Mr. Sebastien Bernier reports
YAMANA GOLD REPORTS STRONG FOURTH QUARTER AND FULL YEAR 2020 RESULTS; IMPRESSIVE TECHNICAL STUDY RESULTS DELIVERED FOR THE ODYSSEY UNDERGROUND PROJECT AT CANADIAN MALARTIC WITH CONSTRUCTION DECISION APPROVED; ADOPTS CLIMATE CHANGE STRATEGY
Yamana Gold Inc. has released its financial and operational results for the fourth quarter and full-year 2020, provided three-year mine-by-mine guidance, and updated mineral reserve and mineral resource estimates as at Dec. 31, 2020. Monetary amounts are in U.S. dollars.
The company is also announcing a positive construction decision for the Odyssey underground project at the Canadian Malartic mine following the impressive results of the technical study, which outlines robust economics, a significant increase in mineral resources and a mine life extension to at least 2039.
Further, as a continuation of Yamana's climate change actions, the company today is also announcing that it has formally adopted a climate strategy, approved by the board of directors, to demonstrate the company's commitment to the transition to a low-carbon future. The strategy is underpinned by adoption of two targets: a 2 C science-based target (SBT) and an aspirational net-zero 2050 target.
Fourth quarter and full-year highlights
Financial results -- strong earnings and cash flows further strengthening cash balances and balance sheet:
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Fourth quarter net earnings were $103.0-million or 11 cents per share basic and diluted, compared with net earnings of $14.6-million or two cents per share, basic and diluted, a year earlier.
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Adjusted net earnings (2) were $107.7-million or 11 cents per share, basic and diluted.
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Fourth quarter cash flows from operating activities were $181.5-million, and net free cash flow (2) was $118.9-million, exceeding the averages of the preceding three quarters by 25 per cent and 6 per cent, respectively.
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Fourth quarter cash flows from operating activities before net change in working capital were $207.4-million, and free cash flow before dividends and debt repayments (2) was $61.7-million.
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Net debt (2) decreased by an additional $53.4-million in the fourth quarter as a result of increased cash balances largely due to the significant increase in free cash flow.
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For the full year, net debt (2) fell by $323.4-million to $565.7-million. The company has achieved its financial management objective of a leverage ratio of net debt to EBITDA (earnings before interest, taxes, depreciation and amortization) (2) of below 1.0 times when assuming a bottom-of-cycle gold price of $1,350 per ounce, underscoring the company's significant financial flexibility.
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As expected and planned, capital expenditures during the fourth quarter were higher than the third quarter as the result of timing delays caused by COVID-19, and interest was paid as interest payments are customarily made in the second and fourth quarters. Further, a working capital outflow occurred due to the timing delays of the collection of recoverable indirect tax credits, payments associated with prepaid expenditures and advances, and an inventory buildup due to production exceeding sales that will normalize in 2021.
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During the fourth quarter, the company announced a further 50-per-cent increase to its annual dividend to 10.5 cents per share, driven by strong free cash flow generation.
Fourth quarter operational results:
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Fourth quarter gold equivalent ounce (GEO) (1) production was 255,361 GEO (1), including gold and silver production of 221,659 ounces and 2.59 million ounces, respectively. The strong gold production followed standout performances from Jacobina and Minera Florida, and silver production was underpinned by an exceptionally strong performance from El Penon.
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Full-year GEO (1) production of 901,155 GEO (1), including 779,810 ounces of gold and 10.37 million ounces of silver, exceeded original guidance for the year of 890,000 GEO, and was within the plus or minus 3-per-cent variance range of the company's revised guidance. GEO (1) production for the year at Jacobina, El Penon, Canadian Malartic and Minera Florida was all well above plan. The entire difference was attributable to further changes to COVID-19 restrictions imposed in Argentina near the end of the year, which impacted production at Cerro Moro.
Costs offset by margin generated from Barnat precommercial production:
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Cash costs (2) for the quarter and full year were $675 and $701 per GEO (1), respectively, and all-in sustaining costs (AISC)(2) for the quarter and full year were $1,076 and $1,080 per GEO (1), respectively.
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Full-year cash costs (2) and AISC (2) were modestly higher than previously forecast, mostly impacted by lower production at Cerro Moro resulting from the reimposition of national safety measures in Argentina in December. The company had also anticipated that more production from Barnat at Canadian Malartic would be classified as commercial production, and as costs for such production were expected to be lower than the company's average, overall costs would have been positively impacted. With more precommercial production from Barnat, costs were not positively impacted, but the margin generated from Barnat's precommercial production was treated as a reduction to expansionary capital. This significant cash flow benefit resulted in the reduction of expansionary capital for the year by a further $14-million compared with plan. The net results of the modestly higher costs and lower expansionary capital were neutral, and consequently had little impact to overall generation of cash flows for the year.
