective tax rate is subject to a number of factors including the source of income between different countries, different tax rates in the various jurisdictions, the non-recognition of tax assets, foreign currency exchange movements, mining taxes, changes in tax laws and the impact of specific transactions and assessments. The consolidated effective tax rate was negative 68.4% on the loss before tax for the year ended December 31, 2018, compared to an effective tax rate of 36.5% for the same period in the prior year.
The following items have the most significant impact on the difference between the Company's Canadian statutory tax rate of 26.5% and our effective rate for the year ended December 31, 2018 and 2017:
Income tax accounts are required to be re-measured at each balance sheet date for changes in the foreign exchange rate. Within a number of our foreign subsidiaries, the tax basis of non-monetary assets is converted from local currency to US Dollars at the period end spot rate for the purpose of calculating deferred taxes. For the year ended December 31, 2018 and 2017 an expense of $151.9 million and $9.9 million, respectively, was recorded on currency fluctuations previously described.
Within a number of the Company's foreign subsidiaries, taxable or deductible foreign exchange gains or losses arise as a result of US Dollar transactions translation into local currency, whereas foreign currency exchange gains or losses that arise as local transaction are translated to US Dollars are not taxable or deductible. For the year ended December 31, 2018, a deductible local foreign exchange loss of $119.7 million was recognized, compared to deductible local foreign exchange loss of $9.2 million recognized in the comparative period.
An income tax expense of $33.3 million incurred at the end of the year, as previously described. This is compared to an expense of $149.9 million relating to the settlement of tax disputes in Brazil in the comparative period.
The deferred tax liabilities relating to the operating mines will reverse in the future, as the assets are depreciated or depleted. The capitalized exploration expenditures on non-producing mineral properties will not reverse until the property becomes a mine subject to depletion, is written off or sold. The deferred income taxes would only be paid on a direct disposition of the asset that may never occur.
The Company operates in the following tax jurisdictions: Brazil, where the statutory tax rate is 34%; Argentina, where the statutory tax rate is 30% in 2018, decreasing to 25% in 2020; Chile, where the statutory tax rate is 27%; and Canada, where the federal statutory tax rate is 15% with varying provincial tax rates. The Company does not anticipate the statutory tax rates to change in the foreseeable future; hence, there should be no impact on the calculation of the current or deferred tax expense in the period.

yamanalogo.jpg | 20



The largest components of the deferred tax liabilities relate to:
(In millions of US Dollars)
2018

2017

Canadian Malartic
$
314.0

$
333.9

Jacobina
$
168.7

$
102.2

Chapada
$
68.0

$
62.0

El Peñón
$
46.1

$
56.5

Agua Rica
$
266.6

$
266.5

Exploration potential / other
$
245.9

$
296.7

See Note 13: Income Taxes to the Company's Consolidated Financial Statements for an explanation of the foreign exchange charged to the income tax expense. Readers are also encouraged to read and consider the tax related risk factors and uncertainties in the Company’s Annual Information Form.

QUARTERLY FINANCIAL SUMMARY
For the three months ended
Dec. 31

Sep. 30,

Jun. 30

Mar. 31,

Dec. 31,

Sep. 30,

Jun. 30,

Mar. 31,

(In millions of US Dollars, unless otherwise noted)
2018

2018

2018

2018

2017

2017

2017

2017

Financial results
 
 
 
 
 
 
 
 
Revenue (i)
$
483.4

$
424.7

$
435.7

$
454.7

$
478.8

$
493.4

$
428.1

$
403.5

Attributable to Yamana equity holders:
 
 
 
 
 
 
 
 
Net (loss) earnings (ii)
$
(61.4
)
$
(81.3
)
$
18.0

$
(160.1
)
$
(194.4
)
$
45.7

$
(39.9
)
$

Per share - basic and diluted
$
(0.06
)
$
(0.09
)
$
0.02

$
(0.17
)
$
(0.20
)
$
0.05

$
(0.04
)
$

(i)
On January 1, 2018, the Company adopted IFRS 15 Revenue from Contracts with Customers. In accordance with the transition requirements in IFRS 15, prior period numbers are not restated. The impact to the Company's revenue of applying IFRS 15 in the three months ended December 31, 2018, September 30, 2018, June 30, 2018 and March 31, 2018 was an increase of $4.2 million, $4.1 million, $2.5 million and $3.0 million, respectively.
(ii)
On January 1, 2018, the Company adopted IFRS 9 Financial Instruments. In accordance with the transition requirements in IFRS 9, the Company has restated the 2017 comparative periods for certain hedging requirements. Specifically, under IFRS 9, changes in time value on the Company's zero cost collars, which were taken to profit or loss under IAS 39: Financial Instruments: Recognition and Measurement, are now recognized in OCI as a cost of hedging rather than in profit or loss. Accordingly, the 2017 comparative periods have been restated for this change.


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4.    OPERATING SEGMENTS PERFORMANCE

YAMANA MINES

CHAPADA, BRAZIL

Chapada is an open pit gold-copper mine, located northwest of Brasília in Goías state, Brazil.
 
For the three months ended December 31,
For the years ended December 31,
Operating and Financial Information
2018

2017

2018

2017

Operating (iv)
 
 
 
 
Ore mined (tonnes)
10,025,022

9,320,161

33,787,816

34,163,445

Waste mined (tonnes)
8,350,604

7,306,962

31,305,991

32,832,383

Ore processed (tonnes)
6,064,827

6,080,611

22,929,227

23,000,557

Gold
 
 
 
 
Production (ounces) (iii)
40,841

36,578

121,003

119,852

Sales (ounces) (iii)
35,607

36,789

116,743

117,305

Feed grade (g/t)
0.31

0.30

0.26

0.28

Concentrate grade (g/t)
17.21

17.21

15.48

15.40

Recovery rate (%)
67.1

61.8

63.3

57.0

Total cost of sales per ounce sold (ii)
$
410

$
326

$
418

$
384

Co-product cash costs per ounce produced (i)
$
294

$
291

$
334

$
334

All-in sustaining co-product costs per ounce produced (i)
$
349

$
327

$
399

$
385

DDA per ounce sold
$
69

$
62

$
75

$
64

Copper
 
 
 
 
Production (millions of pounds)
39.0

34.7

129.2

127.3

Sales (millions of pounds)
35.5

33.2

123.6

120.1

Feed grade (%)
0.34

0.31

0.31

0.31

Concentrate grade (%)
23.98

23.79

24.10

23.85

Recovery rate (%)
86.3

83.5

82.4

79.8

Total cost of sales per pound sold (ii)
$
1.86

$
1.67

$
1.78

$
1.73

Co-product cash costs per pound produced (i)
$
1.50

$
1.51

$
1.51

$
1.54

All-in sustaining co-product costs per pound produced (i)
$
1.73

$
1.67

$
1.76

$
1.74

DDA per pound sold
$
0.28

$
0.28

$
0.28

$
0.25

Concentrate
 
 
 
 
Production (tonnes)
73,830

66,104

243,129

242,126

Sales (tonnes)
70,008

64,873

242,496

242,536

Treatment and refining charges (millions of $)
$
(10.0
)
$
(10.9
)
$
(34.6
)
$
(38.2
)
Metal price adjustments related to concentrate revenue
(millions of $)
$
(2.8
)
$
(10.7
)