EX-99.2 3 ex992q3_2018fs.htm Exhibit

EXHIBIT 99.2





 yamanalogo.jpg

CONDENSED CONSOLIDATED
INTERIM FINANCIAL STATEMENTS
 
FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2018

(Unaudited)

                            
 
CONTENTS
 
Page
 
Condensed Consolidated Interim Statements of Operations
 
Condensed Consolidated Interim Statements of Comprehensive (Loss) Income
 
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:
 
1:
Nature of Operations
  2:
Basis of Preparation and Presentation
  3:
Recent Accounting Pronouncements
  4:
Divestitures
  5:
Revenue
  6:
Other Expenses (Income), Net
  7:
Finance Income and Expense
  8:
Income Taxes
  9:
Earnings (Loss) Per Share
  10:
Supplementary Cash Flow Information
11:
Financial Instruments
12:
Inventories
13:
Selected Composition Notes
14:
Property, Plant and Equipment
15:
Investment in Associate
16:
Long-Term Debt
17:
Share Capital
18:
Share-Based Payments
19:
Non-Controlling Interests
20:
Capital Management
21:
Operating Segments
22:
Contingencies

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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 US Dollars except for shares and per share amounts, unaudited)
2018

2017
(restated) (i)

2018

2017
(restated) (i)

Revenue (Note 5)
$
416.8

$
493.4

$
1,298.0

$
1,325.0

Cost of sales excluding depletion, depreciation and amortization
(233.5
)
(279.0
)
(726.7
)
(778.0
)
Gross margin excluding depletion, depreciation and amortization
$
183.3

$
214.4

$
571.3

$
547.0

Depletion, depreciation and amortization
(109.4
)
(108.0
)
(307.4
)
(325.9
)
Impairment of mining properties (Note 4)
—

—

(103.0
)
—

Mine operating earnings
$
73.9

$
106.4

$
160.9

$
221.1

 


 
 
 
Expenses


 


 
General and administrative
(20.7
)
(28.5
)
(70.8
)
(79.7
)
Exploration and evaluation
(2.5
)
(4.9
)
(9.4
)
(14.2
)
Share of earnings of associate (Note 15)
0.5

—

1.0

—

Other (expenses) income, net (Note 6)
(14.9
)
26.9

20.4

(6.9
)
Impairment of non-operating mining properties (Note 4)
(89.0
)
—

(160.0
)
—

Operating (loss) earnings
$
(52.7
)
$
99.9

$
(57.9
)
$
120.3

Finance income (Note 7)
$
0.4

$
4.1

$
8.6

$
2.6

Finance expense (Note 7)
(40.2
)
(39.5
)
(111.7
)
(98.7
)
Net finance expense
$
(39.8
)
$
(35.4
)
$
(103.1
)
$
(96.1
)
(Loss) earnings before taxes
$
(92.5
)
$
64.5

$
(161.0
)
$
24.2

Current income tax expense (Note 8)
$
(29.5
)
$
(30.8
)
$
(87.2
)
$
(61.1
)
Deferred income tax recovery (Note 8)
40.7

7.8

19.1

36.5

Income tax recovery (expense)
$
11.2

$
(23.0
)
$
(68.1
)
$
(24.6
)
Net (loss) earnings
$
(81.3
)
$
41.5

$
(229.1
)
$
(0.4
)
 
 
 
 
 
Attributable to:

 
 
 
Yamana Gold Inc. equityholders
$
(81.3
)
$
45.7

$
(223.0
)
$
5.9

Non-controlling interests
—

(4.2
)
(6.1
)
(6.3
)
Net (loss) earnings
$
(81.3
)
$
41.5

$
(229.1
)
$
(0.4
)
 

 
 
 
(Loss) earnings per share attributable to Yamana Gold Inc. equityholders (Note 9)

 
 
 
Basic
$
(0.09
)
$
0.05

$
(0.24
)
$
0.01

Diluted
$
(0.09
)
$
0.05

$
(0.24
)
$
0.01

 


 
 
 
Weighted average number of shares outstanding (in thousands)
 

 
 
 
Basic
949,114

948,254

948,927

948,092

Diluted
949,114

948,830

948,927

948,652

(i) The Company has initially applied IFRS 15 and IFRS 9 at January 1, 2018. Under the transition methods chosen, comparative information is not restated except for certain hedging requirements. Refer to Note 3: Recent Accounting Pronouncements.
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 COMPREHENSIVE (LOSS) INCOME

 
For the three months ended September 30,
For the nine months ended September 30,
(In millions of US Dollars, unaudited)
2018

2017
(restated)

2018

2017
(restated)

Net (loss) earnings
$
(81.3
)
$
41.5

$
(229.1
)
$
(0.4
)
 
 
 
 
 
Other comprehensive income (loss), net of taxes
 
 
 
 
Items that may be reclassified subsequently to profit or loss:
 
 
 
 
Available-for-sale financial assets
 
 
 
 
    - Fair value gain, net of income tax of nil
—

0.2

—

0.1

Cash flow hedging reserve
 
 
 
 
    - Increase in fair value of hedging instruments
9.6

24.8

20.3

61.0

    - Decrease in fair value of hedging instruments
(12.7
)
(6.3
)
(41.7
)
(39.3
)
    - Reclassification of (gains) losses recorded in earnings
(0.6
)
—

3.1

4.5

    - Tax Impact on fair value of hedging instruments
—

(3.6
)
(3.0
)
(5.8
)
Cost of hedging reserve
 
 
 
 
    - Changes in fair value
4.4

(3.2
)
3.9

(4.1
)
 
$
0.7

$
11.9

$
(17.4
)
$
16.4

Items that will not be reclassified to profit or loss:


 
 
 
Changes in the fair value of equity investments at FVOCI
0.7

—

0.3

—

Total other comprehensive income (loss)
$
1.4

$
11.9

$
(17.1
)
$
16.4

Total comprehensive (loss) income
$
(79.9
)
$
53.4

$
(246.2
)
$
16.0

 
 
 
 
 
Attributable to:
 
 
 
 
Yamana Gold Inc. equityholders
$
(79.9
)
$
58.6

$
(239.4
)
$
18.4

Non-controlling interests
—

(5.2
)
(6.8
)
(2.4
)
Total comprehensive (loss) income
$
(79.9
)
$
53.4

$
(246.2
)
$
16.0

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 US Dollars, unaudited)
2018

2017
(restated)

2018

2017
(restated)

Operating activities
 
 
 
 
(Loss) earnings before taxes
$
(92.5
)
$
64.5

$
(161.0
)
$
24.2

Adjustments to reconcile loss before taxes to net operating cash flows:
 
 
 
 
Depletion, depreciation and amortization
109.4

108.0

307.4

325.9

Share-based payments (Note 18)
1.2

3.3

5.7

9.0

Finance income (Note 7)
(0.4
)
(4.1
)
(8.6
)
(2.6
)
Finance expense (Note 7)
40.2

39.5

111.7

98.7

Mark-to-market on sales of concentrate and price adjustments on unsettled invoices
(1.6
)
(1.0
)
6.9

(1.7
)
Mark-to-market on fair value through profit or loss instruments
2.8

0.3

8.8

3.0

Share of earnings of associate (Note 15)
(0.5
)
—

(1.0
)
—

Impairment of mineral properties (Note 4(a)(b))
89.0

—

263.0

—

Amortization of deferred revenue
(46.5
)
(2.4
)
(62.1
)
(8.5
)
Loss (gain) on divestitures and disposal of other assets (Note 4(a)(c))
0.3

—

(70.7
)
—

Other non-cash expenses (recoveries) (Note 10(d))
11.7

(26.7
)
36.3

(12.4
)
Decommissioning, restoration and similar liabilities paid
(1.8
)
(3.9
)
(4.3
)
(6.0
)
Advanced payments received on metal sales
—

—

127.8

—

Other cash payments
(6.8
)
(6.0
)
(6.8
)
(6.0
)
Cash flows from operating activities before income taxes paid and net change in working capital
104.5

171.5

553.1

423.6

Income taxes paid
(17.9
)
(5.2
)
(34.7
)
(17.3
)
Payments made related to the Brazilian tax matters
—

(30.5
)
(67.9
)
(30.5
)
Cash flows from operating activities before net change in working capital
$
86.6

$
135.8

$
450.5

$
375.8

Net change in working capital (Note 10(b))
(22.1
)
14.0

(161.0
)
(50.1
)
Cash flows from operating activities
$
64.5

$
149.8

$
289.5

$
325.7

Investing activities
 

 

 
 
Acquisition of property, plant and equipment
$
(102.6
)
$
(179.4
)
$
(338.5
)
$
(447.7
)
Proceeds on disposal of Canadian Exploration Properties (Note 4(c))
—

—

162.5

—

Proceeds on disposal of investments and other assets
—

—

4.3

17.3

Cash outflow on disposition of Brio Gold (Note 4(a))
—

—

(5.4
)
—

Cash used in other investing activities
(15.1
)
(0.4
)
(61.1
)
(17.4
)
Cash flows used in investing activities
$
(117.7
)
$
(179.8
)
$
(238.2
)
$
(447.8
)
Financing activities
 
 
 
 
Dividends paid (Note 17(b))
$
(4.7
)
$
(4.6
)
$
(14.2
)
$
(14.2
)
Interest and other finance expenses paid
(15.9
)
(19.2
)
(52.5
)
(69.5
)
Financing costs paid on early note redemption (Note 7)
—

—

(14.7
)
—

Proceeds from Brio Gold Inc. private placement and rights offering
—

—

—

71.5

Repayment of term loan and notes payable (Note 16)
(0.3
)
(59.2
)
(442.2
)
(150.5
)
Proceeds from term loan and notes payable (Note 16)
80.0

102.5

435.0

312.5

Proceeds from other financing activities
1.7

—

3.6

—

Cash flows from (used in) financing activities
$
60.8

$
19.5

$
(85.0
)
$
149.8

Effect of foreign exchange of non-US Dollar denominated cash and cash equivalents
1.2

3.6

2.7

0.3

Increase (decrease) in cash and cash equivalents
$
8.8

$
(6.9
)
$
(31.0
)
$
28.0

Cash and cash equivalents, beginning of period
$
114.4

$
132.3

$
148.9

$
97.4

Cash and cash equivalents classified as held for sale, beginning of period
$
1.0

$
—

$
6.3

$
—

Cash and cash equivalents, end of period
$
124.2

$
125.4

$
124.2

$
125.4

Cash and cash equivalents reclassified as held for sale (Note 4)
$
3.5

$
—

$
3.5

$
—

Cash and cash equivalents, excluding amounts classified as held for sale, end of period
$
120.7

$
125.4

$
120.7

$
125.4

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 US Dollars, unaudited)
September 30,
2018

December 31, 2017
(restated)

Assets
 

 

Current assets:
 
 

Cash and cash equivalents (Note 10(c))
$
120.7

$
148.9

Trade and other receivables
23.0

38.6

Inventories (Note 12)
172.0

163.5

Other financial assets (Note 13(a))
3.9

13.2

Other assets (Note 13(b))
113.0

119.4

Assets held for sale (Note 4)
147.8

355.8

 
$
580.4

$
839.4

Non-current assets:


 
Property, plant and equipment (Note 14)
6,638.7

7,153.2

Goodwill and intangibles
446.0

449.5

Investment in associate (Note 15)
141.5

—

Deferred tax assets
86.2

97.8

Other financial assets (Note 13(a))
21.1

26.1

Other assets (Note 13(b))
216.0

197.3

Total assets
$
8,129.9

$
8,763.3

 


 
Liabilities


 
Current liabilities:


 
Trade and other payables
$
247.6

$
345.4

Income taxes payable
63.9

91.8

Other financial liabilities (Note 13(c))
69.8

203.1

Other provisions and liabilities (Note 13(d))
129.2

56.7

Liabilities relating to assets held for sale (Note 4)
63.2

83.7

 
$
573.7

$
780.7

Non-current liabilities:


 
Long-term debt (Note 16)
1,776.3

1,747.7

Decommissioning, restoration and similar liabilities
208.9

258.2

Deferred tax liabilities
1,118.1

1,147.1

Other financial liabilities (Note 13(c))
76.2

85.7

Other provisions and liabilities (Note 13(d))
293.8

296.6

Total liabilities
$
4,047.0

$
4,316.0

 
 
 
Equity


 
Share capital (Note 17)


 
Issued and outstanding 949,301,750 common shares (December 31, 2017 - 948,524,667 shares)
$
7,636.3

$
7,633.7

Reserves
(3.8
)
19.7

Deficit
(3,584.3
)
(3,340.0
)
Attributable to Yamana Gold Inc. equityholders
$
4,048.2

$
4,313.4

Non-controlling interests (Note 19)
34.7

133.9

Total equity
$
4,082.9

$
4,447.3

Total liabilities and equity
$
8,129.9

$
8,763.3

Contingencies (Note 22).
The accompanying notes are an integral part of the Condensed Consolidated Interim Financial Statements.