Increased gold mineral reserves and mineral resources:
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Replaced mineral reserve depletion on a consolidated basis at operating mines;
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Significant increase in mineral resources:
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Notable increase in East Gouldie at Canadian Malartic of 1.84 million ounces (at 50 per cent) of inferred mineral resources;
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Further, through the acquisition of the Wasamac project, the company has been able to increase its mineral inventory at a very advantageous purchase price;
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Lastly, inventory from the Mara project, which has generally been shown outside of the company's subtotals, has been added to inventory in the current year, given its advanced stage in the development process and the completion of the integration of the Agua Rica project and Minera Alumbrera plant and infrastructure.
Mara project integration:
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On Dec. 17, 2020, the company completed the integration of the Agua Rica project with the Minera Alumbrera plant and infrastructure. Going forward, the integrated project will be known as the Mara project.
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Under the agreement, Yamana, as the sole owner of Agua Rica, and the partners of Alumbrera have created a new joint venture pursuant to which Yamana holds a controlling ownership interest in the Mara project at 56.25 per cent. Glencore holds a 25.00-per-cent interest, and Newmont holds an 18.75-per-cent interest. Yamana will be the operator of the joint venture, and will continue to lead the engagement with local, provincial and national stakeholders, and completion of the feasibility study and environmental impact assessment for the project.
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The integration creates significant synergies by combining existing substantive infrastructure that was formerly used to process ore from the Alumbrera mine during its mine life, including processing facilities, a fully permitted tailings storage facility, pipeline, logistical installations, ancillary buildings and other infrastructure, with the future open-pit Agua Rica mine.
Acquisition of Wasamac property and Camflo property and mill (acquisition of Monarch Gold):
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During the quarter, the company announced the acquisition of the Wasamac property and the Camflo property and mill through the acquisition of all of the outstanding shares of Monarch Gold not owned by Yamana. The company completed the acquisition on Jan. 21, 2021.
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The Wasamac project, which has existing proven and probable mineral reserves of 1.8 million ounces of gold at 2.56 grams per tonne and excellent potential for future exploration success, further solidifies the company's long-term-growth profile with a top-tier gold project in Quebec's Abitibi region, where the company has deep operational and technical experience and expertise.
Other financial updates: impairment and reversal of impairment:
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During the fourth quarter, the company had a positive non-cash impact related to a net impairment of $191-million on a pretax basis, or approximately $37.6-million after tax. The company believes that its overall net asset value is also further enhanced by the acquisition of the Wasamac project and by the Mara project.
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After indicators of impairment reversal were noted at the El Penon mine in Chile, the company observed an increase in the recoverable amount of the unit, which resulted in a reversal of impairment of $560.0-million pretax, or $386.3-million after tax. This reversal was partially offset by a calculated pretax impairment of $369.0-million, or $348.7-million after tax, in respect of Cerro Moro, at which indicators of impairment were identified. For additional details, please refer to "Section 3: Review of Financial Results" in the company's management's discussion and analysis for the year ended Dec. 31, 2020, available at
Yamana
and on SEDAR.
Climate change action
As a continuation of Yamana's climate change actions, the company has formally adopted a climate strategy, approved by the board of directors, to demonstrate the company's commitment to the transition to a low-carbon future. The strategy is underpinned by adoption of two targets: a 2 C SBT and an aspirational net-zero 2050 target. The targets are supported by foundational work to be performed in 2021 to establish a multidisciplinary climate working group, determine the company's emission baseline, develop the greenhouse gas (GHG) abatement pathways required to achieve the 2 C SBT, and establish preliminary, operation-specific road maps that describe abatement projects, estimated costs and schedules. These actions will help ensure that long-range GHG reduction efforts are supported by practical and operationally focused short-, medium- and long-term actions to achieve the targets.
Impressive technical study results for the Odyssey underground project at Canadian Malartic drives approval of construction decision
Yamana and Agnico Eagle Mines Ltd., which each hold a 50-per-cent interest in the Canadian Malartic General Partnership, owner and operator of the Canadian Malartic mine, have approved construction of the Odyssey underground project. The decision reflects positive technical study results and confirms the Odyssey project as the next phase in the evolution of mining at Canadian Malartic, which has served as an economic beacon in Quebec's Abitibi district for generations and will continue to do so for decades to come. A National Instrument 43-101 technical report for the Canadian Malartic operation is expected to be filed in March, 2021, and will include a summary of the Odyssey underground project.
