Yamana Reports Quarterly Mine Operating Earnings of $1.6 Million.TORONTO Toronto (tərŏn`tō), city (1998 est pop. 2,400,000), provincial capital, S Ont., Canada, on Lake Ontario. Toronto is the largest city in Canada and since the 1970s has been one of the fastest-changing cities in North America, experiencing -- (all figures in US$ unless otherwise stated) Yamana Gold Yamana Gold Inc. (TSX: YRI) is a Toronto, Canada based producer of gold at various sites in South and Central America. The company began in 1980 as Yamana Resources Inc., changing to its present name in 2003. Inc. (TSX TSX Toronto Stock Exchange (TSE before April, 2002) TSX Transfer from Stack Pointer to Index TSX True Space Extension :YRI YRI Yum Restaurants International (Dallas, TX) YRI Yaw Rate Indicator (aviation) YRI You Recall Incorrectly (chat) )(AMEX AMEX See: American Stock Exchange :AUY)(LSE LSE - Language Sensitive Editor AIM:YAU Yau is the Cantonese transcription of the Chinese lastname 邱 (traditional chinese) or 丘 (simplified chinese). Its mandarin transcription (pinyin) is Qiu. Persons surnamed Yau
Profits after subtracting expenses such as marketing, cost of goods sold, administration and general operating costs from revenue. Notes: Tax and interest expenses are not subtracted - operating earnings are synonymous with EBIT (earnings before for the first quarter period ended March 31, 2005 of $1.6 million. The year end of the Company was changed from February February: see month. 28/29 to December December: see month. 31. As such, the first quarter of the current fiscal year is for the three month period ended March 31, 2005 with comparative figures for the three month period ended February 29, 2004. Basic and fully diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. net earnings per share were $0.002 for the first quarter ended March 31, 2005. This compares to earnings of 0.01 per share in the comparative quarter ended February 29, 2004. Sales for the first quarter were $7.9 million. The per share calculations for the first quarter of the current fiscal year and for the comparative quarter ended February 29, 2004 were calculated based on the weighted average shares outstanding for the period of 122.4 million shares and 92.9 million shares, respectively. During the first quarter of this year, Yamana Yamana may mean:
A river of eastern Brazil flowing about 2,896 km (1,800 mi) generally north-northeast and east to the Atlantic Ocean. Noun 1. pilot plant. A total of 25,944 ounces were produced from the Fazenda Brasileiro Mine during the comparative period ended February 29, 2004. Production at the Fazenda Brasileiro Mine for the quarter was marginally mar·gin·al adj. 1. Of, relating to, located at, or constituting a margin, a border, or an edge: the marginal strip of beach; a marginal issue that had no bearing on the election results. 2. below the production level for the prior quarter largely due to processing of lower grade material primarily in January January: see month. . Production for the Fazenda Nova Mine was affected by higher than normal rainfall which delayed loading ore ore, metal-bearing mineral mass that can be profitably mined. Nearly all rock deposits contain some metallic minerals, but in many cases the concentration of metal is too low to justify mining the ore. onto the heap leach leach v. leached, leach·ing, leach·es v.tr. 1. To remove soluble or other constituents from by the action of a percolating liquid. 2. pads. With the rainy rain·y adj. rain·i·er, rain·i·est Characterized by, full of, or bringing rain. rain  i·ness n.Adj. season now over, we are loading ore onto the pads at a rate consistent with our mine plan. Total average cash costs from the Fazenda Brasileiro Mine were $272 per ounce ounce, in zoology ounce, in zoology: see leopard. ounce, unit of measurement ounce: see English units of measurement. for the quarter. Cash costs were affected primarily by a strengthened Real against the US Dollar and lower production in January as noted. Total average cash costs for the comparative quarter ended February 29, 2004 were $213 per ounce. A total 24,400 ounces of gold were sold at an average sale price of $427 per ounce during the period ended March 31, 2005. A total of 18,549 ounces were sold from the Fazenda Brasileiro Mine and are reflected in earnings for the quarter end. The remaining 5,851 ounces were sold from the Fazenda Nova and the Sao Francisco pilot plant for which proceeds from the sale have been credited against pre-operating and mine development costs pending a declaration of commercial production at Fazenda Nova (commercial production was declared de·clare v. de·clared, de·clar·ing, de·clares v.tr. 1. To make known formally or officially. See Synonyms at announce. 2. To state emphatically or authoritatively; affirm. 3. effective May 1, 2005). Production increased throughout the quarter with March production exceeding the expected production for that month. Production and costs will vary from month to month although annual production from Fazenda Brazileiro and Fazenda Nova is expected to be consistent with current guidance levels. The Company previously indicated that it would determine commercial production at Fazenda Nova once the mine operated in a normalized period without excess rainfall. Production levels have exceeded commercial production thresholds and commercial production has been declared at Fazenda Nova effective May 1, 2005. The Company will report sales and operating costs operating costs npl → gastos mpl operacionales for Fazenda Nova beginning May 1, 2005. Cash flow from operations Cash flow from operations A firm's net cash inflow resulting directly from its regular operations (disregarding extraordinary items such as the sale of fixed assets or transaction costs associated with issuing securities), calculated as the sum of net income plus noncash expenses was $1.2 million for the quarter compared with $2.3 million for the comparative quarter. After net changes in non-cash working capital, the current period shows a net cash outflow of $1.4 million versus $2.4 million inflow in·flow n. 1. The act or process of flowing in or into: an inflow of water; an inflow of information. 2. for the comparative period. As at the quarter end, there were $3.1 million of gold sale receivables Receivables An asset designation applicable to all debts, unsettled transactions or other monetary obligations owed to a company by its debtors or customers. Receivables are recorded by a company's accountants and reported on the balance sheet, and they and include all debts owed for which funds were received subsequent to the quarter end. The cash balance as of March 31, 2005 was $66.2 million while working capital surplus was $70.8 million. Cash costs are affected by currency exchange rates. Our assumed exchange rate was 3 to 1 whereas the Rea1 was approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 17% stronger against the Dollar than that assumed rate during the quarter. The appreciation of Real as compared to the Dollar is largely in part due to high interest rates on Real denominated accounts which are attracting significant flows of foreign capital to Brazil Brazil (brəzĭl`), Port. Brasil, officially Federative Republic of Brazil, republic (2005 est. pop. 186,113,000), 3,286,470 sq mi (8,511,965 sq km), E South America. . To protect against a strengthening Real to the Dollar, the Company intends to maintain its cash balances in Real denominated accounts which will earn interest revenue at rates in excess of 18% and up to 20%. These are conventional intermediate term rates on accounts maintained in Brazil. Interest earned on these cash balances will offset differences in current currency exchange rates as compared to our assumed rate and offset increases in Dollar denominated costs. Longer term and into 2006 in particular, the Company is investigating forward currency contracts which would ensure a rate that approximates our assumed currency rate. The complete financial statements and management and discussion analysis for the first quarter period ended March 31, 2005 follow this announcement. A conference call and audio webcast has been schedule for May 10, 2005 at 10:00 a.m. E.S.T. to discuss the first quarter results. Conference Call Information: ---------------------------- Local: 416-640-4127 Toll Free (North America): 800-814-4859 Participant Audio Webcast: www.yamana.com Yamana is a Canadian Canadian (kənā`dēən), river, 906 mi (1,458 km) long, rising in NE New Mexico. and flowing E across N Texas and central Oklahoma into the Arkansas River in E Oklahoma. gold producer with significant gold production, gold and copper-gold development stage properties, exploration properties and land positions in all major mineral areas in Brazil. Yamana expects to produce gold at intermediate company production levels by 2006 in addition to significant copper production by 2007. Yamana also holds gold exploration properties in Argentina Argentina (ärjəntē`nə, Span. ärhāntē`nä), officially Argentine Republic, republic (2005 est. pop. 39,538,000), 1,072,157 sq mi (2,776,889 sq km), S South America. . Company management plans to build on this base by targeting other gold consolidation opportunities in Brazil and elsewhere in Latin America Latin America, the Spanish-speaking, Portuguese-speaking, and French-speaking countries (except Canada) of North America, South America, Central America, and the West Indies. . FORWARD-LOOKING STATEMENTS forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. : This news release contains certain "forward-looking statements" within the meaning of Section 21E of the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. Securities Exchange Act of 1934, as amended a·mend v. a·mend·ed, a·mend·ing, a·mends v.tr. 1. To change for the better; improve: amended the earlier proposal so as to make it more comprehensive. 