Yamana Gold, Inc. (AUY)
Q1 2010 Earnings Call
May 4, 2010 11:00 AM ET
Peter Marrone – Chairman and CEO
Ludovico Costa – President and COO
Chuck Main – Chief Financial Officer
Evandro Cintra – SVP, Technical Services
Steve Butler – Canaccord Adams
Dan Rollins – UBS
Anita Soni – Credit Suisse
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Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the Yamana Gold First Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. Instructions will be provided at this time that time.
This conference call will contain forward-looking statements that involve a number of risks and uncertainties concerning the business, operations and financial performance and conditions of Yamana Gold. Forward-looking statements include but are not limited to statements with respect to the estimation of mineral reserves and resources, the timing and amount of estimated future production, costs of production, capital expenditures, future metal prices and the cost of timing of the development of new deposits.
For a complete discussion of the risks, uncertainties and factors which may lead to our actual financial results and performance being different from the estimates contained in our forward-looking statements, please refer to our press release of yesterday announcing our first quarter results and our management discussion and analysts for the same period, as well as other regulatory filings in Canada and United States. Accordingly, you should not place undue reliance on forward-looking statements.
I would like to remind everyone that this conference call is being recorded and will be available for replay today at 3 PM Eastern Time. The replay number is 416-849-0833 or toll-free at 1-800-642-1687, both with the pass code 63821038. As well, the presentation slides accompanying the conference call are available on Yamana’s website at
I will now turn the conference over to Peter Marrone, Chairman and CEO. Please go ahead, sir.
Thank you. Good morning. I would like to begin with a brief overview and then pass the call over to our President and Chief Operations Officer, Ludovico Costa, who will discuss operations; Chuck Main who is our Chief Financial Officer to discuss the first quarter financial results; and Evandro Cintra, who is our Senior Vice President of Technical Services to give an update on our development stage projects.
A core objective of Yamana is that we recognize the growth must be disciplined, it must be sustainable and it must be over the longer term. This theme will thread throughout our effort and underlies our principal that managed growth delivers superior value.
In 2009, our objective was to create a sustainable production platform. We adhered to and will continue to adhere to our four key commitments. Our commitments are operating in stable jurisdictions, maintaining a sustainable production level at whichever level of production we are at, low cash costs and growth across all measures.
We continue to adhere to our commitments and objectives in the first quarter of this year. In the first quarter, production increased 6% from the comparable quarter last year to approximately 240,000 gold equivalent ounces. We have said before that the first quarter is the weakest quarter for us and we expect production to increase sequentially throughout the year.
We started at a step up from last year in the first quarter this year as compared to the first quarter last year and production is expected to follow similar trends, ramping up quarter-over-quarter. We are on track to achieve our annual production goals.
Revenue in this first quarter as compared to the corresponding quarter increased 62% to $346 million. Mine operating earnings increased 99% to $130 million. Adjusted earnings increased 13% to $73 million or $0.10 per share and cash flow increased over 100% to $138 million or $0.19 per share. As production increases throughout the year, we anticipate these financial metrics to follow a similar trend.
Cash flow is paramount to a gold company and certainly true for us. We have said before that our objectives and our core principles include sustainable production at low cost to ensure steady cash flow along with production and margin growth that further ensure growth in cash flow. We have demonstrated in Q1 once again the strong cash flow generation capacity of this company.
I would like to highlight the performance at our flagship mines this quarter. At Chapada, we increased throughput and transitioned to a larger fleet of trucks and equipment last year. We expect operational improvements to be realized throughout this year. We are confident in achieving our production goals at Chapada.
At El Peñón, we transitioned to owner mining and it went well. In Q1 we concentrated on operations and ensuring the transition went smoothly. We will now focus on cost improvements and many opportunities on cost improvements that include maintenance, schedules for trucks and equipment and costs for consumables. Production in the first quarter provides confidence to us in our production goals at El Peñón.
We made efforts in the first quarter at Gualcamayo to improving waste removal to allow for more flexibility in the mine. Lower grade benches were mined in Q1 as we gained access to higher grade material. We expect grade to improve throughout the year.
Last year at Gualcamayo, we experienced sequential quarter-over-quarter increases in production with Q1 production contributing to only 14% of total annual production. We anticipate similar sequential increases in production this year. We are confident in our production goals at Gualcamayo also.