Yamana Gold reports second quarter 2009 results - cash flow increases 51%, operating margin increases 18%



    
    - Record quarterly production increasing seven percent at declining and
                          industry low cash costs -
    

    TORONTO, Aug. 4 /CNW/ - YAMANA GOLD INC. (TSX:YRI; NYSE:  AUY; LSE:YAU)
today announced its financial and operating results for the second quarter
ended June 30, 2009. All dollar amounts are expressed in United States dollars
unless otherwise specified.

    
    SECOND QUARTER HIGHLIGHTS

    Financial and Operating Highlights

    Highlights for the three- and six-month periods ended June 30, 2009
    include:

    -  Revenues of $269.8 million and $514.0 million, respectively;
    -  Mine operating earnings of $94.9 million and $169.8 million,
       respectively;
    -  Adjusted earnings of $95.8 million or $0.13 per share and
       $160.1 million or $0.22 per share, respectively;
    -  Net earnings of $9.6 million or $0.01 per share and $95.6 million or
       $0.13 per share, respectively;

    -------------------------------------------------------------------------
                                                    Three months  Six months
                                                           ended       ended
                                                         June 30,    June 30,
    Thousands of Dollars                                    2009        2009
    -------------------------------------------------------------------------
    Net Earnings                                       $   9,639   $  95,632
    Stock based compensation                               4,471       5,182
    Foreign exchange loss (gain)                          28,541     (50,260)
    Unrealized loss (gain) on derivatives                 34,117      81,840
    Future income tax expense (recovery) on foreign
     currency translation of inter corporate debt         31,779      35,088
    -------------------------------------------------------------------------
    Adjusted earnings before income tax effect           108,547     167,482
    Income tax effect of adjustments                     (12,735)     (7,413)
    -------------------------------------------------------------------------
    Adjusted Earnings                                  $  95,812   $ 160,069
    -------------------------------------------------------------------------

    -  Cash flow from operations before changes in non-cash working capital
       items of $117.9 million or $0.16 per share, representing a 51 percent
       increase from the first quarter of 2009, and $196.0 million or $0.27
       per share, respectively;
    -  Total production from all mines of 289,574 gold equivalent ounces
       (GEO) and 561,056 GEO, respectively;
    -  By product cash costs of $213 per GEO and $318 per GEO, respectively;
    -  Average co-product cash costs (excluding non-core mines under sale) of
       $352 per GEO and $351 per GEO, respectively. Co-product cash costs per
       pound of copper of $0.91 per pound and $0.92 per pound, respectively.

    Development, Exploration and Corporate Highlights

    Highlights for the three-month period ended June 30, 2009 include:

    -  Delivered an update to Pilar's resource estimate demonstrating an
       approximate 50 percent increase in both resource and grade;
    -  Announced sale of certain non-core mines, Sao Francisco, Sao Vicente
       and San Andrés, for more than $240 million;
    -  Completed Jacobina expansion to 6,500 tonnes per day;
    -  On track for 20 million tonne per day expansion at Chapada for
       completion in the third quarter of 2009;
    -  Announced positive exploration results at Mercedes, Pilar and Minera
       Florida.

    Highlights subsequent to the quarter include:

    -  Declared commercial production at Gualcamayo effective July 1, 2009;
    -  Made construction decisions for the development of the C1 Santa Luz
       project in Brazil, the Mercedes project in Mexico and the tailings
       reprocessing project at Minera Florida, for start-up in 2012,
       representing an initial annualized production increase of 290,000 GEO
       in 2012 at forecast cash costs of approximately $360 per GEO;
    -  Increased 2009 exploration budget to $66 million;
    -  Acquired extensive exploration concession, Caiamar, located in Brazil.
    

    "Our core mines achieved record quarterly production and are expected to
continue to perform in the second half of 2009. During the second quarter, we
continued to show strong operating margins and cash flow due to our industry
low cash costs," said Yamana's chairman and chief executive officer, Peter
Marrone. "Supplementing our steady state operations at our core mines is a
robust portfolio of low-cost, advanced development projects which
distinguishes Yamana as one of the most attractive growth companies in the
industry."