Approved by the Board
“Peter Marrone”
“Richard Graff”
PETER MARRONE
RICHARD GRAFF
Director
Director

yamanalogo.jpg | 5

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

(In millions of US Dollars, unaudited)
Share capital

Equity
reserve

Hedging
reserve

Cost of hedging reserve

Available
-for-sale
reserve

Fair value through OCI reserve

Other
reserve

Total reserves

Deficit

Total equity
attributable
to Yamana
equity holders

Non-
controlling
interests

Total
equity

Balance as at January 1, 2017 as previously reported
$
7,630.5

$
17.8

$
0.2

$
—

$
(3.5
)
$
—

$
(2.5
)
$
12.0

$
(3,130.3
)
$
4,512.2

$
67.8

$
4,580.0

Adjustment from adoption of
IFRS 9 (Note 3 (a)(ii))
—

—

—

2.3

—

—

—

2.3

(2.3
)
—

—

—

Restated balance as at
January 1, 2017
7,630.5

17.8

0.2

2.3

(3.5
)
—

(2.5
)
14.3

(3,132.6
)
4,512.2

67.8

4,580.0

Total comprehensive income
 
 
 
 
 
 
 


 
 
 
 
       Net earnings (loss)
—

—

—

—

—

—

—

—

5.9

5.9

(6.3
)
(0.4
)
Other comprehensive income,
net of income tax
—

—

15.8

(3.4
)
0.1

—

—

12.5

—

12.5

3.9

16.4

 
—

—

15.8

(3.4
)
0.1

—

—

12.5

5.9

18.4

(2.4
)
16.0

Transactions with owners
 
 

 

 
 
 
 
 
 


 
 
Divestment of Brio Gold shares
—

—

—

—

—

—

—

—

—

—

71.5

71.5

Issued on vesting of restricted share units (Note 18)
2.6

(2.6
)
—

—

—

—

—

(2.6
)
—

—

—

—

Restricted share units
(Note 18)
—

2.6

—

—

—

—

—

2.6

—

2.6

5.6

8.2

Dividend reinvestment plan
0.3

—

—

—

—

—

—

—

—

0.3

—

0.3

Dividends (Note 17(b))
—

—

—

—

—

—

—

—

(14.3
)
(14.3
)
—

(14.3
)
Restated balance as at
September 30, 2017
$
7,633.4

$
17.8

$
16.0

$
(1.1
)
$
(3.4
)
$
—

$
(2.5
)
$
26.8

$
(3,141.0
)
$
4,519.2

$
142.5

$
4,661.7

Restated balance as at December 31, 2017
$
7,633.7

$
18.0

$
6.0

$
(4.1
)
$
1.0

$
—

$
(1.2
)
$
19.7

$
(3,340.0
)
$
4,313.4

$
133.9

$
4,447.3

Adjustments on initial application of:
IFRS 15 (Note 3(a)(i))
—

—

—

—

—

—

—

—

(16.4
)
(16.4
)
—

(16.4
)
IFRS 9 (Note 3(a)(ii))
—

—

—

—

(1.0
)
(7.8
)
—

(8.8
)
8.8

—

—

—

Adjusted balance as at
January 1, 2018
$
7,633.7

$
18.0

$
6.0

$
(4.1
)
$
—

$
(7.8
)
$
(1.2
)
$
10.9

$
(3,347.6
)
$
4,297.0

$
133.9

$
4,430.9

Total comprehensive loss
 
 
 
 
 
 
 
 
 
 
 
 
       Net loss
—

—

—

—

—

—

—

—

(223.0
)
(223.0
)
(6.1
)
(229.1
)
Other comprehensive loss,
net of income tax
—

—

(20.6
)
3.9

—

0.3

—

(16.4
)
—

(16.4
)
(0.7
)
(17.1
)
 
—

—

(20.6
)
3.9

—

0.3

—

(16.4
)
(223.0
)
(239.4
)
(6.8
)
(246.2
)
Transactions with owners
 
 
 
 
 
 
 
 
 
 
 
 
Impairment (Note 4(a))
—

—

—

—

—

—

—

—

—

—

(150.0
)
(150.0
)
Disposal of part interest in subsidiary (Note 19 (iii))
—

—

—

—

—

—

—

—

—

—

16.0

16.0

Disposal of Brio Gold
(Note 4(a))
—

—

—

—

—

—

—

—

—

—

41.3

41.3

Issued on vesting of restricted share units (Note 18)
2.3

(2.3
)
—

—

—

—

—

(2.3
)
—

—

—

—

Vesting restricted share units (Note 18)
—

3.8

—

—

—

—

—

3.8

—

3.8

0.3

4.1

Dividend reinvestment plan (Note 17(a))
0.3

—

—

—

—

—

—

—

—

0.3

—

0.3

Dividends (Note 17(b))
—

—

—

—

—

—

—

—

(14.4
)
(14.4
)
—

(14.4
)
Balance as at
September 30, 2018
$
7,636.3

$
19.5

$
(14.6
)
$
(0.2
)
$
—

$
(7.5
)
$
(1.2
)
$
(3.8
)
$
(3,584.3
)
$
4,048.2

$
34.7

$
4,082.9

The accompanying notes are an integral part of the Condensed Consolidated Interim Financial Statements.


yamanalogo.jpg | 6

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

For the Three and Nine Months Ended September 30, 2018
(With Comparatives as at December 31, 2017 and for the Three and Nine Months Ended September 30, 2017)
(Tabular amounts in millions of US Dollars, unless otherwise noted, unaudited)


1.    NATURE OF OPERATIONS
    
Yamana Gold Inc. (the “Company” or “Yamana”) is a Canadian-based gold producer with significant gold production, gold 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 existing operating mine expansions and optimization initiatives, development of new mines, the advancement of its exploration properties and, at times, by targeting other gold consolidation opportunities with a primary focus in the Americas.

The address of the Company’s registered office is 200 Bay Street, Suite 2200, Royal Bank Plaza North Tower Toronto, Ontario, Canada, M5J 2J3. The Company is listed on the Toronto Stock Exchange (Symbol: YRI) and The New York Stock Exchange (Symbol: AUY).

These Condensed Consolidated Interim Financial Statements are comprised of the Company, its subsidiaries, and its 50% interest in the Canadian Malartic mine, which is accounted for as a joint operation.

On May 24, 2018, the Company completed the disposal of its 53.6% controlling interest in Brio Gold to Leagold Mining Corporation ("Leagold"). Pursuant to the terms of the sale, the Company received 20.5% of Leagold's issued and outstanding shares, which is accounted for as an investment in associate using the equity method. Refer to Note 4: Divestitures.

On June 26, 2018, the Company announced that the Cerro Moro mine in Argentina had achieved commercial production.

These Condensed Consolidated Interim Financial Statements were authorized for issuance by the Board of Directors of the Company on October 24, 2018.


2.    BASIS OF PREPARATION AND PRESENTATION

These Condensed Consolidated Interim Financial Statements have been prepared in accordance with IAS 34 Interim Financial Reporting ("IAS 34") as issued by the International Accounting Standards Board (“IASB”). Accordingly, certain disclosures included in the Company’s annual consolidated financial statements prepared in accordance with International Financial Reporting Standards (“IFRSs”) as issued by the IASB have been condensed or omitted. These Condensed Consolidated Interim Financial Statements should be read in conjunction with the Company’s last annual consolidated financial statements for the year ended December 31, 2017, which include information necessary or useful to understanding the Company’s business and financial statement presentation. In particular, the Company’s significant accounting policies were presented in Note 3: Significant Accounting Policies to the consolidated financial statements for the year ended December 31, 2017.

The accounting policies applied in the preparation of these Condensed Consolidated Interim Financial Statements are consistent with those applied and disclosed in the Company’s consolidated financial statements for the year ended December 31, 2017, with the exception of the application of certain new and amended IFRSs issued by the IASB, which were effective from January 1, 2018, and the addition of an accounting policy related to investments in associates, which was not applicable for the year ended December 31, 2017. Those new and amended IFRSs that had a significant impact on the Company’s Condensed Consolidated Interim Financial Statements are described in Note 3: Recent Accounting Pronouncements. The accounting policy related to the Company's investment in associates is described in Note 15: Investment in Associate.

In preparing these Condensed Consolidated Interim Financial Statements, management has made judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, revenue and expenses. Actual results may differ from these estimates. The critical judgements made by management in applying the Company’s accounting policies and the key sources of estimation uncertainty were the same as those applied and disclosed in Note 4: Critical Judgements and Estimation Uncertainties to the Company’s consolidated financial statements for the year ended December 31, 2017, except for those related to revenue recognition, which are disclosed in Note 5: Revenue and the determination of the commencement of commercial production at the Cerro Moro mine, which was not applicable for the year ended December 31, 2017, and is disclosed below.

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Commencement of Commercial Production

Prior to a mine being capable of operating at levels intended by management, costs incurred are capitalized as part of the costs of the related mining properties and proceeds from mineral sales are offset against costs capitalized. Recognition of revenue and the depletion of capitalized costs for mining properties begins when the mine is capable of operating at levels intended by management. Management considers several factors in determining when a mining property is capable of operating at levels intended by management. Amongst other quantitative and qualitative factors, throughput, mill grades and recoveries were assessed over a reasonable period to make this determination. A factor of 70% of planned output and/or design capacity measures were utilized in determining the appropriate timing. The Company determined that the Cerro Moro mine was capable of operating at levels intended by management effective June 26, 2018.


3.    RECENT ACCOUNTING PRONOUNCEMENTS
 
(a)
Application of New and Revised IFRSs

The Company has adopted the following new IFRSs that had an impact on these Condensed Consolidated Interim Financial Statements:

i.
IFRS 15 Revenue from Contracts with Customers ("IFRS 15")

On January 1, 2018, the Company adopted IFRS 15. IFRS 15 is based on the principle that revenue is recognized when control of a good or service is transferred to a customer. The Company adopted IFRS 15 using the cumulative effect method applied to those contracts that were not completed as of January 1, 2018. The cumulative effect of initially applying IFRS 15 has been recognized as an adjustment to the opening deficit at January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented under IFRS 15, while prior period amounts have not been restated and continue to be reported under the accounting standards in effect for those periods.

The adoption of IFRS 15 did not have a significant impact on the Company's condensed consolidated interim financial statements, with the exception of adjustments to the metal streaming arrangements as discussed below, and the addition of new disclosures, which are included in Note 5: Revenue.

Under IFRS 15, where consideration is received in advance of the Company's performance of its obligation, there is an inherent financing component in the transaction. When the period between receipt of consideration and revenue recognition is greater than one year, the Company is required to determine whether the financing component is significant to the contract. The Company performed this assessment for its metal streaming arrangements with Sandstorm Gold Ltd ("Sandstorm") and Altius Minerals Corporation ("Altius") that existed at the date of initial application of IFRS 15, and determined that the financing component was significant to each of these arrangements.

Accordingly, in accounting for each of the arrangements under IFRS 15, the transaction price is increased by an imputed interest amount and a corresponding amount of interest expense recognized in each period. The Company recorded a net increase of $16.4 million to the opening deficit balance as of January 1, 2018 due to the cumulative impact of adopting IFRS 15, as a result of adjustments to the deferred revenue balances associated with the Company's metal streaming arrangements. The adjustments resulted from a change in draw down rates resulting from the adjustment to the transaction price to reflect the financing component.


yamanalogo.jpg | 8

The impact of adoption of IFRS 15 on the Company’s condensed consolidated interim statements of operations for the three and nine months ended September 30, 2018 and condensed consolidated interim balance sheet as at September 30, 2018 was as follows:

Condensed Consolidated Interim Statements of Operations (extract)
 
Three Months Ended September 30, 2018
Nine Months Ended September 30, 2018
 
As reported

Balances without adoption of IFRS 15

Effect of change

As reported

Balances without adoption of IFRS 15

Effect of change

Revenue
$
416.8

$
412.7

$
4.1

$
1,298.0

$
1,288.4

$
9.6

Gross margin excluding DDA
$
183.3

$
179.2

$
4.1

$
571.3

$
561.7

$
9.6

Mine operating earnings
$
73.9

$
69.8

$
4.1

$
160.9

$
151.3

$
9.6

 
 
 
 
 
 
 
Finance expense
(40.2
)
(37.3
)
(2.9
)
(111.7
)
(99.2
)
(12.5
)
Net finance expense
$
(39.8
)
$
(36.9
)
$
(2.9
)
$
(103.1
)
$
(90.6
)
$
(12.5
)
 
 
 
 
 
 
 
Net (loss) earnings
$
(81.3
)
$
(79.3
)
$
1.2

$
(229.1
)
$
(227.1
)
$
(2.9
)

Condensed Consolidated Interim Balance Sheet (extract)
As at September 30, 2018
As reported

Balances without adoption of IFRS 15

Effect of change

Liabilities
 
 
 
Current liabilities:
 
 
 
Other provisions and liabilities
$
129.2

$
124.9

$
4.3

 
 
 
 
Non-current liabilities:
 
 
 
Other provisions and liabilities
$
293.8

$
277.4

$
16.4

Total liabilities
$
4,047.0

$
4,026.3

$
20.7

 
 
 
 
Equity
 
 
 
Deficit
$
(3,584.3
)
$
(3,565.0
)
$
(19.3
)
Total equity
$
4,082.9

$
4,102.2

$
(19.3
)
Total liabilities and equity
$
8,129.9

$
8,128.5

$
1.4

The above changes are attributable to accounting for the financing component in the Company's streaming arrangements, as discussed above, and the financing component on the advanced copper purchase agreement entered into in January 2018. Refer to Note 13(d): Other Provisions and Liabilities.

ii.
IFRS 9 Financial Instruments ("IFRS 9")
On January 1, 2018, the Company adopted IFRS 9 (2014). IFRS 9 addresses the classification, measurement and derecognition of financial assets and financial liabilities, introduces new rules for hedge accounting and a new impairment model for financial assets. In accordance with the transitional provisions in IFRS 9, comparative figures have not been restated with the exception of certain aspects of hedge accounting.
The following summarizes the significant changes in IFRS 9 compared to the current standard:

a.
Classification and Measurement of Financial Assets

IFRS 9 contains three principal classification categories for financial assets: measured at amortized cost, fair value through other comprehensive income (“FVOCI”) and fair value through profit or loss (“FVTPL”). The classification of financial assets under IFRS 9 is generally based on the business model in which a financial asset is managed and its contractual cash flow characteristics. Management reviewed and assessed the Company’s existing financial assets as at January 1, 2018 based on the facts and circumstances that existed at that date and concluded that the initial application of IFRS 9 has had the following impact on the Company’s financial assets as regards their classification and measurement:


yamanalogo.jpg | 9

•
Financial assets measured at FVTPL under IAS 39 Financial Instruments: Recognition and Measurement ("IAS 39") continue to be measured as such under IFRS 9;
•
Financial assets classified as Loans and Receivables under IAS 39 that were measured at amortized cost continue to be measured at amortized cost under IFRS 9;
•
Investments in equity securities that were classified as available-for-sale under IAS 39 have been classified at FVOCI, pursuant to the irrevocable election available in IFRS 9. Under IFRS 9, all realized and unrealized gains and losses are recognized permanently in OCI with no reclassification to profit or loss. Accordingly, impairment losses of $8.8 million on equity securities that the Company continued to own at January 1, 2018 that were previously recognized in profit or loss were reclassified from opening deficit to the fair value through OCI reserve on January 1, 2018.

b.
Impairment of Financial Assets

IFRS 9 introduced a single expected credit loss impairment model, which is based on changes in credit quality since initial recognition. The adoption of the expected credit loss impairment model did not have a significant impact on the carrying amounts of the Company's financial assets on the transition date given the Company transacts exclusively with large international financial institutions and other organizations with strong credit ratings and the negligible historical level of customer default.
    
c.
Hedge Accounting

IFRS 9 changes the requirements for hedge effectiveness and consequently for the application of hedge accounting. The IAS 39 effectiveness test is replaced with a requirement for an economic relationship between the hedged item and hedging instrument, and for the ‘hedged ratio’ to be the same as that used by the entity for risk management purposes. Certain restrictions that prevented some hedging strategies and hedging instruments from qualifying for hedge accounting were removed under IFRS 9. Generally, the mechanics of hedge accounting remain unchanged.

