TORONTO, ONTARIO, Mar 21, 2007 (MARKET WIRE via COMTEX News Network) -- YAMANA GOLD INC. (TSX: YRI)(NYSE: AUY)(LSE AIM: YAU) is pleased to announce its financial and operating results for the year ended December 31, 2006.
Highlights
- Annual sales of $169.2 million, an increase of 270% over the corresponding prior year. Fourth quarter sales of $60 million.
- Mine operating earnings of $35.1 million for the year, an increase of over 300% over the corresponding prior year level.
- Adjusted net earnings for the year of $42.6 million before income tax effects and $19.5 million after income tax effects or $0.07 per share and net loss under Canadian generally accepted accounting principles of $70.2 million.
- Commenced commercial production at its Sao Francisco Mine August 1, 2006.
- Completed construction of its Chapada copper-gold project with commercial production declared in February 2007.
- Acquired RNC Gold Inc., Desert Sun Mining Corp. and Viceroy Exploration Ltd. whereby the Company acquired two additional mines and a near development stage project.
- Declared quarterly dividends of $0.01 per share with the first dividend being paid in mid October.
- Cash balance of $69.7 million as at December 31, 2006.
- Cash flow from operations of $40.2 million or $0.15 per share before changes in non-cash working capital items was reduced by $43.4 million relating to changes in non-cash working capital resulting in a net decline of $3.2 million in working capital from operating activities.
- Raised $170 million (C$200.1 million) in net proceeds from the public issue of 17.4 million common shares.
- Repaid outstanding long term debt: now debt free.
- Settled the terms and conditions for $200 million revolving line of credit.
- Increased copper hedging program intended to help secure a less than two year payback at the Chapada copper-gold project.
- Total production of 359,272 ounces of gold for the twelve month period ended December 31, 2006 including pre-acquisition production (37,248 ounces)from mines acquired during the year and assets sold during the year (8,433 ounces). Commercial production was 283,460 ounces at an average cash cost of $326 per ounce(A non-GAAP measure). -----------------------------------------------------------------------
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Quarter ended Year ended
December 31, 2006 December 31, 2006
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Production Cash costs Production Cash costs
(oz.) per oz. (oz.) per oz.
(a non-GAAP (a non-GAAP
measure) measure)
Brazil
Fazenda Brasileiro 20,443 $ 357 76,413 $ 350
Fazenda Nova 7,853 $ 305 29,843 $ 294
Sao Francisco 37,089 $ 284 57,878 $ 295
Jacobina 20,880 $ 332 62,534 $ 327
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Total Brazil 86,265 $ 315 226,668 $ 322
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Central America
San Andres 18,298 $ 353 56,792 $ 342
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Commercial
Production 104,563 $ 322 283,460 $ 326
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Pre-commercial
Production
Fazenda Nova -
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Sao Francisco - $ N/A 22,250 $ N/A
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Chapada 7,881 $ N/A 7,881 $ N/A
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Pre-Commercial
Production 7,881 $ N/A 30,131 $ N/A
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112,444 $ N/A 313,591 $ N/A
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Pre-acquisition
Production:
San Andres - $ N/A 13,987 $ N/A
Jacobina - $ N/A 18,874 $ N/A
La Libertad - $ N/A 4,287 $ N/A
Post acquisition
Production from
Operations sold:
La Libertad - $ N/A 8,433 $ N/A
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TOTAL
PRODUCTION 112,444 $ N/A 359,272 $ N/A
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Net earnings for the year after giving effect to certain non-cash items
were as follows:
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(A non-GAAP Measure, in Dec. 31, 2006 Dec. 31, 2005 Dec. 31, 2004
thousands of dollars) (ten months)
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Net earnings (loss) per
consolidated
financial statements
$ (70,163) $ (4,111) $ 2,783
Adjustments:
Stock-based compensation 41,099 2,298 2,191
Foreign exchange gain (343) (369) (1,848)
Unrealized losses on commodity
contracts 35,773 8,615 -
Debt repayment expense 24,750
Loss on impairment of the
Fazenda Nova Mine 3,675 - -
Future income tax (recovery)
expense on foreign currency
translation 7,825 (4,447) (430)
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Adjusted net earnings before
income tax effects $ 42,616 $ 1,986 $ 2,696
income tax effect
of adjustments (23,110) - -
-------------------------------------------
Adjusted net earnings $ 19,506 $ 1,986 $ 2,696
-------------------------------------------
Adjusted earnings per share $ 0.07 $ 0.01 $ 0.03
-------------------------------------------
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Financial Results
Earnings per share adjusted for certain non-cash and non-recurring items were $0.07 for the year. This compares to adjusted earnings per share of $0.01 for the comparative year ended December 31, 2005 and adjusted earnings per share of $0.03 for the comparative ten month period ended December 31, 2004.
The basic loss per share was $0.25. This compares to a basic loss per share of $0.03 for fiscal year ended December 31, 2005 and basic earnings income per share of $0.03 per share and diluted earnings of $0.02 per share for the comparative ten month period ended December 31, 2004.
Revenue for the fiscal year was $169.2 million, an increase of 270% over the preceding year. Revenues for the year consisted of 75,321 ounces of gold sold from the Fazenda Brasileiro Mine, 28,484 ounces of gold sold from the Fazenda Nova Mine, 55,551 from the Sao Francisco Mine (commercial production began in August 2006), 64,102 from the Jacobina Mine (post acquisition in April) and 54,484 from the San Andres Mine (post acquisition in February). All gold sales were transacted in the spot market. Hence, a total of 277,942 ounces of gold were sold in 2006. A total of 103,772 and 79,822 commercial ounces were sold during the comparative period ended December 31, 2005, and during the ten month period ended December 31, 2004, respectively.
The Company's average realized gold price during the year was $613 per ounce, an increase of 36% from an average realized price of $448 per ounce during the comparative year ended December 31, 2005. This also compares to an average spot price of $604 per ounce for the year ended December 31, 2006. All gold sales were transacted in the spot market. The spot price itself increased 36% relative to the comparative year ended December 31, 2005. A higher gold price positively affected the Company's revenues. The impact of a higher average gold price on mine operating earnings was partially offset by a strengthened Brazilian Real relative to the US Dollar and higher operating costs. Higher local operating costs were a result of increases in maintenance costs, the price of fuel, the price of power, and other consumables.
Mine operating earnings for the year were $35.1 million, before a $2.2 million loss that arose from operations on assets sold during the year, consisting of operations from the Fazenda Brasileiro Mine, the Fazenda Nova Mine, the Sao Francisco Mine as of commercial production which commenced August 1, 2006, the Jacobina Mine acquired as of April 6, 2006 and the San AndrA-A?1/2s Mine acquired as of February 28, 2006. This compares to mine operating earnings of $8.6 million for the comparative year ended December 31, 2005 and to $10.4 million for the comparative ten month period ended December 31, 2004.
A total of 359,272 ounces of gold were produced by the Company's mines during the twelve month period ended December 31, 2006 of which 313,591 ounces of gold were produced from the Company's existing mines including commercial production of 226,668 ounces and pre-commercial production of 56,792 ounces. The twelve month's production of 359,272 ounces includes pre-acquisition production from mines acquired during the year through business acquisitions of 37,248 ounces and 8,433 ounces from assets sold during the year. This compares to 115,572 ounces of gold produced during the comparative year of 2005 of which 103,350 ounces were produced from commercial production activities and 12,222 ounces were produced from pre-commercial activities and also compares to 84,231 ounces produced during the comparative ten month period ended December 31, 2004. Comparing fiscal 2006 versus fiscal 2005, commercial production increased for Fazenda Nova and Fazenda Brasileiro by 1,063 and 1,843 ounces, respectively.
Average cash costs for the year were $326 compared to $289 per ounce for the comparative year ended December 31, 2005 and to $205 per ounce for the ten month comparative period ended December 31, 2004.