    FINANCIAL AND OPERATING SUMMARY

    Revenues for the three-month period ended June 30, 2009 were $269.8
million and for the six-month period ended were $514.0 million. Approximately
15,000 GEO were produced but not sold during the second quarter due to timing
and will be sold during the third quarter. Revenue from non-precious metals
represented less than 26 percent of total revenue in the second quarter, and
is expected to continue to decline as precious metals production increases for
the balance of 2009 and thereafter.

    Mine operating earnings for the three-month period ended June 30, 2009
were $94.9 million and for the six-month period ended were $169.8 million.

    Adjusted earnings for the three-month period ended June 30, 2009 were
$95.8 million, or $0.13 per share. Adjusted earnings for the six-month period
ended June 30, 2009 were $160.1 million, or $0.22 per share. Net earnings for
the three-month period ended June 30, 2009 were $9.6 million, or $0.01 per
share, and for the six-month period ended were $95.6 million, or $0.13 per
share.

    Cash flow from operations for the three-month period ended June 30, 2009
was $117.9 million or $0.16 per share before changes in non-cash working
capital items, representing a 51 percent increase from the first quarter of
2009. Cash flow from operations for the six-month period ended June 30, 2009
was $196.0 million or $0.27 per share.

    Total production for the three-month period ended June 30, 2009 was
289,574 GEO, up seven percent from 271,482 GEO in the first quarter of 2009.
Total production for the six-month period ended was 561,056 GEO, representing
a 14 percent increase from the comparative six-month period last year. Total
commercial production for the three-month period ended was 256,763 GEO and for
the six-month period ended was 496,622 GEO.

    Average co-product cash costs for the three-month period ended June 30,
2009 (excluding non-core mines under sale) were $352 per GEO and for the
six-month period ended were $351 per GEO. Average co-product cash costs for
all mines for the three-month period ended June 30, 2009 were $387 per GEO and
for the six-month period were $385 per GEO. By-product cash costs for the
three-month period ended June 30, 2009 were $213 per GEO and for the six-month
period were $318 per GEO.

    "The second quarter reflects our continued focus on operating and
financial performance," said Chuck Main, Yamana's senior vice president
finance and chief financial officer. "Production increases at four key mines
contributed to increased revenue of 10 percent and increased mine operating
earnings of 27 percent compared to the first quarter. Despite lower metal
prices from the comparable period last year which impacted revenue, our cash
flow and operating margins increased. With by-product cash costs of $213 per
GEO, we remain one of the lower cost gold producers, if not the lowest cost
gold producer, in the industry."

    Chapada, Brazil

    Chapada continued to demonstrate quarter over quarter improvements.
Production at Chapada increased during the second quarter of 2009 to more than
40,500 ounces of gold, representing an increase of more than five percent from
the first quarter. Cash costs for the second quarter were $260 per ounce, down
six percent from the first quarter of 2009 and 25 percent from the second
quarter of 2008. Yamana continued with the planned expansion to 20 million
tonnes per year with completion expected in the third quarter of 2009.

    El Penon, Chile

    Total production at El Penon increased to more than 92,000 GEO for the
second quarter of 2009, up about 10 percent from approximately 84,000 GEO for
the first quarter of 2009. Due to the nature of the ore body at El Penon, the
grade is subject to short-term variation. Yamana has undertaken a plan to
improve grade control and dilution, increase capacity and develop newer
higher-grade veins and anticipates grade and throughput improvements to
continue in the second half of 2009. The grade in the second quarter of 2009
increased eight percent from the first quarter of 2009, and is expected to
further improve for the balance of this year. Cash costs for the second
quarter were $339 per GEO, down more than seven percent from the first quarter
of 2009.