All of the Company’s existing hedging relationships that qualified for hedge accounting under IAS 39 were assessed upon adoption of IFRS 9 and these have continued to qualify for hedge accounting under IFRS 9. The Company also reassessed economic hedges that did not qualify for hedge accounting under IAS 39. IFRS 9 has enabled the Company to apply hedge accounting to copper derivative contracts, thus reducing the volatility of reported net income. These positions previously did not qualify for hedge accounting as component hedging was not permitted under IAS 39.

The Company enters into zero cost collars, which consist of a combination of purchased and written (sold) options to reduce the impact of the variability of the US Dollar amount of foreign currency denominated operating expenditures caused by changes in currency exchange rates. Under IAS 39, the Company separated the intrinsic value and time value of these contracts, designating only the change in intrinsic value as the hedging instrument. As a result, any variability in the intrinsic value was taken to OCI and any variability in the time value was taken to profit or loss. Under IFRS 9, the Company will continue to separate the intrinsic value and time value of these contracts, designating only the change in intrinsic value as the hedging instrument as allowed under the exception provided in IFRS 9. However, under IFRS 9, changes in time value are recognized in OCI as a cost of hedging rather than in profit or loss, resulting in a reduction in profit or loss volatility.


yamanalogo.jpg | 10

Effect of Adjustments Arising from Application of IFRS 9 Hedge Accounting Requirements

Retrospective application of the cost of hedging approach has had the following effects on the amounts presented for 2017:

Condensed Consolidated Statements of Operations (extract)
 
Three Months Ended September 30, 2017
Nine Months Ended September 30, 2017
 
As originally presented

IFRS 9 Adjustments

Restated

As originally presented

IFRS 9 Adjustments

Restated

Expenses
 
 
 
 
 
 
Finance income
0.9

3.2

4.1

2.6

—

2.6

Finance expense
(39.5
)
—

(39.5
)
(102.8
)
4.1

(98.7
)
Net finance expense
$
(38.6
)
$
3.2

$
(35.4
)
$
(100.2
)
$
4.1

$
(96.1
)
 
 
 
 
 
 
 
Earnings (loss) before tax
61.3

3.2

64.5

20.1

4.1

24.2

Net earnings (loss)
$
38.3

$
3.2

$
41.5

$
(4.5
)
$
4.1

$
(0.4
)
 
 
 
 
 
 
 
Attributable to:
 
 
 
 
 
 
Yamana Gold Inc. equityholders
43.5

2.2

45.7

2.5

3.4

5.9

Non-controlling interests
(5.2
)
1.0

(4.2
)
(7.0
)
0.7

(6.3
)
Net earnings (loss)
$
38.3

$
3.2

$
41.5

$
(4.5
)
$
4.1

$
(0.4
)
 
 
 
 
 
 
 
Earnings (loss) per share attributable to Yamana Gold Inc. equityholders
Earnings (loss) per share - basic and diluted
$
0.05

$
—

$
0.05

$
—

$
0.01

$
0.01


Condensed Consolidated Statements of Comprehensive Income (extract)
 
Three Months Ended September 30, 2017
Nine Months Ended September 30, 2017
 
As originally presented

IFRS 9 Adjustments

Restated

As originally presented

IFRS 9 Adjustments

Restated

Net earnings (loss)
$
38.3

$
3.2

$
41.5

$
(4.5
)
$
4.1

$
(0.4
)
 
 
 
 
 
 
 
Items that may be reclassified subsequently to profit or loss
Cost of hedging reserve - changes in fair value
—

(3.2
)
(3.2
)
—

(4.1
)
(4.1
)
Total other comprehensive income (loss)
$
15.1

$
(3.2
)
$
11.9

$
20.5

$
(4.1
)
$
16.4

Total comprehensive income (loss)
$
53.4

$
—

$
53.4

$
16.0

$
—

$
16.0


The application of the cost of hedging approach resulted in the Company recognizing $4.4 million and $3.9 million of changes in the time value on the Company's zero cost collar option contracts in OCI rather than in profit or loss as finance income in the three and nine months ended September 30, 2018, respectively.

Refer to Note 5: Revenue and Note 11: Financial Instruments for a description of the new accounting policies applied by the Company as a result of adoption of these new IFRS standards.

iii.
Adoption of Other Narrow Scope Amendments to IFRSs and IFRS Interpretations

The Company also adopted other amendments to IFRSs, as well as the Interpretation IFRIC 22 Foreign Currency Transactions and Advance Consideration, which were effective for accounting periods beginning on or after January 1, 2018. The impact of adoption was not significant to the Company's Condensed Consolidated Interim Financial Statements.

(b)
New and Revised IFRSs not yet Effective

Certain pronouncements have been issued by the IASB that are mandatory for accounting periods after December 31, 2018. Pronouncements that are not applicable to the Company have been excluded from this note.


yamanalogo.jpg | 11

IFRS 16 Leases ("IFRS 16")

In January 2016, the IASB issued IFRS 16, which supersedes IAS 17 Leases (and related interpretations). IFRS 16 introduces a comprehensive model for the identification of lease arrangements and accounting treatments. IFRS 16 distinguishes leases and service contracts on the basis of whether an identified asset is controlled by a customer. Distinctions of operating leases (off balance sheet) and finance leases (on balance sheet) are removed for lessee accounting, and are replaced by a model where a right-of-use asset and a corresponding liability are required to be recognized for all leases, with limited exceptions for short-term leases and leases of low value assets.

The Company continues to progress with its implementation project, focusing on the review of contracts, aggregation of data to support the evaluation of the accounting impacts of applying the new standard, and assessment of the need for changes to systems and processes. Although the Company's evaluation of the impact of adopting the new standard is still ongoing, it is expected that the Company will record a material balance of lease assets and associated lease liabilities on the balance sheet at January 1, 2019. In addition to the recognition of additional assets and liabilities on the balance sheet, it is expected that the adoption of IFRS 16 will result in a decrease in lease expense and a corresponding increase in both depreciation expense and finance charges representing the unwind of the discount on the lease liability. The Company also expects cash flows from operating activities to increase under IFRS 16 as lease payments for substantially all leases will be recorded as financing outflows in the statement of cash flows as opposed to operating cash flows.

IFRS 16 is effective for the Company from January 1, 2019. As noted in the Company's condensed consolidated interim financial statements for the three and six months ended June 30, 2018, the Company currently expects to use the modified retrospective approach, with the cumulative impact of applying IFRS 16 recognized at January 1, 2019. Further, the Company does not currently intend to bring short-term leases (contracts of 12 months or fewer or 12 months or fewer to run as at January 1, 2019, including reasonably certain options to extend) or low value leases on balance sheet. Costs for these items will continue to be expensed directly to the statement of operations.


4.    DIVESTITURES

(a)
Brio Gold

On May 24, 2018, the Company completed the sale of its 53.6% controlling interest in Brio Gold to Leagold Mining Corporation ("Leagold") and received total consideration of $147.6 million. The consideration was comprised of $140.5 million of Leagold common shares ("Leagold Shares"), representing approximately 20.5% of Leagold's issued and outstanding common shares at the closing date and $7.1 million of Leagold share purchase warrants, which entitle the Company to purchase one Leagold Share at a price of C$3.70 for a period of two years from May 24, 2018. The Leagold Shares were measured based on the 3-day volume weighted average trading price of Leagold Shares on the Toronto Stock Exchange ("TSX") as at May 23, 2018, and must be held for a minimum period of 12 months, subject to certain exceptions. The Leagold share purchase warrants were valued using the Black-Scholes option-pricing model.
During the first quarter of 2018, the Company concluded that the assets and liabilities of Brio Gold met the criteria for classification as held for sale, and accordingly, the assets and liabilities of Brio Gold were presented separately in the Company's condensed consolidated interim balance sheet as at March 31, 2018 as current assets and current liabilities, respectively.
Immediately prior to the classification as assets and liabilities held for sale, the carrying amount of Brio Gold was remeasured to its recoverable amount, being its fair value less costs of disposal ("FVLCD"). The FVLCD was determined using the Leagold share price per the TSX (C$2.86 per Leagold share), a level 1 input per the fair value hierarchy, and resulted in the Company recording an impairment loss of $145.0 million. The $145.0 million was the net of a $270.4 million gross asset impairment, of which $125.4 million was related to the non-controlling interests of Brio Gold. An additional impairment loss of $23.2 million was recorded, based on remeasuring Brio Gold to its recoverable amount using the closing share price of Leagold per the TSX (C$2.61 per Leagold share) as at March 31, 2018. The $23.2 million was the net of a $47.8 million gross asset impairment, of which $24.6 million was related to the non-controlling interests of Brio Gold. The net after-tax impairment loss recognized in the statement of operations for the nine months ended September 30, 2018 relating to the above asset impairments totalled $168.2 million, which was net of a $5.8 million deferred income tax recovery.

yamanalogo.jpg | 12

Upon disposal of Brio Gold on May 24, 2018, the Company recognized a $32.0 million gain, as calculated below:
Total consideration (net of transaction costs of $1.5 million)
$
146.1

Net assets sold and derecognized:
 
Cash and cash equivalents
$
5.4

Trade and other receivables
1.4

Inventories
42.0

Other financial assets
1.5

Other assets
16.1

Property, plant and equipment
194.7

Deferred tax assets
6.9

Total assets
$
268.0

Trade and other payables
54.1

Income taxes payable
3.3

Other financial liabilities
19.4

Other provisions and liabilities
14.5

Long-term debt
73.0

Deferred tax liabilities
1.6

Decommissioning, restoration and similar liabilities
34.2

Total liabilities
$
200.1

Net assets
$
67.9

Other comprehensive Income
4.9

Non-controlling interests
41.3

Net assets attributable to Yamana
$
114.1

Gain on disposal
$
32.0

The gain on disposal is included in other (expenses) income, net in the statement of operations for the nine months ended September 30, 2018.

Brio Gold was presented in the "Other Mines" reportable operating segment.

(b)
Gualcamayo and Related Argentinian Exploration Properties

As part of ongoing strategic and technical reviews of its asset portfolio, in December 2017 the Company committed to a formal plan to dispose of the Gualcamayo mine and related exploration properties in Argentina (“Gualcamayo”) and initiated an active program to sell Gualcamayo. As the sale was considered highly probable at December 31, 2017, the assets and liabilities of Gualcamayo were classified as assets and liabilities (a disposal group) held for sale and presented separately under current assets and current liabilities, respectively. Immediately prior to the classification to assets and liabilities held for sale, the carrying amount of Gualcamayo was re-measured to its recoverable amount, being its FVLCD, the estimate of which, was supported by various sources including a formal bid received by the Company, external valuation reports and comparable trading company multiples. As a result, the Company recorded an impairment loss of $356.5 million in relation to Gualcamayo in the year ended December 31, 2017.

Subsequent to the quarter end, the Company entered into a sale transaction with Mineros S.A. ("Mineros") to sell 100% of its interest in the Gualcamayo Mine.  The total consideration comprises:

•
$30.0 million in cash, payable at closing;
•
An additional $30.0 million in cash upon declaration of commercial production of the Deep Carbonates project, which is an undeveloped mineral resource below the existing oxide gold mineralization at Gualcamayo;
•
A 2% net smelter return royalty (“NSR”) at Gualcamayo on metal produced after the initial 396,000 ounces, capped at $50.0 million (excluding products produced from the Deep Carbonates Project); and
•
A 1.5% uncapped NSR on products produced from the Deep Carbonates project.

The total value of the consideration for Gualcamayo resulting from the sale transaction is in line with recent market valuations for comparable assets.  These valuations are reflective of the current commodity price environment, which is approximately $100 per ounce of gold lower than

yamanalogo.jpg | 13

as of December 31, 2017.  This total value is estimated at approximately $85.0 million and, as such, the carrying value of Gualcamayo has been reduced to this amount resulting in an impairment loss of $75.0 million net of tax ($89.0 million pre-tax).

Separately, the Company has also entered into an option agreement with Mineros, pursuant to which Mineros has the option to acquire up to a 100% interest in the La Pepa gold project located in Chile.  The option agreement allows Mineros to earn an undivided 20% interest in La Pepa once project expenditures aggregating $5.0 million have been made, an additional 31% for a payment of approximately $5.0 million and project expenditures aggregating $15.0 million, and the remaining 49% at the proportionate fair market value at the time of exercise.

The Sale Transaction is subject to customary regulatory and third party approvals and other customary closing conditions and is expected to close by the end of the year.