2. . All statements, other than statements of historical fact, included in this release, and Yamana's future plans are forward-looking statements that involve various risks and uncertainties. There can be no assurance that such statements will prove to be accurate, and actual results and future events could differ materially from those anticipated in such statements. Forward-looking statements are based on the estimates and opinions of management on the date the statements are made, and Yamana does not undertake any obligation to update forward-looking statements should conditions or management's estimates or opinions change. Management's Discussion and Analysis Management's discussion and analysis (MD&A) A report from management to shareholders that accompanies the firm's financial statements in the annual report. It explains the period's financial results and enables management to discuss topics that may not be apparent in the financial of Operations and Financial Condition (US Dollars, in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with Canadian GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). ) This report provides a discussion and analysis of the financial condition and results of operations ("Management's Discussion and Analysis") to enable a reader to assess material changes in financial condition and results of operations for the quarter ended March 31, 2005, compared to those of the quarter ended February 29, 2004. This Management's Discussion and Analysis has been prepared as of May 9, 2005. The unaudited consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: interim financial statements prepared in accordance with Canadian Generally Accepted Accounting Principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting ("Canadian GAAP") follow this Management's and Discussion Analysis. This Management's Discussion and Analysis is intended to supplement and complement the unaudited interim consolidated financial statements Consolidated Financial Statements The combined financial statements of a parent company and its subsidiaries. Notes: Because consolidated financial statements present an aggregated look at the financial position of a parent and its subsidiaries, they enable you to gauge and notes thereto there·to adv. 1. To that, this, or it. 2. Archaic In addition to that; furthermore. thereto Adverb Formal 1. to that or it 2. for the period ended March 31, 2005 (collectively the "Financial Statements"). You are encouraged to review the Financial Statements in conjunction conjunction, in astronomy conjunction, in astronomy, alignment of two celestial bodies as seen from the earth. Conjunction of the moon and the planets is often determined by reference to the sun. with your review of this Management's Discussion and Analysis. This Management's Discussion and Analysis should be read in conjunction with both the annual audited consolidated financial statements for the period ended December 31, 2004 and the related annual Management's Discussion and Analysis included in the most recent fiscal year's Annual Report, and the most recent Annual Information Form/40F on file with the Securities Commissions of all the provinces in Canada Canada (kăn`ədə), independent nation (2001 pop. 30,007,094), 3,851,787 sq mi (9,976,128 sq km), N North America. Canada occupies all of North America N of the United States (and E of Alaska) except for Greenland and the French islands of and with the United States Securities and Exchange Commission. Certain notes to the Financial Statements Notes to the financial statements A detailed set of notes immediately following the financial statements in an annual report that explain and expand on the information in the financial statements. are specifically referred to in this Management's Discussion and Analysis and such notes are incorporated by reference herein. All Dollar amounts in the Management's Discussion and Analysis are in US Dollars, unless otherwise specified spec·i·fy tr.v. spec·i·fied, spec·i·fy·ing, spec·i·fies 1. To state explicitly or in detail: specified the amount needed. 2. To include in a specification. 3. . Cautionary Note Regarding Forward-Looking Statements This document contains certain "forward-looking statements" that involve a number of risks and uncertainties. These risks include the inherent risks involved in the exploration and development of mineral properties, the uncertainties involved in interpreting in·ter·pret v. in·ter·pret·ed, in·ter·pret·ing, in·ter·prets v.tr. 1. To explain the meaning of: interpreted the ambassador's remarks. See Synonyms at explain. drilling results and other ecological ecological emanating from or pertaining to ecology. ecological biome see biome. ecological climax the state of balance in an ecosystem when its inhabitants have established their permanent relationships with each data, fluctuating fluc·tu·ate v. fluc·tu·at·ed, fluc·tu·at·ing, fluc·tu·ates v.intr. 1. To vary irregularly. See Synonyms at swing. 2. To rise and fall in or as if in waves; undulate. v. metal prices, the possibility of project cost overruns Noun 1. cost overrun - excess of cost over budget; "the cost overrun necessitated an additional allocation of funds in the budget" cost - the total spent for goods or services including money and time and labor or unanticipated costs and expenses, uncertainties relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the availability and costs of financing needed in the future and other factors. Such forward-looking statements include among other things, statements regarding targets or production estimates, cash operating costs, capital expenditures and reserves and resources. Forward-looking statements are often characterized char·ac·ter·ize tr.v. character·ized, character·iz·ing, character·iz·es 1. To describe the qualities or peculiarities of: characterized the warden as ruthless. 2. by words such as "plan", "expect", "project," "intend," "believe," "anticipate" 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 risks are further described in the Company's Annual Management and Discussion Analysis and Annual Information Form filed with the Securities Commissions of all the provinces in Canada, with the United States Securities and Exchange Commission (under Form 40-F), as well as the Toronto Stock Exchange Toronto Stock Exchange (TSE) Canada's largest stock exchange, trading approximately 1,200 company stocks and 33 options. (TSX) and the American Stock Exchange American Stock Exchange (AMEX) Stock exchange in the U.S. Originally known as “the Curb,” it began as an outdoor marketplace in New York City c. 1850. It moved indoors to its present location in the Wall Street area in 1921. (AMEX). There can be no assurance that such statements will prove to be accurate. 