EX-99.2 3 ex992q3_2016fs.htm EXHIBIT 99.2 Exhibit
    


EXHIBIT 99.2









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CONDENSED CONSOLIDATED
INTERIM FINANCIAL STATEMENTS
 
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2016
(UNAUDITED)


                            


TABLE OF CONTENTS
 
 
 
 
 
Page
 
 
Condensed Consolidated Interim Statements of Operations
 
 
Condensed Consolidated Interim Statements of Comprehensive Income/(Loss)
 
 
Condensed Consolidated Interim Statements of Cash Flows
 
 
Condensed Consolidated Interim Balance Sheets
 
 
Condensed Consolidated Interim Statements of Changes in Equity
 
 
 
 
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS:
 
Note 1:
 
Basis of Preparation and Presentation
Note 2:
 
Recent Accounting Pronouncements
Note 3:
 
Acquisition and Disposition of Mineral Interests
Note 4:
 
Other Expenses
Note 5:
 
Finance Income and Expense
Note 6:
 
Income Taxes
Note 7:
 
Earnings/(Loss) Per Share
Note 8:
 
Other Comprehensive Income
Note 9:
 
Supplementary Cash Flow Information
Note 10:
 
Fair Value Measurement
Note 11:
 
Inventories
Note 12:
 
Property, Plant and Equipment
Note 13:
 
Selected Composition Notes
Note 14:
 
Long-Term Debt
Note 15:
 
Share Capital
Note 16:
 
Share-Based Payments
Note 17:
 
Capital Management
Note 18:
 
Operating Segments
Note 19:
 
Contractual Commitments
Note 20:
 
Contingencies
Note 21:
 
Events After the Reporting Period



YAMANA GOLD INC.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF OPERATIONS

 
For the three months ended September 30,
For the nine months ended September 30,
(In millions of United States Dollars except for shares and per share amounts, unaudited)
2016

2015

2016

2015

Revenue
$
464.3

$
424.4

$
1,303.3

$
1,281.5

Cost of sales excluding depletion, depreciation and amortization
(261.2
)
(248.0
)
(744.9
)
(762.7
)
Gross margin excluding depletion, depreciation and amortization
$
203.1

$
176.4

$
558.4

$
518.8

Depletion, depreciation and amortization
(112.1
)
(124.3
)
(334.0
)
(366.5
)
Mine operating earnings
$
91.0

$
52.1

$
224.4

$
152.3

 


 
 
 
Expenses


 
 
 
General and administrative
(24.8
)
(26.4
)
(70.3
)
(83.2
)
Exploration and evaluation
(3.8
)
(4.8
)
(11.9
)
(12.5
)
Other expenses (Note 4)
(13.8
)
(13.3
)
(20.9
)
(50.6
)
Operating earnings/(loss)
$
48.6

$
7.6

$
121.3

$
6.0

Finance income (Note 5)
0.4

40.4

0.7

49.4

Finance expense (Note 5)
(40.1
)
(37.3
)
(113.4
)
(99.9
)
Net finance expense
$
(39.7
)
$
3.1

$
(112.7
)
$
(50.5
)
 
 
 
 
 
Earnings/(loss) before taxes
$
8.9

$
10.7

$
8.6

$
(44.5
)
Current income tax (expense) (Note 6)
(13.9
)
(38.0
)
(34.5
)
(67.5
)
Deferred income tax recovery/(expense) (Note 6)
2.9

(79.7
)
90.2

(126.0
)
Income tax (expense)/recovery of continuing operations
$
(11.0
)
$
(117.7
)
$
55.7

$
(193.5
)
Net (loss)/earnings from continuing operations
(2.1
)
(107.0
)
64.3

(238.0
)
Net (loss) from discontinued operations (Note 3(a))
(9.7
)
(6.0
)
(5.0
)
(34.6
)
Net (loss)/earnings attributable to Yamana Gold Inc. equityholders
$
(11.8
)
$
(113.0
)
$
59.3

$
(272.6
)
 

 
 
 
Net loss per share attributable to Yamana Gold Inc. equityholders (Note 7)

 
 
 
Net (loss)/earnings per share from continuing operations - basic and diluted
$
—

$
(0.11
)
$
0.07

$
(0.26
)
Net loss per share from discontinued operations - basic and diluted
$
(0.01
)
$
(0.01
)
$
(0.01
)
$
(0.03
)
Net (loss)/earnings per share - basic and diluted
$
(0.01
)
$
(0.12
)
$
0.06

$
(0.29
)
 


 
 
 
Weighted average number of shares outstanding (in thousands)
 (Note 7)
 

 

 
 
Basic
947,590

946,563

947,374

933,180

Diluted
947,590

946,563

947,953

933,180

The accompanying notes are an integral part of the condensed consolidated interim financial statements.

YAMANA GOLD INC.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF COMPREHENSIVE INCOME/(LOSS)

 
For the three months ended September 30,
For the nine months ended September 30,
(In millions of United States Dollars, unaudited)
2016

2015

2016

2015

Net (loss)/earnings attributable to Yamana Gold Inc. equityholders
$
(11.8
)
$
(113.0
)
$
59.3

$
(272.6
)
 
 
 
 
 
Other comprehensive income, net of taxes (Note 8)
 
 
 
 
   Items that may be reclassified subsequently to profit or loss:
 
 
 
 
    - Net gain in fair value of available-for-sale securities
0.3

(0.5
)
5.1

(0.4
)
    - Net change in fair value of hedging instruments
4.5

(1.8
)
4.5

8.9

Total other comprehensive income
$
4.8

$
(2.3
)
$
9.6

$
8.5

Total comprehensive (loss)/income attributable to Yamana Gold Inc. equityholders
$
(7.0
)
$
(115.3
)
$
68.9

$
(264.1
)
The accompanying notes are an integral part of the condensed consolidated interim financial statements.

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YAMANA GOLD INC.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS

 
For the three months ended
 September 30,
 
For the nine months ended
 September 30,
 
(In millions of United States Dollars, unaudited)
2016

2015

2016

2015

Operating activities
 
 
 
 
Earnings/(loss) before taxes
$
8.9

$
10.7

$
8.6

$
(44.5
)
Adjustments to reconcile earnings before taxes to net operating cash flows:
 
 
 
 
Depletion, depreciation and amortization
112.1

124.3

334.0

366.5

Share-based payments (Note 16)
(1.1
)
(1.5
)
16.6

3.6

Finance income (Note 5)
(0.4
)
(40.4
)
(0.7
)
(49.4
)
Finance expense (Note 5)
40.1

37.3

113.4

99.9

Mark-to-market on sales of concentrate and price adjustments on unsettled invoices
0.7

0.7

(8.1
)
—

Mark-to-market on investments and other assets
8.7

(4.6
)
(11.2
)
(6.5
)
Amortization of deferred revenue on metal purchase agreements (Note 13)
(1.8
)
—

(4.0
)
—

Other non-cash expenses
11.8

14.9

21.6

61.2

Advanced payments received on metal purchase agreement (Note 13)
—

—

64.0

—

Decommissioning, restoration and similar liabilities paid
(2.8
)
(0.7
)
(5.1
)
(2.9
)
Income taxes paid
(3.2
)
(15.8
)
(50.4
)
(67.3
)
Cash flows from operating activities before net change in working capital
$
173.0

$
124.9

$
478.7

$
360.6

Net change in working capital (Note 9(b))
5.6

(40.5
)
9.8

(143.4
)
Cash flows from operating activities of continuing operations
$
178.6

$
84.4

$
488.5

$
217.2

Cash flows (used in)/ from operating activities of discontinued operations (Note 3(a))
$
(2.2
)
$
5.8

$
12.5

$
10.5

Investing activities
 

 

 
 
Acquisition of property, plant and equipment (Note 12)
$
(143.8
)
$
(97.0
)
$
(344.0
)
$
(262.3
)
Payments on settlement of derivative contracts
—

14.0

(7.6
)
14.0

Proceeds from sale of Mexican operation (Note 3(a))
122.5

—

122.5

—

Proceeds from sale of bond
—

18.6

—

18.6

Acquisition of Mineração Riacho dos Machados Ltda (Note 3(b))
—

—

(50.2
)
—

Proceeds on disposal of investments and other assets
33.6

—

33.6

—

Other investing activities
0.6

4.5

(1.8
)
7.2

Cash flows from/(used in) investing activities of continuing operations
$
12.9

$
(59.9
)
$
(247.5
)
$
(222.5
)
Cash flows used in investing activities of discontinued operations (Note 3(a))
$
(4.4
)
$
(5.8
)
$
(12.8
)
$
(18.0
)
Financing activities
 
 
 
 
Dividends paid (Note 15(b))
$
(4.7
)
$
(13.9
)
$
(23.2
)
$
(41.1
)
Interest and other finance expenses paid
(17.0
)
(21.1
)
(65.9
)
(76.3
)
Proceeds on common share offering
—

—

—

228.2

Repayment of long-term debt (Note 14)
(117.0
)
(143.3
)
(306.5
)
(523.1
)
Proceeds from long-term debt (Note 14)
105.4

175.0

275.5

375.6

Cash flows used in financing activities of continuing operations
$
(33.3
)
$
(3.3
)
$
(120.1
)
$
(36.7
)
Effect of foreign exchange of non-United States Dollar denominated cash and cash equivalents
(1.4
)
(2.2
)
3.1

(4.0
)
Increase/(decrease) in cash and cash equivalents of continuing operations
$
156.8

$
19.0

$
124.0

$
(46.0
)
Decrease in cash and cash equivalents of discontinued operations
$
(6.6
)
$
—

$
(0.3
)
$
(7.5
)
Cash and cash equivalents of continuing operations, beginning of period
$
86.8

$
118.5

$
119.6

$
183.5

Cash and cash equivalents of discontinued operations, beginning of period
$
6.6

$
0.6

$
0.3

$
8.1

Cash and cash equivalents, end of period of continuing operations
$
243.6

$
137.5

$
243.6

$
137.5

Cash and cash equivalents, end of period of discontinued operations
(Note 3(a))
$
—

$
0.6

$
—

$
0.6

Note 9: Supplementary Cash Flow Information.
The accompanying notes are an integral part of the condensed consolidated interim financial statements.

