On July 28, 2016, YAMANA GOLD INC. (NYSE:AUY) reported its financial and operational results for the second quarter 2016:
- Net earnings of $32.9 million or $0.03 per share, an increase of $39.9 million or $0.04 per share compared to the second quarter of 2015.
- Net free cash flow of $37.4 million, an increase of $15.2 million compared to the second quarter of 2015.
Yamana reported adjusted earnings of $5.4 million or $0.01 per share, an increase of $13.7 million or $0.02 per share compared to the second quarter of 2015, and missed by $0.01 analysts' most recent estimates for Q2 2016.
Due to increased gold sales, partly offset by lower silver and copper production and significantly lower realized copper price, the miner reported revenue of $466.5M, a 2.5% increase compared to Q2 2015, and beat by $20.00M analysts' estimates:
Source: Yahoo Finance as of May 6, 2016
Shares of Yamana Gold Inc. (USA) (NYSE:AUY) went down 3.4% during After-hours trading (AHT).
Other financial results of the period (highlights):
- Mine operating earnings of $63.7 million, an increase of $7.5 million compared to the second quarter of 2015.
- Cash flows from operating activities after net change in working capital of $202.0 million, an increase of $78.6 million compared to the second quarter of 2015.
- Cash flows from operating activities before net change in working capital of $202.0 million, an increase of $52.7 million compared to the second quarter of 2015.
- General and administrative expenses of $23.6 million, a decrease of $6.2 million compared to the second quarter of 2015.
With gold price trending higher during Q2 2016, from US$1,181.250 per troy ounce of April 1, 2016 to US$1,317.000 per troy ounce of June 30, 2016, Yamana generated sufficient cash flow from operations to continue its strategy in reducing its debt exposure (decreasing net debt by at least $300 million by the end of 2017) and gradually improved the net debt/EBITDA ratio to reach the target of between 1.5 to 2.0 times.
The postponement in the interest hikes by the Fed that according to many traders will probably not change for the rest of 2016 or will even be lower, is putting more pressure on the price of gold that will facilitate Yamana, with a manageable debt repayment schedule, in generating sufficient cash flow to meet all of its targets:
- To invest in the development of the projects and add production to its yearly metal production expectations.
- To gradually improve the net debt-to-EBITDA ratio.
- To pay the dividend to its shareholders: on July 28, 2016 the miner declared a third quarter 2016 dividend of $0.005 per share.
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The net free cash flow improved on a Year over Year basis, both when the second quarter and half year period are considered:
Source: Yamana Q2 2016 Report
On higher trends in the gold price Yamana will generate at least the same level of FCF for the next quarters, even when higher cash will be required to meet the official 2016 production guidance on Capex.
2016 production and cost guidance: stronger gold production is expected in H2 at co-product AISC of between $880 - $920/oz.
Source: Yamana website
Source: Yamana Gold Inc. Q2 2016 Report
Other operational results of the period (highlights):
- Silver production of respectively approximately 1.8 million ounces at co-product cash costs and AISC per ounce of $8.50 and $12.31.
- Copper production of respectively 23.2 million pounds at co-product cash costs and AISC per pound of $1.80 and $2.43.
Performance of Yamana Gold on the New York Stock Exchange: the stock increased with 216% YTD and is up trending
Other news on Yamana Gold Inc.:
- On July 28, 2016, Yamana entered a Share Purchase Agreement to sell 100% of its interest in the Mercedes mine in Sonora, Mexico to Premier Gold Mines Limited. Yamana will receive $122.5 million, 6 million in Premier common shares and 3 million Premier common share purchase warrants.
- On July 28, 2016, Yamana announced the decision to move forward with C1 Santa Luz Recomissioning.
Disclosure: I have no positions in Yamana Gold Inc.