The construction decision is a milestone in the continuing evolution of the Canadian Malartic operation, and is the culmination of several years of exploration, mineral resource development and technical evaluation. It marks the transition point of the Odyssey underground project from the project definition phase to the construction and ramp-up phase, which will extend to 2028. From 2029 to 2039, the underground operation will be in full production, producing an expected 500,000 to 600,000 ounces per year. This represents an increase over the company's initial estimate for an annual production platform of approximately 450,000 ounces. Further extension of the mine life beyond 2039 provides additional upside, with several opportunities under evaluation.
2021 to 2023 production guidance
Actual production for the year ended Dec. 31, 2020, includes comparative operations, which comprise those mines in the company's portfolio as of Dec. 31, 2020. The company notes that it guides on GEO production and costs based on a particular assumption of gold and silver prices. Although underlying gold and silver production does not change with the fluctuation in gold and silver prices, the change in the GEO ratio from such fluctuations may result in a different GEO production than that guided.
The production profile for 2021 to 2023 shows sequential growth in gold production. Several growth opportunities are available, and in the near and medium term, the company remains focused on optimizing the existing portfolio of five operating mines while also advancing studies for various expansion projects and longer-term development assets.
Production guidance for 2021 is slightly below the company's guidance for 2021 from last year, entirely related to Cerro Moro. A more conservative production risk adjustment has been applied to Cerro Moro during 2021 to reflect the continued impact of COVID-19-related restrictions, as experienced in December. Costs for the mine have also been commensurately risk adjusted.
The company expects to continue its established trend of delivering stronger production in the second half of the year, with approximately 53 per cent of production slated for the second half, along with quarterly sequential increases in production.
The company looks at production within a normal range of plus or minus 3 per cent, and the guidance values reflect both the midpoint and the range for the 2021 to 2023 period. With improved mine plans, the company is also providing its maiden three-year guidance by mine.
2021 TO 2023 PRODUCTION GUIDANCE
(000s ounces)
2020 actual 2021 guidance 2022 guidance 2023 guidance
Midpoint Range Midpoint Range Midpoint Range
Total gold production (3) 780 862 836-888 870 844-896 889 862-916
Total silver production 10,366 10,000 9,700-10,300 9,400 9,118-9,682 8,000 7,760-8,240
Total GEO production (i) 901 1,000 970-1,030 1,000 970-1,030 1,000 970-1,030
------ ------ ------------ ----- ----------- ----- -----------
(i) GEO assumes gold ounces plus the equivalent of silver ounces using a ratio of 88.86
for 2020, and a ratio of 72.00 for 2021, 2022 and 2023.
The attached mine-by-mine production results and guidance table presents mine-by-mine production results for Yamana mines for 2020 and updates guidance provided on Jan. 25, 2021, as the company is now providing mine-by-mine guidance for the next three years.
MINE-BY-MINE PRODUCTION RESULTS AND GUIDANCE
Gold (000s ounces)
2020 actual 2021 guidance 2022 guidance 2023 guidance
Midpoint Range Midpoint Range Midpoint Range
Canadian Malartic
(50%) (3) 284 350 340-361 330 320-340 350 340-361
Jacobina 178 175 170-180 180 175-186 185 179-191
Cerro Moro 67 90 87-93 100 97-103 90 87-93
El Penon 161 160 155-165 165 160-170 165 160-170
Minera Florida 90 87 84-90 95 92-98 99 96-102
--- --- ------- --- ------- --- -------
Total 780 862 836-889 870 844-897 889 862-916
--- --- ------- --- ------- --- -------
Silver (000s ounces)
2020 actual 2021 guidance 2022 guidance 2023 guidance
Midpoint Range Midpoint Range Midpoint Range
Cerro Moro 5,449 5,500 5,335-5,665 5,000 4,850-5,150 3,500 3,395-3,605
El Penon 4,917 4,500 4,365-4,635 4,400 4,268-4,532 4,500 4,365-4,635
------ ------ ------------ ----- ----------- ----- -----------
Total 10,366 10,000 9,700-10,300 9,400 9,118-9,682 8,000 7,760-8,240
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GEO (000s ounces)
2020 actual 2021 guidance 2022 guidance 2023 guidance
Midpoint Range Midpoint Range Midpoint Range
Canadian Malartic
(50%) (3) 284 350 340-361 330 320-340 350 340-361
Jacobina 178 175 170-180 180 175-186 185 179-191
Cerro Moro 132 166 161-171 169 164-174 138 134-142
El Penon 217 222 215-229 226 219-233 228 221-235
Minera Florida 90 87 84-90 95 92-98 99 96-102
--- ----- --------- ----- --------- ----- ---------
Total 901 1,000 970-1,030 1,000 970-1,030 1,000 970-1,030
--- ----- --------- ----- --------- ----- ---------
Cost outlook
The company anticipates that it will continue to incur some costs in relation to COVID-19 in the near future. Current expectation of pandemic-related costs is that those costs will continue to be incurred during the first half of the year and begin to decrease in the second half of the year with a rollout of vaccinations expected in most countries in which the company operates. With increasing numbers of the population receiving the vaccine, the company would expect to see increasing immunity and decreasing caseloads, allowing for gradual easing of its COVID-related controls and associated costs toward the second half of 2021 as noted. Total costs are expected to not exceed approximately $20-million for the year. Similar to 2020, COVID-19 costs are disclosed as part of mine operating earnings as temporary suspension, standby and other incremental COVID-19 costs, and are excluded from cash costs and all-in sustaining costs.