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YAMANA GOLD INC.
CONDENSED CONSOLIDATED INTERIM BALANCE SHEETS
AS AT,
(In millions of United States Dollars, unaudited)
September 30,
2016

December 31,
2015

Assets
 
 
Current assets:
 
 
Cash and cash equivalents
$
243.6

$
119.9

Trade and other receivables
16.5

45.9

Inventories (Note 11)
250.4

270.0

Other financial assets (Note 13(a))
73.7

102.3

Other assets
85.0

93.1

Assets held for sale
—

17.8

 
$
669.2

$
649.0

Non-current assets:


 
Property, plant and equipment (Note 12)
8,164.3

8,208.7

Other financial assets (Note 13(a))
41.6

27.3

Deferred tax assets
140.7

88.6

Goodwill and intangibles
485.6

489.5

Other assets
63.1

55.0

Total assets
$
9,564.5

$
9,518.1

 


 
Liabilities


 
Current liabilities:


 
Trade and other payables
$
314.5

$
316.1

Income taxes payable
2.5

27.1

Other financial liabilities
169.5

166.1

Other provisions and liabilities (Note 13(b))
27.3

18.1

Liabilities held for sale
—

14.7

 
$
513.8

$
542.1

Non-current liabilities:


 
Long-term debt (Note 14)
1,651.2

1,676.7

Decommissioning, restoration and similar liabilities
213.2

187.6

Deferred tax liabilities
1,796.5

1,837.8

Other financial liabilities
80.0

60.6

Other provisions and liabilities (Note 13(b))
383.1

348.7

Total liabilities
$
4,637.8

$
4,653.5

 


 
Equity


 
Share capital (Note 15)


 
Issued and outstanding 947,599,397 common shares (December 31, 2015 - 947,038,778 shares)
7,629.3

7,625.4

Reserves
26.7

18.6

Deficit
(2,757.9
)
(2,802.7
)
Equity attributable to Yamana Gold Inc. shareholders
$
4,898.1

$
4,841.3

Non-controlling interest
28.6

23.3

Total equity
$
4,926.7

$
4,864.6

Total liabilities and equity
$
9,564.5

$
9,518.1

Note 19: Contractual Commitments and Note 20: Contingencies.
The accompanying notes are an integral part of the condensed consolidated interim financial statements.

Approved by the Board
“Peter Marrone”
“Patrick Mars”
PETER MARRONE
PATRICK MARS
Director
Director

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YAMANA GOLD INC.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN EQUITY

(In millions of United States Dollars, unaudited)
Share
capital
Equity
reserve
Hedging
reserve
Available
-for-sale
reserve
Other
reserve
Total
reserves
Retained
earnings/ (deficit)
Equity
attributable
to Yamana
shareholders
Non-
controlling
interest
Total
equity
Balance as at January 1, 2015
$
7,347.3

$
23.2

$
(24.9
)
$
—

$
(1.2
)
$
(2.9
)
$
(630.3
)
$
6,714.1

$
18.7

$
6,732.8

Net loss
—

—

—

—

—

—

(272.6
)
(272.6
)
—

(272.6
)
Accumulated other comprehensive income,
net of income tax (Note 8)
—

—

8.9

(0.4
)
—

8.5

—

8.5

—

8.5

Transactions with owners
 
 
 
 
 


 


 
 
Convertible debentures exercised
9.6

—

—

—

—

—

—

9.6

—

9.6

Issued on acquisition of mineral interest (Note 3)
26.8

0.2

—

—

—

0.2

—

27.0

—

27.0

Issued on vesting of restricted share units
(Note 16)
10.0

(10.0
)
—

—

—

(10.0
)
—

—

—

—

Issued on public offering (net of issue costs)
(Note 15)
227.9

—

—

—

—

—

—

227.9

—

227.9

Restricted share units (Note 16)
—

8.2

—

—

—

8.2

—

8.2

—

8.2

Share cancellation (Note 15)
(0.3
)
0.3

—

—

—

0.3

—

—

—

—

Dividend reinvestment plan
0.2

 
 
 
 
—

 
0.2

 
0.2

Dividends
—

—

—

—

—

—

(43.3
)
(43.3
)
—

(43.3
)
Balance as at September 30, 2015
$
7,621.5

$
21.9

$
(16.0
)
$
(0.4
)
$
(1.2
)
$
4.3

$
(946.2
)
$
6,679.6

$
18.7

$
6,698.3

Balance as at January 1, 2016
$
7,625.4

$
20.1

$
—

$
(0.4
)
$
(1.1
)
$
18.6

$
(2,802.7
)
$
4,841.3

$
23.3

$
4,864.6

Net earnings
—

—

—

—

—

—

59.3

59.3

—

59.3

Accumulated other comprehensive income,
net of income tax (Note 8)
—

—

4.5

5.1



9.6

—

9.6

—

9.6

Transactions with owners
 
 
 
 
 
 
 
 
 
 
Issued on exercise of stock options
0.3

0.3

—

—

—

0.3

—

0.6

—

0.6

Issued on vesting of restricted share units
(Note 15)
3.3

(3.3
)
—

—

—

(3.3
)
—

—

—

—

Restricted share units (Note 15)
—

1.5

—

—

—

1.5

—

1.5

5.3

6.8

Dividend reinvestment plan (Note 15)
0.3

—

—

—

—

—

—

0.3

—

0.3

Dividends
—

—

—

—

—

—

(14.5
)
(14.5
)
—

(14.5
)
Balance as at September 30, 2016
$
7,629.3

$
18.6

$
4.5

$
4.7

$
(1.1
)
$
26.7

$
(2,757.9
)
$
4,898.1

$
28.6

$
4,926.7

 The accompanying notes are an integral part of the condensed consolidated interim financial statements.



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YAMANA GOLD INC.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

For the Three and Nine Months Ended September 30, 2016
(With Comparatives as at December 31, 2015 and for the Three and Nine Months Ended September 30, 2015)
(Amounts in millions of United States Dollars, except for shares and per share amounts unless otherwise noted, unaudited)

1.    BASIS OF PREPARATION AND PRESENTATION

These Condensed Consolidated Interim Financial Statements of Yamana Gold Inc. (the "Company" or "Yamana"), including comparative figures, have been prepared in accordance with International Accounting Standard 34 Interim Financial Reporting ("IAS 34") using the accounting principles consistent with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). These Condensed Consolidated Interim Financial Statements do not include all disclosures required by IFRS for annual audited consolidated financial statements and accordingly should be read in conjunction with the Company’s Annual Audited Consolidated Financial Statements for the year ended December 31, 2015 prepared in accordance with IFRS as issued by the IASB. These Condensed Consolidated Interim Financial Statements were authorized for issuance by the Board of Directors of the Company on October 26, 2016.

These Condensed Consolidated Interim Financial Statements have been prepared on the basis of and using the accounting policies, methods of computation and presentation consistent with those applied and disclosed in Notes 3 and 5 to the Company’s Annual Audited Consolidated Financial Statements for the year ended December 31, 2015, except as noted below. Certain comparative balances have been reclassified to conform to the presentation adopted in the current period. In particular, effective January 1, 2016, the Company changed its policy with respect to certain general and administrative expenses incurred at producing mines previously classified as general and administrative expenses, are now classified as cost of sales excluding depletion, depreciation and amortization in the Condensed Consolidated Interim Statements of Operations.

In preparing the Consolidated Financial Statements in accordance with IFRS, 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 uncertain and for which changes in those estimates could materially impact the Company's Consolidated Financial Statements. Actual future outcomes may differ from present estimates. Management reviews its estimates and assumptions on an ongoing basis using the most current information available.

The critical judgments and key sources of estimation uncertainties in the application of accounting policies during the three and nine months ended September 30, 2016 are the same as those disclosed in Note 4 to the Company's Annual Audited Consolidated Financial Statements for the year ended December 31, 2015.


2.    RECENT ACCOUNTING PRONOUNCEMENTS
 
Certain pronouncements have been issued by the IASB or the International Financial Reporting Interpretations Committee (“IFRIC”) that are mandatory for accounting periods after December 31, 2015. Pronouncements that are not applicable to the Company have been excluded from this note. The following pronouncements have been issued but are not yet effective:  

(a)
IFRS 9 Financial Instruments - The standard is effective for annual reporting periods beginning January 1, 2018 for public entities. The Company is assessing the impact of this Standard.
(b)
IFRS 15 Revenue from Contracts with Customers - The final standard on revenue from contracts with customers was issued on May 28, 2014, effective for annual reporting periods beginning on or after January 1, 2018 with early adoption permitted. Entities have the option of using either a full retrospective or a modified retrospective approach to adopt the guidance. The Company is assessing the impact of this Standard.
(c)
IFRS 16 Leases - The standard is effective for annual reporting periods beginning January 1, 2019. Early application is permitted for companies that also apply IFRS 15 Revenue from Contracts with Customers. The Company is assessing the impact of this Standard.