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 CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or or management's estimates or opinions should change. The reader is cautioned not to place undue reliance on forward-looking statements. Change in Year End The year end of the Company was changed from February 28/29 to December 31. As such, the first quarter for the current fiscal year is for the three month period ended March 31, 2005 with comparative figures for the three month period ended February 29, 2004. Below is a summary of the quarterly periods for the current fiscal year and comparative periods: For the Period Ending Comparative Period --------------------------------------------------------------------- Q1 March 31, 2005 February 29, 2004 Q2 June 30, 2005 June 30, 2004(i) Q3 September 30, 2005 September 30, 2004 Q4 December 31, 2005 December 31, 2004(ii) (i) Four months (ii) Ten months Highlights Review of Financial Results The Company recorded net earnings for the first quarter ended March 31, 2005 of $0.3 million and mine operating earnings for the quarter of $1.6 million, compared to earnings of $0.6 million for the quarter ended February 29, 2004 and mine operating earnings of $2.7 for the quarter ended February 29, 2004. Mine operating earnings consist entirely of earnings from the Fazenda Brasileiro Mine. Production for the quarter ended March 31, 2005 from the Fazenda Brasileiro was 19,059 ounces of gold at an average cash cost of $272 per ounce. In addition, a total of 5,229 ounces of gold were produced at the Fazenda Nova Mine and 1,139 ounces of gold were produced at the Sao Francisco pilot plant for total production of 25,427 ounces of gold for the quarter. General and administrative costs administrative costs, n.pl the overhead expenses incurred in the operation of a dental benefits program, excluding costs of dental services provided. for the quarter were $1.7 million compared to $1.3 million for the comparative quarter ended February 29, 2004. Cash and cash equivalents as at the end of the quarter were $66.2 million. Cash flow generated from operations was $1.2 million compared to $2.3 million for the comparative period. Temporary additions to working capital of $2.7 million resulted in a net operating cash outflow of $1.4 million for the quarter. Investment income and other business income generated during the quarter totaled $0.2 million which is comparable to $0.3 million generated during the comparative period ended February 29, 2004. The balance consists of interest earned on surplus cash and income earned on the sale of redundant Repetitive. See redundancy. materials and supplies. Basic and diluted net earnings were $0.002 per share, compared to earnings of $0.01 per share for the comparative period ended February 29, 2004. Basic earnings per share for the quarter ended March 31, 2005 was calculated based on the weighted average number of common shares outstanding of 122.4 million. The table below presents selected quarterly financial and operating data:
March 31, December 31, September 30, June 30,
2005 2004 2004 2004
(4 months)
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Financial results
(in thousands of
Dollars)
Revenue(i) $ 7,850 $ 10,305 $ 8,827 $ 13,166
Net earnings for the
quarter $ 292 $ 804 $ 6 $ 1,973
Per share financial
results
Basic and diluted
earnings per share $ 0.002 $ 0.01 $ Nil $ 0.02
Financial position
(in thousands of
Dollars)
Total assets $ 177,902 $ 177,106 $ 101,196 $ 96,363
Total long-term
liabilities $ 8,924 $ 9,572 $ 8,145 $ 7,240
Gold production
(ounces):
Fazenda Brasileiro 19,059 20,854 23,214 34,099
Fazenda Nova 5,229 2,745 104 -
Sao Francisco
Pilot Plant 1,139 846 1,157 1,211
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25,427 24,445 24,475 35,310
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Fazenda Brasileiro
gold sales (ounces) 18,549 23,982 22,246 33,594
Non-GAAP measures
Fazenda Brasileiro
operating statistics
Gold ore grade (g/t) 2.66 2.82 3.07 3.44
Gold recovery rate (%) 90.4 90.5 92.4 95.5
Fazenda Brasileiro per
ounce data:
Cash costs per
ounce produced $ 272 $ 234 $ 225 $ 196
Average gold price
realized(i) $ 427 $ 434 $ 401 $ 396
February 29, November 30, August 31, May 31,
2004 2003 2003 2003
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Financial results
(in thousands of
Dollars)
Revenues $ 10,453 $ 9,359 $ - $ -
Net earnings (loss)
for the quarter $ 639 $ 2,113 $ (1,349) $ (395)
Basic and diluted
earnings (loss)
per share $ 0.01 $ 0.03 $ (0.06) $ (0.13)
Financial position
(in thousands of
Dollars)
Total assets $ 93,948 $ 72,809 $ 68,156 $ 6,108
Total long-term
liabilities $ 7,657 $ 7,290 $ 7,697 $ 1,500
Gold production
(ounces):
Fazenda Brasileiro 25,944 27,127 3,723 -
Fazenda Nova - - - -
Sao Francisco
Pilot Plant 283 1,050 - -
----------------------------------------------
26,227 28,177 3,723 -
----------------------------------------------
Fazenda Brasileiro gold
sales (ounces) 26,617 23,373 - -
Non-GAAP measures
Fazenda Brasileiro
operating statistics
Gold ore grade (g/t) 3.50 3.36 2.73 -
Gold recovery rate (%) 95.3 95.5 95.5 -
Fazenda Brasileiro per
ounce data:
Cash costs per
ounce produced $ 213 $ 220 $ 225 $ -
Average gold price
realized(i) $ 407 $ 400 $ - $ -
(i) Revenues consist of sales net of sales taxes. Revenue per ounce
data is calculated based on gross sales.
Mine Operations Mine operating earnings for the quarter ended March 31, 2005 were $1.6 million (three months ended February 29, 2004 - $2.7 million) and consist entirely of earnings from the Fazenda Brasileiro Mine. A total of 19,059 ounces of gold was produced from Fazenda Brasileiro. Production during the quarter was affected by processing of lower grade ore primarily in January. The average ore grade Ore grade is a measure that describes the concentration of a valuable natural material (such as metals or minerals) in its surrounding ore. Ore grade is used to assess the economic feasibility of a mining operation: the cost of extracting a natural material from its ore is directly for the forthcoming quarter is not expected to exceed the grade of the first quarter although the average ore grade is expected to increase later in the year. The average recovery rate was 90.4% on 246,000 tonnes milled during the first quarter. This compares to 91.9% for the December 31, 2004 fiscal year on 826,400 tonnes. Average cash costs per ounce for the quarter ended March 31, 2005 at Fazenda Brasileiro were $272 per ounce. These cash costs reflect the mining of lower grade material and a strengthened Real throughout the quarter. The average Real-US Dollar exchange rate during the quarter ended March 31, 2005 was 2.665 compared to an average exchange rate of 2.786 during the quarter ended December 31, 2004. Direct mining costs for the quarter represent approximately 54% ($146 per ounce) of total cash costs and milling costs represent approximately 29% ($79 per ounce). The following table summarizes the major components of total average cash costs per ounce for the Fazenda Brasileiro Mine for the quarter ended March 31, 2005:
Cash costs / Percentage of
oz. cash costs /
oz.
---------------------------------------------------------------------
Mining $ 146 54%
Milling 79 29%
General and admin 49 18%
Other(1) (2) (1%)
----------------------------------
Total $ 272 100%
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(1) Includes by-product revenues
In addition to the 19,059 ounces produced at Fazenda Brasileiro, 5,229 ounces of gold were produced at the Fazenda Nova Mine and 1,139 ounces of gold were produced at the Sao Francisco pilot plant for total production of 25,427 ounces of gold for the quarter. Production at the Fazenda Nova Mine continued to be affected by record rainfall during January and February which resulted in oversaturated ore with a moisture moisture wetness due to any liquid; usually refers to water as a component, e.g. in feed. moisture free a substance heated at 220°F (105°C) to constant weight. Called also oven-dry or 100% dry matter. content on average of 19%. Production was also affected by less ore being stacked Stacked is an American television sitcom that premiered on Fox on April 13, 2005. On May 18, 2006, Stacked was cancelled, leaving five episodes unaired in the United States. The last episode aired on January 11, 2006. onto the heap leach pads due to rain. With the end of the rainy season, total ore stacked on the heap leach pads during the month of April was on budget at approximately 126,000 tonnes compared to 50,000 tonnes stacked in the month of March. Total production for the month of April from Fazenda Nova was approximately 2,400 ounces and commercial production has been declared effective May 1, 2005. With the expected period for recovery from heap leaching Heap leaching is an industrial mining process to extract precious metals and copper compounds from ore. Process The mined ore is crushed into small chunks and heaped on an impermeable plastic and/or clay lined leach pad where it can be irrigated with a leach solution to , management anticipates production consistent with the mine plan for the second quarter. The average leaching leaching, method of extraction in which a solvent is passed through a mixture to remove some desired substance from it. A simple example is the passage of boiling