Inventory as at December 31, 2006 was $51.3 million compared to $7 million as at December 31, 2005. Inventory increased as a result of the acquisition of the Jacobina and San AndrA-A?1/2s mines in 2006 as well as commercial production commencing at the Sao Francisco Mine in August 2006 in-circuit plant inventory, concentrate inventory and ore stockpiled at the Chapada Mine during 2006.
Proven and probable reserves were 6.8 million ounces of contained gold and 2.3 billion pounds of contained copper as of December 31, 2006 based on a gold price of $425-450 per ounce (except for Fazenda Nova which is calculated assuming $550 gold price) and a copper price of $1.10 per pound. This represents an increase of approximately 1.5 million ounces, a 39% increase after mining of approximately 400,000 contained ounces during the year.
Cash as at December 31, 2006 was $69.7 million compared to $151.6 million as at December 31, 2005. Significant cash transactions during the year included $170 million, net of issue costs of $9.7 million received from an equity financing held in May; repayment of the outstanding long term loan, including accrued interest and prepayment fees, totalling $116.4 million; $19.8 million received on the exercise of warrants held by the lender of the loan; and expenditures relating to construction of the Sao Francisco and Chapada mines.
Cash flow from operations before changes in non-cash working capital items was $40.2 million or $0.15 per share for the year compared to $6.4 million for the comparative year ended December 31, 2005 and $9.3 million for the ten month period ended December 31, 2004. The increase in cash flow from operations is primarily due to the incremental production resulting from the acquisition of the San AndrA-A?1/2s and Jacobina mines, the commencement of commercial production at the Sao Francisco mine and higher gold prices.
Working capital as at December 31, 2006 was $53 million compared to $134.6 million as at December 31, 2005 and to $88.9 million as at December 31, 2004.
The balance sheet as at December 31, 2006 reflects $35.2 million of total Brazilian tax credit receivables of which $10.7 million is included in advances and deposits and $24.5 million is included in other assets. A recoverability provision in the amount of approximately $0.9 million was charged to operations during 2006. Brazilian tax credits of $24.2 million included in the receivable balance may be applied against future income taxes payable and taxes payable on eligible local sales. The tax credits can be recovered by domestic sales (currently nil) or may be sold at a discount. It is expected that a portion of copper concentrate from the Chapada Mine will be sold locally in Brazil which will take advantage of some of these eligible tax credits. An increase in tax credits arose as operating expenditures and capital expenditures relating to construction and operations increased significantly during the year.
Assets under construction of $224.6 million reflect construction of the Chapada mine. Construction costs include cash expenditures, capitalized interest, capitalized amortization of deferred financing charges and capitalized pre-operating net earnings.
General and administrative expenses were $24.4 million for the year compared to $10.4 million for the comparative year ended December 31, 2005 and $6.2 million for the ten month period year ended December 31, 2004. The increase in general and administrative expenses is reflective of the Company's growing infrastructure related to its production growth plans and acquisitions and regulatory compliance costs.
Investment income was $5.3 million for the fiscal year, compared to $4 million for the comparative year ended December 31, 2005 and $0.8 million for the ten month period ended December 31, 2004. Investment income increased principally due to higher average cash balances in Brazil at higher interest rates than those available in Canada. Reserves
Summary Reserve and Resource Table (i)
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Gold M&I Reserve Inferred
Ounces Ounces Ounces
(000s) (000s) (000s)
-------------------------------------
Fazenda Brasileiro 434.9 254.9 94.9
C1-Santa Luz 1,040.8 556.0 402.1
Fazenda Nova 41.5 24.1 4.0
Jacobina 2,924.3 1,185.0 4,164.4
Sao Francisco (Main ore) 1,518.9 1,192.7 875.2
Sao Francisco (ROM ore) 347.9 223.3 561.1
-------------------------------------
1,866.8 1,416.0 1,436.3
Sao Vicente 605.1 341.9 101.2
Ernesto 178.9 - 179.6
San Andres (ii) 1,290.0 499.4 22.0
Chapada 3,032.1 2,509.2 1,223.5
Gualcamyao 2,284.4 - 698.0
-------------------------------------
Total Ounces 13,698.7 6,786.4 8,326.0
-------------------------------------
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Copper M&I Reserve Inferred
Pounds Pounds Pounds
(millions) (millions) (millions)
-------------------------------------
Chapada 2,801.0 2,310.9 1,392.3
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(i) Reserve ounces are included in Measured and Indicated ("M&I")
ounces. Inferred ounces are in addition to M&I ounces. A table
providing a breakdown of reserves and resources and additional
information is attached.
(ii) Reserves and Resources as of October 31, 2006
As at December 31, 2006, the Company had proven and probable reserves of 6.786 million contained ounces of gold, an increase of 1.55 million contained ounces from the previous year end, primarily as a result of the acquisition of the Jacobina and San Andres mines. The primary changes in proven and probable reserves were: Increase in contained
ounces (000's)
-------------------------------------------
Jacobina 1,185
San Andres 499
-------------------------------------------
Reserves as at December 31, 2006 were estimated using a gold price of $425-$475 per ounce except for the very small reserve at Fazenda Nova where $550 was used compared to $425 used to calculate reserve estimates as at December 31, 2005.
Future Outlook
The Company is committed to increasing shareholder value through increases in reserves and production thereby increasing earnings per share and cash flow from operations. The Company's strategy involves optimizing operations, completing construction of projects currently under development, investing in high target exploration areas and growing through acquisitions of high quality accretive properties and projects. The Company's financial strategy involves ensuring there are sufficient resources available to bring the Company's development projects into production and fund an exploration program focused on high priority targets.
The focus for 2007 and 2008 will continue to include the following:
- Advance exploration and development projects
- Pursue consolidation opportunities in the Americas
- Continue an extensive exploration program in Brazil, Argentina and Central America
- Increase throughput at Chapada
- Further assess the pyrite concentrate/sulfuric acid opportunity at Chapada
- Continue to advance understanding of the coarse gold effect at Sao Francisco
- Complete feasibility for Gualcamayo
With the acquisition of RNC Gold Inc., Desert Sun Mining Corp. and Viceroy Exploration Ltd. the Company has acquired an additional two operating mines and an advanced-stage development stage property. In 2006 the Company also declared commercial production at Sao Francisco and in early 2007 also declared commercial production at Chapada bringing the total number of mines to six. Yamana also has four advanced exploration and development stage projects along with an extensive Brazilian and Central American exploration portfolio. Yamana's objective remains to achieve a sustainable annual gold production rate of at least 1,000,000 ounces of gold per year by the end of 2008. In addition, the Company will have significant copper production in 2007. Yamana Gold Inc.
