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Yamana Gold Posts 2Q In-Line Profit, Reduces Debt

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Editor's note: Updating earlier story to include consensus estimate.

(Kitco News) - Yamana Gold Inc. (TSX: YRI; NYSE: AUY) late Thursday reported that the company reduced its debt while posting a profit in the second quarter that matched  expectations.

Net earnings were $14.1 million, or a penny per share, down from $18 million, or 2 cents, in the same quarter a year ago. Excluding special items, adjusted net earnings were $19.8 million, or 2 cents.

Analysts with Credit Suiise and BMO Capital Markets reported that the adjusted results were in line with the consensus estimate of 2 cents a share.

Yamana listed a 7% year-on-year increase in gold-equivalent production to 257,556 ounces, with higher gold and silver output highlighted by a second straight quarter of record production at Jacobina. Yamana reported all-in sustaining cost guidance of $941 per gold-equivalent ounce.

Gold output rose to 232,863 ounces from 224,083 in the year-ago period, while silver production jumped to 2.1 million ounces from 1.3 million. Copper output was roughly steady at 31.2 million pounds.

Against this backdrop, revenue rose to $463.5 million ounces from $435.7 million in the same quarter of 2018.

The average realized gold price was $1,307 an ounce, up slightly from $1,304. The silver price fell to $15.03 an ounce from $16.53, while the average copper price slid to $2.88 a pound from $3.09.

The company reported a third-quarter dividend of a penny per share, up from a half cent in the prior quarter. Yamana previously announced that it was hiking the annual dividend by 100% to 4 cents a share, contingent upon completion of the sale of the Chapada mine, which occurred earlier this summer. Shareholders of record at the close of business on Sept. 30 will be entitled to receive payment of the new quarterly dividend on Oct. 15.

The Chapada mine was sold for total consideration of over $1 billion, including upfront cash of $800 million on closing. In conjunction, Yamana said it used $385 million to repay the entire June 30 outstanding balance under the revolving credit facility. The remaining $415 million in upfront cash is being used prepay senior notes issued in March 2012 and June 2013 on a pro rata basis, the company said.

Yamana said the reduction in net debt immediately lowers its ratio of net debt to earnings before interest, taxes, depreciation and amortization, which is a measure of financial strength, to 1.5 times. The company said it continues to target this ratio at one time by the end of 2021.

“This was one of the more important and exciting quarters in Yamana’s history,” said Daniel Racine, president and chief executive officer. “We have embarked on a new era, significantly improving our balance sheet and financial flexibility, which will allow us to pursue our organic growth opportunities at a time when the metal price cycle appears to be turning.”

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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