The expected decline in COVID-19 costs throughout the coming year also corresponds to the company's customary lower second half of the year costs, associated with higher production levels.
10-year outlook: additional information
The company recently announced its 10-year outlook, highlighting a strong and sustainable production platform of at least one million GEO per year through 2030. As noted, production will be underpinned by continued operational success at the company's existing operations, which have consistently replaced mineral reserves above depletion, including in 2020. In addition, production will be driven by the now approved Odyssey underground project at Canadian Malartic, incremental production growth at Minera Florida, further expansions at Jacobina, and continued exploration success and mine life extension at Cerro Moro.
The company reiterates this outlook and, with the benefit of its now completed mineral reserve and mineral resource update, provides this additional information.
Jacobina replaced 2020 depletion of gold mineral reserves and added approximately 300,000 ounces of additional reserves, based on positive infill drilling results at all mines and especially at Canavieiras Central, where drilling has added indicated mineral resources in the high-grade LUT reef and lower-grade parallel reefs. Average mineral reserve grade has modestly decreased as a result of such parallel reefs that are considered economical to mine. Operational costs will consequently not be affected by the change in reserve grade. In the short term, the company expects to continue processing at a grade higher than average mineral reserves grade, as reflected in the 2020 average feed grade of 2.36 grams per tonne. These lower-grade mineral reserves also provide opportunities for incremental lower-cost mill feed in excess of the planned throughput rates, in the event that the processing plant optimizations and expansions exceed targeted throughput rates. Measured and indicated mineral resources and inferred mineral resources both increased from year-end 2019, with total gold mineral resources and mineral reserves increasing by 823,000 ounces. The continued mineral reserve and mineral resource growth establishes Jacobina as a multidecade operation and supports the continuing production growth trend toward 230,000 ounces of gold per year after the implementation of the phase 2 expansion project. As a result of the exploration success, the company is now considering further growth opportunities, including a potential phase 3 expansion to 10,000 tonnes per day.
At El Penon, which recently completed its 21st year of production, the company has a high degree of confidence that it will continue to replace mineral reserves through new discoveries and infill drilling on several major veins, thereby maintaining mine life visibility for at least another 10 years.
The company further clarifies that El Penon's outlook is fully supported by mineral reserves and mineral resources. Mineral resources are composed of multiple veins at different grades. The company plans to draw into inventory higher-conviction mineral resources from veins which are at mineral reserve grade and close to the existing mine. The company notes an increase in mineral reserve grade from 2019, highlighting that new ounces being converted to mineral reserves are higher-than-average mineral reserve grade. Moreover, the company continues to make new discoveries of mineral inferred ounces that are also at better grades, as noted by an increase in mineral resource grade.
YEAR-END MINERAL RESERVES AND MINERAL RESOURCES SUMMARY
(as at Dec. 31, 2020)
Proven and probable mineral reserves
Tonnes (000s) Grade (g/t) Contained oz (000s)
Gold 765,505 0.56 13,803
Silver 633,832 5.5 112,780
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Measured and indicated mineral resources
Tonnes (000s) Grade (g/t) Contained oz (000s)
Gold 485,681 0.94 14,604
Silver 165,889 9.2 49,004
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Inferred mineral resources
Tonnes (000s) Grade (g/t) Contained oz (000s)
Gold 653,662 0.75 15,714
Silver 444,541 4.4 62,859
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Key statistics
Key financial statistics for the fourth quarter and full-year 2020 are outlined in the attached financial summary table.