3.    ACQUISITION AND DISPOSITION OF MINERAL INTERESTS

a)
Disposition of Mercedes


yamanalogoa15.jpg | 7

On September 30, 2016, the Company completed the sale to Premier Gold Inc. of its Mexican subsidiaries through which the Mercedes mine was held. Pursuant to the transaction, the Company received total consideration of $122.5 million in cash plus shares, equity securities and net smelter return royalties having an additional value of $26 million. The marketable securities received include 6 million common shares of Premier and 3 million common share purchase warrants of Premier that are exercisable at C$4.75 per common share for 24 months. The Company also received a 1.0% net smelter return royalty on the Mercedes mine, that becomes payable upon the earlier of six years from the completion of the sale or the date upon which cumulative production of 450,000 ounces of gold equivalent from Mercedes has been achieved, as well as a 2.0% net smelter return royalty on the La Silla property in Sinaloa, Mexico and the La Espera property in Sonora, Mexico. The Company has recognized a non-cash loss of $24.4 million on the sale. The comparative loss and cash flows from discontinued operations have been restated to include those operations classified as discontinued in the current period.

The following table summarizes the statement of operations of the Mexican subsidiaries operations:
 
For the three months ended September 30,
For the nine months ended September 30,
(In millions of United States Dollars except for shares and per share amounts, unaudited)
2016
2015
2016
2015
Revenues
32.6

24.5

90.5

80.5

Cost of sales excluding depletion, depreciation and amortization
(17.0
)
(20.0
)
(49.6
)
(62.2
)
Gross margin excluding depletion, depreciation and amortization
15.6

4.5

40.9

18.3

Depletion, depreciation and amortization
(2.3
)
(8.9
)
(7.2
)
(28.9
)
Mine operating earnings/(loss)
13.3

(4.4
)
33.7

(10.6
)
Other expenses
(12.8
)
(3.8
)
(19.2
)
(8.2
)
Earnings/(loss) before taxes
0.5

(8.2
)
14.5

(18.8
)
Attributable income tax recovery/(expense)
15.1

0.3

6.0

(0.4
)
 
15.6

(7.9
)
20.5

(19.2
)
Loss on disposal of operation
(24.4
)
—

(24.4
)
—

Attributable income tax expense
(0.9
)
—

(0.9
)
—

Net loss from discontinued operation
(9.7
)
(7.9
)
(4.8
)
(19.2
)

b)
Acquisition of Mineração Riacho dos Machados Ltda (“MRDM”)

On February 17, 2016, Brio Gold, a wholly-owned subsidiary of Yamana Gold Inc. (the “Company”), entered into an Assignment and Assumption Agreement and a Restructuring Agreement pursuant to which it would ultimately acquire all right, title and interests in Mineração Riacho dos Machados Ltda (“MRDM”), a wholly-owned subsidiary of Carpathian Gold Inc. (“Carpathian”), from Macquarie Bank Limited, holder of rights and interests in loan facility extended to MRDM, and Carpathian. MRDM owns and operates the Riacho Dos Machados ("RDM") mine which is an open-pit heap-leach gold mine located in Minas Gerais State, Brazil. RDM increases the production profile of the Company in a mining-friendly jurisdiction expected to increase the sustainable production level, contribute to cash flow and provide mineral reserve growth and a mineral resource base with growth potential.

On April 29, 2016, the Company closed on the restructuring procedures and concurrently attained control of MRDM for approximately $53.9 million in total cash consideration, excluding acquisition related costs of $3.0 million which have been recognized as an expense and included in other expenses in the Condensed Consolidated Interim Statements of Operations for the period ended September 30, 2016 since the acquisition date.

The Company has recognized its interest in the assets, liabilities, revenues and expenses of MRDM in accordance with the Company’s rights and obligations prescribed by the transaction, as a business combination. In accordance with the Company’s accounting policy, the Company has recognized the acquired identifiable assets and liabilities.

As of the date of these Condensed Consolidated Interim Financial Statements, the determination of fair value of assets and liabilities acquired is based on preliminary estimates and has not been finalized. The Company is currently in the process of determining the fair values of the net assets acquired, assessing and measuring the associated deferred income tax assets and liabilities on the acquisition. The actual fair values of the assets and liabilities may differ materially from the amounts disclosed in the preliminary fair value below and are subject to change.

Total consideration paid by the Company was as follows:
Cash
$
53.9



yamanalogoa15.jpg | 8

The following table summarizes the total fair values of assets and liabilities acquired:
 
Preliminary
Cash
$
0.3

Net working capital acquired (i)
2.3

Property, plant and equipment (including mineral interests)
57.4

Non-current liabilities
(6.1
)
Net identifiable assets
$
53.9


(i)    Included in net working capital acquired is accounts receivables of $2.6 million at fair value which were collected subsequent to closing of the MRDM acquisition.

MRDM's revenues and net losses are $28.1 million and $4.6 million, respectively, for the period ended September 30, 2016 since the acquisition date. Revenues and net earnings for the Company would have been $1,380 million and $53.5 million, respectively, for the nine months period ended September 30, 2016, if the acquisition had taken place on January 1, 2016.


4.    OTHER EXPENSES
 
For the three months ended September 30,
For the nine months ended September 30,
 
2016

2015

2016

2015

Change in provisions
$
1.7

$
3.8

$
2.8

$
20.1

Write-down of other assets
3.8

2.9

4.8

16.3

Business transaction costs
1.0

0.4

6.7

(1.1
)
Loss/(gain) on sale of assets
1.3

(0.4
)
0.8

3.7

Mark-to-market/(gain) loss on deferred share units
(3.1
)
(3.8
)
8.4

(5.5
)
Mark-to-market loss/(gain) on warrants (i)
6.2

(4.8
)
(15.9
)
(7.8
)
Equity loss from associate (ii)
—

6.3

—

17.2

Legal expense
0.2

0.6

3.7

2.6

Reorganization costs
—

6.1

—

5.4

Other expenses/losses/(gain)
2.7

2.2

9.6

(0.3
)
Other expenses
$
13.8

$
13.3

$
20.9

$
50.6


(i)
Includes non-cash realized loss of $6.1 million related to the sale of Sandstorm warrants on September 26, 2016.
(ii)
The Company has discontinued recognizing its share of losses of Alumbrera as the investment was fully written down as at December 31, 2015. Additional losses in the future will be recognized to the extent the Company has incurred legal or constructive obligations or made payments on behalf of Alumbrera at its 12.5% interest. Future equity earnings from Alumbrera will be recognized by the Company to the extent that the Company's share of those earnings exceeds its share of accumulated losses not recognized.


5.    FINANCE INCOME AND EXPENSE
 
For the three months ended September 30,
For the nine months ended September 30,
 
2016

2015

2016

2015

Interest income
$
0.4

$
0.5

$
0.7

$
3.3

Mark-to-market on convertible debt
—

—

—

4.6

Net foreign exchange gain
—

39.9

—

41.5

Finance income
$
0.4

$
40.4

$
0.7

$
49.4

 
 
 
 
 
Unwinding of discounts on provisions
$
(3.7
)
$
(3.8
)
$
(10.6
)
$
(12.1
)
Interest expense on long-term debt
(19.9
)
(23.0
)
(59.2
)
(71.0
)
Unrealized loss on derivative
(6.9
)
(6.6
)
(6.4
)
(8.6
)
Amortization of deferred financing, bank, financing fees and other
(4.2
)
(3.9
)
(12.2
)
(8.2
)
Net foreign exchange loss
(5.4
)
—

(25.0
)
—

Finance expense
$
(40.1
)
$
(37.3
)
$
(113.4
)
$
(99.9
)
Net finance expense
$
(39.7
)
$
3.1

$
(112.7
)
$
(50.5
)

yamanalogoa15.jpg | 9

 

6.    INCOME TAXES

Tax expense is recognized based on management's best estimate of the average annual income tax rate expected for the full financial year multiplied by the pre-tax income of the interim reporting period. The following table reconciles income taxes calculated at statutory rates with the income tax expense in the Condensed Consolidated Interim Statements of Operations:

 
For the three months ended September 30,
For the nine months ended September 30,
 
2016

2015

2016

2015

Earnings/(loss) before income taxes
$
8.9

$
10.7

$
8.6

$
(44.5
)
Canadian statutory tax rate (%)
26.5
%
26.5
%
26.5
%
26.5
%
 
 
 
 
 
Expected income tax expense/(recovery)
2.4

2.8

2.3

(11.8
)
Impact of higher/(lower) foreign tax rates (i)
2.3

56.6

(38.7
)
92.5

Impact of change in enacted tax rates (ii)
—

(0.4
)
(8.2
)
2.1

Permanent differences
(4.6
)
18.0

(46.0
)
(15.6
)
Unused tax losses and tax offsets not recognized in deferred tax assets
43.9

18.8

52.2

28.4

Tax effects of translation in foreign operations
(19.6
)
(120.0
)
48.4

(129.4
)
True-up of tax provisions in respect of prior years
(0.4
)
(0.6
)
8.9

0.5

Withholding taxes
2.4

4.1

6.2

7.4

Unrealized foreign exchange loss/(gain)
2.0

130.1

(70.8
)
201.8

Mining taxes on profit
1.9

8.3

8.1

20.0

Planned distribution of foreign earnings
(15.9
)
—

(15.9
)
—

Other
(3.4
)
—

(2.2
)
(2.4
)
Income tax expense/(recovery)
$
11.0

$
117.7

$
(55.7
)
$
193.5

Income tax expense/(recovery) is represented by:
 
 
 
 
Current income tax expense
$
13.9

$
38.0

$
34.5

$
67.5

Deferred income tax (recovery)/expense
(2.9
)
79.7

(90.2
)
126.0

Net income tax expense/(recovery)
$
11.0

$
117.7

$
(55.7
)
$
193.5


(i)
The Company operates in multiple foreign tax jurisdictions that have tax rates that differ from the Canadian statutory rate.
(ii)
On February 8, 2016, the Chilean government enacted changes to its tax law that reduced the withholding tax on the repatriation of dividend from 35% to 32%.