    Jacobina, Brazil

    Second quarter production at Jacobina continued at record levels,
increasing to more than 27,500 ounces of gold. Recovery rates were
approximately 92 percent in the second quarter, an increase over the first
quarter, and are expected to increase to 94 percent in the second half of 2009
as leach tank capacity reaches planned levels with the addition of two tanks
in the second quarter. Expected lower grade compared to the first quarter was
offset by throughput and recovery increases, thereby maintaining a steady
state of production quarter over quarter.

    Gualcamayo, Argentina

    Gualcamayo reached commercial production effective July 1, 2009.
Pre-commercial production for the second quarter of 2009 was more than 24,000
ounces of gold and more than 44,800 for the first half of 2009. Cumulative
weighted average cash costs from February to June 2009 were less than $450 per
ounce (which were pre-commercial and therefore capitalized). Commercial
production for the remainder of 2009 is expected to be approximately 75,000
ounces of gold from the main QDD open pit deposit.

    Minera Florida, Chile

    Production in the second quarter of 2009 was approximately 23,000 GEO, up
from approximately 14,000 GEO for the comparable period last year and
approximately 19,000 GEO for the first quarter of 2009, confirming the planned
ramp up in production with the completion of the expansion in the first
quarter. Cash costs for the second quarter of 2009 were $414 per GEO, down
from $471 per GEO for the comparable period last year although higher than the
first quarter of 2009 mainly due to the strengthening local currency. Minera
Florida has the potential to increase annual production toward a target of up
to 120,000 GEO beginning in 2010 with a change in the mining method to
accommodate the completed expansion and more effectively mine in narrower
veins.

    Fazenda Brasileiro, Brazil

    Second quarter production of more than 18,400 ounces of gold was in line
with Company expectations. Yamana expects production in the second half of the
year to exceed production in the first half.

    
    Overview of Financial Results

    The following table presents a summary of financial and operating
    information for the three and six months ended June 30, 2009:

                                                    Three months  Six months
                                                           ended       ended
    (in thousands of United States Dollars;              June 30,    June 30,
     unaudited)                                             2009        2009
    -------------------------------------------------------------------------
    Revenues                                           $ 269,756     514,049
    Cost of sales                                       (120,939)   (240,524)
    Depreciation, amortization and depletion             (53,370)   (102,338)
    Accretion of asset retirement obligations               (572)     (1,373)
    -------------------------------------------------------------------------
    Mine operating earnings                               94,875     169,814

    Expenses
    General and administrative                           (22,991)    (38,953)
    Exploration                                           (2,109)     (7,542)
    Other                                                  1,232       1,209
    -------------------------------------------------------------------------

    Operating earnings                                    71,007     124,528

    Foreign exchange gain
    Other business (expense) income                      (29,392)     52,167
    Realized gain on derivatives                           8,327      31,702
    Unrealized loss on derivatives                       (34,117)    (81,840)
    -------------------------------------------------------------------------
    Earnings before income taxes and equity earnings      15,825     126,557

    Income tax expense                                    (9,950)    (41,729)
    Equity earnings from Minera Alumbrera                  3,764      10,804
    -------------------------------------------------------------------------

    Net earnings                                       $   9,639      95,632

    Stock based compensation                           $   4,471       5,182
    Foreign exchange loss (gain)                          28,541     (50,260)
    Unrealized loss (gain) on derivatives                 34,117      81,840
    Future income tax expense (recovery) on foreign
     currency translation of inter corporate debt         31,779      35,088
    -------------------------------------------------------------------------
    Adjusted earnings before income tax effect           108,547     167,482
    Income tax effect of adjustments                     (12,735)     (7,413)

    Adjusted earnings                                  $  95,812     160,069

    -------------------------------------------------------------------------
    Cash flow from operations (before
     changes in non-cash working capital items)        $ 117,936     195,975

    Cash flow from operations (after
     changes in non-cash working capital items)        $ 121,662     188,052

    Capital expenditures                               $(127,373)   (232,167)

    Cash and cash equivalents (end of period)          $  94,375     170,137

    Average realized gold price per ounce              $     922         914

    Average realized silver price per ounce            $   14.03       13.31

    Chapada average realized copper price per lb       $    2.06        1.80

    Gold sales (ounces)                                  197,474     391,939

    Silver sales (millions of ounces)                        2.4         4.8

    Chapada payable copper contained in
     concentrate sales (millions of lbs)                    34.2        66.6

    -------------------------------------------------------------------------
    

    Further details of the 2009 second quarter results can be found in the
Company's unaudited Management's Discussion and Analysis and Interim
Consolidated Financial Statements at www.yamana.com, in the "Investors"
section under "Financial and Corporate Reports".

