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Yamana Gold posts 1Q profit, hikes dividend, trims production guidance

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(Kitco News) - Yamana Gold Inc. (TSX: YRI; NYSE: AUY) reported Thursday that it doubled its adjusted profit in the first quarter, upped its dividend and revised down 2020 production guidance due to mandated temporary mine closures resulting from the COVID-19 pandemic.

Adjusted first-quarter net earnings were listed at $47.2 million, or 5 cents per share, up from $24 million, or 3 cents, in the same period a yer ago. This beat the consensus estimate that Credit Suisse put at 3 cents a share.

Net earnings were $45 million, or a nickel per share, compared to a net loss of $4.1 million, or 0 cents per share, in the year-ago period.

The company said the annual dividend was increased by a further 25% to $0.0625 per share, effective for the second quarter. Shareholders of record at the close of business on June 30 will be entitled to receive payment on July 14. This is the third dividend increase announced by Yamana in the past year.

Yamana listed first-quarter gold production of 192,238 ounces, which the company said was in line with expectations, with Jacobina, El Peñón and Minera Florida all exceeding their targets. Consolidated output was in line with the company’s target despite government-mandated temporary suspensions of operations at Cerro Moro and Canadian Malartic, Yamana said. Consolidated production in the year-ago period was 214,438 ounces.

Silver production was 2.7 million ounces, also in line with plan although down from 3 million a year ago. The company said El Peñón exceeded its target.

Yamana put gold-equivalent output at 221,746 ounces during the first quarter. All-in sustaining costs were $1,032 per gold-equivalent ounce sold, compared to $973 in the same period in 2019.

As a result of the temporary mine suspensions, Yamana revised its 2020 gold-output guidance to 786,000 ounces from 857,000 previously. Silver-mine output was revised to 10.25 million ounces from 11.5 million.

Meanwhile, the forecast gold-equivalent output was also impacted by the move in prices, with gold outperforming silver, Yamana explained. Thus, the gold-equivalent forecast was trimmed to 890,000 ounces from 990,000 previously.

“The expected production shortfall from original guidance to revised guidance is approximately 8%, excluding the aforementioned GEO impact,” Yamana said. “The revised production guidance at Cerro Moro and Canadian Malartic in relation to initial guidance coincides with the number of weeks that those operations have been either in suspension of operations or gradual resumption of operations, as compared to the number of weeks in the year of normal operations.”

Yamana said it currently does not anticipate any changes to guidance for 2021 or 2022.

Yamana said net free cash flow during the first quarter was $91.1 million, well up from net free cash outflow of $13.6 million in the same period of 2019.

“The latest quarterly results reflect the impact of strong production, strong commodity prices and the positive impact of foreign exchange on the cost structure of the company,” Yamana said. “Cash flows were all in line or better than the average of the past four quarters, and better than all comparable cash flows in the first quarter of 2019.”

The company said the positive cash flow enabled it to decrease net debt by $20 million during the quarter to $869.1 million. However, when factoring in funds from the completion of the Equinox Gold sale that occurred on April 15, net debt at the end of the quarter was approximately $786 million on a pro forma basis, Yamana said.

“Given the expected lower production in the second quarter, and depending on metal prices, net debt may increase in the second quarter,” Yamana said. “Any increase is expected to be modest, and at current metal prices, is considered unlikely. Furthermore, the company expects to generate more significant net free cash flow in the second half of the year, sequentially increasing over the third and fourth quarters.”

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