water through ground coffee to dissolve and carry out the chemicals necessary for producing the beverage. time for the month of April was three months down from an average of six months during the start-up Start-up The earliest stage of a new business venture. phase of operations. With the end of the rainy season, management anticipates further reductions in the average leaching period. Moreover, as ore will be stacked for the balance of the year before next year's rainy season, production should remain at previously announced levels for the balance of the year and should not be affected by the rainy season next year. During the comparative period ended February 29, 2004, production comprised of 25,944 ounces of gold from the Fazenda Brasileiro Mine at an average cash cost of $216 per ounce and 283 ounces from the Sao Francisco pilot plant. There was no production from the Fazenda Nova Mine for the comparative quarter ended February 29, 2004. Inventory as at March 31, 2005 included 5,070 ounces of gold from Fazenda Brasileiro. Total dollar value of inventory as at March 31, 2005 at Fazenda Brasileiro was $3.8 million of which $2.2 million consisted of supplies and materials, $0.7 million of gold dore and $0.9 million of in-circuit inventory. Inventory as at December 31, 2004 was $3.4 million of which $1.8 million consisted of materials and supplies, $0.5 million of gold dore and $1.1 million of in-circuit inventory. Inventory as at March 31, 2005 from Fazenda Nova consisted of 6,402 ounces of gold of which 1,626 ounces was dore and the remaining ounces of 4,776 were comprised of gold in-process and in-circuit inventory which includes 3,750 ounces were on the heap leach pads. Revenue for the quarter ended March 31, 2005 was $7.9 million from the sale of 18,549 ounces of gold from the Fazenda Brasileiro Mine. An additional 5,851 ounces were sold from the Fazenda Nova Mine and the Sao Francisco pilot plant during the quarter. Revenue earned from the gold sales from both Fazenda Nova and Sao Francisco pilot plant production during the quarter have been credited to mineral property development costs. Revenue for the comparative quarter ended February 29, 2004 was $10.5 million from the sale of 26,617 ounces of gold from the Fazenda Brasileiro Mine. General and Administrative Expenses General and administrative expenses were $1.7 million for the period ended March 31, 2005 compared to $1.3 million for the comparative period ended February 29, 2004. The increase in general and administrative expenses is a result of our growing operations. The Company continues to build its infrastructure and personnel reflecting the construction of Chapada A chapada is a flat-topped upland found in the Brazilian Highlands. The chapadas, which are usually described as mountain ranges, are capped by horizontal strata of sandstone and show the original surface, which has been worn away by the rivers, leaving here and there broad and Sao Francisco. Foreign Exchange A foreign exchange loss of $0.3 million was recognized for the three month period ended March 31, 2005 compared to a foreign exchange loss of $0.7 million for the comparative quarter ended February 29, 2004. The Company translates non US Dollar monetary items at period end rates and recognizes a gain or loss on translation in the period. A foreign exchange loss is recognized on a net monetary asset position when the local currency depreciates vis-a-vis the US Dollar. The US-CDN Dollar exchange rate as at March 31, 2005 was 1.2096 compared to 1.202 as at December 31, 2004. The US-Real exchange rate as at March 31, 2005 was 2.6662 compared to 2.6544 as at December 31, 2004. The Company holds cash reserves Cash reserves See: Cash investments cash reserves Investment funds that are held in short-term assets such as Treasury bills and certificates of deposit until more permanent investment opportunities are available. in both Canadian and US Dollars and in Brazilian Reais. The Company's revenues are denominated in US Dollars. However, the Company's expenses are denominated in a variety of US and Canadian Dollars Noun 1. Canadian dollar - the basic unit of money in Canada; "the Canadian dollar has the image of loon on one side of the coin" loonie dollar - the basic monetary unit in many countries; equal to 100 cents and Brazilian Reais. Accordingly, fluctuations in the exchange rates could significantly impact the results of operation. Income Taxes The income tax provision on the consolidated financial statements reflects a Brazilian net tax recovery of $0.4 million. The Brazilian net tax recovery is comprised of current income taxes payable in Brazil of $0.2 million and a future income tax recovery in Brazil of $0.6 million. In addition, $0.1 million has been recorded as a future income tax recovery on taxable losses incurred in Canada for a total tax recovery during the period of $0.5 million. Liquidity and Capital Resources Cash and cash equivalents as at March 31, 2005 were $66.2 million compared to $87.1 million as at December 31, 2004. Working capital as at March 31, 2005 was $70.8 million and $88.9 million as at December 31, 2004. Cash flow generated from operations for the period ended was an outflow of $1.4 million compared to an inflow of $2.4 million for the comparative period ended February 29, 2004. Cash flow from operations consists mainly of operating results from Fazenda Brasileiro Mine off-set by temporary additions to working capital. As at the quarter end, there were $3.1 million of gold sale receivables for which funds were received subsequent to the period end. Operating cash for the period end prior to changes in non-cash working capital items was $1.2 million compared to $2.3 million for the comparative quarter ended February 29, 2004. Cash outflow from investing activities was $19.3 million consisting mainly of deferred mineral property expenditures, construction in progress and routine capital expenditures as follows:
(In millions)
Construction of Chapada $ 9.5
Construction of Sao Francisco 4.4
Capitalized exploration 2.5
Capital expenditures at Fazenda Brasileiro 1.5
Sao Vicente feasibility study 0.3
Acquisition of mining rights in the Santa
Elina Gold Belt region 0.7
Other 0.4
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$ 19.3
---------------------------------------------------------------------
Cash outflow from investing activities for the comparative period was $4.2 million. Cash outflow from financing activities were $0.1 million and consist of expenditures incurred in regards to the loan facility net of monies received on the exercise of stock options. Subsequent to the period end, the Company drew down under the loan facility and the lender LENDER, contracts. He from whom a thing is borrowed. 2. The contract of loan confers rights, and imposes duties on the lender. 1. The lender has the right to revoke the loan at his mere pleasure; 9 Cowen, R. 687; 8 Johns. Rep. 432; 1 T. R. 480; 2 Campb. Rep. fully advanced the funds. The funds are in an escrow escrow Instrument, such as a deed, money, or property, that constitutes evidence of obligations between two or more parties and is held by a third party. It is delivered by the third party only upon fulfillment of some condition. account for the benefit of the Company pending perfection Perfection Giotto’s O perfect circle drawn effortlessly by Giotto. [Ital. Hist.: Brewer Dictionary, 463] golden mean or section and registration of security in Brazil in the ordinary course of business. Off-Balance Sheet Arrangements The Company does not have any off-balance sheet arrangements, Equity As at March 31, 2005, the Company had 122.4 million (December 31, 2004 - 122.3 million) common shares outstanding. A total of 43.4 million (December 31, 2004 - 43.4 million) share purchase warrants were outstanding as at March 31, 2005 at a weighted average exercise price of Cdn$1.68 (December 31, 2004 - Cdn$1.78) per share and a weighted average life of 3.41 (December 31, 2004 - 3.65 years). Shareholders' equity Shareholders' Equity A firms' total assets minus its total liabilities. Equivalently, it is share capital plus retained earnings minus treasury shares. Shareholders' equity is the amount by which a company is financed through common and preferred shares. as at March 31, 2005 was $160.7 million compared to $160.3 million as at the fiscal year ended December 31, 2004. A total of 6.47 million (December 31, 2004 - 6.66 million) stock options were outstanding as at March 31, 2005 of which 6.35 million (December 31, 2004 - 6.54 million) were exercisable. Stock options outstanding as at March 31, 2005 had a weighted average exercise price of Cdn$2.04 (December 31, 2004 - Cdn$2.04) per share and a weighted average life of 8.16 (December 31, 2004 - 8.28) years. There were no stock options issued during the period ended under the Company share incentive plan. However, the Company may from time to time issue stock options which would impact on the financial results of the Company. Contractual Commitments