Key Statistics
(Based on Canadian GAAP and expressed in U.S. dollars, unless otherwise
noted)
(Unaudited) (Unaudited)
For the three For the fiscal
months ended year ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
2006 2005 2006 2005
Gold Production (ounces)
Commercial
Fazenda Brasileiro 20,443 17,810 76,413 74,570
Fazenda Nova 7,853 12,740 29,843 28,780
Sao Francisco 37,089 - 57,878 -
Jacobina 20,880 - 62,534 -
---------------------------------------------
Total Brazil 86,265 30,550 226,668 103,350
Central America
San Andres 18,298 - 56,792 -
---------------------------------------------
Total Commercial
Production 104,563 - 283,460 -
Pre-Commercial
Fazenda Nova - - - 7,379
Sao Francisco 1,212 22,250 4,843
Chapada (gold contained
in concentrate) 7,881 - 7,881 -
---------------------------------------------
Total Production 112,444 31,762 313,591 115,572
Gold Sales (ounces)
Fazenda Brasileiro 20,574 19,257 75,321 72,074
Fazenda Nova 6,816 15,463 28,484 31,698
Sao Francisco 33,723 55,551
Jacobina 19,876 64,102
---------------------------------------------
Total Brazil 80,989 34,720 223,458 103,772
Central America
San Andres 16,260 54,484
---------------------------------------------
Total Commercial Sales 97,249 34,720 277,942 103,772
Gold Price per oz sold
Average Realized Price $ 619 $ 485 $ 613 $ 448
Cash Cost per ounce
Produced
Fazenda Brasileiro $ 357 $ 357 $ 350 $ 320
Fazenda Nova $ 305 $ 177 $ 294 $ 208
Sao Francisco $ 284 - $ 295 -
Jacobina $ 332 - $ 327 -
---------------------------------------------
Total Brazil $ 315 $ 282 $ 322 $ 289
Central America
San Andres $ 349 - $ 342 -
---------------------------------------------
Total Commercial Sales $ 321 $ 282 $ 326 $ 289
Average Ore Grade (g/t)
Fazenda Brasileiro 2.80 2.31 2.63 2.44
Fazenda Nova 0.57 0.87 0.66 0.87
Sao Francisco 0.74 - 0.67 -
Jacobina 1.91 - 1.91 -
Central America - - - -
San Andres 0.63 - 0.66 -
Average Recovery Rate (%)
Fazenda Brasileiro 93.6 88.3 92.0 89.3
Fazenda Nova 93.3 90.0 82.1 81.0
Sao Francisco 67.2 - 51.7 -
Jacobina 95.3 - 94.2 -
Central America
San Andres 79.3 - 85.6 -
Financial Results
(thousands)
Revenue $ 59,951 $ 16,655 $ 169,206 $ 46,038
Mine operating earnings $ 8,903 $ 4,807 $ 35,056 $ 8,569
Net earnings $ 6,141 $ (73) $ (70,163) $ (4,111)
Adjusted net earnings $ 505 $ 3,311 $ 19,506 $ 1,991
Per share data:
Basic (loss) earnings
per share $ 0.02 $ 0.00 $ (0.25) $ (0.03)
Diluted (loss) earnings
per share $ 0.02 $ 0.00 $ (0.25) $ (0.03)
Adjusted net earnings
per share $ 0.00 $ 0.02 $ 0.07 $ 0.01
Financial Position
(thousands)
Dec. 31, 2006 Dec. 31, 2005
Cash and cash equivalents $ 69,680 $ 151,633
Working Capital $ 52,999 $ 134,593
Shareholders' equity $ 1,716,590 $ 314,974
Weighted average number
of common shares
outstanding
(thousands) 276,617 144,888
Yamana Gold Inc.
Reserves and Resources
December 31, 2006
Mineral Reserves (Proven and Probable)
Proven Reserves Probable Reserves
--------------------------------------------------------------------------
Tonnes Grade Contained Tonnes Grade Contained
(000's) (g/t) oz. (000's) (g/t) oz.
(000's) (000's)
--------------------------------------------------------------------------
Gold
Fazenda Brasileiro 2,193 3.34 235.4 254 2.39 19.5
C1-Santa Luz - - - 9,200 1.88 556.0
Fazenda Nova 786 0.75 18.9 257 0.62 5.1
Jacobina 1,869 2.50 150.0 15,313 2.10 1,035.0
Sao Francisco -
Main Ore 15,674 1.25 630.4 14,909 1.17 562.3
Sao Francisco -
ROM Ore 13,940 0.25 110.7 14,771 0.24 112.6
--------------------------------------------------------------------------
Total Sao Francisco 29,614 0.78 741.1 29,680 0.71 674.8
Sao Vicente -
Main Ore 6,580 1.06 224.8 2,854 0.90 82.2
Sao Vicente -
ROM Ore 1,694 0.27 14.5 1,932 0.33 20.4
--------------------------------------------------------------------------
Total Sao Vicente 8,274 0.90 239.3 4,786 0.67 102.6
Chapada 20,002 0.34 218.6 282,992 0.25 2,290.6
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San Andres (1) 5,939 0.77 147.8 15,806 0.69 351.6
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Total Gold Reserves 68,677 0.79 1,751 358,288 0.44 5,035
--------------------------------------------------------------------------
Tonnes Grade Contained Tonnes Grade Contained
(000's) (%) lbs (mm) (000's) (%) lbs (mm)
--------------------------------------------------------------------------
Copper
Chapada 20,002 0.42% 184.6 282,992 0.34% 2,126.3
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Total - Proven and Probable
---------------------------------------------------------
Tonnes Grade Contained
(000's) (g/t) oz.
(000's)
---------------------------------------------------------
Gold
Fazenda Brasileiro 2,447 3.24 254.9
C1-Santa Luz 9,200 1.88 556.0
Fazenda Nova 1,043 0.72 24.1
Jacobina 17,181 2.14 1,185.0
Sao Francisco -
Main Ore 30,583 1.21 1,192.7
Sao Francisco -
ROM Ore 28,711 0.24 223.3
--------------------------------------------------------
Total Sao Francisco 59,294 0.74 1,416.0
Sao Vicente -
Main Ore 9,434 1.01 307.0
Sao Vicente -
ROM Ore 3,626 0.30 34.9
--------------------------------------------------------
Total Sao Vicente 13,060 0.81 341.9
Chapada 302,994 0.26 2,509.2
--------------------------------------------------------
San Andres (1) 21,745 0.71 499.4
--------------------------------------------------------
Total Gold Reserves 426,964 0.49 6,786
--------------------------------------------------------
Tonnes Grade Contained
(000's) (%) lbs (mm)
--------------------------------------------------------
Copper
Chapada 302,994 0.35% 2,310.9
--------------------------------------------------------
Mineral Resources (Measured, Indicated and Inferred)(Measured and
Indicated include Reserves as outlined above)
Measured Resources Indicated Resources
------------------------------------------------------------------------
Tonnes Grade Contained Tonnes Grade Contained
(000's) (g/t) oz. (000's) (g/t) oz.
(000's) (000's)
------------------------------------------------------------------------
Gold
Fazenda
Brasileiro 3,352 3.26 351.7 900 2.87 83.2
C1-Santa
Luz - - - 19,608 1.65 1,040.8
Fazenda
Nova 1,046 0.99 33.4 214 1.17 8.1
Jacobina 9,038 2.15 624.0 31,198 2.29 2,300.3
Sao
Francisco -
Main Ore 18,861 1.19 720.5 23,422 1.06 798.3
Sao
Francisco -
ROM Ore 17,762 0.24 139.0 28,083 0.23 208.9
------------------------------------------------------------------------
Total Sao
Francisco 36,623 0.73 859.5 51,505 0.61 1,007.2
Sao Vicente 14,490 0.77 357.3 10,992 0.70 247.7
Ernesto - - - 1,520 3.66 178.9
Chapada 25,058 0.30 241.7 395,463 0.22 2,790.4
San Andres(1) 14,748 0.70 326.0 47,550 0.64 964.0
Gualcamayo 6,923 1.15 255.9 69,161 0.91 2,028.5
------------------------------------------------------------------------
Total Gold
Resources 111,279 0.85 3,050 628,111 0.53 10,649
------------------------------------------------------------------------
Tonnes Grade Contained Tonnes Grade Contained
(000's) (%) lbs (000's) (%) lbs
(mm) (mm)
------------------------------------------------------------------------
Copper
Chapada 25,058 0.34% 187.7 395,463 0.30% 2,613.3
------------------------------------------------------------------------
Total - Measured and Indicated Inferred Resources
------------------------------------------------------------------------
Tonnes Grade Contained Tonnes Grade Contained
(000's) (g/t) oz. (000's) (g/t) oz.