Gualcamayo is presented in the "Other Mines" reportable operating segment.

(c)
Canadian Exploration Properties

On March 29, 2018, the Company completed the sale of certain jointly owned exploration properties of the Canadian Malartic Corporation (“CMC”) including the Kirkland Lake and Hammond Reef properties (the “Canadian Exploration Properties”) to Agnico Eagle Mines Limited (“Agnico”) for total cash consideration of $162.5 million. The Transaction was structured as a sale of assets by CMC (in which the Company holds a 50% indirect interest) pursuant to which Agnico acquired all of the Company's indirect 50% interest in the Canadian exploration assets of CMC.

At December 31, 2017, the sale was considered highly probable and accordingly, the assets and liabilities of the Canadian Exploration Properties were classified as assets and liabilities held for sale and presented separately under current assets and current liabilities, respectively. No impairment loss was recognized on reclassification to held for sale, as the FVLCD was higher than the carrying amount of the assets based on the sale price in the agreement. Upon sale, the Company recognized a gain of $39.0 million, which is included in other income (expenses) in the statement of operations for the nine months ended September 30, 2018.

The Canadian Exploration Properties were presented in the Canadian Malartic reportable operating segment.

The components of assets and liabilities held for sale at September 30, 2018 and December 31, 2017 relating to the above disposal groups are as follows:
 
September 30, 2018
December 31, 2017
 
Gualcamayo

Canadian Exploration Properties

Gualcamayo

Total

Assets
 
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
$
3.5

$
—

$
6.3

$
6.3

Trade and other receivables
0.2

—

—

—

Inventories
64.6

—

78.4

78.4

Property, plant and equipment
42.1

98.4

130.8

229.2

Deferred tax assets
25.0

—

—

—

Goodwill and intangibles
1.4

24.0

1.4

25.4

Other financial assets
0.8

0.8

—

0.8

Other assets
10.2

—

15.7

15.7

Total assets held for sale
147.8

123.2

232.6

355.8

 
 
 
 
 
Liabilities
 
 
 
 
Current liabilities:
 
 
 
 
Trade and other payables
$
26.1

$
0.4

$
45.0

$
45.4

Other financial liabilities
0.9

—

2.4

2.4

Decommissioning, restoration and similar liabilities
26.9

0.6

26.5

27.1

Other provisions and liabilities
9.3

0.1

8.7

8.8

Total liabilities relating to assets held for sale
63.2

1.1

82.6

83.7

Net assets held for sale
$
84.6

$
122.1

$
150.0

$
272.1


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5.    REVENUE

The Company has recognized the following amounts relating to revenue in the condensed consolidated interim statements of operations:
 
For the three months ended September 30,
For the nine months ended September 30,
 
2018

2017

2018

2017

Revenue from contracts with customers (a)
$
412.5

$
498.2

$
1,302.0

$
1,324.6

Revenue from other sources
 
 
 
 
     Provisional pricing adjustments on concentrate sales
4.3

(4.8
)
(4.0
)
0.4

 
$
416.8

$
493.4

$
1,298.0

$
1,325.0


(a)
Disaggregation of Revenue from Contracts with Customers
    
The following table disaggregates revenue from contracts with customers by metal and source mine. The table also includes a reconciliation of the disaggregated revenue from contracts with customers with disaggregated revenue reported in Note 21: Operating Segments.
Three months ended September 30, 2018
Chapada
El Peñón
Canadian Malartic
Jacobina
Minera Florida
Cerro Moro
Other mines
Total

Gold
$
33.0

$
42.2

$
108.9

$
42.2

$
25.9

$
31.0

$
24.9

$
308.1

Silver
—

12.7

0.9

—

—

15.2

—

28.8

Copper
75.6

—

—

—

—

—

—

75.6

Total revenue from contracts with customers
$
108.6

$
54.9

$
109.8

$
42.2

$
25.9

$
46.2

$
24.9

$
412.5

Provisional pricing adjustments
4.3

—

—

—

—

—

—

4.3

Total segment revenue
$
112.9

$
54.9

$
109.8

$
42.2

$
25.9

$
46.2

$
24.9

$
416.8


yamanalogo.jpg | 15

Three months ended September 30, 2017
Chapada
El Peñón
Canadian Malartic
Jacobina
Minera Florida
Cerro Moro
Other mines
Total

Gold
$
48.9

$
61.2

$
99.7

$
44.9

$
28.7

$
—

$
95.2

$
378.6

Silver
0.2

20.8

0.8

—

4.4

—

—

26.2

Copper
93.4

—

—

—

—

—

—

93.4

Total revenue from contracts with customers
$
142.5

$
82.0

$
100.5

$
44.9

$
33.1

$
—

$
95.2

$
498.2

Provisional pricing adjustments
(4.8
)
—

—

—

—

 
—

(4.8
)
Total segment revenue
$
137.7

$
82.0

$
100.5

$
44.9

$
33.1

$
—

$
95.2

$
493.4


Nine months ended September 30, 2018
Chapada
El Peñón
Canadian Malartic
Jacobina
Minera Florida
Cerro Moro
Other mines
Total

Gold
$
98.2

$
146.3

$
334.0

$
134.5

$
73.3

$
31.0

$
180.6

$
997.9

Silver
—

44.3

3.4

—

—

15.2

—

62.9

Copper
241.2

—

—

—

—

—

—

241.2

Total revenue from contracts with customers
$
339.4

$
190.6

$
337.4

$
134.5

$
73.3

$
46.2

$
180.6

$
1,302.0

Provisional pricing adjustments
(4.0
)
—

—

—

—

—

—

(4.0
)
Total segment revenue
$
335.4

$
190.6

$
337.4

$
134.5

$
73.3

$
46.2

$
180.6

$
1,298.0


Nine months ended September 30, 2017
Chapada
El Peñón
Canadian Malartic
Jacobina
Minera Florida
Cerro Moro
Other mines
Total

Gold
$
95.9

$
156.3

$
285.4

$
127.8

$
84.7

$
—

$
300.5

$
1,050.6

Silver
1.4

57.4

2.3

—

7.2

—

—

68.3

Copper
205.7

—

—

—

—

—

—

205.7

Total revenue from contracts with customers
$
303.0

$
213.7

$
287.7

$
127.8

$
91.9

$
—

$
300.5

$
1,324.6

Provisional pricing adjustments
0.4

—

—

—

—

—

—

0.4

Total segment revenue
$
303.4

$
213.7

$
287.7

$
127.8

$
91.9

$
—

$
300.5

$
1,325.0


(b)
Accounting Policies and Significant Judgements

The policies described below have been applied in the preparation of the revenue numbers for the three and nine months ended September 30, 2018. In the comparative periods, revenue was accounted for in accordance with the revenue policy disclosed in the Company’s Annual Consolidated Financial Statements for the year ended December 31, 2017.

Gold and Silver

The Company sells gold and silver in bullion and doré form to customers, which are all major financial institutions.

Revenue is recognized when control of the gold or silver has transferred to the customer. For bullion sales, this is typically at the point in time when the bullion is credited to the metal account of the customer. For doré sales, this is typically at the point in time when the doré is shipped from the mine. Following the crediting of gold or silver to a customer’s metal account or the shipment of doré, the customer has legal title to, physical possession of, and the risks and rewards of ownership of the metal, and therefore, the ability to direct the use of, and obtain substantially all of the remaining benefits from, the metal.

Revenue is measured at the transaction price agreed under the contract and excludes any amounts collected on behalf of third parties. Payment of the transaction price is due immediately when the metal is transferred to the customer. A receivable is recognized when the metal is transferred to the customer, as this is the point in time that the consideration is unconditional because only the passage of time is required before the payment is due.

Metal Concentrate


yamanalogo.jpg | 16

The Company sells concentrate from its Chapada mine in Brazil. The concentrate is sold to independent smelting companies for extraction of the metal contents, which are predominantly copper, with small quantities of gold and silver.

Revenue from concentrate sales is recognized when control of the concentrate has transferred to the customer, which is typically upon loading of the concentrate onto the shipping vessel for shipment to the customer. At this point in time, the customer has the significant risks and rewards of ownership of the concentrate, and is committed to accept and pay for the concentrate. Although legal title does not pass until receipt of the first provisional payment, the fact that under the contract the customer has the right to process the concentrate as soon as it is received, indicates that the customer has obtained control of the concentrate prior to the transfer of title - i.e. the customer has the ability to direct the use of, and obtain substantially all of the remaining benefits from, the concentrate.

Concentrate sales include provisional pricing features whereby the price is provisional at the time of sale, with the final sales price based on the market price at a future specified date and the final physical attributes (i.e. quantity of contained metals) of the concentrate determined after further processing and assessment. The price adjustments associated with changes in market price and the physical attributes of the concentrate give rise to variability in the consideration the Company will receive from the customer. The variability associated with the change in market prices is accounted for separately as a derivative.

At the point in time that control of the concentrate transfers to the customer, the Company recognizes revenue and a receivable (the latter, because the Company has determined it has an unconditional right to the consideration). Revenue is measured at the amount the Company expects to be entitled to - being the estimate of the price expected to be received upon final invoice (at the end of the quotational period) using the most recently determined estimate of metal quantity and the estimated forward price. The receivable is measured at fair value through profit or loss, and is marked to market through earnings each period prior to final settlement. The period between provisional and final invoicing is typically 3 to 4 months. The Company presents changes in the fair value of the receivable arising from provisionally priced contracts in the revenue line in the statement of operations.

Streaming Arrangements and Advanced Metal Sales

From time to time, the Company enters into arrangements with customers pursuant to which, the Company receives consideration in advance of the delivery of metals.

Under advanced metal sales, the Company receives advanced consideration against the delivery of a fixed quantity of a specified metal over a specified period.

The Company has entered into the following advanced metal sales agreements:

•
On January 10, 2018, the Company entered into an advanced metal sales agreement pursuant to which, the Company received advanced consideration of $125.0 million in exchange for approximately 40.3 million pounds of copper to be delivered in the second half of 2018 and the first half of 2019.

Under streaming arrangements, the Company receives advanced consideration against the delivery of a portion of future metal production referenced to the mine(s) of the Company specified in the contract. In addition to the advanced consideration, the Company may also receive a cash payment as metals are delivered to the customer.

The Company has entered into the following streaming arrangements:

•
On October 27, 2015 the Company entered into three metal purchase agreements with Sandstorm pursuant to which, the Company received advanced consideration of $170.4 million against future deliveries of silver production related to Cerro Moro, Minera Florida and Chapada, copper production related to Chapada, and gold production related to Agua Rica. In addition to the advanced consideration, the Company receives cash payments equal to 30% of market price at the date of delivery.
•
On March 31, 2016, the Company entered into a copper purchase agreement with Altius, pursuant to which, the Company received advanced consideration of $61.1 million against future deliveries of copper related to the Company's Chapada mine in Brazil. In addition to the advanced consideration, the Company receives cash payments equal to 30% of the market price at the date of delivery.

The Company recognizes the advanced consideration as deferred revenue and recognizes the amounts in revenue as it satisfies its performance obligations to deliver metal to the customer over the life of the contract. In contracts for the delivery of gold or silver bullion, this is typically at

yamanalogo.jpg | 17

the point in time when the metal is credited to the metal account of the customer. For copper sales, this is at the point in time when the copper, in the form of copper warrants, is delivered to the customer. Following the crediting of gold or silver to a customer’s metal account or the delivery of copper warrants, the customer has legal title to, physical possession of, and the risks and rewards of ownership of the metal, and therefore, the ability to direct the use of, and obtain substantially all of the remaining benefits from, the metal.

The Company determines the amortization of deferred revenue to the statement of operations on a per unit basis. In advanced metal sales arrangements, this is over the fixed number of ounces specified in the contract. In streaming arrangements, the estimated total quantity of metal expected to be delivered to the customer over the term of the contract is used. Subsequent changes to expected deliveries result in an adjustment to revenue in the year of change to retroactively adjust for the new number of ounces or pounds expected to be delivered under the contract.

Where consideration is received in advance of the Company’s performance of its obligation, there is an inherent financing component in the transaction. When the period between receipt of consideration and revenue recognition is greater than one year, the Company determines whether the financing component is significant to the contract.

Where a contract is determined to have a significant financing component, the transaction price is adjusted to reflect the financing. The discount rate used in adjusting the promised amount of consideration is the rate that would be reflected in a separate financing transaction between the Company and the customer at contract inception. This rate is not subsequently adjusted for any other changes over the contract term.

The accretion of the interest expense is recognized in the finance expense line in the statement of operations, unless capitalized to assets under construction in accordance with the Company’s policy on capitalized borrowing costs.

The Company estimates the current portion of deferred revenue based on quantities anticipated to be delivered over the next twelve months.

Critical Judgements in Applying Accounting Policies and Key Sources of Estimation Uncertainty

Application of Variable Consideration Constraint

The Company determines the amortization of deferred revenue to the statement of operations on a per unit basis using the expected quantity of metal (ounces for gold and silver and pounds for copper) that will be delivered over the term of the contract, which is based on geological reports and the Company’s LOM plan at contract inception. As subsequent changes to the expected quantity of metal to be delivered triggers a retrospective adjustment to revenue, management is required to estimate the ounces or pounds to be included in the denominator that will be sufficient such that subsequent changes are not expected to result in a significant revenue reversal. Accordingly, management includes reserves and portion of resources, which management is reasonably confident are transferable to reserves, in the calculation. With this approach, the Company considers that it is highly probable that changes in subsequent reserve and resource estimates will not result in a significant revenue reversal of previously recognized revenue.

