February 21, 2013 / 1:39 AM / 5 years ago

UPDATE 2-Yamana profit jumps on higher gold output

* Q4 adjusted EPS $0.26 v Street-view $0.25

* Revenue up 11 percent at $629.5 million

* CEO remains growth focused, says no M&A for now

TORONTO, Feb 20 (Reuters) - Canadian gold miner Yamana Gold Inc reported a boost in quarterly profit on Wednesday as strong gold production and sales outweighed higher operating costs.

The Toronto-based mining company, which produced a record 1.2 million gold equivalent ounces in 2012, said it plans to boost output by at least 20 percent in 2013 as it ramps up production at its newest mines.

With gold prices slipping and capital costs still climbing, many mining companies are shifting away from growth to focus instead on boosting margins and increasing shareholder returns.

For Yamana, the focus remains on building up the production base. The strategy is to move forward with projects that deliver growth, maximize cash flows and demonstrate efficient use of capital, said Chief Executive Peter Marrone.

“Growth is growth. I think the challenge is always, what do we mean by growth? It can’t just be about production,” he told Reuters. “Ultimately it also has to be about cash flow and it has to be about earnings and about revenue and about all the financial measures.”

As its new mines ramp up, the midtier producer expects cash flows to exceed capital needs, leading to more free cash flow.

Yamana is ramping up production at its Ernesto/Pau a Pique mine in Brazil, and has two other Brazilian mines, C1 Santa Luz and Pilar, under construction, with first output at both expected later this year.

The company has also started development work on the Cerro Moro project in Argentina, which was acquired last year through its takeover of Extorre Gold.

While Yamana is open to future strategic acquisitions, the focus for now is on internal growth, said Marrone.

“We’re not at the stage of considering acquisitions at this point,” he said. “We have two mines that start operations this year, three that reach commercial production this year and we have Cerro Moro.”

Yamana plans to spend $470 million in 2013 on expansionary capital projects, including $40 million on Cerro Moro, and $445 million on sustaining capital.


Net earnings rose to $169.2 million, or 22 cents a share, in the quarter ended Dec. 31, compared with $89.6 million, or 12 cents, in the year-before period.

Adjusted to remove one-time items, earnings came in at $197.4 million, or 26 cents a share. That was in line with analysts’ average expectation of 25 cents a share, according to Thomson Reuters I/B/E/S.

Revenue rose 11 percent to $629.5 million as fourth-quarter output jumped 17 percent to 322,990 gold equivalent ounces.

The average realized gold price rose slightly to $1,692 an ounce, from $1,670 an ounce in the year-ago period, while operating costs climbed on lower gold grades and higher input costs at certain mines.

Full-year production rose 9 percent to 1.2 million gold equivalent ounces in 2012. Yamana said it expects 2013 output in the range of 1.44 million to 1.60 million ounces, an increase of at least 20 percent.

Yamana also announced on Wednesday a quarterly dividend of $0.065 a share.

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