(000's) (000's)
------------------------------------------------------------------------
Gold
Fazenda
Brasileiro 4,252 3.18 434.9 686 4.30 94.9
C1-Santa
Luz 19,608 1.65 1,040.8 8,586 1.46 402.1
Fazenda
Nova 1,261 1.02 41.5 118 1.05 4.0
Jacobina 40,236 2.26 2,924.3 45,657 2.84 4,164.4
Sao
Francisco -
Main Ore 42,284 1.12 1,518.9 33,686 0.81 875.2
Sao
Francisco -
ROM Ore 45,845 0.24 347.9 76,995 0.23 561.1
------------------------------------------------------------------------
Total Sao
Francisco 88,128 0.66 1,866.8 110,682 0.40 1,436.3
Sao Vicente 25,482 0.74 605.1 3,623 0.87 101.2
Ernesto 1,520 3.66 178.9 2,144 2.61 179.6
Chapada 420,521 0.22 3,032.1 250,693 0.15 1,223.5
San Andres(1) 62,298 0.66 1,290.0 1,339 0.53 22.0
Gualcamayo 76,084 0.93 2,284.4 16,765 1.29 698.0
------------------------------------------------------------------------
Total Gold
Resources 739,389 0.58 13,699 440,291 0.59 8,326
------------------------------------------------------------------------
Tonnes Grade Contained Tonnes Grade Contained
(000's) (%) lbs (000's) (%) lbs
(mm) (mm)
------------------------------------------------------------------------
Copper
Chapada 420,521 0.30% 2,801.0 250,693 0.25% 1,392.3
------------------------------------------------------------------------
(1) As of October 31, 2006
Mineral Reserves and Resources
Chapada's inferred resources were taken from a Micon International Limited NI 43-101 compliant technical report dated July 2003. Independent Mining Consultants estimated Chapada's inferred resources in their report dated February 2004 at 68 million tonnes grading 0.14 g/t gold and 0.2% copper. C1 Santa Luz's resources were updated in February 2007 by GRD Minproc (Perth, Australia) including 2006 drilling, and reserve was taken from a NCL Brasil 43-101 compliant report dated November 2005 which does not include 2006 drilling results. Mineral reserve and resource estimates presented were prepared by or under the supervision of external consultants or by internal qualified persons as indicated in the table below in accordance with NI 43-101. In estimating the mineral reserves and mineral resources, such persons made assumptions, and used parameters and methods appropriate for each property, and verified the data disclosed, including sampling, analytical and test data underlying such estimates. These reports have been reviewed by Evandro Cintra, Vice-President Exploration as "qualified person", as that term is defined in NI 43-101.
These figures are estimates, however, and no assurance can be given that the indicated amounts of quantities of gold will be produced. Gold price fluctuations may render mineral reserves containing relatively lower grades of gold mineralization uneconomic. Moreover, short-term operating factors relating to the mineral reserves could affect the Company's profitability in any particular accounting period. The corporation is not aware of any environmental, permitting, legal, title, taxation, socio-political, marketing or other relevant issues which may materially affect the Corporation's mineral reserve and resource estimates, other than factors discussed above and in "Risks and Uncertainties" in the Management Discussion and Analysis section of the annual report. Mineral Mineral Resources Date Report
Reserves ----------------- ---- ------
--------
Fazenda Geoexplore Geoexplore Jan- Mineral Reserves
Brasileiro Consultoria e Consultoria e 07 and Resources
Servicos Ltd. Servicos Ltd. Update, Fazenda
Brasileiro Mine
C1-Santa NCL Brasil GRDMinproc Ltd. Nov- "Preliminary
Luz Ltda. 05 Assessment Study,
C-1 Gold Project",
NCL Brasil
Feb- "Resource Estimate
07 Summary at 2
February 2007",
GRDMinproc
Fazenda Yamana Moreno&Associados Feb- Reserve Estimate
Nova Technical 06 Update
Services
Jacobina NCL Brasil Micon Feb- "An Updated Mineral
Ltda. International 07 Resource and
Ltd. Mineral Reserve
Estimate and
Results of 2006
Exploration
Program for the
Joao Belo mine,
Jacobina Mine
Project, Bahia
State, Brazil"
NCL Brasil Ltda. Mar- Mineral Resource
07 and Reserve
estimate update for
Canavieiras, Serra
do Corrego, Morro
do Vento and Joao
Belo, Jacobina
Mine, as December
31st, 2006"
Moreno&Associados Feb- Mineral Resource
Ltda. 07 Estimate for
Pindobacu, Bahia
Gold Belt
Sao Yamana NCL Brasil Ltda. Feb- 'Mineral Reserve
Francisco Technical 07 Update'
Services
Mar- Mineral Resource
07 Model Update for
Sao Francisco mine,
Mato Grosso,
Brazil, as December
31st, 2006
Sao Vicente NCL Brasil Geosystems Nov- "Sao Vicente
Ltda. International 06 Technical Report
for an Open Pit,
Gravity
Concentration and
Heap Leach Project
in Brazil", Rezende
Engenharia
Ernesto N/A NCL Brasil Ltda. Feb- Technical Report on
07 Mineral Resource
Estimate Update
Chapada Independent Independent Feb- Chapada Reserve
Mining Mining 07 Update
Consultants Consultants
Inc.
Feb- Feasibility Study
04 (mineral resource)
San Andres Scott Wilson Scott Wilson RPA Jan- Technical Report on
RPA 07 the San Andres Gold
Project, Honduras
Gualcamayo N/A GeoSim Services Sep- Mineral Resource
Inc. 06 Update Gualcamayo
Gold Project
Americas Ltd.
Jan- Preliminary
05 Assessment and
Economic Evaluation
of QDD Deposit,
Gualcamayo
Project", Amec
Americas Ltd.
Mine Mineral Reserve Gold Copper Mineral Resources
Cut-off Price Price Cut-off Grade
(g/t gold; % (g/t gold; % copper)
copper)
---------------------------------------------------------------------------
Fazenda Brasileiro 1.50 US$450 n/a 1.5
C1-Santa Luz 0.5 US$425 n/a 0.5
Fazenda Nova 0.40 US$550 n/a 0.40
Jacobina 1.6 US$475 n/a 1.3
Sao Francisco 0.36 and 0.15 US$450 n/a 0.36 and 0.15
Sao Vicente 0.35 and 0.22 US$427.5 n/a 0.20
Ernesto ---------------- US$450 n/a 1.5 and 1.0(2)
Chapada $ 2.53(3) US$450 US$1.10 0.15%(4)
San Andres 0.4 and 0.66(5) US$450 n/a 0.4 and 0.66
Gualcamayo ---------------- US$400 n/a 0.3 and 0.5(6)
(2) 1.5 cut-off for underground, 1.0 for open pit
(3) Internal Net Smelter Return (NSR) cut-off versus grade cut-off used
(4) copper equivalent equals (copper (%) + 0.56 x gold (g/t))
(5) 0.4 cut-off for oxide zone, and 0.66 cut-off for mixed zone
(6) 0.3 cut-off for Quebrada Del Diablo, and 0.5 cut-off for Amelia and
Magdalena resources
About Yamana
Yamana is a Canadian gold producer with significant gold production, gold development stage properties, exploration properties, and land positions in Brazil, Argentina and Central America. Yamana is producing gold at intermediate company production levels in addition to significant copper production. Company management plans to continue to build on this base through the advancement of its exploration properties and by targeting other gold consolidation opportunities in Brazil, Argentina and elsewhere in the Americas. A conference call and audio webcast has been scheduled for March 21, 2007
at 11:00 a.m. E.T. to discuss the results.
Conference Call Information:
----------------------------
Local and Toll Free (North America): 800-732-9307
International: +1 416-644-3415
Participant Audio Webcast: www.yamana.com
Conference Call REPLAY:
-----------------------
Replay Call: 416-640-1917 Passcode 21220433#
Replay Toll Free Call: 877-289-8525 Passcode 21220433#
The conference call replay will be available from 1:00 p.m. E.T. on March 21, 2007 until 11:59 p.m. E.T. on March 28, 2007.