7.    EARNINGS/(LOSS) PER SHARE

Earnings/(Loss) per share are based on the weighted average number of common shares of the Company outstanding during the year. The diluted earnings/(loss) per share reflects the potential dilution of common share equivalents, such as outstanding share options and warrants, in the weighted average number of common shares outstanding during the period, if dilutive.

yamanalogoa15.jpg | 10

 
For the three months ended September 30,
For the nine months ended September 30,
 
2016

2015

2016

2015

Weighted average number of common shares (in thousands) - basic
947,590

946,563

947,374

933,180

Weighted average number of dilutive stock options (in thousands)
—

—

1

—

Weighted average number of dilutive Restricted Share Units (in thousands)
—

—

578

—

Weighted average number of common shares (in thousands) - diluted (i)
947,590

946,563

947,953

933,180

 
 
 
 
 
Basic and diluted earnings/(loss) per share from continuing operations
 
 
 
 
Net earnings/(loss) from continuing operations
$
(2.1
)
$
(107.0
)
$
64.3

$
(238.0
)
Earnings/(loss) per share from continuing operations - basic and diluted
$
—

$
(0.11
)
$
0.07

$
(0.26
)
 
 
 
 
 
Basic and diluted earnings/(loss) per share
 
 
 
 
Net earnings/(loss)
$
(11.8
)
$
(113.0
)
$
59.3

$
(272.6
)
Earnings/(loss) per share - basic and diluted
$
(0.01
)
$
(0.12
)
$
0.06

$
(0.29
)

(i)
Effect of dilutive securities - the potential shares attributable to 125,548 stock options and 653,771 restricted share units ("RSUs") in the three-month period ended September 30, 2016, and 1,342 stock options and 577,598 RSUs in the nine-month periods ended September 30, 2016 were anti-dilutive.


8.    OTHER COMPREHENSIVE INCOME
 
 
For the three months ended September 30,
For the nine months ended September 30,
 
2016

2015

2016

2015

Net change in unrealized gains on available-for-sale securities:
 

 

 
 
Change in fair value (net of tax)
$
0.3

$
(0.5
)
$
5.1

$
(0.4
)
 
 
 
 
 
Net change in fair value of hedging instruments
 

 

 
 
Change in fair value
4.5

(2.4
)
4.5

(0.6
)
Reclassification of losses recorded in earnings
—

—

—

12.7

Tax impact
—

0.6

—

(3.2
)
 
4.5

(1.8
)
4.5

8.9

Accumulated other comprehensive income attributable to equity shareholders
$
4.8

$
(2.3
)
$
9.6

$
8.5



9.    SUPPLEMENTARY CASH FLOW INFORMATION

(a)
Non-Cash Investing and Financing Transactions
 
For the three months ended September 30,
For the nine months ended September 30,
 
2016

2015

2016

2015

Interest capitalized to assets under construction
$
1.4

$
1.7

$
4.5

$
4.5

Non-cash land purchase agreement
$
21.2

$
—

$
21.2

$
—

Issue of common shares on acquisition of mineral interests (Note 15)
$
—

$
9.7

$
—

$
26.8

Issue of common shares on vesting of RSU (Note 15)
$
0.3

$
1.2

$
3.3

$
10.0

Issue of common shares on convertible debentures exercised
$
—

$
—

$
—

$
9.6



yamanalogoa15.jpg | 11

(b)    Net Change in Working Capital
 
For the three months ended September 30,
For the nine months ended September 30,
 
2016

2015

2016

2015

Net decrease/(increase) in:
 
 
 
 
Trade and other receivables
$
9.8

$
(14.2
)
$
40.4

$
14.0

Inventories
(21.9
)
(3.5
)
(3.9
)
(10.3
)
Other assets
1.1

11.9

(9.4
)
(9.8
)
Net decrease/(increase) in:
 
 
 
 
Trade payable and other payables (i)
15.6

(10.2
)
(4.8
)
(68.5
)
Other liabilities
11.2

(23.6
)
4.8

(57.2
)
Movement in above related to foreign exchange
(10.2
)
(0.9
)
(17.3
)
(11.6
)
Net change in working capital (ii)
$
5.6

$
(40.5
)
$
9.8

$
(143.4
)

(i)
Interest and other finance expenses of $12.4 million paid in the three months ended March 31, 2015 were included in change in working capital and have been reclassified to Interest and other finance expenses paid under financing activities.
(ii)
Change in working capital is net of items related to Property, Plant and Equipment.

(c)
Cash and Cash Equivalents
As at September 30,
2016

2015

Cash at bank
$
239.3

$
137.3

Bank short-term deposits
4.3

0.2

Total cash and cash equivalents of continuing operations (i)(ii)
$
243.6

$
137.5


(i)
Cash and cash equivalents consist of cash on hand, cash on deposit with banks, banks term deposits and highly liquid short-term investments with terms of less than 90 days from the date of acquisition.
(ii)
The balance as at September 30, 2015 has been restated to exclude the Mexican operations. Refer to Note 3a for details on the disposition.


10.    FAIR VALUE MEASUREMENT

(a)
Fair Value of Financial Instruments

The Company’s financial instruments include cash and cash equivalents, trade and other receivables, investments in financial securities, trade and other payables, long-term debt and derivative assets (liabilities). The carrying values of cash and cash equivalents, trade and other receivables, advances and deposits, trade and other payables approximate their fair values due to the relatively short-term nature of these instruments. Adjustments recognized in the balance sheet relating to concentrate sales are fair valued based on published and observable prices. Fair values of derivatives were based on market closing prices at period end, on published and observable market prices for similar instruments and on inputs derived principally from or collaborated by observable market data or other means, except for the determination of the fair value of warrants for which the Black-Scholes model was used.

There were no material differences between the carrying value and fair value of non-current financial assets and liabilities. As at September 30, 2016, the debt has a carrying value of $1.7 billion (December 31, 2015 — $1.8 billion), which is comprised of a revolving facility, senior debt notes and assumed debt with fair values of $175.8 million, $1.5 billion and $22.4 million, respectively (December 31, 2015 — $185.7 million, $1.5 billion and $42.2 million). The fair value was calculated by discounting the future cash flows by a discount factor based on an interest rate of 5% which reflects the Company's own credit risk. Fair values of available-for-sale securities were calculated based on current and available market information.

The Company assesses its financial instruments and non-financial contracts on a regular basis to determine the existence of any embedded derivatives which would be required to be accounted for separately at fair value and to ensure that any embedded derivatives are accounted for in accordance with the Company’s policy. As at September 30, 2016, there were no embedded derivatives requiring separate accounting other than concentrate sales.
The fair value hierarchy establishes three levels to classify the inputs to valuation techniques used to measure fair value. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs are quoted prices in markets that are not active, quoted prices for similar assets or liabilities in active markets, inputs other than quoted prices that are observable for the asset or liability (for example, interest rate and yield curves observable at commonly quoted intervals, forward pricing curves used to value currency and commodity contracts and volatility measurements used to value option contracts), or inputs that are derived principally from or corroborated by observable market data or other means. Level 3 inputs are unobservable (supported by little or no market activity). The fair value hierarchy gives the highest priority to Level 1 inputs and the lowest priority to Level 3 inputs.
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In assessing the fair value of a particular contract, the market participant would consider the credit risk of the counterparty to the contract. Consequently, when it is appropriate to do so, the Company adjusts its valuation models to incorporate a measure of credit risk. The following table summarizes the Company's financial assets and liabilities measured at fair value on a recurring basis:

yamanalogoa15.jpg | 12

As at September 30, 2016
Level 1
 Input
Level 2
 Input
Level 3
 Input
Aggregate
Fair Value
Assets:
 
 
 
 
 
Available-for-sale securities (Note 13(a))
$
26.8

$
—

$
—

$
26.8

 
Warrants
—

3.3

—

3.3

 
Derivative related assets (Note 13(a))
—

3.5

—

3.5

 
 
$
26.8

$
6.8

$
—

$
33.6

Liabilities:
 
 
 
 
 
Derivative related liabilities
$
—

$
2.2

$
—

$
2.2

 
 
$
—

$
2.2

$
—

$
2.2


As at December 31, 2015
Level 1
 Input
Level 2
 Input
Level 3
 Input
Aggregate
Fair Value
Assets:
 
 
 
 
 
Available-for-sale securities (Note 13(a))
$
3.3

$
—

$
—

$
3.3

 
Warrants
—

17.3

—

17.3

 
Derivative related assets (Note 13(a))
—

3.8

—

3.8

 
 
$
3.3

$
21.1

$
—

$
24.4

Liabilities:
 
 
 
 
 
Derivative related liabilities
$
—

$
—

$
—

$
—

 
 
$
—

$
—

$
—

$
—


Valuation Techniques
Available-for-Sale Securities
The fair value of publicly traded available-for-sale securities is determined based on a market approach reflecting the bid price of each particular security at the balance sheet date. The closing price is a quoted market price obtained from the exchange that is the principal active market for the particular security, and therefore available-for-sale securities are classified within Level 1 of the fair value hierarchy.