6.    OTHER EXPENSES (INCOME), NET

 
For the three months ended September 30,
For the nine months ended September 30,
 
2018

2017

2018

2017

Change in provisions
$
(1.1
)
$
(29.2
)
$
12.6

$
(28.6
)
Write-down (recoveries) of other assets
7.3

(4.7
)
13.1

—

Gain on sale of Canadian Exploration Properties (Note 4(c))
—

—

(39.0
)
—

Gain on disposal of Brio Gold (Note 4(a))
—

—

(32.0
)
—

Business transaction costs
0.8

0.5

6.8

2.8

Loss (gain) on sale of assets
0.3

—

(4.3
)
0.5

Mark-to-market (gain) loss on deferred share compensation
(0.3
)
0.5

0.1

(0.6
)
Net mark-to-market loss on investments
2.8

0.3

8.9

3.0

Reorganization costs
2.7

1.9

7.9

3.6

Other expenses
2.4

3.8

5.5

26.2

Other expenses (income), net
$
14.9

$
(26.9
)
$
(20.4
)
$
6.9




yamanalogo.jpg | 18

7.    FINANCE INCOME AND EXPENSE

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

2018

2017
(restated) (i)

2018

2017
(restated) (i)

Interest income
$
0.4

$
0.8

$
1.9

$
2.6

Unrealized gain on derivatives
—

3.3

6.7

—

Finance income
$
0.4

$
4.1

$
8.6

$
2.6

 
 
 
 
 
Unwinding of discounts on provisions
$
(3.7
)
$
(5.5
)
$
(13.1
)
$
(15.4
)
Interest expense on long-term debt
(20.1
)
(19.2
)
(54.5
)
(54.7
)
Fees on extinguishment of long-term debt
—

—

(14.7
)
—

Unrealized loss on derivatives
(3.3
)
—

—

(0.5
)
Net foreign exchange loss
(7.4
)
(11.5
)
(6.3
)
(16.1
)
Amortization of deferred financing, bank, financing fees and other (ii)
(5.7
)
(3.3
)
(23.1
)
(12.0
)
Finance expense
$
(40.2
)
$
(39.5
)
$
(111.7
)
$
(98.7
)
Net finance expense
$
(39.8
)
$
(35.4
)
$
(103.1
)
$
(96.1
)
(i)
The Company has initially applied IFRS 9 at January 1, 2018. Under the transition method chosen, comparative information has been restated for certain hedging requirements. Refer to Note 3: Recent Accounting Pronouncements for further discussion.
(ii)
Included in other finance expense during the three and nine month periods ended September 30, 2018 is $2.9 million and $12.5 million, respectively of non-cash interest expense related to the financing component of deferred revenue contracts. Refer to Note 3(a)(i): Recent Accounting Pronouncements.


8.    INCOME TAXES

 
For the three months ended September 30,
For the nine months ended September 30,
 
2018

2017

2018

2017

Current tax expense (recovery)
 
 
 
 
Current income tax expense in respect of the current period
$
27.8

$
27.3

$
75.0

$
53.8

Adjustment for prior periods
(0.2
)
—

1.0

(1.5
)
Impact of foreign exchange
(0.3
)
(0.6
)
3.0

(0.3
)
Other
2.2

4.1

8.2

9.1

 
$
29.5

$
30.8

$
87.2

$
61.1

Deferred income tax expense (recovery)


 
 
 
Deferred tax recovery recognized in the current year
(117.8
)
(15.1
)
(216.5
)
(38.7
)
Adjustment for prior periods
(1.8
)
6.3

5.2

3.6

Impact of foreign exchange
78.9

1.0

192.2

(1.4
)
 
(40.7
)
(7.8
)
(19.1
)
(36.5
)
Net income tax (recovery) expense
$
(11.2
)
$
23.0

$
68.1

$
24.6


Income 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 Company records changes in foreign exchange rates related to income taxes in the income tax expense. As a result, the tax rate will fluctuate during the period with the changes in the Brazilian Real, Argentine Peso and Canadian Dollar against the US Dollar. Under IFRS, the US Dollar value of non-monetary assets (mainly inventory and property, plant and equipment) is converted into local currency at the quarter-end exchange rate for the purposes of calculating tax owing on the future realization of these assets. This difference between the quarter-end exchange rate and the historical exchange rate results in a non-cash unrealized foreign exchange gain or loss, which is recorded as a deferred tax expense or recovery. When the US Dollar strengthens and local currencies weaken, such as in the current quarter, the non-monetary assets have a higher value in local currency, which results in higher notional taxes being owed and a foreign exchange loss being recorded in the deferred income tax expense. When the US Dollar weakens, the non-monetary asset have a lower value in the local currency, which results in less notional tax being owed and a foreign exchange gain being recorded in the deferred income tax expense. These foreign exchange differences will reverse as assets are depleted or the shares of the foreign subsidiary are sold.

yamanalogo.jpg | 19


The income tax rate for the three months ended September 30, 2018 was 12.2% (2017 - 37.6%). Included in deferred taxes is the foreign exchange gain on the strengthening of the US Dollar of $78.6 million (2017 - loss of $2.6 million), the non-recognition of deferred tax assets on losses in non-profitable entities of $24.9 million (2017 - $14.2 million) and the deductible local foreign exchange losses of $90.5 million (2017 - deductible local foreign exchange losses of $6.6 million).


9.    EARNINGS (LOSS) PER SHARE

Earnings (loss) per share for the three and nine months ended September 30, 2018 and 2017 was calculated based on the following:
 
For the three months ended September 30,
For the nine months ended September 30,
 
2018

2017
(Restated) (i)

2018

2017
(Restated) (i)

Attributable to Yamana Gold Inc. equityholders
 
 
 
 
Net (loss) earnings
$
(81.3
)
$
45.7

$
(223.0
)
$
5.9

(i)
The Company has initially applied IFRS 9 at January 1, 2018. Under the transition method chosen, comparative information has been restated for certain hedging requirements. Refer to Note 3: Recent Accounting Pronouncements for further discussion.

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

The weighted average number of shares used in the calculation of earnings (loss) per share for the three and nine months ended September 30 were based on the following:
 
For the three months ended September 30,
For the nine months ended September 30,
(in thousands)
2018

2017

2018

2017

Weighted average number of common shares - basic
949,114

948,254

948,927

948,092

Weighted average number of dilutive share options (i)
—

1

—

1

Weighted average number of dilutive Restricted Share Units (i)
—

575

—

559

Weighted average number of common shares - diluted (i)
949,114

948,830

948,927

948,652

(i)
The outstanding equity instruments that could potentially dilute basic earnings per share in the future, but were not included because they were anti-dilutive in the calculation of diluted earnings (loss) per share. The potential shares attributable to 928 share options and 1,219,571 restricted share units in the three-month period, and 905 share options and 1,154,929 restricted share units in the nine-month periods ended September 30, 2018 were anti-dilutive.


10.    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,
 
2018

2017

2018

2017

Interest capitalized to assets under construction
$
—

$
2.9

$
8.3

$
7.2

Issue of common shares on vesting of restricted share units (Note 17(a))
$
0.9

$
0.6

$
2.3

$
2.6



yamanalogo.jpg | 20

(b)    Net Change in Working Capital
 
For the three months ended September 30,
For the nine months ended September 30,
 
2018

2017

2018

2017

Net decrease (increase) in:
 
 
 
 
Trade and other receivables
$
6.7

$
(11.8
)
$
4.6

$
(0.2
)
Inventories
(10.1
)
5.2

(42.6
)
(11.9
)
Other assets
2.5

(9.5
)
(9.4
)
(29.9
)
Net (decrease) increase in:
 
 
 
 
Trade and other payables
(17.2
)
18.1

(87.2
)
(22.8
)
Other liabilities
(1.6
)
12.3

(6.5
)
(0.7
)
Movement in above related to foreign exchange
(2.4
)
(0.3
)
(19.9
)
15.4

Net change in working capital (i)
$
(22.1
)
$
14.0

$
(161.0
)
$
(50.1
)
(i)
Change in working capital is net of items related to Property, Plant and Equipment.

(c)
Cash and Cash Equivalents
As at
September 30,
2018

December 31,
2017

Cash at bank
$
120.5

$
146.7

Bank short-term deposits
0.2

2.2

Total cash and cash equivalents (i)
$
120.7

$
148.9

(i)
Cash and cash equivalents consist of cash on hand, cash on deposit with banks, bank term deposits and highly liquid short-term investments with terms of less than 90 days from the date of acquisition.

(d)    Other Non-Cash Expenses (Recoveries), Net
 
For the three months ended September 30,
For the nine months ended September 30,
 
2018

2017

2018

2017

Write off (recoveries) of assets
$
0.8

$
(3.6
)
$
10.7

$
4.4

Revaluation of employees' pension plan
6.3

0.9

10.1

4.0

Provision on indirect taxes
0.3

(6.3
)
(1.5
)
(9.7
)
Legal (recoveries) expenses
(1.1
)
(20.1
)
8.5

(28.6
)
Other expenses
5.4

2.4

8.5

17.5

Total non-cash expenses (recoveries), net
$
11.7

$
(26.7
)
$
36.3

$
(12.4
)


11.    FINANCIAL INSTRUMENTS

(a)
Financial Assets and Financial Liabilities by Categories


yamanalogo.jpg | 21

As at September 30, 2018
Financial assets at amortized cost

FVOCI - equity instruments

FV - Hedging Instruments

Mandatorily at FVTPL - others

Other financial liabilities at amortized cost

Total

Financial assets
 
 
 
 
 
 
Cash and cash equivalents
$
—

$
—

$
—

$
120.7

$
—

$
120.7

Trade and other receivables
8.1

—

—

—

—

8.1

Receivables from provisional copper sales
—

—

—

14.9

—

14.9

Investments in equity securities
—

9.0

—

—

—

9.0

Warrants
—

—

—

1.1

—

1.1

Derivative assets - Hedging instruments
—

—

—

—

—

—

Derivative assets - Non-hedge
—

—

—

—

—

—

Other financial assets
14.9

—

—

—

—

14.9

Total financial assets
$
23.0

$
9.0

$
—

$
136.7

$
—

$
168.7

 
 
 
 
 
 
 
Financial liabilities
 
 
 
 
 
 
Total debt
$
—

$
—

$
—

$
—

$
1,778.5

$
1,778.5

Trade and other payables
—

—

—

—

247.6

247.6

Derivative liabilities - Hedging instruments
—

—

14.0

—

—

14.0

Derivative liabilities - Non-hedge
—

—

—

—

—

—

Other financial liabilities
—

—

—

—

129.8

129.8

Total financial liabilities
$
—

$
—

$
14.0

$
—

$
2,155.9

$
2,169.9


As at December 31, 2017
Loans and receivables

Available-for-sale

Fair value
through
profit or loss

Derivative instruments in designated hedge accounting relationships

Other financial liabilities at amortized cost

Total

Financial assets
 
 
 
 
 
 
Cash and cash equivalents
$
—

$
—

$
148.9

$
—

$
—

$
148.9

Trade and other receivables
8.1

—

—

—

—

8.1

Receivables from provisional copper sales
—

—

30.5

—

—

30.5

Investments in equity securities
—

4.6

—

—

—

4.6

Warrants
—

—

2.6

—

—

2.6

Derivative assets - Hedging instruments
—

—

—

6.7

—

6.7

Derivative assets - Non-hedge
—

—

2.5

—

—

2.5

Other financial assets
22.9

—

—

—

—

22.9

Total financial assets
$
31.0

$
4.6

$
184.5

$
6.7

$
—

$
226.8

 
 
 
 
 
 
 
Financial liabilities
 
 
 
 
 
 
Total debt
$
—

$
—

$
—

$
—

$
1,857.7

$
1,857.7

Trade and other payables
—

—

—

—

345.4

345.4

Derivative liabilities - Hedging instruments
—

—

—

5.7

—

5.7

Derivative liabilities - Non-hedge
—

—

8.5

—

—

8.5

Other financial liabilities
—

—

—

—

164.6

164.6

Total financial liabilities
$
—

$
—

$
8.5

$
5.7

$
2,367.7

$
2,381.9


(b)
Fair Value of Financial Instruments

i)
Fair Value Measurements of Financial Assets and Liabilities Measured at Fair Value

The Company uses the following hierarchy for determining and disclosing the fair value of financial instruments that are measured at fair value:


yamanalogo.jpg | 22

Level 1:
Quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company can access at the measurement date.
Level 2:    Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
Level 3:    Unobservable inputs for the asset or liability.

The levels in the fair value hierarchy into which the Company’s financial assets and liabilities that are measured and recognized on the Condensed Consolidated Interim Balance Sheets at fair value on a recurring basis were categorized as follows:
 
September 30, 2018
December 31, 2017
 
Level 1
input

Level 2
input

Aggregate
fair value

Level 1
input

Level 2
input

Aggregate
fair value

Assets
 
 
 
 
 
 
Cash and cash equivalents
$
120.7

$
—

$
120.7

$
148.9

$
—

$
148.9

Receivables from provisional copper sales
—

14.9

14.9

—

30.5

30.5

Equity securities (Note 13(a))
9.0

—

9.0

4.6

—

4.6

Warrants (Note 13(a))
—

1.1

1.1

—

2.6

2.6

Derivative related assets (Note 13(a))
—

—

—

—

9.3

9.3

 
$
129.7

$
16.0

$
145.7

$
153.5

$
42.4

$
195.9

Liabilities
 
 
 
 
 
 
Derivative related liabilities (Note 13(c))
$
—

$
14.0

$
14.0

$
—

$
14.2

$
14.2

 
$
—

$
14.0

$
14.0

$
—

$
14.2

$
14.2


At September 30, 2018, there were no financial assets and liabilities measured and recognized at fair value on a non-recurring basis.

There were no transfers between Level 1 and Level 2 during the nine months ended September 30, 2018. At September 30, 2018, there were no financial assets or liabilities measured and recognized on the Condensed Consolidated Interim Balance Sheets at fair value that would be categorized as Level 3 in the fair value hierarchy.

ii)
Valuation Methodologies Used in the Measurement of Fair Value for Level 2 Financial Assets and Financial Liabilities

Receivables from Provisional Copper Sales

The Company's copper concentrate sales are subject to provisional pricing with the final selling price adjusted at the end of the quotational period. At the end of each reporting period, the Company's accounts receivable relating to these contracts are marked-to-market based on quoted forward prices for which an active commodity market exists.