For further information on the Conference Call or audio webcast, please contact the Investor Relations Department or visit our website, www.yamana.com.
"FORWARD-LOOKING STATEMENTS: This news release contains certain "forward-looking statements" within the meaning of Section 21E of the United States Securities Exchange Act of 1934, as amended and "forward-looking information" under applicable Canadian securities laws. Except for statements of historical fact relating to the company, certain information contained herein constitutes forward-looking statements. Forward-looking statements are frequently characterized by words such as "plan," "expect," "project," "intend," "believe," "anticipate", "estimate" and other similar words, or statements that certain events or conditions "may" or "will" occur. Forward-looking statements are based on the opinions and estimates of management at the date the statements are made, and are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those
projected in the forward-looking statements. These factors include possible variations in ore grade or recovery rates, fluctuating metal prices and currency exchange rates, changes in project parameters, the possibility of project cost overruns or unanticipated costs and expenses, labour disputes and other risks of the mining industry, failure of plant, equipment or processes to operate as anticipated, as well as those risk factors discussed or referred to in the Company's annual Management's Discussion and Analysis and Annual Information Form filed with the securities regulatory authorities in all provinces of Canada and available at www.sedar.com, and the Company's Annual Report on Form 40-F filed with the United States Securities and Exchange Commission. Although the Company has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results not to be anticipated, estimated or intended. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. The Company undertakes no obligation to update forward-looking statements if circumstances or management's estimates or opinions should change. The reader is cautioned not to place undue reliance on forward-looking statements." Yamana Gold Inc.
CONSOLIDATED BALANCE SHEETS
As at
(In thousands of US Dollars)
---------------------------------------------------------------------------
---------------------------------------------------------------------------
December 31, December 31,
2006 2005
---------------------------------------------------------------------------
Assets
Current
Cash and cash equivalents $ 69,680 $ 151,633
Accounts receivable, advances and deposits 30,280 6,160
Inventory 51,252 6,981
Income taxes recoverable 2,248 1,261
---------------------------------------------------------------------------
153,460 166,035
Capital
Property, plant and equipment 134,792 24,992
Assets under construction 224,650 158,717
Mineral properties 1,496,732 61,506
Capital assets held for sale - 5,667
---------------------------------------------------------------------------
1,856,174 250,882
Other
Investments 28,322 2,259
Loan receivable - 18,986
Other assets 34,452 20,974
Future income tax assets 53,784 9,310
Goodwill 55,000 -
---------------------------------------------------------------------------
171,558 51,529
---------------------------------------------------------------------------
$ 2,181,192 $ 468,446
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Liabilities
Current
Accounts payable $ 39,467 $ 20,606
Accrued liabilities 10,722 2,018
Income taxes payable 3,922 203
Derivative related liabilities 44,423 8,615
Current portion of long-term liabilities 1,927 -
--------------------------------------------------------------------------
100,461 31,442
Long-term
Notes payable - 106,847
Asset retirement obligations 18,720 8,012
Future income tax liabilities 328,372 5,671
Long-term liabilities 17,049 -
Long-term liabilities associated with assets
held for sale - 1,500
--------------------------------------------------------------------------
364,141 122,030
--------------------------------------------------------------------------
464,602 153,472
--------------------------------------------------------------------------
Shareholders' Equity
Capital Stock
Issued and Outstanding
344,595,212 common shares
(December 31, 2005 - 191,341,932 shares) 1,619,850 310,409
Shares to be issued 42,492 -
Share purchase warrants 73,004 3,737
Contributed surplus 61,578 4,676
Deficit (80,334) (3,848)
---------------------------------------------------------------------------
1,716,590 314,974
---------------------------------------------------------------------------
$ 2,181,192 $ 468,446
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Yamana Gold Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS (DEFICIT)
For the Periods Ended
(In thousands of US Dollars)
---------------------------------------------------------------------------
---------------------------------------------------------------------------
December 31, December 31, December 31,
2006 2005 2004
(10 Months)
---------------------------------------------------------------------------
Sales $ 169,206 $ 46,038 $ 32,298
Cost of sales (100,004) (30,371) (17,016)
Depreciation, amortization and
depletion (33,510) (6,740) (4,541)
Accretion of asset retirement
obligations (636) (358) (364)
---------------------------------------------------------------------------
Mine operating earnings 35,056 8,569 10,377
Expenses
General and administrative (24,350) (10,415) (6,226)
Foreign exchange gain 343 369 1,848
Loss on impairment of the Fazenda
Nova Mine (3,675) - -
Stock-based compensation (41,099) (2,298) (2,191)
---------------------------------------------------------------------------
Operating (loss) earnings (33,725) (3,775) 3,808
Investment and other business
income 5,328 4,049 792
Interest and financing
Expense (28,846) (94) -
Unrealized loss on commodity
contracts (35,773) (8,615) -
Loss arising from assets
sold (2,186) - -
---------------------------------------------------------------------------
(Loss) earnings before income taxes (95,202) (8,435) 4,600
Income tax recovery
(expense) 25,039 4,324 (1,817)
---------------------------------------------------------------------------
Net (loss) earnings (70,163) (4,111) 2,783
(Deficit) retained earnings,
beginning of period (3,848) 263 (2,520)
Dividends declared (6,323) - -
---------------------------------------------------------------------------
(Deficit) retained earnings, end of
period $ (80,334) $ (3,848) $ 263
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Basic (loss) earnings per share $ (0.25) $ (0.03) $ 0.03
---------------------------------------------------------------------------
Diluted (loss) earnings per share $ (0.25) $ (0.03) $ 0.02
---------------------------------------------------------------------------
Weighted average number of shares
outstanding (in thousands) 276,617 144,888 100,036
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Yamana Gold Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Periods Ended
(In thousands of US Dollars)
---------------------------------------------------------------------------
---------------------------------------------------------------------------
2006 2005 2004
(10 Months)
---------------------------------------------------------------------------
Operating Activities
Net (loss) earnings for the period $ (70,163) $ (4,111) $ 2,783
Asset retirement obligations
Realized (358) (309) (237)
Non-operating financing fee 5,000 - -
Items not involving cash
Depreciation, amortization and
depletion 33,510 6,740 4,541
Stock-based compensation 41,099 2,298 2,191
Future income taxes (31,077) (4,447) 430
Accretion of asset retirement
Obligations 636 358 364
Unrealized foreign exchange (gains) (343) (3,252) (1,792)
losses
Financing charge 19,744 - -
Unrealized loss on commodity
Contracts 35,773 8,615 -
Impairments 3,675 - -
Other 2,675 553 1,013
---------------------------------------------------------------------------
40,171 6,445 9,293
Net change in non-cash working
capital (43,386) (3,035) (757)
---------------------------------------------------------------------------
(3,215) 3,410 8,536
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Financing Activities
Issue of common shares, options and
warrants for cash (net of issue costs) 221,209 155,099 71,931
Deferred financing charges - (4,630) (3,049)
Proceeds (repayment) of notes payable
and long-term liabilities (115,414) 100,000 -
Dividends (2,883)
Other (5,000)
---------------------------------------------------------------------------
97,912 250,469 68,882
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Investing Activities
Expenditures on mineral properties (64,829) (23,199) (11,512)
Acquisition of property, plant and
equipment (27,762) (5,752) (3,079)
Expenditures on assets under
construction (126,710) (132,031) (11,965)
Company acquisitions, net of cash
acquired 66,815 - -
Loan receivable - (18,986) -
Other assets and investments (26,543) (12,584) (531)
---------------------------------------------------------------------------
(179,029) (192,552) (27,087)
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Increase (decrease) in cash and cash
equivalents (84,332) 61,327 50,331
Effect of foreign exchange on non-US
dollar denominated cash and cash
equivalents 2,379 3,252 2,120
Cash and cash equivalents, beginning of
period 151,633 87,054 34,603
---------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 69,680 $ 151,633 $ 87,054
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Cash and cash equivalents are comprised
of the following:
Cash at bank $ 40,015 20,576 $ 11,903
Bank term deposits 29,665 131,057 75,151
---------------------------------------------------------------------------
$ 69,680 $ 151,633 $ 87,054
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Management's Discussion and Analysis of Operations and Financial Condition
(US Dollars, in accordance with Canadian GAAP)
A cautionary note regarding forward-looking statements and non-GAAP measures follows this Management's Discussion and Analysis of Operations and Financial Condition.