    OUTLOOK AND STRATEGY

    The Company focused on its core assets, generating cash flow, preserving
capital, maximizing cash balances and maintaining maximum flexibility across
its various interests including its development stage and near development
stage projects. The Company continues to be committed to prudent and
disciplined growth and will continue to improve the value and returns of its
various projects. It will also continue to focus on containing costs and
ensuring effective management of capital expenditures.

    The Company's production plan is targeting approximately 1.1 million gold
equivalent ounces in 2009, not including non-core mines under sale, an
increase of 12% over 2008 and approximately 1.2 million gold equivalent ounces
in 2009 including only the attributable portion of production from non-core
mines under sale. The Company continues to evaluate the further expansion of
its mines and development projects as follows:

    
                                    Expected Initial
                                    Annual
                  Status            Contribution (GEO)   Expected Start-date
    -------------------------------------------------------------------------
    Mercedes      Construction         120,000           Production targeted
                   decision made                         to begin late 2012

    C1 Santa      Construction         130,000           Production targeted
     Luz(*)        decision made                         to begin in mid-2012

    Pilar/        Feasibility study    Over 100,000      Pending
     Caiamar       underway

    Ernesto/      Scoping study        100,000           Pending
     Pau-a-Pique   completed


    Minera        Advanced plan to     40,000            Production targeted
     Florida       process                               to begin in early
                   historical                            2012
                   tailings;
                   construction
                   decision made

    QDD Lower     Updated              90,000            Pending
     West          feasibility study
                   expected fourth
                   quarter of
                   2009
    -------------------------------------------------------------------------
    (*) In the first two full years of production at C1 Santa Luz, average
        annual production is expected to exceed 130,000 ounces of gold, which
        would accelerate payback, and average 104,000 ounces of gold per year
        life of mine.
    

    The Company continues to advance the Agua Rica project and has received
the environmental license early in 2009. The Company is now advancing efforts
relating to sectoral permits which are expected within 18 months. In the
context of current metal prices, the Company is continuing to advance the
prospects of a strategic partnership in respect of Agua Rica.

    With total cash and available credit at approximately $313 million,
supplemented by robust cash flow, Yamana is well positioned financially to
fund its strategic growth plans.

    
    SECOND QUARTER CONFERENCE CALL

    A conference call and audio webcast is scheduled for August 5, 2009 at
11:00 a.m. E.T. to discuss 2009 second quarter results.

    Q2 Conference Call Information:
    -------------------------------

    Toll Free (North America):                                  800-732-1073
    International:                                           +1 416-915-5762
    Participant Audio Webcast:                                www.yamana.com

    Q2 Conference Call REPLAY:
    --------------------------
    Toll Free Replay Call (North America):  877-289-8525, Passcode: 21310486
                                                followed by the number sign.
    Replay Call:                         +1 416-640-1917, Passcode: 21310486
                                                followed by the number sign.
    

    The conference call replay will be available from 1:00 p.m. ET on August
5, 2009 until 11:59 p.m. EST on August 19, 2009
    For further information on the conference call or audio webcast, please
contact the Investor Relations Department or visit our website,
www.yamana.com.

    About Yamana

    Yamana is a Canadian-based gold producer with significant gold
production, gold development stage properties, exploration properties, and
land positions in Brazil, Argentina, Chile, Mexico and Central America. The
Company plans to continue to build on this base through existing operating
mine expansions and throughput increases, the advancement of its exploration
properties and by targeting other gold consolidation opportunities in the
Americas.

    CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS: This news release
contains or incorporates by reference "forward-looking statements" within the
meaning of the United States Private Securities Litigation Reform Act of 1995
and applicable Canadian securities legislation. Except for statements of
historical fact relating to the Company, information contained herein
constitutes forward-looking statements, including any information as to the
Company's strategy, plans or future financial or operating performance.
Forward-looking statements are characterized by words such as "plan,"
"expect", "budget", "target", "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, assumptions and estimates of management considered reasonable at the
date the statements are made, and are inherently subject to a variety of risks
and uncertainties and other known and unknown factors that could cause actual
events or results to differ materially from those projected in the
forward-looking statements. These factors include the impact of general
business and economic conditions, global liquidity and credit availability on
the timing of cash flows and the values of assets and liabilities based on
projected future conditions, fluctuating metal prices (such as gold, copper,
silver and zinc), currency exchange rates (such as the Brazilian Real and the
Chilean Peso versus the United States Dollar), possible variations in ore
grade or recovery rates, changes in the Company's hedging program, changes in
accounting policies, changes in the Company's corporate resources, risk
related to non-core mine dispositions, changes in project parameters as plans
continue to be refined, changes in project development, construction,
production and commissioning time frames, risk related to joint venture
operations, the possibility of project cost overruns or unanticipated costs
and expenses, higher prices for fuel, steel, power, labour and other
consumables contributing to higher costs and general risks of the mining
industry, failure of plant, equipment or processes to operate as anticipated,
unexpected changes in mine life, final pricing for concentrate sales,
unanticipated results of future studies, seasonality and unanticipated weather
changes, costs and timing of the development of new deposits, success of
exploration activities, permitting time lines, government regulation of mining
operations, environmental risks, unanticipated reclamation expenses, title
disputes or claims, limitations on insurance coverage and timing and possible
outcome of pending litigation and labour disputes, as well as those risk
factors discussed or referred to in the Company's annual Management's
Discussion and Analysis and Annual Information Form for the year ended
December 31, 2008 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,
assumptions or opinions should change, except as required by applicable law.
The reader is cautioned not to place undue reliance on forward-looking
statements. The forward-looking information contained herein is presented for
the purpose of assisting investors in understanding the Company's expected
financial and operational performance and results as at and for the periods
ended on the dates presented in the Company's plans and objectives and may not
be appropriate for other purposes.

    NON-GAAP MEASURES

    The Company believes that in addition to conventional measures prepared
in accordance with Canadian GAAP, the Company and certain investors and
analysts use certain other non-GAAP financial measures to evaluate the
Company's performance including its ability to generate cash flow and profits
from its operations. The Company has included certain non-GAAP measures
including "cash cost per gold equivalent ounce", "Adjusted Earnings or Loss
and Adjusted Earnings or Loss per share" and "cash flow from operations before
changes in non-cash working capital" or "cash flow from operating activities
before changes in non-cash working capital" to supplement its financial
statements, which are presented in accordance with Canadian GAAP. Non-GAAP
measures do not have any standardized meaning prescribed 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 Company has also provided a reconciliation of cost of sales to
co-product cash costs and adjusted earnings to net earnings in the Company's
Management's Discussion and Analysis for the quarter ended June 30, 2009. For
additional disclosure on the cautionary note regarding Non-GAAP measures,
reference should be made to Section 6 of the Company's Management's Discussion
and Analysis for the quarter ended June 30, 2009 available at www.sedar.com or
on the Company's website at www.yamana.com.




For further information:

For further information: Jodi Peake, Vice President, Corporate
Communications & Investor Relations, (416) 815-0220, Email:
investor@yamana.com, www.yamana.com; Letitia Wong, Director, Investor
Relations, (416) 815-0220, Email: investor@yamana.com; MEDIA INQUIRIES:
Mansfield Communications Inc., Hugh Mansfield, (416) 599-0024

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