Year 2005 2006 2007 2008 2009
---------------------------------------------------------------------
Office leases $ 281 $ 276 $ 211 $ 128 $ -
Fazenda Brasileiro operating
and service contracts 5,564 994 96 - -
Fazenda Nova operating and
service contracts 2,638 2,461 - - -
Chapada construction service
contracts 30,205 2,293 410 37 -
Sao Francisco construction
service contracts 29,238 527 - - -
---------------------------------------------------------------------
$ 67,926 $ 6,551 $ 717 $ 165 $ -
--------------------------------------
Related Party Transactions The Company expensed directors' fees during the quarter in the amount of $19,000 (February 29, 2004 - $89,000). These transactions were measured and recorded at the amount of consideration established and agreed to by the related parties based on their estimate of fair market value. Critical Accounting Policies and Estimates In preparing financial statements in accordance with Canadian GAAP, management is required to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses for the period end. Critical accounting estimates represent estimates that are highly uncertain and for which changes in those estimates could materially impact on the Company's financial statements. Management reviews its estimates and assumptions on an ongoing basis using the most current information available. The following accounting estimates are critical: - Closure and reclamation Reclamation A claim for the right to return or the right to demand the return of a security that has been previously accepted as a result of bad delivery or other irregularities in the delivery and settlement process. costs Closure and reclamation costs are accrued ac·crue v. ac·crued, ac·cru·ing, ac·crues v.intr. 1. To come to one as a gain, addition, or increment: interest accruing in my savings account. 2. at their fair value and are estimated based on the Company's interpretation of current regulatory requirements Regulatory requirements are part of the process of drug discovery and drug development. Regulatory requirements describe what is necessary for a new drug to be approved for marketing in any particular country. . - Depletion depletion n. when a natural resource (particularly oil) is being used up. The annual amount of depletion may, ironically, provide a tax deduction for the company exploiting the resource because if the resource they are exploiting runs out, they will no longer be able and impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. of mineral properties Depletion and impairment of mineral properties is highly impacted by estimates of reserves and resources. There are numerous uncertainties inherent in estimating mineral reserves and mineral resources Noun 1. mineral resources - natural resources in the form of minerals natural resource, natural resources - resources (actual and potential) supplied by nature . Differences between management's assumptions and market conditions could have a material effect in the future on the Company's financial position and results of operation. - Reserve Estimates The figures for reserves and resources are determined in accordance with National Instrument 43-101 issued by the Canadian Securities Administrators Canadian Securities Administrators(CSA) is a forum for the 13 securities regulators of Canada's provinces and territories to coordinate and harmonize regulation of the Canadian capital markets. . There are numerous uncertainties inherent in estimating mineral reserves and mineral resources, including many factors beyond the Company's control. Such estimation estimation In mathematics, use of a function or formula to derive a solution or make a prediction. Unlike approximation, it has precise connotations. In statistics, for example, it connotes the careful selection and testing of a function called an estimator. is a subjective subjective /sub·jec·tive/ (sub-jek´tiv) pertaining to or perceived only by the affected individual; not perceptible to the senses of another person. sub·jec·tive adj. 1. process, and the accuracy of any reserve or resource estimate is a function of the quantity and quality of available data and of the assumptions made and judgments used in engineering and geological ge·ol·o·gy n. pl. ge·ol·o·gies 1. The scientific study of the origin, history, and structure of the earth. 2. The structure of a specific region of the earth's crust. 3. A book on geology. interpretation. Differences between management's assumptions including economic assumptions such as metal prices and market conditionscould have a material effect in the future on the Company's financial position and results of operation. Development Projects Update Sao Francisco A total of $4.7 million has been incurred during the period on the construction of Sao Francisco. Construction costs as at March 31, 2005 were $6.5 million and committed costs to the end of March 2005 were $29.8 million. To date the construction of the airstrip has been completed, foundation and steel structure fabrication fabrication (fab´rikā´sh  n),n the construction or making of a restoration. has been contracted and detailed engineering services and construction of the tailings Tailings (also known as tailings pile, tails, leach residue, or slickens[1]) are the materials left over[2] after the process of separating the valuable fraction from the worthless fraction of an ore. dam and the access road is ongoing. Construction costs remain on budget at $46.1 million. A total of $41.4 million of construction costs are expected to be incurred during the remainder of the current fiscal year. Production remains expected to commence between September September: see month. to November November: see month. 2005 as previously announced. Gold production from the Sao Francisco Mine for fiscal 2005 will largely depend on the timing of completion of construction and is targeted at 20,000 ounces to 28,000 ounces. Total production for 2006 remains targeted at 130,000 - 138,000 ounces. Construction costs will be transferred to property, plant and equipment and mineral properties once Sao Francisco commences commercial production. Chapada Copper-Gold Project Construction of the Chapada Copper-Gold Project in ongoing. Construction costs incurred and accrued during the period ended March 31, 2005 were $9.5 million. Construction costs as at March 31, 2005 were $12.7 million and committed costs to the end of March 2005 were $33.9 million. Most significant construction costs incurred during the period end include the following: - Site clearing and grubbing - Engineering services - Detailed mine plan - Pre-stripping - Site surveying - Decantation decantation /de·can·ta·tion/ (de?kan-ta´shun) the pouring of a clear supernatant liquid from a sediment. decantation the pouring of a clear supernatant liquid from a sediment. of ponds - Geotechnical services - Power line - Access roads - Construction of the on-site on-site adj. Done or located at the site, as of a particular activity: on-site monitoring of a production run; an on-site film shoot. office - Property acquisitions - Purchase of machinery and equipment including: trucks and loaders, excavator ex·ca·va·tor n. An instrument, such as a sharp spoon or curette, used in scraping out pathological tissue. excavator (eks´k , rotary Rotary can refer to:
(2) (SAG) (SQL Access Group) See CLI. and ball mills, office equipment and furniture The following table summarizes property, plant and equipment for Chapada as included in the consolidated financial statements as at March 31, 2005:
March 31, December 31,
2005 2004
---------------------------------------------------------------------
Accumulated Net Net
Cost Amortization Book Value Book Value
---------------------------------------------------------------------
Land $ 396 $ - $ 396 $ 396
Machinery and equipment 33 12 21 22
Furniture and office
equipment 12 10 2 3
---------------------------------------------------------------------
441 22 419 421
Assets under
construction(i) 12,720 - 12,720 3,221
---------------------------------------------------------------------
$ 13,161 $ 22 $ 13,139 $ 3,642
---------------------------------------------------------------------
(i) Construction costs will be transferred to property plant and
equipment and mineral properties once Chapada commences
commercial production.