1. Core Business
Yamana is a Canadian gold producer with significant gold production, gold development stage properties, exploration properties, and land positions in Brazil, Argentina and Central America. Yamana is producing gold at intermediate company production levels in addition to significant copper production. The Company plans to continue to build on this base through the advancement of its exploration properties and by targeting other gold consolidation opportunities in the Americas.
2. Previous Change in Year
In May 2004, the year end of the Company was changed from February 28/29 to December 31. Consequently, comparisons of current results are to those of the twelve month period ended December 31, 2005 and the ten month period ended December 31, 2004.
3. Highlights
Significant achievements during the year include:
- Annual sales of $169.2 million, an increase of 270% over the corresponding prior year. Fourth quarter sales of $60 million.
- Mine operating earnings of $35.1 million for the year, an increase of over 300% over the corresponding prior year.
- Adjusted net earnings (A non-GAAP measure) for the year of $42.6 million before income tax effects and $19.5 million after income tax effects or $0.07 per share and net loss under Canadian generally accepted accounting principles of $70.2 million.
- Commenced commercial production at its Sao Francisco Mine August 1, 2006.
- Completed construction of its Chapada copper-gold project with commercial production declared in February 2007.
- Acquired RNC Gold Inc., Desert Sun Mining Corp. and Viceroy Exploration Ltd. whereby the Company acquired two additional mines and an advanced stage exploration property. Acquiring the San Andres and Jacobina mines brings total forecast gold production up to 585,000 to 650,000 ounces in 2007.
- Declared quarterly dividends of $0.01 per share with the first dividend being paid in mid October.
- Cash balance of $69.7 million as at December 31, 2006.
- Cash flow from operations of $40.2 million was reduced by $43.4 million relating to changes in non-cash working capital resulting in a net decline of $3.2 million in cash flow from operating activities.
- Raised $170 million (C$200.1 million) in net proceeds from the public issue of 17.4 million common shares.
- Repaid outstanding long term debt: now debt free.
- Negotiated the terms and conditions for $200 million revolving line of credit.
- Increased copper hedging program intended to help secure a less than two year payback at the Chapada copper-gold project.
- Total production of 359,272 ounces of gold for the twelve month period ended December 31, 2006 including pre-acquisition production (37,248 ounces)from mines acquired during the year and assets sold during the year (8,433 ounces). Commercial production was 283,460 ounces at an average cash cost of $326 per ounce (A non-GAAP measure).
4. Outlook and Strategy
The Company is committed to increasing shareholder value through increases in reserves and production thereby increasing earnings per share and cash flow from operations. The Company's strategy involves optimizing operations, completing construction of projects currently under development, investing in high target exploration areas and growing through acquisitions of high quality accretive properties and projects. The Company's financial strategy involves ensuring there are sufficient resources available to bring the Company's development projects into production and fund an exploration program focused on high priority targets.
The focus for 2007 and 2008 will continue to include the following:
- Advance exploration and development projects
- Pursue consolidation opportunities in the Americas
- Continue an extensive exploration program in Brazil, Argentina and Central America
- Increase throughput at Chapada
- Further assess the pyrite concentrate/sulphuric acid opportunity at Chapada
- Continue to advance understanding of the coarse gold effect at Sao Francisco
- Complete feasibility for Gualcamayo
With the acquisition of RNC Gold Inc., Desert Sun Mining Corp. and Viceroy Exploration Ltd. the Company acquired an additional two operating mines and an advanced exploration stage property. In 2006, the Company also declared commercial production at Sao Francisco and in early 2007 declared commercial production at Chapada bringing the total number of mines to six. Yamana also has four advanced exploration and development stage projects along with an extensive Brazilian and Central American exploration portfolio. Yamana's objective remains to achieve a sustainable annual gold production rate of at least 1 million ounces per year by late 2008. In addition, the Company will have significant copper production in 2007.
Production
During the year ended December 31, 2007, it is estimated that the Company will produce gold in the range of 585,000 to 650,000 ounces at average cash costs of $(114) per ounce. The Company will account for sales of copper as by-product credits to gold production costs. Estimated gold production from the Company's properties in 2007 is as
follows:
Gold Production Estimates 2007E
----------------------------------------------------------
Fazenda Brasileiro 80-85,000
Fazenda Nova 15-20,000
Sao Francisco 120-130,000
Chapada 180-205,000
San Andres 70-80,000
Jacobina (i) 120-130,000
----------------------------------------------------------
Total 585-650,000
----------------------------------------------------------
----------------------------------------------------------
Average Projected Total Cash Costs/Ounce $ (114)
Chapada copper production 130-145 million pounds
(i) The Company is evaluating the impact on production of certain sill pillar failures in historical areas of the mine (refer to the Jacobina commentary in Section 7).
Production estimates stated above do not include the potential gold production from advanced projects including Gualcamayo, Sao Vicente, Ernesto and C1 Santa Luz. These projects are subject to completion of feasibility studies or favorable construction decisions.
Forecast information is based on the opinions and estimates of management under current circumstances and is subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ from projections. Forecast cash costs assume a Real to US Dollar exchange rate of 2.4 to 1 in 2007. This exchange rate assumption is more favorable than the current rate, but in line with Brazilian consensus estimates for 2007.
5. Acquisitions
The Company made three strategic acquisitions during the year. RNC Gold Inc. was acquired February 28, 2006 at a cost of $53 million, which included $18.9 million of cash and 5.8 million common shares. The acquisition of RNC Gold Inc. brought in two operating mines including the San Andres Mine and La Libertad Mine, the latter which was subsequently sold in July 2006. In April 2006, the Company acquired Desert Sun Mining Corp. acquiring the Jacobina Mine. Consideration consisted of 63.9 million common shares at a total cost of $632 million. The Company's third acquisition of Viceroy Exploration Ltd. was made in the fourth quarter. Consideration for this acquisition was $549.1 million which consisted of 52.5 million common shares. With the acquisition of Viceroy Exploration Ltd. the Company acquired a development stage project, Gualcamayo in Argentina.
All three acquisitions have been accounted for using the purchase method of accounting for business combinations. The cost of the acquisitions have been allocated to identifiable assets and liabilities acquired. Approximately $55 million, being the excess of the purchase price over the net assets acquired of Desert Sun Mining Corp represented goodwill. Goodwill primarily represents the advantage of sustaining and growing a portfolio of mining operations and synergies that are realizable from consolidating certain business functions.
The Company has spent considerable effort in integrating the operations of each of these acquisitions.