Derivative Instruments
The fair value of derivative instruments is determined using either present value techniques or option pricing models that utilize a variety of inputs that are a combination of quoted prices and market-corroborated inputs. The Company continues to monitor the potential impact of the recent instability of the financial markets, and will adjust its derivative contracts for credit risk based upon the credit default swap spread for each of the counterparties as warranted.

Gold Sales Contracts and Metal Concentrate Sales Contracts
Gold sales are made at market observable spot prices. Metal concentrate sales are based on market prices of measurement dates, which are two or three months after shipment depending on the terms of the off-take agreements. The sales are measured initially and then adjusted monthly on the basis of prices quoted on the London Metal Exchange until measurement date. Therefore, metal concentrate sales would be classified within Level 2 of the fair value hierarchy. The Company continues to monitor and, as warranted, adjust for credit risk based upon the credit default swap spread for each of the counterparties.

The following table summarizes unrealized derivative (losses)/gains:

 
For the three months ended September 30,
For the nine months ended September 30,
 
2016

2015

2016

2015

Non-hedge derivatives
 
 
 
 
Commodity contracts
$
(0.8
)
$
(14.0
)
$
(6.0
)
$
(10.8
)
Hedging instruments - time value
 
 
 
 
Currency contracts
(6.1
)
$
—

(0.4
)
$
—

Hedge ineffectiveness
 
 
 
 
Currency contracts
$
—

$
3.3

$
—

$
9.3

 
$
(6.9
)
$
(10.7
)
$
(6.4
)
$
(1.5
)


yamanalogoa15.jpg | 13

The following table summarizes realized derivative gains/(losses):

 
For the three months ended September 30,
For the nine months ended September 30,
 
2016

2015

2016

2015

Commodity contracts
$
0.9

$
25.6

$
0.9

$
37.7

Currency contracts
—

(17.8
)
—

(43.9
)
Share purchase warrants (i)
(6.2
)
—

15.2

—

 
$
(5.3
)
$
7.8

$
16.1

$
(6.2
)

(i)
Share purchase warrants includes proceeds from the sale of warrants received from Sandstorm Gold Ltd. (“Sandstorm”) on October 27th, 2015. The share purchase warrants, which were initially valued at $18.4 million, were sold on September 26, 2016.

Market risk is the risk that changes in market factors, such as foreign exchange, commodity prices or interest rates will affect the value of the Company's financial instruments. Market risks are managed by either accepting the risk or mitigating it through the use of derivatives and other economic hedges. As at September 30, 2016, there are no substantial changes to the market risk described in Note 16: Financial Instruments to the Consolidated Annual Financial Statements, except for the change in managing the Company’s currency risk as discussed below.

The Company’s sales are predominantly denominated in United States Dollars. The Company is primarily exposed to currency fluctuations relative to the United States Dollar as a portion of the Company’s operating costs and capital expenditures are denominated in foreign currencies; predominately the Brazilian Real, the Argentine Peso, the Chilean Peso, the Mexican Peso and the Canadian Dollar. Monetary assets denominated in foreign currencies are also exposed to foreign currency fluctuations. These potential currency fluctuations could have a significant impact on production costs and affect the Company’s earnings and financial condition.

Following a period of sustained decline in the aforementioned currencies, as at December 31, 2015, the Company temporarily halted its currency hedging program. To limit the variability in the Company’s expected operating expenses denominated in Brazilian Reais, the Company restarted its hedging program in May 2016. It has entered into zero-cost collar contracts totaling 510 million Reais with purchase of call options at an average strike price of 3.40 Reais per USD and sale of put options at an average strike price of 4.13 Reais per USD. The term of the cash flow hedge is from May 2016 to April 2017. In October 2016, the Company entered into an additional zero-cost collar contracts totaling $400.0 million Reais with the purchase of call options at an average strike price of 3.25 Reais per USD and sale of put options at an average strike price of 3.79 Reais per USD. The term of the cash flow hedge is from May 2017 to December 2017.


11.    INVENTORIES
As at,
September 30,
2016

December 31,
2015

Product inventories
$
59.8

$
52.4

Metal in circuit and gold in process
65.6

70.0

Ore stockpiles
19.5

34.1

Materials and supplies
105.5

113.5

 
$
250.4

$
270.0


The amount of inventories recognized as an expense during the three months and nine month periods ended September 30, 2016 was $261.2 million and $744.9 million, respectively (2015 - $248.0 million and $762.7 million) and is included in cost of sales excluding depletion, depreciation

yamanalogoa15.jpg | 14

and amortization. For the three months and nine months ended September 30, 2016, charges of $2.5 million and $4.7 million, respectively, were recorded to adjust inventory to net realizable value (2015 - $0.2 million and $0.7 million), which are included in cost of sales excluding depletion, depreciation and amortization.


12.    PROPERTY, PLANT AND EQUIPMENT
 
Mining property costs subject
to depletion
(i)

Mining property costs not subject to depletion
(ii)

Land, building,
plant & equipment 


Total


Cost, January 1, 2015
$
5,068.0

$
6,814.9

$
2,709.7

$
14,592.6

Additions
70.9

274.9

33.0

378.8

Reclassification, transfers and other non-cash movements (iii)
384.0

(531.9
)
171.2

23.3

Change in decommissioning, restoration & similar liabilities
(0.5
)
(0.6
)
—

(1.1
)
Disposals
0.1

(10.6
)
(111.7
)
(122.2
)
Cost, December 31, 2015
$
5,522.5

$
6,546.7

$
2,802.2

$
14,871.4

Additions
148.9

209.6

35.7

394.2

Reclassification, transfers and other non-cash movements (iii)
100.1

(95.8
)
24.9

29.2

Change in decommissioning, restoration & similar liabilities
21.1

1.1

—

22.2

Disposals
(329.8
)
(369.2
)
(170.2
)
(869.2
)
Cost, September 30, 2016
$
5,462.8

$
6,292.4

$
2,692.6

$
14,447.8

Accumulated depreciation, January 1, 2015
$
1,692.2

$
968.8

$
1,004.0

$
3,665.0

Depreciation for the period
310.6

7.4

209.1

527.1

Impairment
1,207.0

1,339.2

—

2,546.2

Reclassification, transfers and other non-cash movements
1.5

(36.7
)
35.2

—

Disposals
—

(2.9
)
(72.7
)
(75.6
)
Accumulated depreciation, December 31, 2015
$
3,211.3

$
2,275.8

$
1,175.6

$
6,662.70

Depreciation for the period
190.8

—

144.6

335.4

Disposals
(329.8
)
(295.7
)
(89.1
)
(714.6
)
Accumulated depreciation, September 30, 2016
$
3,072.3

$
1,980.1

$
1,231.1

$
6,283.5

Carrying value, December 31, 2015
$
2,311.2

$
4,270.9

$
1,626.6

$
8,208.7

Carrying value, September 30, 2016
$
2,390.5

$
4,312.3

$
1,461.5

$
8,164.3


(i)
The following table shows the reconciliation of capitalized stripping costs incurred in the production phase:
As at,
September 30,
2016

December 31,
2015

Balance, beginning of period
$
238.3

$
252.3

Additions
77.1

48.5

Amortization
(17.7
)
(19.2
)
Impairment
—

(43.3
)
Balance, end of period
$
297.7

$
238.3


(ii)
Mining property costs not subject to depletion include: capitalized mineral reserves and exploration potential acquisition costs, capitalized exploration & evaluation costs, capitalized development costs, assets under construction, capital projects and acquired mineral resources at operating mine sites. Mining property costs not subject to depletion are composed of the following:
As at,
September 30,
2016

December 31,
2015

Projects with mineral reserves
$
2,146.6

$
2,103.6

Exploration potential
2,099.8

2,137.1

Mines under construction
65.9

30.2

Total
$
4,312.3

$
4,270.9


(iii)
Reclassification, transfers and other non-cash movements for the period includes $6.3 million (2015 - $23.3 million) in stockpile inventory which is not expected to be processed within one year for a cumulative balance of $36.7 million.