Capital requirements Capital requirements Financing required for the operation of a business, composed of long-term and working capital plus fixed assets. for the construction of Chapada are estimated at $178 million before working capital. Construction is on budget and expenditures of $84.5 million are expected to be incurred during the remainder of the current fiscal year. The Company signed a $100 million debt financing Debt Financing When a firm raises money for working capital or capital expenditures by selling bonds, bills, or notes to individual and/or institutional investors. In return for lending the money, the individuals or institutions become creditors and receive a promise to repay commitment in December 2004 for the construction and development of Chapada. Subsequent to the period end, the Company drew down under the loan facility and the lender fully advanced the funds. The funds are in an escrow account for the benefit of the Company pending perfection and registration of security which is expected to occur in the ordinary course of business. Accounts payable relating to the construction and development of Chapada were $1.1 million and under 60 days. Forecast production is an average of 130 million pounds payable copper and 134,000 ounces payable gold per year in concentrate for each of the first five years of operation for a total (life of mine) of 2.0 billion pounds of copper and 1.3 million ounces of gold. However, production is targeted at 290 million pounds payable copper and 355,000 ounces payable gold in the first two years. Production is expected to commence January 2007. We are assessing accelerating our capital expenditures at Chapada with the intention of completing construction ahead of schedule. Outlook Sao Vicente São Vi·cen·te A city of southeast Brazil on an offshore island in the Atlantic Ocean west of Santos. Founded in 1532, it was sacked by English pirates in 1591. Population: 327,000. The Company has completed a feasibility study "A Feasibility Study" is an episode of the original The Outer Limits television show. It first aired on 13 April, 1964, during the first season. It was remade in 1997 as part of the revived The Outer Limits series with a minor title change. relating to development of the Sao Vicente mine. The feasibility study The analysis of a problem to determine if it can be solved effectively. The operational (will it work?), economical (costs and benefits) and technical (can it be built?) aspects are part of the study. Results of the study determine whether the solution should be implemented. was commissioned before the current exploration program and based was on historical drilling only. However, with an ongoing exploration program at Sao Vicente to delineate further resources and a potential future underground operation, a construction decision has been deferred. Exploration During the period ended March 31, 2005 a total of $2.5 million was spent on exploration initiatives, of which $1.4 million was spent on near mine exploration of the Fazenda Brasileiro Mine, and $1.0 million was spent on the Rio See RapidIO and MP3. Itapicuru Greenstone Belt Greenstone belts are zones of variably metamorphosed mafic to ultramafic volcanic sequences with associated sedimentary rocks that occur within Archaean and Proterozoic cratons between granite and gneiss bodies. region and $0.1 million was spent on the Santa Elina Gold Belt. Production and Cash Costs Forecast information relating to production and cash costs is based on the opinions and estimates of management under current circumstances and are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ from projections. Production and costs will vary from month to month although annual production from Fazenda Brazileiro and Fazenda Nova is expected to remain at current guidance levels. Forecast cash costs have assumed a Real to US Dollar exchange rate of 3.0 to 1.0 which is a more favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. US Dollar exchange rate than the current rate. The Real is at historically high levels and the consensus view is that these levels are not sustainable. Forecast cash costs to the end of the year will remain at the level of the current quarter if the Real remains at these high levels. Currency Hedging hedging, in commerce, method by which traders use two counterbalancing investment strategies so as to minimize any losses caused by price fluctuations. It is generally used by traders on the commodities market. The appreciation of the Real to the Dollar is in part largely dependent on high interest rates on Real denominated accounts which are attracting significant inflows of foreign capital to Brazil. The rate on Real denominated accounts currently exceeds 18% per annum Per annum Yearly. . To hedge against a strengthening Real to the Dollar, the Company has cash balances that it will maintain in Real denominated accounts. The Company is currently evaluating the extent that US Dollar balances will be converted into Reais. These balances will earn interest revenue at this high rate. Interest earned on these cash balances will offset movements in current currency exchange rates as compared to our assumed rate. As such, the earned interest income should offset any increase in Dollar denominated costs. Similarly, if the Real weakens to the Dollar, then the expected reason would be that interest rates in Brazil have gone down and while less interest would be earned on these cash balances, Dollar denominated costs should also be lower. This interest rate spread offers the Company the opportunity to investigate methods of monetizing interest revenue to provide a higher effective currency rate. Risks and Uncertainties Exploration, development and mining of metals involve numerous inherent risks. As such the Company is subject to various financial, operational and political risks that could have a significant impact on its profitability and levels of operating cash flows Operating cash flow Earnings before depreciation minus taxes. Measures the cash generated from operations, not counting capital spending or working capital requirements. . Although the Company assesses and minimizes these risks by applying high operating standards, including careful management and planning of its facilities, hiring qualified personnel and developing their skills through training and development programs these risks cannot be eliminated. Such risks include changes in local laws governing gov·ern v. gov·erned, gov·ern·ing, gov·erns v.tr. 1. To make and administer the public policy and affairs of; exercise sovereign authority in. 2. the mining industry, a decline in the price of gold or copper and the activity in the mining sector, uncertainties inherent in estimating mineral reserves and mineral resources and fluctuations in local currency against the US Dollar. Conducting exploration and production in Latin America also exposes the Company to the risk of currency fluctuations. A significant portion of the Company's expenditures are denominated in Brazilian Reais and Canadian Dollars and revenues are earned in US Dollars. A strengthened local currency could adversely affect the Company's costs denominated in Dollars. Historically, the Real has been highly volatile With regard to computer memory, it means "temporary" and not "highly changeable," which is the usual meaning of the word. See volatile memory. 1. (programming) volatile - volatile variable. 2. (storage) volatile - See non-volatile storage. relative to other currencies and can fluctuate significantly against the US Dollar over short-term Short-term Any investments with a maturity of one year or less. short-term 1. Of or relating to a gain or loss on the value of an asset that has been held less than a specified period of time. periods. Readers are encouraged to read and consider the risk factors more particularly described in the Company's Annual Report and its Annual Information Form. Changes in Accounting Policies There were no changes in accounting policies during the quarter ended March 31, 2005. Non-GAAP Measures The Company has included cost per ounce information data because it understands that certain investors use this information to determine the Company's ability to generate earnings and cash flow for use in investing and other activities. The Company believes that conventional measures of performance prepared in accordance with Canadian GAAP do not fully illustrate the ability of its operating mine to generate cash flow. Non-GAAP measures do not have any standardized standardized pertaining to data that have been submitted to standardization procedures. standardized morbidity rate see morbidity rate. standardized mortality rate see mortality rate. meaning prescribed pre·scribe v. pre·scribed, pre·scrib·ing, pre·scribes v.tr. 1. To set down as a rule or guide; enjoin. See Synonyms at dictate. 2. To order the use of (a medicine or other treatment). under Canadian GAAP, 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 Canadian GAAP. The measures are not necessarily indicative indicative: see mood. of operating profit Operating profit (or loss) Revenue from a firm's regular activities less costs and expenses and before income deductions. operating profit See operating income. or cash flow from operations as determined under Canadian GAAP. Where cost per ounce data is computed by dividing GAAP operating cost components by ounces sold, the Company has not provided formal reconciliations of these statistics. Cash costs are determined in accordance with the Gold Institute's Production Cost Standard.
YAMANA GOLD INC.
CONSOLIDATED BALANCE SHEETS
As at the periods ended
Prepared by Management
(In thousands of US Dollars; unaudited)
March 31, December 31,
2005 2004
---------------------------------------------------------------------
Assets
Current
Cash and cash equivalents $ 66,216 $ 87,054
Accounts receivable 3,867 1,177
Inventory (Note 3) 6,803 5,862
Advances and deposits 2,131 2,068
---------------------------------------------------------------------
79,017 96,161
Capital
Property, plant and equipment (Note 4) 18,001 18,315
Assets under construction (Note 5) 25,797 12,085
Mineral properties (Note 6) 47,171 43,292
---------------------------------------------------------------------
90,969 73,692
Other
Other assets (Note 7) 6,394 5,797
Future income tax assets 1,522 1,456
---------------------------------------------------------------------
$ 177,902 $ 177,106
--------------------------------
--------------------------------
Liabilities
Current
Accounts payable and accrued liabilities $ 8,253 $ 7,225
Long Term
Asset retirement obligation 4,911 4,972
Future income tax liabilities 4,013 4,600
---------------------------------------------------------------------
17,177 16,797
---------------------------------------------------------------------
Shareholders' Equity
Capital stock
Authorized
Unlimited number of first preference
shares without par value issuable in
series
Unlimited number of common shares without
par value
Issued and outstanding 122,398,529 common
shares (Note 8i) (December 31, 2004 -
122,286,716 shares) 147,641 147,407
Share purchase warrants (Note 9) 10,864 10,864
Contributed surplus (Note 8ii) 1,665 1,775
Retained Earnings 555 263
---------------------------------------------------------------------
160,725 160,309
---------------------------------------------------------------------
$ 177,902 $ 177,106
--------------------------------
--------------------------------
The accompanying notes are an integral part of the financial
statements.