Warrants

The fair value of warrants is calculated using the Black-Scholes option pricing model, which uses a combination of quoted prices and market-derived inputs, including volatility estimates.

Derivative Related Assets and Liabilities

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.

iii)
Carrying Value Versus Fair Value

Set out below is a comparison by class of the carrying amounts and fair value of the Company's financial instruments, other than those whose carrying amounts are a reasonable approximation of fair value:


yamanalogo.jpg | 23

 
 
September 30, 2018
December 31, 2017
 
Financial instrument classification
Carrying amount

Fair value (i)

Carrying amount

Fair value (i)

Debt
 
 
 
 
 
Senior unsecured notes
Other financial liabilities at amortized cost
$
1,465.0

$
1,454.5

$
1,754.8

$
1,751.5

(i)
The Company's senior unsecured notes are accounted for at amortized cost, using the effective interest rate method. The fair value required to be disclosed is determined 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.

Management assessed that the fair values of trade and other receivables, accounts payable and accrued liabilities, and other financial assets and liabilities approximate their carrying amounts, largely due to the short-term maturities of these instruments. Derivative assets and liabilities are already carried at fair value.

c)
Financial Instruments and Related Risks

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, 2018 there are no substantial changes to the market risk described in Note 16: Financial Instruments to the Company's Consolidated Annual Financial Statements.

The Company manages its exposure to fluctuations in commodity prices, and foreign exchange rates by entering into derivative financial instruments from time to time, in accordance with the Company's risk management policy. Details of these contracts that were outstanding at December 31, 2017 are included in Note 16: Financial Instruments to the Company's Consolidated Annual Financial Statements.

The Company entered into the following new zero cost collar derivative contracts in the third quarter of 2018, which have been designated as cash flow hedges:

•
R$483 million (R$ = Brazilian Reais) with an average call strike of R$3.75 and an average put strike of R$4.74, covering the period from January to December 2019, evenly split by month; and
•
R$135 million with an average call strike of R$3.75 and an average put strike of R$4.87 per US Dollar, for the period from July to December 2019, evenly split by month.

d)
New Accounting Policies

The below new accounting policies have been applied in the preparation of these Condensed Consolidated Interim Financial Statements.

Changes in accounting policies resulting from the adoption of IFRS 9 have been applied retrospectively, except as described below.

•
The Company has taken an exemption not to restate comparative information for prior periods with respect to classification and measurement (including impairment) requirements. Therefore, comparative periods have been restated only for retrospective application of the cost of hedging approach for the time value of option contracts. Differences in the carrying amounts of financial assets and financial liabilities resulting from the adoption of IFRS 9 are recognized in retained earnings (deficit) and reserves as at January 1, 2018. Accordingly, the information presented for 2017 does not generally reflect the requirements of IFRS 9 but rather those of IAS 39.

•
The following assessments have been made on the basis of the facts and circumstances that existed at the date of initial application.
◦
The determination of the business model within which a financial asset is held.
◦
The designation and revocation of previous designations of certain financial assets and financial liabilities as measured at FVTPL.
◦
The designation of certain investments in equity instruments not held for trading as at FVOCI.

•
Changes to hedge accounting policies have been applied prospectively except for the cost of hedging approach for the time value component of options, which has been applied retrospectively to hedging relationships that existed on or were designated after January 1, 2017.

•
All hedging relationships designated under IAS 39 at December 31, 2017 met the criteria for hedge accounting under IFRS 9 at January 1, 2018 and are therefore regarded as continuing hedging relationships.


yamanalogo.jpg | 24

i)
Classification and Measurement of Financial Assets

On initial recognition, a financial asset is classified as measured at: amortized cost; FVOCI - debt investment; FVOCI - equity investment; or FVTPL. The classification of financial assets is generally based on the business model in which a financial asset is managed and its contractual cash flow characteristics. Derivatives embedded in contracts where the host is a financial asset in the scope of the standard are never separated. Instead, the hybrid financial instrument as a whole is assessed for classification.
A financial asset is measured at amortized cost if it meets both of the following conditions and is not designated as at FVTPL:
•
it is held within a business model whose objective is to hold assets to collect contractual cash flows; and
•
its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
A debt investment is measured at FVOCI if it meets both of the following conditions and is not designated as at FVTPL:
•
it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and
•
its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

On initial recognition of an equity investment that is not held for trading, the Company may irrevocably elect to present subsequent changes in the investment’s fair value in OCI. This election is made on an investment-by-investment basis.
All financial assets not classified as measured at amortized cost or FVOCI as described above are measured at FVTPL. This includes all derivative financial assets. On initial recognition, the Company may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortized cost or at FVOCI as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.
A financial asset (unless it is a trade receivable without a significant financing component that is initially measured at the transaction price) is initially measured at fair value plus, for an item not at FVTPL, transaction costs that are directly attributable to its acquisition.
The following accounting policies apply to the subsequent measurement of financial assets.
Financial assets at amortized cost
These assets are subsequently measured at amortized cost using the effective interest method. The amortized cost is reduced by impairment losses (see ii) below). Interest income, foreign exchange gains and losses and impairment are recognized in profit or loss. Any gain or loss on derecognition is recognized in profit or loss.
Financial assets at FVTPL
These assets are subsequently measured at fair value. Net gains and losses, including any interest or dividend income, are recognized in profit or loss. Refer to iii) below for derivatives designated as hedging instruments.
Equity investments at FVOCI
These assets are subsequently measured at fair value. Dividends are recognized as income in profit or loss unless the dividend clearly represents a recovery of part of the cost of the investment. Other net gains and losses are recognized in OCI and are never reclassified to profit or loss.
Debt investments at FVOCI
These assets are subsequently measured at fair value. Interest income calculated using the effective interest method, foreign exchange gains and losses and impairment are recognized in profit or loss. Other net gains and losses are recognized in OCI. On derecognition, gains and losses accumulated in OCI are reclassified to profit or loss.

ii)
Impairment

The Company recognizes a loss allowance for expected credit losses on financial assets that are measured at amortized cost. At each reporting date, the Company measures the loss allowance for the financial asset at an amount equal to the lifetime expected credit losses if the credit risk on the financial asset has increased significantly since initial recognition. If at the reporting date, the credit risk on the financial asset has not increased significantly since initial recognition, the Company measures the loss allowance for the financial asset at an amount equal to twelve month expected credit losses. Impairment losses on financial assets carried at amortized cost are reversed in subsequent periods if the amount of the loss decreases and the decrease can be objectively related to an event occurring after the impairment was recognized.

For trade receivables that are classified as financial assets at amortized cost, the Company applies the simplified approach permitted by IFRS 9, which requires expected lifetime losses to be recognized from initial recognition of the receivables.

yamanalogo.jpg | 25


iii)
Derivative Instruments and Hedge Accounting
The Company uses derivative financial instruments to hedge its exposure to exchange rate fluctuations on foreign currency operating expenses and capital expenditures.
The Company formally documents all relationships between hedging instruments and hedged items, as well as its risk management objectives and strategies for undertaking hedge transactions. This process includes linking all derivative hedging instruments to forecasted transactions. Hedge effectiveness is assessed based on the degree to which the cash flows from the derivative contracts are expected to offset the cash flows of the underlying transaction being hedged.
When a derivative is designated as a cash flow hedging instrument, the effective portion of changes in fair value is recognized in other comprehensive income, net of tax. For hedged items other than the purchase of non-financial assets, the amounts accumulated in other comprehensive income are reclassified to the consolidated statements of operations when the underlying hedged transaction, identified at contract inception, affects profit or loss. When hedging a forecasted transaction that results in the recognition of a non-financial asset or a non-financial liability, the gains and losses previously deferred in equity are transferred from equity and included in the measurement of the initial carrying amount of the asset or liability.
Any ineffective portion of a hedge relationship is recognized immediately in the consolidated statements of operations. The Company has elected to exclude the time value component of options and the forward element of forward contracts from the hedging relationships, with changes in these amounts recorded in other comprehensive income and treated as a cost of hedging. For hedged items other than the purchase of non-financial assets, the cost of hedging amounts is reclassified to the consolidated statements of operations when the underlying hedged transaction affects profit or loss. When hedging a forecasted transaction that results in the recognition of a non-financial asset, the cost of hedging is added to the carrying amount of the non-financial asset.
When derivative contracts designated as cash flow hedges are terminated, expired, sold or no longer qualify for hedge accounting, hedge accounting is discontinued prospectively. Any amounts recorded in other comprehensive income up until the time the contracts do not qualify for hedge accounting remain in other comprehensive income. Amounts recognized in other comprehensive income are recognized in the consolidated statements of operations in the period in which the underlying hedged transaction is completed. Gains or losses arising subsequent to the derivative contracts not qualifying for hedge accounting are recognized in the period incurred in the consolidated statements of operations.
If the forecasted transaction is no longer expected to occur, then the amounts accumulated in other comprehensive income are reclassified to the consolidated statement of operations immediately.

12.    INVENTORIES

As at,
September 30,
2018

December 31,
2017

Product inventories
$
51.3

$
35.6

Work in process
12.0

14.1

Ore stockpiles
181.9

126.6

Materials and supplies
92.5

93.7

 
$
337.7

$
270.0

Less: non-current ore stockpiles included in other non-current assets (Note 13(b))
$
(165.7
)
$
(106.5
)
 
$
172.0

$
163.5


For the three months and nine months ended September 30, 2018, charges of $3.1 million and $12.6 million, respectively were recorded to adjust inventory to net realizable value (2017 - charges of nil and $9.5 million, respectively) which are included in cost of sales excluding depletion, depreciation and amortization in the condensed consolidated interim statements of operations.


13.    SELECTED COMPOSITION NOTES


yamanalogo.jpg | 26

(a)
Other Financial Assets
As at,
September 30,
2018

December 31,
2017

Derivative related assets
$
—

$
9.3

Other receivables
14.9

21.0

Investments in financial securities (i)
10.1

7.2

Other
—

1.8

 
$
25.0

$
39.3

Current
$
3.9

$
13.2

Non-current
21.1

26.1

 
$
25.0

$
39.3

(i)
Investments in financial securities include equity securities and warrants with a cost of $24.0 million (December 31, 2017 - $16.4 million) and a fair value of $10.1 million (December 31, 2017 - $7.2 million).

(b)
Other Assets
As at,
September 30,
2018

December 31,
2017

Non-current portion of ore stockpiles (Note 12) (i)
$
165.7

$
106.5

Income tax recoverable and installments
9.5

23.1

Tax credits recoverable (ii)
93.0

118.8

Advances and deposits
46.0

53.1

Other long-term advances
14.8

15.2

 
$
329.0

$
316.7

Current
$
113.0

$
119.4

Non-current
216.0

197.3

 
$
329.0

$
316.7

(i)
Non-current ore stockpiles represent material not scheduled for processing within the next twelve months at the Company's Chapada and Canadian Malartic mines. Comparatives, which were previously included in Property, Plant and Equipment, have been reclassified to conform to the change in presentation adopted in the current period. As at January 1, 2017, the non-current ore stockpile balance was $28.2 million.
(ii)
Tax credits recoverable consist of sales taxes which are recoverable either in the form of a refund from the respective jurisdictions in which the Company operates or against other taxes payable and value-added tax.

(c)
Other Financial Liabilities
As at,
September 30,
2018

December 31,
2017

Royalty payable (i)
$
17.8

$
18.1

Payable related to purchase of mineral interests (ii)
—

10.8

Severance accrual
31.8

32.0

Deferred share units/performance share units liability (Note 18)
20.6

21.0

Accounts receivable financing credit (iii)
40.5

54.1

Current portion of debt (Note 16)
2.2

110.0

Derivative related liabilities
14.0

14.2

Other
19.1

28.6

 
$
146.0

$
288.8

Current
$
69.8

$
203.1

Non-current
76.2

85.7

 
$
146.0

$
288.8

(i)
Included in Royalty payable is an agreement with Miramar Mining Corporation (“Miramar” acquired by Newmont Mining Corporation) for a Proceeds Interest of C$15.4 million. The agreement entitles Miramar to receive payment of this interest over time calculated as the economic equivalent of a 2.5% net smelter return royalty on all production from the Company’s mining properties held at the time of Northern Orion entering into the agreement, or 50% of the net proceeds of disposition of any interest in the Agua Rica property until the Proceeds Interest of C$15.4 million is paid. Since inception, partial payments of $6.0 million and appreciation of the US Dollar have resulted in the liability being measured at $5.6 million as at September 30, 2018. Also included in Royalty payable is $10.6 million of amounts payable by Canadian Malartic.
(ii)
Payable related to purchase of the remaining interests in Agua Fria.
(iii)
Accounts receivable financing credit is payable within 30 days from the proceeds on concentrate sales.

yamanalogo.jpg | 27


(d)
Other Provisions and Liabilities 
As at,
September 30,
2018

December 31,
2017

Other taxes payable
$
15.0

$
15.8

Provision for repatriation taxes payable (i)
22.9

22.9

Provision for taxes
19.9

24.4

Deferred revenue on metal streaming arrangements - Altius (ii)
59.1

57.5

Deferred revenue on metal streaming arrangements - Sandstorm (iii)
170.3

158.5

Deferred revenue on advanced metal sales - other (iv)
86.2

—

Other provisions and liabilities
49.6

74.2

 
$
423.0

$
353.3

Current
$
129.2

$
56.7

Non-current
293.8

296.6

 
$
423.0

$
353.3

(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 $22.9 million (December 31, 2017 - $22.9 million) have been accrued on the assumption that the profits will be repatriated.
(ii)
On March 31, 2016, the Company entered into a metal streaming arrangement with Altius, pursuant to which, the Company received advanced consideration of $61.1 million against future deliveries of copper produced by the Company's Chapada mine in Brazil. The advanced consideration is accounted for as deferred revenue, with revenue recognized when copper is delivered to Altius.
The following table summarizes the changes in deferred revenue:    
 
2018

Balance as at January 1, 2018
$
57.5

Adjustment on initial adoption of IFRS 15 (Note 3(a)(i))
3.4

Adjusted balance at January 1, 2018
$
60.9

Recognition of revenue during the year
(1.8
)
 
$
59.1

Current portion
$
2.2

Non-current portion
56.9

Balance as at September 30, 2018
$
59.1

(iii)
On October 27, 2015 the Company entered into three metal streaming arrangements with Sandstorm pursuant to which, the Company received advanced consideration of $170.4 million against future deliveries of silver related to production from Cerro Moro, Minera Florida and Chapada, copper production related to Chapada, and gold production related to Agua Rica. The advanced consideration is accounted for as deferred revenue, with revenue recognized when the respective metals are delivered to Sandstorm.
The following table summarizes the changes in deferred revenue:
 
2018

Balance as at January 1, 2018
$
158.5

Adjustment on initial adoption of IFRS 15 (Note 3(a)(i))
13.0

Adjusted balance at January 1, 2018
$
171.5

Recognition of revenue during the year
(1.2
)
 
$
170.3

Current portion
$
11.0

Non-current portion
159.3

Balance as at September 30, 2018
$
170.3

(iv)
On January 10, 2018, the Company entered into an advanced metal sales agreement pursuant to which, the Company received advanced consideration of $125.0 million in exchange for approximately 40.3 million pounds of copper to be delivered in the second half of 2018 and the first half of 2019. The advanced consideration is accounted for as deferred revenue, with revenue recognized as copper is delivered to the counterparty. As the Company received consideration more than a year in advance of completion of delivery, the Company has accounted for the financing component in the transaction. Accordingly, in the three and nine months to September 30, 2018, the Company recognized interest expense of $0.4 million and $4.3 million respectively, with a corresponding increase to the deferred revenue balance. During the third quarter, the Company made the first delivery of copper under the arrangement and recognized revenue of $43.1 million.