yamanalogoa15.jpg | 15


13.    SELECTED COMPOSITION NOTES

a)
Other Financial Assets
As at,
September 30,
2016

December 31,
2015

Income tax recoverable and installments
$
8.0

$
34.8

Tax credits recoverable (i)
56.9

64.6

Derivative related asset
3.5

3.8

Restricted cash
1.0

1.0

Investments in financial securities (ii)
30.1

20.6

Other
15.8

4.8

 
$
115.3

$
129.6

Current
73.7

102.3

Non-current
41.6

27.3

 
$
115.3

$
129.6


(i)
Tax credits recoverable classified as other financial assets consist of sales taxes which are recoverable in the form of a refund from the respective jurisdictions in which the Company operates.
(ii)
Investments in financial securities includes available-for-sale (“AFS”) securities and warrants with a cost of $39.3 million (2015 - $35.1 million) and a fair value of $30.1 million (2015 - $20.6 million). Pursuant to the sale of the Mercedes mine to Premier Gold Inc, the Company received 6,000,000 common shares of Premier Gold Inc. and 3,000,000 common share purchase warrants that are exercisable at C$4.25 per common share for the next 24 months. During the period ended June 30, 2016, the Company received common shares of Aura Minerals Inc. as consideration for the sale of Ernesto Pau-a-Pique ("EPP"). The Company's total ownership in Premier Gold and Aura Minerals does not represent a significant interest, thus, the Company does not have control over Premier Gold or Aura Minerals. AFS are reviewed quarterly for significant or prolonged decline in fair value requiring impairment and more frequently when economic or market concerns warrant such evaluation. The review includes an analysis of the fact and circumstances of the financial assets, the market price of actively traded securities and other financial assets, the severity of loss, the financial position and near-term prospects of the investment, credit risk of the counterparties, the length of time the fair value has been below costs, both positive and negative evidence that the carrying amount is recoverable within a reasonable period of time, management’s intent and ability to hold the financial assets for a period of time sufficient to allow for any anticipated recovery of fair value and management’s market view and outlook. On September 26, 2016 the Company sold all of its Warrants held in Sandstorm for $33.5 million cash. The warrants were originally issued by Sandstorm to Yamana as part of the consideration for certain metal purchase arrangements relating to copper and silver entered into with Sandstorm in 2015.

b)
Other Provisions and Liabilities
As at,
September 30,
2016

December 31,
2015

Provision for repatriation taxes payable (i)
$
34.9

$
70.3

Provision for taxes
27.8

15.3

Deferred revenue on metal agreements - Altius (ii)
60.8

—

Deferred revenue on metal agreements - Sandstorm (iii)
166.6

170.4

Other provisions and liabilities (iv)
120.3

110.8

 
$
410.4

$
366.8

Current
27.3

18.1

Non-current
383.1

348.7

 
$
410.4

$
366.8


(i)
The Company is subject to additional taxes in Chile on the repatriation of profits to its foreign shareholders.  Total taxes in the amount of $34.9 million (December 31, 2015 - $70.3 million) have been accrued on the assumption that the profits will be repatriated.
(ii)
On March 31, 2016, the Company entered into a copper purchase agreements with Altius Minerals Corporation (“Altius”) (the “Copper Purchase Agreement”), pursuant to which Altius paid the Company total advanced payments of $60 million in cash consideration plus 400,000 Altius warrants valued at $1.1 million. The Copper Purchase Agreement provides Altius with the right to receive deliveries of copper referenced to production from the Company’s Chapada mine in Brazil.  The advanced payments have been accounted as deferred revenue.  The Company records a portion of the deferred revenue as sales, when substantial risks and rewards of the metals have been transferred to Altius. Movement of deferred revenue of $0.4 million in the year to date is related to the amortization of deferred revenue on metal delivery.
(iii)
Deferred revenue on metal agreements include the proceeds received from three metal agreements signed with Sandstorm Gold Ltd. (“Sandstorm”) on October 27th, 2015. Sandstorm paid the Company total cash of $152 million and issued the Company 15 million common share purchase warrants (valued at $18.4 million at inception) with a five year term and strike price of $3.50. The metal purchase agreements include a silver purchase contract referenced to production from Cerro Moro, Minera Florida and Chapada, a copper purchase transaction referenced to production from Chapada, and a gold purchase transaction referenced to production from Agua Rica. Refer to details of the terms of the agreement disclosed in note 26 Other Provisions and Liabilities to the Company's Annual Audited Consolidated Financial Statements for the year ended December 31, 2015. Movement of deferred revenue of $3.6 million in the year to date is related to the amortization of deferred revenue on metal delivery.
(iv)
Other provisions and liabilities include provisions relating to legal proceedings, silicosis and other. In 2004, a former director of Northern Orion (now named 0805346 B.C. Ltd.) commenced proceedings in Argentina against Northern Orion claiming damages in the amount of $177.0 million for alleged breaches of agreements entered into with the plaintiff.  The plaintiff alleged that the agreements entitled him to a pre-emptive right to participate in acquisitions by Northern Orion in Argentina and claimed damages in connection with the acquisition by Northern Orion of its 12.5% equity interest in the Alumbrera Mine.  On August 22, 2008, the National Commercial Court No. 13 of the

yamanalogoa15.jpg | 16

City of Buenos Aires issued a first-instance judgment rejecting the claim.  The plaintiff appealed this judgment to the National Commercial Appeals Court.  On May 22, 2013, the appellate court overturned the first-instance decision.  The appellate court determined that the plaintiff was entitled to make 50% of Northern Orion’s investment in the Alumbrera acquisition, although weighted the chance of the plaintiff’s 50% participation at 15%.  The matter was remanded to the first-instance court to determine the value.  Northern Orion appealed this decision through to the Supreme Court of Argentina, but on October 28, 2014, the Supreme Court denied Northern Orion’s motion for leave to appeal and accordingly the determination of the National Commercial Appeals Court regarding the plaintiff’s entitlement to damages stands. The court appointed valuator subsequently delivered an assessment order of the value of lost opportunity to the plaintiff at $244 million. The Company succeeded in having the assessment order annulled on November 13, 2015, the National Commercial Court of Appeals rejected the plaintiff’s appeal against the annulment of the award. As no further action before the expiration of the term for any possible appeal on December 18, 2015, the annulment of the $244 million award made by the valuator is definitive.  A new valuator was appointed and an “arbitral report” was rendered on September 13, 2016. Such report provides only a suggestion of value at $54.2 million. While this represents a significant improvement over the original annulled award, of $244 million, the amount suggested in the current report continues to be well in excess of the amount Northern Orion considers reflective of the claim. Northern Orion has determined that there are several flaws in this latest report, as was the case in the first report, and that the instructions of the court pursuant to which the arbitration is being conducted were not followed. In addition, the latest report is advisory of the amount of the award and is not a determinative award. As such, an application has been made to annul the report on similar grounds to the application to annul the first report which succeeded. Northern Orion believes that pursuant to the instructions for conducting the valuation, any award should be at most de minimis or nominal. In addition to the application for an annulment of the current arbitration, Northern Orion will continue to consider all its legal options to defend its interests.


14.    LONG-TERM DEBT
As at,
September 30,
2016

December 31,
2015

$500 million senior debt notes, issued on June 25, 2014
$
495.5

$
495.0

$300 million senior debt notes, issued on June 10, 2013
298.6

298.4

$500 million senior debt notes, issued on March 23, 2012
498.0

497.7

$270 million senior debt notes, issued on December 18, 2009
254.8

254.7

$1 billion revolving facility (ii)
175.8

185.7

Long-term debt from 50% interest of Canadian Malartic
22.4

42.2

Total debt
$
1,745.1

$
1,773.7

Less: current portion of long-term debt
$
(93.9
)
$
(97.0
)
Long-term debt (i)
$
1,651.2

$
1,676.7


(i) Balances are net of transaction costs of $12.6 million, net of amortization (December 31, 2015 - $13.7 million).
(ii) During the nine months ended September 30, 2016, the Company repaid $285.0 million and drew $275.0 million on its revolving facility. The Company will, from time to time, repay balances outstanding on its revolving credit and intends to renew the credit facility upon maturity in 2021.

The following is a schedule of long-term debt principal repayments which includes corporate debt, the revolving facility, and debt assumed from the 50% interest in Canadian Malartic which is neither corporate nor guaranteed by the Company: 
 
Long-term Debt

2016
$
76.5

2017
17.9

2018
111.5

2019
181.8

2020
85.0

2021
180.0

2022
200.0

2023
265.0

2024
640.0

 
$
1,757.7




yamanalogoa15.jpg | 17

15.    SHARE CAPITAL
 
(a)
Common Shares Issued and Outstanding

The Company is authorized to issue an unlimited number of common shares at no par value and a maximum of eight million first preference shares. There were no first preference shares issued or outstanding as at September 30, 2016 (2015: nil).
For the nine months ended September 30,
2016
2015
 
Number of

 
Number of

 

Issued and outstanding - 947,599,397 common shares
common shares

Amount

common shares

Amount

(December 31, 2015 - 947,038,778 common shares):
(in thousands)

(in millions)

(in thousands)

(in millions)

Balance, as at January 1,
947,039

$
7,625.4

878,053

$
7,347.3

Public offering (net of issue costs)
—

—

56,465

227.9

Issued on acquisition of mineral interests
—

—

7,916

26.8

Convertible debentures exercised
—

—

3,177

9.6

Exercise of options and share appreciation rights
56

0.3

—

—

Issued on vesting of restricted share units
372

3.3

968

10.0

Dividend reinvestment plan (i)
132

0.3

81

0.2

Share cancellation
—

—

(40
)
(0.3
)
Balance, end of period
947,599

$
7,629.3

946,620

$
7,621.5


(i)
The Company has a dividend reinvestment plan to provide holders of common shares a simple and convenient method to purchase additional common shares by electing to automatically reinvest all or any portion of cash dividends paid on common shares held by the plan participant without paying any brokerage commissions, administrative costs or other service charges. As at September 30, 2016, shareholders holding a total of 11,494,966 shares have subscribed to the plan.