FINANCIAL SUMMARY
(in millions of U.S. dollars, except for per-share amounts)
Three months ended Dec. 31, Year ended Dec. 31,
2020 2019 2020 2019
Revenue $461.8 $383.8 $1,561.0 $1,612.2
Cost of sales excluding depletion, depreciation
and amortization (166.8) (169.4) (614.1) (782.8)
Depletion, depreciation and amortization (112.5) (119.0) (395.0) (471.7)
Total cost of sales (279.3) (288.4) (1,009.1) (1,254.5)
Net reversal of impairment of mining properties 191.0 - 191.0 -
Temporary suspension, standby and
other incremental COVID-19 costs (9.2) - (40.5) -
Mine operating earnings 364.3 95.4 702.4 357.7
General and administrative expenses (23.4) (19.3) (85.9) (79.4)
Exploration and evaluation expenses (6.0) (3.3) (15.1) (10.3)
Net earnings 103.0 14.6 203.6 225.6
Net earnings per share -- basic and diluted (i) 0.11 0.02 0.21 0.24
Cash flow generated from operations
after changes in non-cash working capital 181.5 201.7 617.8 521.8
Cash flow from operations
before changes in non-cash working capital (ii) 207.4 176.6 688.7 590.5
Revenue per ounce of gold 1,875 1,486 1,777 1,392
Revenue per ounce of silver 24.02 17.55 21.11 16.39
Average realized gold price per ounce 1,875 1,484 1,777 1,387
Average realized silver price per ounce 24.02 17.50 20.93 16.26
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(i) For the three months and year ended Dec. 31, 2020, the weighted-average number of shares
outstanding was 952,435,000 (basic) and 954,565,000 (diluted), and 951,818,000 (basic) and
953,846,000 (diluted), respectively.
(ii) Refers to a non-generally accepted accounting principle financial measure or an
additional line item or subtotal in financial statements. Please see the discussion included
in Section 12 of the company's management's discussion and analysis for the year ended Dec.
31, 2020, which is available on the company's website and on SEDAR.
For a full discussion of Yamana's operational and financial results and mineral reserve and mineral resource estimates, please refer to the company's management's discussion and analysis and consolidated financial statements for the year ended Dec. 31, 2020, which are available on the company's website, on SEDAR and on EDGAR.
The company will host a conference call and webcast on Feb. 12, 2021, at 10 a.m. ET (3 p.m. GMT).
Fourth quarter 2020 conference call
Toll-free (North America): 1-800-806-5484
Toronto local and international: 416-340-2217
Toll-free (United Kingdom): 00-800-4222-8835
Passcode: 3993987 followed by the number sign
Webcast: at the Yamana website
Conference call replay
Toll-free (North America): 1-800-408-3053
Toronto local and international: 905-694-9451
Toll-free (United Kingdom): 00-800-3366-3052
Passcode: 3289901 followed by the number sign
The conference call replay will be available from 12 p.m. ET on Feb. 12, 2021, until 11:59 p.m. ET (4:59 p.m. GMT) on March 12, 2021.
Qualified persons
Scientific and technical information contained in this news release has been reviewed and approved by Sebastien Bernier (PGeo and senior director, geology and mineral resources). Mr. Bernier is an employee of Yamana and a qualified person as defined by Canadian Securities Administrators' National Instrument 43-101 (Standards of Disclosure for Mineral Projects).
About Yamana Gold Inc.
Yamana is a Canadian-based precious metal producer with significant gold and silver production, development-stage properties, exploration properties, and land positions throughout the Americas, including Canada, Brazil, Chile and Argentina. Yamana plans to continue to build on this base through expansion and optimization initiatives at existing operating mines, development of new mines, the advancement of its exploration properties and, at times, targeting other consolidation opportunities with a primary focus in the Americas.
Endnotes
(1) GEO assumes gold ounces plus the gold equivalent of silver ounces using a ratio of 76.82 and 88.86 for the three months and year ended Dec. 31, 2020, respectively, and 85.54 and 86.02 for the three months and year ended Dec. 31, 2019, respectively.
(2) A cautionary note regarding non-generally accepted accounting principle performance measures and their respective reconciliations, as well as additional line items or subtotals in financial statements, is included in "Section 12: Non-GAAP Performance Measures" in the company's management's discussion and analysis for the year ended Dec. 31, 2020.
(3) Included in the gold production figure for the year ended Dec. 31, 2020, is 18,929 of precommercial production ounces (3,137 precommercial production ounces are included in the three months and year ended Dec. 31, 2019), related to the company's 50-per-cent interest in the Canadian Malartic mine's Barnat pit, which achieved commercial production on Sept. 30, 2020. Precommercial production ounces are excluded from sales figures, although precommercial production ounces that were sold during their respective period of production had their corresponding revenues and costs of sales capitalized to mineral properties, captured as expansionary capital expenditures.
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