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14.    PROPERTY, PLANT AND EQUIPMENT
 
Mining properties
 
 
 
 
 
Depletable (ii)

Non-depletable

Land, building,
plant & equipment

Construction in progress

Exploration & evaluation

Total(i)

Cost, January 1, 2017
$
5,860.4

$
1,708.9

$
2,745.2

$
89.6

$
4,155.3

$
14,559.4

Additions
231.9

62.7

94.1

172.0

83.2

$
643.9

Reclassification, transfers and other non-cash movements
99.5

225.8

(29.2
)
—

(328.1
)
$
(32.0
)
Change in decommissioning, restoration and similar liabilities
47.4

0.5

—

—

—

$
47.9

Gross cost reclassified as held for sale (Note 4) and other disposals
(712.2
)
(289.3
)
(319.7
)
—

(460.9
)
$
(1,782.1
)
Cost, December 31, 2017
$
5,527.0

$
1,708.6

$
2,490.4

$
261.6

$
3,449.5

$
13,437.1

Additions
98.0

120.4

40.9

58.6

20.2

338.1

Reclassification, transfers and other non-cash movements
658.1

(639.3
)
287.4

(320.2
)
15.1

1.1

Change in decommissioning, restoration and similar liabilities
(27.6
)
—

—

—

—

(27.6
)
Gross cost reclassified as held for sale (Note 4) and other disposals
(594.2
)
(206.9
)
(665.2
)
—

(0.8
)
(1,467.1
)
Cost, September 30, 2018
$
5,661.3

$
982.8

$
2,153.5

$
—

$
3,484.0

$
12,281.6

 
 
 
 
 
 
 
Accumulated depletion, depreciation and impairment, January 1, 2017
$
3,569.4

$
1,032.7

$
1,370.7

$
—

$
1,048.5

$
7,021.3

Depletion and depreciation for the year
224.9

—

212.4

—

—

437.3

Impairment
129.7

7.5

80.4

—

138.9

356.5

Gross accumulated depletion, depreciation, and impairment eliminated on reclassification as held for sale (Note 4) and other disposals
(653.1
)
(253.8
)
(265.0
)
—

(359.3
)
(1,531.2
)
Accumulated depletion, depreciation and impairment, December 31, 2017
$
3,270.9

$
786.4

$
1,398.5

$
—

$
828.1

$
6,283.9

Depletion and depreciation for the period
186.5

—

107.7

—

—

294.2

Impairment (iii)
90.7

78.3

101.4

—

—

270.4

Gross accumulated depletion, depreciation, and impairment eliminated on reclassification as held for sale (Note 4) and other disposals
(271.8
)
(548.2
)
(385.6
)
—

—

(1,205.6
)
Accumulated depletion, depreciation and impairment September 30, 2018
$
3,276.3

$
316.5

$
1,222.0

$
—

$
828.1

$
5,642.9

Carrying value, December 31, 2017
$
2,256.1

$
922.2

$
1,091.9

$
261.6

$
2,621.4

$
7,153.2

Carrying value, September 30, 2018
$
2,385.0

$
666.3

$
931.5

$
—

$
2,655.9

$
6,638.7

(i)
During the period, the Company enhanced its disclosures to separately identify exploration and evaluation assets and provide further clarity on the movements during the periods presented. Comparative balances reflect the change in presentation adopted in the current period.
(ii)
The following table shows the reconciliation of capitalized stripping costs incurred in the production phase:
As at,
September 30,
2018

December 31,
2017

Balance, beginning of period
$
355.6

$
285.3

Additions
35.4

135.2

Amortization
(22.9
)
(18.2
)
Reclassified as held for sale (Note 4)
(106.5
)
(46.7
)
Balance, end of period
$
261.6

$
355.6

(iii)
During the period, the Company recognized impairment charges on the Brio Gold and Gualcamayo mineral interests. The balance includes the amount in relation to the non-controlling interests of Brio Gold. Refer to Note 4: Divestitures for additional details.


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15.    INVESTMENT IN ASSOCIATE

As at September 30, 2018, the Company held an approximate 20.5% interest in Leagold, which is accounted for using the equity method. The Company adjusts the financial results of the associate, where appropriate, to give effect to uniform accounting policies. The following table summarizes the change in the carrying amount of the Company's investment in associate:

 
2018

Balance as at January 1, 2018
$
—

Acquisition of interest in Leagold (Note 4(a))
140.5

Company's share of net earnings of Leagold
1.0

Balance as at September 30, 2018
$
141.5


Accounting Policy

An associate is an entity over which the Company has significant influence. Significant influence is the power to participate in the financial and operating policy of decisions of the investee but is not control or joint control over those policies. The Company is presumed to have significant influence if it holds, directly or indirectly, 20% or more of the voting power of the investee, unless it can be clearly demonstrated that the Company does not have significant influence.

The Company accounts for its investments in associates using the equity method. Under the equity method, the Company’s investment in an associate is initially recognized at cost and subsequently increased or decreased to recognize the Company's share of net earnings or losses of the associate, after any adjustments necessary to give effect to uniform accounting policies, any other movement in the associate's reserves, and for impairment losses after the initial recognition date. The total carrying amount of the Company's investments in associates also include any long-term debt interests which, in substance, form part of the Company's net investment. The Company’s share of an associate's losses that are in excess of its investment are recognized only to the extent that the Company has incurred legal or constructive obligations or made payments on behalf of the associate. The Company's share of earnings or losses of associates are recognized in net earnings during the period. Dividends and repayment of capital received from an associate are accounted for as a reduction in the carrying amount of the Company’s investment. Unrealized gains and losses between the Company and its associates are recognized only to the extent of unrelated investors’ interests in the associates. Intercompany balances and interest expense and income arising on loans and borrowings between the Company and its associates are not eliminated.



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16.    LONG-TERM DEBT

As at,
September 30,
2018

December 31,
2017

$300 million senior debt notes, issued December 4, 2017
$
296.8

$
297.5

$500 million senior debt notes, issued June 30, 2014
496.6

496.2

$300 million senior debt notes, issued June 10, 2013 (vi)
260.3

295.1

$500 million senior debt notes, issued March 23, 2012 (v)
411.3

484.6

$270 million senior debt notes, issued December 18, 2009 (iv)
—

181.4

$1 billion revolving facility (ii)
311.3

27.0

$75 million revolving facility (iii)
—

72.6

Debt from 50% interest in Canadian Malartic
2.2

3.3

Total debt (i)
$
1,778.5

$
1,857.7

Less: current portion of debt (Note 13(c))
(2.2
)
(110.0
)
Long-term debt
$
1,776.3

$
1,747.7

(i)
Balances are net of transaction costs of $12.4 million, net of amortization (December 31, 2017 - $14.3 million).
(ii)
During the nine months ended September 30, 2018, the Company drew down $435.0 million and repaid $150.0 million on its revolving facility. The Company will, from time to time, repay balances outstanding on its revolving credit facility. In June 2018, the maturity date on the revolving facility was extended from September 2021 to June 2023 on substantially similar terms.
(iii)
The $75.0 million revolving facility related to Brio Gold. The Company's interest in Brio Gold was disposed of on May 24, 2018. Refer to Note 4: Divestitures.
(iv)
On January 29, 2018, the Company redeemed the 6.97% Series C senior debt notes due December 2019 at a make-whole price of 108.12.
(v)
On March 23, 2018, the Company repaid the $75.0 million of 3.89% Series A senior debt notes, which matured.
(vi)
On June 10, 2018, the Company repaid the $35.0 million of 3.64% Series A senior debt notes, which matured.

The following is a schedule of debt principal repayments, which includes corporate debt, the revolving facility, and debt assumed from the 50% interest in Canadian Malartic: 
 
Total debt

2018
$
0.3

2019
1.9

2020
84.1

2021
—

2022
192.7

2023
576.2

2024
635.7

2025
—

2026
—

2027
300.0

 
$
1,790.9




yamanalogo.jpg | 31

17.    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, 2018 (December 31, 2017: nil).

 
For the nine months ended
For the year ended
 
September 30, 2018
December 31, 2017
 
Number of
common shares

 
Number of
common shares

 

Issued and outstanding - 949,301,750 common shares
Amount

Amount

(December 31, 2017 - 948,524,667 common shares):
(In thousands)

(In millions)

(In thousands)

(In millions)

Balance, beginning of year
948,525

$
7,633.7

947,798

$
7,630.5

Issued on vesting of restricted share units
687

2.3

591

2.9

Dividend reinvestment plan (i)
90

0.3

136

0.3

Balance, end of period
949,302

$
7,636.3

948,525

$
7,633.7

(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, 2018, a total of 20,462,909 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,
 
2018

2017

2018

2017

Dividends paid
$
4.7

$
4.6

$
14.2

$
14.2

Dividends declared in respect of the period
$
4.8

$
4.8

$
14.4

$
14.3

Dividend paid (per share)
$
0.005

$
0.005

$
0.015

$
0.015

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

$
0.005

$
0.015

$
0.015



18.    SHARE-BASED PAYMENTS
 
The total expense relating to share-based payments includes accrued compensation expense related to plans granted in the current period, plans granted in the prior period 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,
 
2018

2017

2018

2017

Accrued expense on equity-settled compensation plans
$
1.4

$
1.0

$
3.9

$
2.7

Accrued expense on cash-settled compensation plans
0.6

0.3

2.3

1.7

Total expense for instruments granted
$
2.0

$
1.3

$
6.2

$
4.4

Compensation expense for Brio Gold
—

1.9

0.3

5.6

Mark-to-market change on cash-settled plans
(0.8
)
0.1

(0.8
)
(0.9
)
Total expense recognized as compensation expense
$
1.2

$
3.3

$
5.7

$
9.1

 
As at
September 30,
2018

December 31,
2017

Total carrying amount of liabilities for cash-settled arrangements (Note 13(c))
$
20.6

$
21.0



yamanalogo.jpg | 32

The following table summarizes the equity instruments outstanding related to share-based payments.
As at (In thousands)
September 30,
2018

December 31,
2017

Share options (i)
1,772

1,831

Restricted share units ("RSU") (ii)
2,292

1,474

Deferred share units ("DSU") (iii)
4,649

4,288

Performance share units ("PSU") (iv)
3,271

2,521

(i)
During the nine months ended September 30, 2018, 58,851 share options expired.
(ii)
During the nine months ended September 30, 2018, the Company granted 1,672,156 RSUs with a weighted average grant date fair value of C$4.15 per RSU; 167,104 RSUs were cancelled or forfeited; and a total of 687,472 RSUs vested and the Company credited $2.3 million (2017 - $2.6 million) to share capital in respect of RSUs that vested during the period.
(iii)
During the nine months ended September 30, 2018, the Company granted 360,749 DSUs and recorded an expense of C$1.4 million. During the first quarter of 2017, the Company entered into a derivative contract to mitigate the volatility of share price on DSU compensation, effectively locking in the exposure of the Company for 3 million DSUs (approximately 80% of outstanding DSUs) at a value of C$3.5002 per share. For the nine months ended September 30, 2018, the Company recorded a mark-to-market gain on DSUs of $2.4 million and a mark-to-market loss on the DSU hedge of $1.6 million.
(iv)
During the nine months ended September 30, 2018, 1,225,764 PSU units were granted and 476,624 PSU units vested. The new PSU plan granted during the first quarter of 2018 has an expiry date on December 31, 2020 and had a fair value of C$3.62 per unit at September 30, 2018.
 