(b) Dividends Paid and Declared
 
For the three months ended September 30,
For the nine months ended September 30,
 
2016

2015

2016

2015

Dividends paid
$
4.7

$
13.9

$
23.2

$
41.1

Dividends declared in respect of the period
$
4.9

$
14.8

$
14.5

$
43.3

Dividend paid (per share)
$
0.005

$
0.015

$
0.025

$
0.045

Dividend declared in respect of the period (per share)
$
0.005

$
0.015

$
0.015

$
0.045



16.    SHARE-BASED PAYMENTS
 
The total expense relating to share-based payments includes accrued compensation expense related to plans granted and adjustments to compensation associated with mark-to-market adjustments on cash-settled plans, as follows:
 
For the three months ended September 30,
For the nine months ended September 30,
 
2016

2015

2016

2015

Accrued expense on equity-settled compensation plans
$
0.4

$
1.7

$
1.9

$
8.2

Accrued expense on cash-settled compensation plans
(0.1
)
0.5

1.1

1.5

Total for instruments granted
$
0.3

$
2.2

$
3.0

$
9.7

Compensation expense for Brio Gold Inc.
1.7

—

5.2

—

Mark-to-market (recovery)/loss on cash-settled plans
(3.1
)
(3.7
)
8.4

(6.1
)
Total expense recognized as compensation expense
$
(1.1
)
$
(1.5
)
$
16.6

$
3.6

 
As at,
September 30,
2016

December 31,
2015

Total carrying amount of liabilities for cash-settled arrangements
$
21.3

$
12.3



yamanalogoa15.jpg | 18

The following table summarizes the equity instruments outstanding related to share-based payments as at:
As at (In thousands)
September 30,
2016

December 31,
2015

Options (i)
2,243

2,961

Restricted share units ("RSU") (ii)
888

994

Deferred share units ("DSU") (iii)
3,740

3,520

Performance share units ("PSU") (iv)
1,861

1,047


(i)
During the three months ended September 30, 2016, 25,000 options were exercised.
(ii)
During the three months ended September 30, 2016, the Company granted 227 RSUs with a weighted average grant date fair value of C$7.61 per RSU.
(iii)
During the three months ended September 30, 2016, the Company granted 44,399 DSUs and recorded an expense of $0.3 million.
(iv)
During the three months ended September 30, 2016, the Company granted 1,592 PSU at a grant price of C$7.58.


17.    CAPITAL MANAGEMENT

The Company’s objectives in managing capital are to ensure sufficient liquidity to pursue its strategy of organic growth combined with strategic acquisitions, to ensure the externally imposed capital requirements relating to its long-term debt are being met, and to provide returns to its shareholders. The Company defines capital that it manages as net worth, which is comprised of total shareholders’ equity and debt obligations (net of cash and cash equivalents). Refer to Note 15: Share Capital and Note 14: Long-term Debt for a quantitative summary of these items.

The Company manages its capital structure and makes adjustments to it in light of general economic conditions, the risk characteristics of the underlying assets and the Company’s working capital requirements. In order to maintain or adjust its capital structure, the Company, upon approval from its Board of Directors, may issue shares, pay dividends, or undertake other activities as deemed appropriate under the specific circumstances. The Board of Directors reviews and approves any material transactions out of the ordinary course of business, including proposals on acquisitions or other major investments or divestitures, as well as capital and operating budgets. The Company has not made any changes to its policies and processes for managing capital during the year.

The Company has the following externally imposed financial covenants on certain of its debt arrangements:
(a)
Tangible net worth of at least $2.3 billion.
(b)
Maximum net total debt (debt less cash) to tangible net worth of 0.75.
(c)
Leverage ratio (net total debt/EBITDA) to be less than or equal to 3.5:1.

Not meeting these capital requirements could result in a condition of default by the Company. As at September 30, 2016, the Company has met all of the externally imposed financial covenants.


18.    OPERATING SEGMENTS
 
Effective January 1, 2016, the Company’s determination of its reportable operating segments was revised to reflect the revisions to its portfolio approach on its assets as, at this point in time, no producing or development stage assets are considered to be non-core. The Company has seven core reportable operating segments which include the following mines: the Chapada mine in Brazil, El Peñón mine in Chile, Canadian Malartic mine in Canada (50% interest), Gualcamayo mine in Argentina, Minera Florida in Chile, Jacobina in Brazil and Brio Gold Inc. with assets in Brazil. The Company aggregates and discloses the financial results of non-reportable operating segments which include, but are not limited to: investments in associate and corporate entities as these operating segments do not meet the quantitative thresholds to qualify as reportable operating segments. The Company’s chief operating decision makers perform planning, review operation results, assess performance and make resource allocation decisions for each of these segments at an operational level on a number of measures, which include mine operating earnings, production levels and unit production costs.  General and administrative, exploration and evaluation, finance income and costs, impairment charges and reversals, and investment write-down are managed on a consolidated basis and are therefore not reflected in segment income. Comparative information of prior periods has been restated to conform to the current reportable segment format and definition.

(a)
Information about Assets and Liabilities

Property, plant and equipment referred to below consist of land, buildings, equipment, mining properties subject to depletion and mining properties not subject to depletion which include assets under construction and exploration and evaluation costs.


yamanalogoa15.jpg | 19

As at September 30, 2016
Chapada
El Peñón
Canadian Malartic
Gualca-mayo
Minera Florida
Jacobina
Brio
Gold Inc.
Corporate and
other (ii)
Total
Property, plant and equipment
$
641.8

$
1,153.0

$
1,397.5

$
408.7

$
276.4

$
728.7

$
498.7

$
3,059.5

$
8,164.3

Goodwill and intangibles
$
—

$
7.2

$
427.7

$
1.5

$
—

$
—

$
—

$
49.2

$
485.6

Non-current assets
$
662.6

$
1,181.1

$
1,840.8

$
410.3

$
280.6

$
744.4

$
525.6

$
3,249.9

$
8,895.3

Total assets
$
750.4

$
1,250.0

$
1,887.3

$
534.3

$
306.9

$
767.9

$
565.5

$
3,502.2

$
9,564.5

Total liabilities
$
232.3

$
373.9

$
436.8

$
149.0

$
114.8

$
176.9

$
121.3

$
3,032.8

$
4,637.8


As at December 31, 2015
Chapada
El Peñón
Canadian Malartic
Gualca-mayo
Minera Florida
Jacobina
Brio
Gold Inc.
Corporate and
other (ii)
Total
Property, plant and equipment
$
587.7

$
1,095.6

$
1,439.4

$
526.9

$
246.8

$
696.7

$
428.1

$
3,187.5

$
8,208.7

Goodwill and intangibles
$
—

$
8.5

$
427.7

$
1.5

$
—

$
—

$
—

$
51.8

$
489.5

Non-current assets
$
596.8

$
1,133.9

$
1,872.2

$
528.4

$
248.3

$
712.8

$
464.7

$
3,312.0

$
8,869.1

Total assets (i)
$
697.2

$
1,208.5

$
1,930.7

$
659.6

$
277.6

$
740.6

$
503.5

$
3,500.4

$
9,518.1

Total liabilities (i)
$
239.1

$
322.1

$
461.6

$
173.4

$
96.4

$
184.4

$
111.9

$
3,064.6

$
4,653.5


(i)
Total assets and total liabilities of "Corporate and other" include assets and liabilities held for sale EPP and Mercedes.
(ii)
"Corporate and other" includes Agua Rica ($1.1 billion), Mexican operations, other advanced stage development, exploration properties and investments in associate and corporate entities.

(b)
Information about Profit and Loss
For the three months ended
September 30, 2016
Chapada
El Peñón
Canadian Malartic
Gualca-mayo
Minera Florida
Jacobina
Brio
Gold Inc.
Corporate and
other (iii)
Total
Revenues (ii)
$
67.8

$
99.8

$
102.4

$
55.5

$
39.6

$
37.5

$
61.7

$
—

$
464.3

Cost of sales excluding depletion, depreciation and amortization
(43.0
)
(52.2
)
(47.4
)
(33.5
)
(21.4
)
(24.8
)
(38.9
)
—

(261.2
)
Gross margin excluding depletion, depreciation and amortization
24.8

47.6

55.0

22.0

18.2

12.7

22.8

—

203.1

Depletion, depreciation and amortization
(9.8
)
(27.5
)
(31.2
)
(10.1
)
(9.3
)
(8.5
)
(13.9
)
(1.8
)
(112.1
)
Segment income/(loss)
$
15.0

$
20.1

$
23.8

$
11.9

$
8.9

$
4.2

$
8.9

$
(1.8
)
$
91.0

Other expenses (i)
 
$
(82.1
)
Earnings before taxes
 
$
8.9

Income tax expense
 
(11.0
)
Net loss from continuing operations
 
$
(2.1
)
Net loss from discontinued operation
 
$
(9.7
)
Net loss
 
$
(11.8
)


yamanalogoa15.jpg | 20

For the three months ended
September 30, 2015
Chapada
El Peñón
Canadian Malartic
Gualca-mayo
Minera Florida
Jacobina
Brio
Gold Inc.
Corporate and
other (iii)
Total
Revenues (ii)
$
99.7