YAMANA GOLD INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
For the three month periods ended
Prepared by Management
(In thousands of US Dollars; unaudited)
March 31, February 29,
2005 2004
Sales $ 7,850 $ 10,453
Cost of sales (5,019) (6,336)
Depreciation, amortization and depletion (1,198) (1,303)
Accretion of asset retirement obligation (79) (162)
---------------------------------------------------------------------
Mine Operating Earnings 1,554 2,652
Expenses
General and administrative (1,681) (1,311)
Foreign exchange loss (278) (663)
Stock-based compensation (Note 10) - (227)
Other - (11)
---------------------------------------------------------------------
Operating Earnings (Loss) (405) 440
Investment and other business income 238 289
Interest and financing recovery (expense) - 3
---------------------------------------------------------------------
Earnings (Loss) Before Income Taxes (167) 732
Income Tax Recovery (Expense) (Note 11) 459 (93)
---------------------------------------------------------------------
Net Earnings 292 639
Retained earnings (deficit),
beginning of Period 263 (3,159)
---------------------------------------------------------------------
Retained earnings (deficit),
end of Period $ 555 $ (2,520)
--------------------------------
--------------------------------
Basic and Diluted Earnings
(Loss) per Share $ 0.002 $ 0.01
--------------------------------
--------------------------------
Weighted average number of shares
outstanding (in thousands) 122,354 92,870
--------------------------------
--------------------------------
The accompanying notes are an integral part of the financial
statements.
YAMANA GOLD INC.
CONSOLIDATED STATEMENTS
OF CASH FLOWS
For the three month periods ended
Prepared by management
(In thousands of US Dollars; unaudited)
---------------------------------------------------------------------
March 31, February 29,
2005 2004
---------------------------------------------------------------------
Operating Activities
Net earnings for the period $ 292 $ 639
Asset retirement obligations realized (66) -
Items not involving cash
Services paid in common shares(adjustment) - (566)
Depreciation, amortization and
depletion 1,198 1,303
Stock-based compensation(Note 10) - 227
Future income taxes (653) (324)
Accretion of asset retirement obligation 79 162
Foreign exchange (80) -
Other 472 819
---------------------------------------------------------------------
1,242 2,260
Net change in non-cash working capital
(Note 12) (2,666) 151
---------------------------------------------------------------------
(1,424) 2,411
--------------------------------
--------------------------------
Financing Activities
Issue of common shares
and warrants for cash 124 21,630
Issue costs - (1,488)
Interest expense on convertible notes - 37
Deferred financing charges (224) -
--------------------------------
(100) 20,179
--------------------------------
--------------------------------
Investing Activities
Business acquisition of
Fazenda Brasileiro - (933)
Expenditures on mineral properties (4,339) (2,848)
Acquisition of property, plant and
equipment (643) (466)
Expenditures on assets under
construction (13,958) -
Other (374) -
--------------------------------
(19,314) (4,247)
--------------------------------
--------------------------------
Increase in cash and cash
equivalents (20,838) 18,343
Cash and cash equivalents,
beginning of Period 87,054 16,260
--------------------------------
Cash and cash equivalents,
end of Period $ 66,216 $ 34,603
--------------------------------
--------------------------------
Cash and cash equivalents are
comprised of the following:
Cash at bank $ 2,794 $ 6,977
Bank term deposits 63,422 27,626
--------------------------------
$ 66,216 $ 34,603
--------------------------------
--------------------------------
Supplementary cash flow information (Note 12).
The accompanying notes are in integral part of the financial
statements.
Note: In the opinion of management of Yamana, all adjustments of a normal recurring re·cur intr.v. re·curred, re·cur·ring, re·curs 1. To happen, come up, or show up again or repeatedly. 2. To return to one's attention or memory. 3. To return in thought or discourse. nature have been included in these financial statements to provide a fair statement of results for the periods presented. The results of those periods are not necessarily indicative of the results for the full year. Yamana Gold Inc. Notes to the Consolidated Financial Statements For the three month period ended March, 31, 2005 (with comparatives as at December 31, 2004 and for the three month period ended February 29, 2004) (Tabular tab·u·lar adj. 1. Having a plane surface; flat. 2. Organized as a table or list. 3. Calculated by means of a table. tabular resembling a table. amounts in thousands of US Dollars, prepared by management and unaudited) 1. Basis of presentation The accompanying ac·com·pa·ny v. ac·com·pa·nied, ac·com·pa·ny·ing, ac·com·pa·nies v.tr. 1. To be or go with as a companion. 2. consolidated interim financial statements have been prepared in accordance with Canadian generally accepted accounting principles ("Canadian GAAP") and include the assets, liabilities and operations of the Company and its wholly-owned subsidiaries. These consolidated interim financial statements do not contain all the information required by generally accepted accounting principles for annual financial statements and therefore should be read in conjunction with the most recent annual financial statements of the Company. These interim consolidated financial statements follow the same accounting policies and methods of their application as the most recent annual financial statements. 2. Change in year end The Company changed its year end from February 28/29 to December 31. As such, the quarter for fiscal December 31, 2005 is for the three month period ended March 31, 2005 with comparative figures as at December 31, 2004 and for the three month period ended February 29, 2004. Below is a summary of the quarterly periods for the current fiscal year and comparative periods:
For the Period Ending Comparative Period
---------------------------------------------------------------------
Q1 March 31, 2005 February 29, 2004
Q2 June 30, 2005 June 30, 2004(i)
Q3 September 30, 2005 September 30, 2004
Q4 December 31, 2005 December 31, 2004(ii)
(i) Four months
(ii) Ten months
3. Inventory
March 31, December 31,
2005 2004
---------------------------------------------------------------------
Metal in circuit and gold in process $ 1,335 $ 2,729
Ore stockpiles 1,389 -
Dore inventories 1,346 996
Materials and supplies 2,733 2,137
---------------------------------------------------------------------
$ 6,803 $ 5,862
-------------------------------
4. Property, plant and equipment
March 31, December 31,
2005 2004
---------------------------------------------------------------------
Accumulated Net Net
Cost Amortization Book Value Book Value
---------------------------------------------------------------------
Land $ 1,100 $ - $ 1,100 $ 1,053
Buildings 8,693 2,433 6,260 6,439
Machinery and
Equipment 9,339 2,292 7,047 7,306
Vehicles 2,688 645 2,043 2,134
Furniture and
office equipment 1,478 365 1,113 958
Computer equipment
and software 548 110 438 425
---------------------------------------------------------------------
$ 23,846 $ 5,845 $ 18,001 $ 18,315
-------------------------------------------------
5. Assets under construction
March 31, December 31,
2005 2004
---------------------------------------------------------------------
Fazenda Nova $ 6,454 $ 6,949
Sao Francisco 6,623 1,915
Chapada 12,720 3,221
---------------------------------------------------------------------
$ 25,797 $ 12,085
----------------------------
Construction and preproduction pre·pro·duc·tion adj. 1. Taking place or existing before production: preproduction planning. 2. revenues will be transferred to property plant and equipment and mineral properties for each property upon commencement of commercial production.
6. Mineral properties
March 31, December 31,
2005 2004
---------------------------------------------------------------------
Fazenda Brasileiro(i) $ 15,462 $ 13,158
Santa Elina properties(ii) 14,199 13,319
Chapada 12,117 11,523
Argentine properties 5,075 5,036
Other 318 256
---------------------------------------------------------------------
$ 47,171 $ 43,292
----------------------------
(i) Fazenda Brasileiro Balance is net of accumulated ac·cu·mu·late v. ac·cu·mu·lat·ed, ac·cu·mu·lat·ing, ac·cu·mu·lates v.tr. To gather or pile up; amass. See Synonyms at gather. v.intr. To mount up; increase. amortization in the amount of $4.0 million (December 31, 2004 - $2.77 million). (ii) Santa Elina properties Balance is net of accumulated amortization in the amount of $0.8 million (December 31, 2004 - $0.7 million).