6. Overview of Financial Results
The table below presents selected financial data for the Company's three most recently completed fiscal years: -----------------------------------------------------------------------
----
Dec 31, Dec 31, Dec 31,
2006 2005 2004
(ten
months)
-------------------------------
Financial results (in thousands of
dollars)
Revenues(1) $ 169,206 $ 46,038 $ 32,298
Mine operating earnings $ 35,056 $ 8,569 $ 10,377
Net (loss) earnings(2) $ (70,163) $ (4,111) $ 2,783
Adjusted net earnings(3) $ 19,506 $ 1,986 $ 2,696
Cash flow (to)from operations $ (3,216) $ 3,410 $ 8,536
(after changes in non-cash working
capital items)
Cash flow from operations $ 40,171 $ 6,445 $ 9,293
(before changes in non-cash working
capital items)
Per share financial results
Basic (loss) earnings per share(2) $ (0.25) $ (0.03) $ 0.03
Diluted (loss) earnings per share(2) $ (0.25) $ (0.03) $ 0.02
Adjusted net earnings per share(3) $ 0.07 $ 0.01 $ 0.03
Financial position (in thousands of
dollars)
Total assets $ 2,181,192 $ 468,446 $ 177,106
Total long-term liabilities $ 364,141 $ 122,030 $ 9,572
Gold Production (ounces):
Commercial
Fazenda Brasileiro 76,413 74,570 78,168
Fazenda Nova 29,843 28,780 -
Sao Francisco 57,878
Jacobina 62,534
---------------------------------------------------------------------------
Total Brazil 226,668 103,350 78,168
Central America
San Andres 56,792 - -
---------------------------------------------------------------------------
Commercial Production 283,460 103,350 78,168
---------------------------------------------------------------------------
Pre-Commercial
Fazenda Nova - 7,379 2,849
Sao Francisco 22,250 4,843 3,214
Chapada (gold contained in concentrate) 7,881 - -
---------------------------------------------------------------------------
Pre-Commercial Production 30,131 12,222 6,063
Pre-acquisition production:
San Andres 13,987 - -
Jacobina 18,974 - -
La Libertad 4,287 - -
Post acquisition production from
operations sold -
La Libertad 8,433 - -
---------------------------------------------------------------------------
359,272 115,572 84,231
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Gold Sales (ounces)
Commercial
Fazenda Brasileiro 75,321 72,074 79,822
Fazenda Nova 28,484 31,698 -
Sao Francisco 55,551 - -
Jacobina 64,102 - -
---------------------------------------------------------------------------
Total Brazil 223,458 103,772 79,822
Central America
San Andres 54,484 - -
---------------------------------------------------------------------------
Total commercial sales 277,942 103,772 79,822
---------------------------------------------------------------------------
Pre-Commercial
Fazenda Nova - 4,694 1,704
Sao Francisco 8,101 4,050 2,883
---------------------------------------------------------------------------
Pre-Commercial Sales 8,101 8,744 4,587
---------------------------------------------------------------------------
286,043 112,516 84,409
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Non-GAAP Measures(3)
Per ounce data:
Cash costs per ounce produced
Fazenda Brasileiro $ 350 $ 320 $ 205
Fazenda Nova $ 294 $ 208 -
Sao Francisco $ 295 - -
Jacobina $ 327 - -
San Andres $ 342 - -
---------------------------------------------------------------------------
$ 326 $ 289 $ 205
---------------------------------------------------------------------------
Average gold price realized(1) $ 613 $ 448 $ 409
Average gold spot price $ 604 $ 445 $ 409
Operating statistics
Gold ore grade (g/t)
Fazenda Brasileiro 2.62 2.44 3.13
Fazenda Nova 0.74 0.87 -
Sao Francisco 0.74 - -
Jacobina 1.89 - -
San Andres 0.66 - -
Gold recovery rate (%)
Fazenda Brasileiro 92.0 89.3 91.9
Fazenda Nova 82.0 81.0 -
Sao Francisco 51.7 - -
Jacobina 94.2 - -
San Andres 85.6 - -
---------------------------------------------------------------------------
(1) Revenues consist of sales net of sales taxes. Revenue per ounce data is
calculated based on gross sales.
(2) Net (loss) earnings, basic (loss) earnings per share and diluted
earnings per share for the year ended December 31, 2006 include an
unrealized non-cash loss on commodity contracts of $35.8 million.
(December 31, 2005 - $8.6 million; December 31, 2004 (ten months) -
$nil).
(3) Non GAAP measure - see reconciliation table below. A cautionary note of
non-GAAP measures follows this Management's Discussion and Analysis of
Operations and Financial Condition.
Net loss for the 2006 year included certain non-cash and non-recurring charges in respect of stock-based compensation, foreign exchange gains, unrealized losses on commodity contracts, debt payment financing charges, impairment of the Fazenda Nova Mine and a future income tax expense on foreign currency translation of inter corporate debt. Adjusted earnings for these non-cash and non-recurring items (a non-GAAP measure -- see Non-GAAP measures following this Managements' Discussion and Analysis) was $42.6 million before income tax effects and $19.5 million after income tax effects compared to $2 million for the comparative year ended December 31, 2005 and $2.7 million for the ten month period ended December 31, 2004. The following chart summarizes adjusted net earnings: -----------------------------------------------------------------------
-
A non-GAAP Measure Dec. 31, 2006 Dec. 31, 2005 Dec. 31, 2004
(in thousands of dollars) (ten months)
------------------------------------------------------------------------
Net(loss) earnings per
consolidated
financial statements $ (70,163) $ (4,111) $ 2,783
Adjustments:
Stock-based compensation 41,099 2,298 2,191
Foreign exchange gain (343) (369) (1,848)
Unrealized losses
on commodity
contracts 35,773 8,615 -
Debt repayment expense 24,750 - -
Loss on impairment
of the Fazenda Nova Mine 3,675 - -
Future income tax
(recovery) expense
on foreign currency
translation of inter
corporate debt 7,825 (4,447) (430)
------------------------------------------------------------------------
Adjusted earnings before
tax effects $ 42,616 $ 1,986 $ 2,696
-----------------------------------------------
Tax effect of adjustments $ (23,110)
Adjusted net earnings $ 19,506 $ 1,986 $ 2,696
-----------------------------------------------
Adjusted net earnings
per share $ 0.07 $ 0.01 $ 0.03
-----------------------------------------------
------------------------------------------------------------------------
---------------------------------------------------------------------------
(Unaudited) Quarter Ended
---------------------------------------------------------------------------
A non-GAAP Measure,
(in thousands of dollars) Dec. 31, 2006 Dec. 31, 2005 Dec. 31, 2004
---------------------------------------------------------------------------
Net earnings (loss)
for the quarter $ 6,140 $ (73) $ 804
Adjustments:
Stock-based compensation 2,799 - -
Foreign exchange loss
(gain) 5,790 3,057 (519)
Unrealized (gains)
losses on commodity contracts (1,229) 8,615 -
Loss on impairment
of the Fazenda Nova Mine 3,675 - -
Future income tax
(recovery) expense on
foreign currency
translation of inter
corporate debt 6,439 (8,288) (1,548)
---------------------------------------------------------------------------
Adjusted net earnings
before tax effects $ 23,614 $ 3,311 $ (1,263)
-------------------------------------------
Tax effect of adjustments (23,110) - -
Adjusted net earnings $ 504 $ 3,311 $ (1,263)
-------------------------------------------
Adjusted net earnings per
share $ 0.00 $ 0.02 $ (0.01)
-------------------------------------------
---------------------------------------------------------------------------
The basic loss per share was $0.25. This compares to a basic loss per share of $0.03 for fiscal year ended December 31, 2005 and basic earnings income per share of $0.03 per share and diluted earnings of $0.02 per share for the comparative ten month period ended December 31, 2004.
Earnings per share adjusted for certain non-cash and non-recurring items were $0.07 for the year. This compares to adjusted earnings per share of $0.01 for the comparative year ended December 31, 2005 and adjusted earnings per share of $0.03 for the comparative ten month period ended December 31, 2004.
Revenue for the fiscal year was $169.2 million, an increase of 270% over the preceding year. Revenue for the year consisted of 277,942 ounces of gold sold.