$
88.3

$
85.8

$
43.6

$
34.0

$
30.2

$
42.8

$
—

$
424.4

Cost of sales excluding depletion, depreciation and amortization
(47.0
)
(53.8
)
(41.5
)
(39.0
)
(22.3
)
(17.1
)
(27.3
)
—

(248.0
)
Gross margin excluding depletion, depreciation and amortization
52.7

34.5

44.3

4.6

11.7

13.1

15.5

—

176.4

Depletion, depreciation and amortization
(7.7
)
(31.2
)
(27.7
)
(16.9
)
(15.3
)
(5.2
)
(17.2
)
(3.1
)
(124.3
)
Segment income/(loss)
$
45.0

$
3.3

$
16.6

$
(12.3
)
$
(3.6
)
$
7.9

$
(1.7
)
$
(3.1
)
$
52.1

Other expenses (i)
 
$
(41.4
)
Loss before taxes
 
$
10.7

Income tax expense
 
(117.7
)
Net loss from continuing operations
 
$
(107.0
)
Net loss from discontinued operations
 
$
(6.0
)
Net Loss
 
$
(113.0
)

(i)
Other expenses are comprised of general and administrative expense of $24.8 million (2015 -$26.4 million), exploration and evaluation expense of $3.8 million (2015 - $4.8 million), net finance expense of $39.7 million (2015 - $3.1 million) and other expense of $13.8 million (2015 - $13.3 million).
(ii)
Revenues are derived from sales of gold of $396.1 million (2015 - $333.3 million), silver of $30.1 million (2015 - $32.1 million) and copper of $47.2 million (2015 - $83.0 million) net of revenue adjustments relating to treatment and refining charges of gold and copper concentrate, sales taxes, metal price adjustments related to concentrate revenue and other adjustments totalling negative $9.1 million (2015 - negative $24.0 million).
(iii)
"Corporate and other" includes Agua Rica as well as other advanced stage development, exploration properties and investments in associate and corporate entities.

For the nine months ended
September 30, 2016
Chapada
El Peñón
Canadian Malartic
Gualca-mayo
Minera Florida
Jacobina
Brio
Gold Inc.
Corporate and
other (iii)
Total
Revenues (ii)
$
200.2

$
285.6

$
278.1

$
150.0

$
102.5

$
110.1

$
176.8

$
—

$
1,303.3

Cost of sales excluding depletion, depreciation and amortization
(139.4
)
(147.3
)
(132.8
)
(101.0
)
(59.7
)
(65.0
)
(99.7
)
—

(744.9
)
Gross margin excluding depletion, depreciation and amortization
60.8

138.3

145.3

49.0

42.8

45.1

77.1

—

558.4

Depletion, depreciation and amortization
(32.7
)
(77.5
)
(90.4
)
(29.4
)
(28.5
)
(27.9
)
(40.5
)
(7.1
)
(334.0
)
Segment income/(loss)
$
28.1

$
60.8

$
54.9

$
19.6

$
14.3

$
17.2

$
36.6

$
(7.1
)
$
224.4

Other expenses (i)
 
$
(215.8
)
Earnings before taxes
 
$
8.6

Income tax recovery
 
55.7

Net earnings from continuing operations
 
$
64.3

Net loss from discontinued operation
 
$
(5.0
)
Net earnings
 
$
59.3



yamanalogoa15.jpg | 21

For the nine months ended
September 30, 2015
Chapada
El Peñón
Canadian Malartic
Gualca-mayo
Minera Florida
Jacobina
Brio
Gold Inc.
Corporate and
other (iii)
Total
Revenues (ii)
$
295.2

$
295.5

$
248.0

$
137.1

$
104.3

$
79.5

$
121.9

$
—

$
1,281.5

Cost of sales excluding depletion, depreciation and amortization
(161.3
)
(161.1
)
(125.0
)
(107.9
)
(66.7
)
(58.4
)
(82.3
)
—

(762.7
)
Gross margin excluding depletion, depreciation and amortization
133.9

134.4

123.0

29.2

37.6

21.1

39.6

—

518.8

Depletion, depreciation and amortization
(29.6
)
(101.8
)
(80.3
)
(40.6
)
(46.7
)
(20.3
)
(37.7
)
(9.5
)
(366.5
)
Segment income/(loss)
$
104.3

$
32.6

$
42.7

$
(11.4
)
$
(9.1
)
$
0.8

$
1.9

$
(9.5
)
$
152.3

Other expenses (i)
 
$
(196.8
)
Loss before taxes
 
$
(44.5
)
Income tax expense
 
(193.5
)
Net loss from continuing operations
 
$
(238.0
)
Net loss from discontinued operations
 
$
(34.6
)
Net Loss
 
$
(272.6
)

(i)
Other expenses are comprised of general and administrative expense of $70.3 million (2015 -$83.2 million), exploration and evaluation expense of $11.9 million (2015 - $12.5 million), net finance expense of $112.7 million (2015 - $50.5 million) and other expense of $20.9 million (2015 - $50.6 million).
(ii)
Revenues are derived from sales of gold of $1,093.7 million (2015 - $989.8 million), silver of $84.7 million (2015 - $107.6 million) and copper of 150.4 million (2015 - $252.0 million) net of revenue adjustments relating to treatment and refining charges of gold and copper concentrate, sales taxes, metal price adjustments related to concentrate revenue and other adjustments totalling negative $25.5 million (2015 - negative $67.9 million).
(iii)
"Corporate and other" includes Agua Rica as well as other advanced stage development, exploration properties and investments in associate and corporate entities.

Capital expenditures
Chapada
El Peñón
Canadian Malartic
Gualca-mayo
Minera Florida
Jacobina
Brio
Gold Inc.
Corporate and other
Total
For the three months ended September 30, 2016
$
29.1

$
23.6

$
14.2

$
6.3

$
21.7

$
13.8

$
16.2

$
18.9

$
143.8

For the three months ended September 30, 2015
$
15.5

$
19.2

$
19.4

$
5.2

$
8.4

$
8.2

$
7.6

$
13.5

$
97.0

For the nine months ended September 30, 2016
$
65.0

$
63.9

$
44.5

$
14.4

$
34.9

$
31.0

$
39.8

$
50.5

$
344.0

For the nine months ended September 30, 2015
$
42.5

$
60.0

$
43.2

$
12.7

$
32.5

$
20.8

$
23.0

$
27.6

$
262.3



19.    CONTRACTUAL COMMITMENTS
 
Construction and Service Contracts
As at,
September 30,
2016

December 31,
2015

Within 1 year
$
341.5

$
361.2

Between 1 to 3 years
224.2

240.6

Between 3 to 5 years
33.2

47.3

After 5 years
2.7

0.2

 
$
601.6

$
649.3



yamanalogoa15.jpg | 22

Operating Leases
 
The aggregate amount of minimum lease payments under non-cancellable operating leases are as follows:
As at,
September 30,
2016

December 31,
2015

Within 1 year
$
2.0

$
4.3

Between 1 to 3 years
2.0

4.5

Between 3 to 5 years
—

0.1

After 5 years
—

—

 
$
4.0

$
8.9



20.    CONTINGENCIES
 
Due to the size, complexity and nature of the Company’s operations, various legal and tax matters arise in the ordinary course of business. The Company accrues for such items when a liability is both probable and the amount can be reasonably estimated.  Certain conditions may exist as of the date the financial statements are issued that may result in a loss to the Company, but which will be resolved only when one or more future events occur or fail to occur. The impact of any resulting loss from such matters affecting these Condensed Consolidated Interim Financial Statements of the Company may be material.
 
In December 2012, the Company received assessments from the Brazilian federal tax authorities disallowing certain deductions relating to financial instruments used to finance Brazilian operations for the years 2007 to 2010. The Company believes that these financial instruments were issued on commercial terms permitted under applicable laws and is appealing these assessments. As such, the Company does not believe it is probable that any amounts will be paid with respect to these assessments with the Brazilian authorities and the amount and timing of any assessments cannot be reasonably estimated.

On August 2, 2016, Canadian Malartic General Partnership (“CMGP”), the operator of the Canadian Malartic mine, was served with a class action lawsuit with respect to allegations involving the Canadian Malartic mine. Beginning in the spring of 2015, Canadian Malartic GP has been working collaboratively with the community of Malartic and its citizens to develop a “Good Neighbour Guide” that addresses the allegations contained in the lawsuit. Yamana and Canadian Malartic GP will take all reasonable steps necessary to defend themselves from this lawsuit. At the current time, the Company does not believe it is probable that any amounts will be paid with respect to these lawsuits and the amount and timing cannot be reasonably estimated.


21.    EVENTS AFTER THE REPORTING PERIOD
 
On October 17, 2016, the Company announced that its wholly owned subsidiary, Brio Gold Inc. had filed a preliminary prospectus with the securities regulatory authorities in each of the provinces and territories of Canada in connection with qualifying a secondary offering of common shares held by Yamana, which Brio Shares will be transferred to purchasers through the exercise of purchase rights. Each purchase right shall provide Yamana Shareholders with an opportunity to purchase from Yamana its Brio Shares at an exercise price to be determined in the context of the market.

Subsequent to quarter end, the Company entered into additional zero-cost collar contracts totaling $400.0 million Reais with average call and put strike prices of $3.25 and $3.80 respectively.


*************

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