7. Other assets
March 31, December 31,
2005 2004
---------------------------------------------------------------------
Deferred financing charges(i) $ 5,415 $ 5,191
Other 979 606
---------------------------------------------------------------------
$ 6,394 $ 5,797
----------------------------
(i) Deferred financing charges relate to a $100 million debt financing commitment for the development of the Chapada Copper-Gold project that was signed in December 2004. The secured notes are for a term of 6 years and bear interest at an annual rate of 10.95%. Principal is repayable re·pay v. re·paid , re·pay·ing, re·pays v.tr. 1. To pay back: repaid a debt. 2. upon maturity of the notes and covenants under the facility have characteristics comparable to high yield debt. The Company may also elect to defer de·fer 1 v. de·ferred, de·fer·ring, de·fers v.tr. 1. To put off; postpone. 2. To postpone the induction of (one eligible for the military draft). v.intr. interest payments for the first three years. Under this scenario A scenario (from Italian, that which is pinned to the scenery) is a synthetic description of an event or series of actions and events. In the Commedia dell'arte , the interest note is subject to an additional 150 basis points during the first two years during which the interest is accrued. The Company must drawdown Drawdown The peak to trough decline during a specific record period of an investment or fund. It is usually quoted as the percentage between the peak to the trough. Notes: the full $100 million within 180 days of closing. As at March 31, 2005, the Company had not drawn down any monies from this facility. A total of 2.5 million warrants were previously issued in connection with the debt facility resulting in the recognition of $ 2.1 million of deferred financing charges in fiscal December 31, 2004. The fair value of the warrants was calculated using the Black-Scholes pricing model with the following assumptions: (i) dividend yield of 0%, (ii) expected volatility Volatility 1. A statistical measure of the tendency of a market or security to rise or fall sharply within a period of time. 2. A variable in option pricing formulas that denotes the extent to which the return of the underlying asset will fluctuate between now and the of 30%, (iii) risk free interest rate of 3.0% and (iv) expected life of 5 years. Additional fees of $850,000 and 2.5 million warrants are payable only on funding. Financing charges will be amortized over the life of the loan upon funding. Subsequent to the period end, the Company drew down under the loan facility and the lender fully advanced the funds. The funds are in an escrow account for the benefit of the Company pending perfection and registration of security which is expected to occur in the ordinary course of business.
8. Capital stock
(i) Common shares issued and outstanding:
Number of
Common Shares Amount
---------------------------------------------------------------------
Balance as at December 31, 2004 $ 122,287 $ 147,407
Exercise of options and share
appreciation rights(1) 112 234
---------------------------------------------------------------------
Balance as at March 31, 2005 $ 122,399 $ 147,641
----------------------------
(1) The Company issued 112,000 shares to optionees on the exercise of their share options and appreciation rights for cash proceeds of $124,000. Previously recognized compensation expense in the amount of $110,000 on options exercised during the year was charged to share capital with a corresponding decrease to contributed surplus.
(ii) Contributed surplus
March 31, December 31,
2005 2004
(ten months)
---------------------------------------------------------------------
Balance as at beginning of period $ 1,775 $ 1,800
Reversal of stock based compensation
on the exercise of stock option
and share appreciation rights (110) (25)
---------------------------------------------------------------------
Balance as at end of period $ 1,665 $ 1,775
----------------------------
9. Share purchase warrants As at March 31, 2005 there were 43.4 million share purchase warrants outstanding with an average exercise price of Cdn$1.68 and an average outstanding life of 3.41 years. 10. Stock-based compensation There were no stock options issued during the three month period ended March 31, 2005. As at March 31, 2005, there were 6.47 million stock options outstanding with an average exercise price of Cdn$2.04 and an average outstanding life of 8.15 years. A total of 6.35 million stock options were exercisable as at March 31, 2005. 11. Income taxes The following table reconciles income taxes calculated at statutory rates with the income tax expense in the period end consolidated financial statements:
For the three months ended
March 31, February 29,
2005 2004
---------------------------------------------------------------------
Earnings (loss) before income taxes $ (167) $ 732
Statutory rate 36.12% 38.0%
---------------------------------------------------------------------
Expected income tax expense (recovery) $ (60) $ 278
Effect of lower tax rates in foreign
jurisdictions (215) (270)
Unrecognized tax benefits in Canada
and United States 76 172
Non-taxable items (255) (87)
Other (5) -
---------------------------------------------------------------------
Income tax expense (recovery) $ (459) $ 93
---------------------------------------------------------------------
Less: current income tax expense 194 417
---------------------------------------------------------------------
Future income tax expense (recovery) $ (653) $ (324)
-----------------------------
12. Supplementary cash flow information
a. Supplementary information regarding other non-cash transactions
For the three months ended
March 31, February 29,
2005 2004
---------------------------------------------------------------------
Financing Activities
Issue of common shares for Santa
Elina assets $ - $ 171
Shares issued on the exercise of stock
options and share appreciation rights $ 110 $ -
Reversal of contributed surplus on the
issue of stock options and share
appreciation rights $ (110) $ -
Investing Activities
Expenditures on mineral properties, net of tax $ - $ (171)
---------------------------------------------------------------------
b. Net change in non-cash working capital
For the three months ended
March 31, February 29,
2005 2004
---------------------------------------------------------------------
Net decrease (increase) in
Accounts receivable $ (2,690) $ (268)
Inventory (941) 987
Advances and deposits (63) (540)
Net increase (decrease) in
Accounts payable and accrued liabilities 1,028 (28)
---------------------------------------------------------------------
$ (2,666) $ 151
----------------------------
13. Segmented information The Company considers its business to consist of three geographical ge·o·graph·ic also ge·o·graph·i·cal adj. 1. Of or relating to geography. 2. Concerning the topography of a specific region. ge segments primarily in Brazil, Argentina and corporate head office in Canada. (i) Capital assets capital assets n. equipment, property, and funds owned by a business. (See: capital, capital account) referred to below consist of land, buildings and equipment, and mineral properties.
March 31, December 31,
2005 2004
---------------------------------------------------------------------
Mineral properties, assets under
construction and property,
plant and equipment
Brazil $ 85,395 $ 68,163
Argentina 5,446 5,413
Corporate 128 116
---------------------------------------------------------------------
$ 90,969 $ 73,692
-----------------------------
For the three months ended
March 31, February 29,
2005 2004
---------------------------------------------------------------------
Mine Revenues
Brazil $ 7,850 $ 10,453
-----------------------------
14. Related party transactions
The Company had the following transactions with related parties:
For the three months ended
March 31, February 29,
2005 2004
---------------------------------------------------------------------
Directors fees and consulting fees
to associates thereof(i) $ 19 $ 89
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(i) Included in accounts payable and accrued liabilities is $20,000
(February 29, 2004 - $22,000) in this regard.
These transactions occurred in the normal course of business and are measured at the exchange amount, which is the amount of consideration established and agreed to by the related parties based on their estimate of fair market value.
15. Contractual commitments
Year 2005 2006 2007 2008 2009
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Office leases $ 281 $ 276 $ 211 $ 128 $ -
Fazenda Brasileiro operating
and service contracts 5,564 994 96 - -
Fazenda Nova operating
and service contracts 2,638 2,461 - - -
Chapada construction
service contracts 30,205 2,293 410 37 -
Sao Francisco construction
service contracts 29,238 527 - - -
------------------------------------------
$ 67,926 $ 6,551 $ 717 $ 165 $ -
------------------------------------------
Yamana Gold Inc. (TSX:YRI) (AMEX:AUY) (AIM:YAU) |
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