To view the 'Gold Price per Ounce (US $)' graph, please visit the following link - http://www.ccnmatthews.com/docs/yam10320.pdf
The Company's average realized gold price during the year was $613 per ounce, an increase of 36% from an average realized price of $448 per ounce during the comparative year ended December 31, 2005. This also compares to an average spot price of $604 per ounce for the year ended December 31, 2006. All gold sales were transacted in the spot market. The spot price itself increased 36% relative to the comparative year ended December 31, 2005. A higher gold price positively affected the Company's revenues. The impact of a higher average gold price on mine operating earnings was partially offset by a strengthening of the Brazilian Real relative to the US Dollar and higher operating costs. Higher local operating costs before the impact of foreign exchange movements were a result of increases in maintenance costs, the price of fuel, the price of power, and other consumables.
Mine operating earnings for the year were $35.1 million before a $2.2 million loss that arose from operations on assets sold during the year consisting of operations from the Fazenda Brasileiro Mine, the Fazenda Nova Mine, the Sao Francisco Mine as of commercial production which commenced August 1, 2006, the Jacobina Mine acquired as of April 6, 2006 and the San Andres Mine acquired as of February 28, 2006. This compares to mine operating earnings of $8.6 million for the comparative year ended December 31, 2005 and to $10.4 million for the comparative ten month period ended December 31, 2004.
A total of 359,272 ounces of gold were produced by the Company's mines during the twelve month period ended December 31, 2006 of which 313,591 ounces of gold were produced from the Company's existing mines including commercial production of 226,668 ounces and pre-commercial production of 56,792 ounces. The twelve month's production of 359,272 ounces includes pre-acquisition production from mines acquired during the year through business acquisitions of 37,248 ounces and 8,433 ounces from assets sold during the year. This compares to 115,572 ounces of gold produced during the comparative year of 2005 of which 103,350 ounces were produced from commercial production activities and 12,222 ounces were produced from pre-commercial activities and also compares to 84,231 ounces produced during the comparative ten month period ended December 31, 2004. Comparing fiscal 2006 versus fiscal 2005, commercial production increased for Fazenda Nova and Fazenda Brasileiro by 1,063 and 1,843 ounces, respectively.
Average cash costs for the year were $326 compared to $289 per ounce for the comparative year ended December 31, 2005 and to $205 per ounce for the ten month comparative period ended December 31, 2004.
Inventory as at December 31, 2006 was $51.3 million compared to $7 million as at December 31, 2005. Inventory increased as a result of the acquisition of the Jacobina and San Andres mines in 2006 as well as commercial production commencing at the Sao Francisco Mine in August 2006 in-circuit plant inventory, concentrate inventory and ore stockpiled at the Chapada Mine during 2006.
Proven and probable reserves were 6.8 million ounces of contained gold and 2.3 billion pounds of contained copper as of December 31, 2006 based on a gold price of $425-450 per ounce (except for Fazenda Nova which is calculated assuming $550 gold price) and a copper price of $1.10 per pound. This represents an increase of approximately 1.5 million ounces, a 39% increase after mining of approximately 400,000 contained ounces during the year.
Cash as at December 31, 2006 was $69.7 million compared to $151.6 million as at December 31, 2005. Significant cash transactions during the year included $170 million, net of issue costs of $9.7 million received from an equity financing held in May; repayment of the outstanding long term loan, including accrued interest and prepayment fees, totalling $116.4 million; $19.8 million received on the exercise of warrants held by the lender of the loan; and expenditures relating to construction of the Sao Francisco and Chapada mines.
Cash flow from operations before changes in non-cash working capital items was $40.2 million for the year compared to $6.4 million for the comparative year ended December 31, 2005 and $9.3 million for the ten month period ended December 31, 2004. The increase in cash flow from operations is primarily due to the incremental production resulting from the acquisition of the San Andres and Jacobina mines, the commencement of commercial production at the Sao Francisco mine and higher gold prices.
Working capital as at December 31, 2006 was $53 million compared to $134.6 million as at December 31, 2005 and to $88.9 million as at December 31, 2004.
The balance sheet as at December 31, 2006 reflects $35.2 million of total Brazilian tax credit receivables of which $10.7 million is included in advances and deposits and $24.5 million is included in other assets. A recoverability provision in the amount of approximately $0.9 million was charged to operations during 2006. Brazilian tax credits of $24.2 million included in the receivable balance may be applied against future income taxes payable and taxes payable on eligible local sales. The tax credits can be recovered by domestic sales (currently nil) or may be sold at a discount. It is expected that a portion of copper concentrate from the Chapada Mine will be sold locally in Brazil which will take advantage of some of these eligible tax credits. An increase in tax credits arose as operating expenditures and capital expenditures relating to construction and operations increased significantly during the year.
Assets under construction of $224.6 million reflect construction of the Chapada mine. Construction costs include cash expenditures, capitalized interest, capitalized amortization of deferred financing charges and capitalized pre-operating net earnings.
General and administrative expenses were $24.4 million for the year compared to $10.4 million for the comparative year ended December 31, 2005 and $6.2 million for the ten month period year ended December 31, 2004. The increase in general and administrative expenses is reflective of the Company's growing infrastructure related to its production growth plans and acquisitions and regulatory compliance costs.
Investment income was $5.3 million for the fiscal year, compared to $4 million for the comparative year ended December 31, 2005 and $0.8 million for the ten month period ended December 31, 2004. Investment income increased principally due to higher average cash balances in Brazil at higher interest rates than those available in Canada.
7. Mines and Development Projects
During the year the Company has made three strategic business acquisitions: RNC Gold Inc., Desert Sun Mining Corp. and Viceroy Exploration Ltd. by which it has acquired the San Andres Mine, the Jacobina Mine and the Gualcamayo advanced stage exploration project. Since acquisition the San Andres Mine has produced 56,792 ounces of gold and has added 0.5 million ounces to the proven and probable reserves at December 31, 2006. The Jacobina Mine has produced 62,534 ounces of gold since acquisition and has added 1.2 million ounces to the proven and probable reserves at December 31, 2006.
As well, the Company has completed its development of two additional mines, specifically Sao Francisco and Chapada which declared commercial production on August 1, 2006 and February 11, 2007, respectively.
The following chart summarizes commercial production and cash costs per ounce for the quarter and year ended December 31, 2006 with comparative figures for the year end December 31, 2005: ----------------------------------------------------------------------
----------------------------------------------------------------------
Quarter ended Quarter ended
December 31, 2006 December 31, 2005
----------------------------------------------------------------------
Cash costs Cash costs
per oz. per oz.
Production (a non-GAAP Production (a non-GAAP
(oz.) measure) (oz.) measure)
----------------------------------------------------------------------
Brazil
Fazenda Brasileiro 20,443 $ 357 17,810 $ 357
Fazenda Nova 7,853 $ 305 12,740 $ 177
Sao Francisco 37,089 $ 284 - $ -
Jacobina 20,880 $ 332 - $ -
----------------------------------------------------------------------
Total Brazil 86,265 $ 315 30,550 $ 282
----------------------------------------------------------------------
Central America
San Andres 18,298 $ 349 - $ -
----------------------------------------------------------------------
Commercial
Production 104,563 $ 321 30,550 $ 282
----------------------------------------------------------------------
Pre-commercial
Production
Sao Francisco - $ - 1,212 $ -
Chapada 7,881 $ - - $ -
----------------------------------------------------------------------
----------------------------------------------------------------------
TOTAL
PRODUCTION 112,444 $ - 31,762 $ -
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----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
For the year ended For the year ended
December 31, 2006 December 31, 2005
----------------------------------------------------------------------
Cash costs Cash costs
per oz. per oz.
Production (a non-GAAP Production (a non-GAAP
(oz.) measure) (oz.) measure)
----------------------------------------------------------------------
Brazil
Fazenda Brasileiro 76,413 $ 350 74,570 $ 320
Fazenda Nova 29,843 $ 294 28,780 $ 208
Sao Francisco 57,878 $ 295 - $ -
Jacobina 62,534 $ 327 |