19.    NON-CONTROLLING INTERESTS

As at,
September 30,
2018

December 31,
2017

Agua De La Falda S.A. (i)
$
18.7

$
18.7

Brio Gold Inc. (ii)
—

115.2

Estelar Resources Ltd. (iii)
16.0

—

 
$
34.7

$
133.9

(i)
The Company holds a 56.7% interest in the Agua De La Falda ("ADLF") project along with Corporación Nacional del Cobre de Chile ("Codelco"). The ADLF project is an exploration project that includes the Jeronimo Deposit and is located in northern Chile.
(ii)
The Company held approximately 53.6% of the issued and outstanding shares of Brio Gold as at December 31, 2017. On May 24, 2018, the Company completed the sale of its 53.6% controlling interest in Brio Gold to Leagold and deconsolidated the subsidiary. Refer to Note 4: Divestitures for further discussion.
(iii)
During the second quarter of 2018, the Company entered into an arrangement with Fomento Minero de Santa Cruz S.E. ("FOMICRUZ") pursuant to which, FOMICRUZ is entitled to certain subordinated shares in the legal entity that owns Cerro Moro, Estelar Resources Ltd. These subordinated shares entitle FOMICRUZ to a 5% interest in future dividends after the Company's investment in Cerro Moro, which includes construction and development along with acquisition costs, has been recovered in full. As part of the arrangement and as further consideration to the Company, the right to use the land related to the Bahía Laura properties, a significant land package to the west and south west of Cerro Moro, was obtained at an approximate value of $16.0 million.


20.    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 17: Share Capital and Note 16: Long-term Debt, respectively, 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.

yamanalogo.jpg | 33

(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, 2018, the Company has met all of the externally imposed financial covenants.


21.    OPERATING SEGMENTS
 
The Company bases its operating segments on the way information is reported and used by the Company's chief operating decision maker ("CODM"), being the Company's senior management team. The results of operating segments are reviewed by the CODM in order to make decisions about resources to be allocated to the segments and to assess their performance.

The Company considers each of its individual operating mine sites as reportable segments for financial reporting purposes. In addition to these reportable segments, the Company aggregates and discloses the financial results of other operating segments with similar economic characteristics as reviewed by the CODM, including exploration properties and corporate entities, under "Corporate and Other".

The following changes have been made to Company's reportable segments since December 31, 2017:

•
The Company's Cerro Moro mine, which was included in "Corporate and Other" at December 31, 2017, is now a separate reportable segment. On June 26, 2018, the Company announced that the Cerro Moro mine had achieved commercial production, and the assets associated with Cerro Moro now comprise 12% of the Company's total assets.
•
The CODM reviews the results of operating mines that the Company does not intend to manage in the long-term and for which a disposal plan has been initiated, as one operating segment. Accordingly, Gualcamayo and Brio Gold, which were separate reportable operating segments at December 31, 2017 are now grouped into one reportable operating segment, "Other Mines". The Company's interest in Brio Gold was disposed of on May 24, 2018. Refer to Note 4: Divestitures.

Comparatives have been adjusted to conform to the change in presentation adopted in the current period.

(a)
Information about Assets and Liabilities
As at September 30, 2018
Chapada

El Peñón

Canadian Malartic

Jacobina

Minera Florida

Cerro Moro

Other
Mines

Corporate and Other (i)

Total

Total assets
$
799.4

$
661.6

$
1,731.9

$
787.8

$
327.0

$
1,012.5

$
147.8

$
2,661.9

$
8,129.9

Total liabilities
$
254.4

$
158.3

$
431.9

$
172.8

$
84.5

$
51.7

$
63.2

$
2,830.2

$
4,047.0


As at December 31, 2017
Chapada

El Peñón

Canadian Malartic

Jacobina

Minera Florida

Cerro Moro

Other
Mines

Corporate and Other (i)

Total

Total assets
$
798.2

$
707.2

$
1,869.6

$
783.3

$
330.0

$
897.6

$
811.3

$
2,566.1

$
8,763.3

Total liabilities
$
318.0

$
179.1

$
436.4

$
162.0

$
103.0

$
75.5

$
203.5

$
2,838.5

$
4,316.0

(i)
"Corporate and other" includes Agua Rica ($1.1 billion) (December 31, 2017 - $1.1 billion), advanced stage development projects, exploration properties, corporate entities and the Company's investment in associate.


yamanalogo.jpg | 34

(b)
Information about Profit or Loss
For the three months ended September 30, 2018
Chapada

El Peñón

Canadian Malartic

Jacobina

Minera Florida

 Cerro Moro

Other
Mines

Corporate
and other

Total

Revenue (ii)
$
112.9

$
54.9

$
109.8

$
42.2

$
25.9

$
46.2

$
24.9

$
—

$
416.8

Cost of sales excluding
depletion, depreciation and amortization
(51.9
)
(41.3
)
(49.9
)
(22.2
)
(20.0
)
(24.2
)
$
(24.0
)
—

$
(233.5
)
Gross margin excluding depletion, depreciation and amortization
$
61.0

$
13.6

$
59.9

$
20.0

$
5.9

$
22.0

$
0.9

$
—

$
183.3

Depletion, depreciation and amortization
(10.6
)
(23.6
)
(36.1
)
(8.1
)
(9.4
)
(19.6
)
—

(2.0
)
$
(109.4
)
Impairment of mining properties
—

—

—

—

—

—

—

—

$
—

Segment income (loss)
$
50.4

$
(10.0
)
$
23.8

$
11.9

$
(3.5
)
$
2.4

$
0.9

$
(2.0
)
$
73.9

Other expenses (i)
 
(166.4
)
Loss before taxes
 
$
(92.5
)
Income tax recovery
 
11.2

Net loss
 
$
(81.3
)

For the three months ended September 30, 2017 (restated) (iii)
Chapada

El Peñón

Canadian Malartic

Jacobina

Minera Florida

Cerro Moro

Other
Mines

Corporate
and other

Total

Revenue (ii)
$
137.7

$
82.0

$
100.5

$
44.9

$
33.1

$
—

$
95.2

$
—

$
493.4

Cost of sales excluding
depletion, depreciation and amortization
(60.9
)
(54.4
)
(46.3
)
(24.4
)
(20.1
)
—

(72.9
)
—

$
(279.0
)
Gross margin excluding depletion, depreciation and amortization
$
76.8

$
27.6

$
54.2

$
20.5

$
13.0

$
—

$
22.3

$
—

$
214.4

Depletion, depreciation and amortization
(11.2
)
(20.6
)
(30.8
)
(12.5
)
(10.1
)
—

(21.0
)
(1.8
)
$
(108.0
)
Segment income (loss)
$
65.6

$
7.0

$
23.4

$
8.0

$
2.9

$
—

$
1.3

$
(1.8
)
$
106.4

Other expenses (i)
 
(41.9
)
Earnings before taxes
 
$
64.5

Income tax expense
 
(23.0
)
Net earnings
 
$
41.5

(i)
Other expenses are comprised of general and administrative expense of $20.7 million (2017 - $28.5 million), exploration and evaluation expense of $2.5 million (2017 - $4.9 million), share of earnings of associate of $0.5 million (2017 - $nil), net finance expense of $39.8 million (2017 - $35.4 million), other operating expenses (income) of $14.9 million (2017 - income of $26.9 million) and expenses related to impairment of non-operating mineral properties of $89.0 million (2017 - $nil).
(ii)
Intersegment sales are eliminated in the above information reported to the Company's CODM. For the three months ended September 30, 2018, intersegment purchases included $416.8 million of gold, silver and copper purchased by the Company's corporate office from the Company's producing mines (2017 - $439.3 million) and revenue related to the sale of these metals to third parties was $416.8 million (2017 - $439.3 million).
(iii)
The Company has initially applied IFRS 9 at January 1, 2018. Under the transition method chosen, comparative information has been restated for certain hedging requirements. Refer to Note 3: Recent Accounting Pronouncements for further discussion.
  
For the nine months ended September 30, 2018
Chapada

El Peñón

Canadian Malartic

Jacobina

Minera Florida

Cerro Moro

Other
Mines

Corporate
and other

Total

Revenue (ii)
$
335.4

$
190.6

$
337.4

$
134.5

$
73.3

$
46.2

$
180.6

$
—

$
1,298.0

Cost of sales excluding
depletion, depreciation and amortization
(150.6
)
(130.6
)
(147.9
)
(69.9
)
(57.2
)
(24.3
)
(146.2
)
—

$
(726.7
)
Gross margin excluding depletion, depreciation and amortization
$
184.8

$
60.0

$
189.5

$
64.6

$
16.1

$
21.9

$
34.4

$
—

$
571.3

Depletion, depreciation and amortization
(31.3
)
(66.7
)
(103.1
)
(25.7
)
(28.9
)
(19.6
)
(26.1
)
(6.0
)
$
(307.4
)
Impairment of mining properties
—

—

—

—

—

—

(103.0
)
—

(103.0
)
Segment income (loss)
$
153.5

$
(6.7
)
$
86.4

$
38.9

$
(12.8
)
$
2.3

$
(94.7
)
$
(6.0
)
$
160.9

Other expenses (i)
 
(321.9
)
Loss before taxes
 
$
(161.0
)
Income tax expense
 
(68.1
)
Net loss
 
$
(229.1
)


yamanalogo.jpg | 35

For the nine months ended September 30, 2017 (restated) (iii)
Chapada

El Peñón

Canadian Malartic

Jacobina

Minera Florida

Cerro Moro

Other
Mines

Corporate
and other

Total

Revenue (ii)
$
303.4

$
213.7

$
287.7

$
127.8

$
91.9

$
—

$
300.5

$
—

$
1,325.0

Cost of sales excluding
depletion, depreciation and amortization
(159.4
)
(131.3
)
(130.0
)
(72.7
)
(60.5
)
—

(224.1
)
—

(778.0
)
Gross margin excluding depletion, depreciation and amortization
$
144.0

$
82.4

$
157.7

$
55.1

$
31.4

$
—

$
76.4

$
—

$
547.0

Depletion, depreciation and amortization
(26.5
)
(53.4
)
(97.0
)
(36.1
)
(30.6
)
—

(76.8
)
(5.5
)
(325.9
)
Segment income (loss)
$
117.5

$
29.0

$
60.7

$
19.0

$
0.8

$
—

$
(0.4
)
$
(5.5
)
$
221.1

Other expenses (i)
 
(196.9
)
Earnings before taxes
 
$
24.2

Income tax expense
 
(24.6
)
Net loss
 
$
(0.4
)
(i)
Other expenses are comprised of general and administrative expense of $70.8 million (2017 - $79.7 million), exploration and evaluation expense of $9.4 million (2017 - $14.2 million), share of earnings of associate of $1.0 million (2017 - $nil), net finance expense of $103.1 million (2017 - $96.1 million), other operating (income) expenses of $(20.4) million (2017 - $6.9 million) and expenses related to impairment of non-operating mineral properties of $160.0 million (2017 - $nil).
(ii)
Intersegment sales are eliminated in the above information reported to the Company's CODM. For the nine months ended September 30, 2018, intersegment purchases included $1,204.2 million of gold, silver and copper purchased by the Company's corporate office from the Company's producing mines (2017 - $1,157.7 million) and revenue related to the sale of these metals to third parties was $1,204.2 million (2017 - $1,157.7 million).
(iii)
The Company has initially applied IFRS 9 at January 1, 2018. Under the transition method chosen, comparative information has been restated for certain hedging requirements. Refer to Note 3: Recent Accounting Pronouncements for further discussion.

(c)
Information about Capital Expenditures
Capital expenditures
Chapada

El Peñón

Canadian Malartic

Jacobina

Minera Florida

Cerro Moro

Other

Total

For the three months ended September 30, 2018
$
14.5

$
12.8

$
20.5

$
12.8

$
22.5

$
9.1

$
10.6

$
102.8

For the three months ended September 30, 2017
$
8.1

$
14.2

$
22.3

$
10.4

$
20.5

$
49.3

$
34.7

$
159.5

For the nine months ended September 30, 2018
$
31.0

$
37.6

$
61.1

$
31.3

$
41.9

$
72.5

$
64.3

$
339.7

For the nine months ended September 30, 2017
$
36.1

$
45.9

$
51.0

$
30.6

$
40.9

$
129.2

$
94.2

$
427.9



22.    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 Consolidated Financial Statements of the Company may be material.

Canadian Malartic

On August 2, 2016, Canadian Malartic General Partnership (“CMGP”), a general partnership jointly owned by the Company and Agnico Eagle Mines Limited (the "Partnership"), was served with a class action lawsuit filed in the Superior Court of Québec with respect to allegations involving the Canadian Malartic mine.  The complaint is in respect of "neighbourhood annoyances" arising from dust, noise, vibrations and blasts at the mine.  The plaintiffs are seeking damages in an unspecified amount as well as punitive damages in the amount of CAD$20 million.  The class action was certified in May 2017. In November 2017, a declaratory judgment was issued allowing the Partnership to settle individually with class members for 2017. On December 11, 2017, hearings were completed in respect of certain preliminary matters, including the Partnership's application for partial dismissal of the class action. Judgment was rendered on the preliminary matters and the partial dismissal of the class action was granted, removing the period of August 2013 to June 2014 from the class period. The Company and the Partnership will take all necessary steps to defend themselves from this lawsuit.
On August 15, 2016, the Partnership received notice of an application for injunction relating to the Canadian Malartic mine, which had been filed under the Environment Quality Act (Québec). A hearing related to an interlocutory injunction was completed on March 17, 2017 and a decision of the Superior Court of Québec dismissed the injunction. An application for permanent injunction is currently pending. The Company and the Partnership have reviewed the injunction request, consider the request without merit and will take all reasonable steps to defend against this injunction. These measures include a motion for the dismissal of the application for injunction, which has been filed and will be heard at a date

yamanalogo.jpg | 36

that has yet to be determined. While at this time the potential impacts of the injunction cannot be definitively determined, the Company expects that if the injunction were to be granted, there would be a negative impact on the operations of the Canadian Malartic mine, which could include a reduction in production and shift reductions resulting in the loss of jobs.
On June 1, 2017, the Partnership was served with an application for judicial review to obtain the annulment of a governmental decree authorizing expansion of the Canadian Malartic mine. The Partnership is an impleaded party in the proceedings. The Company and the Partnership have reviewed the application for judicial review, consider the application without merit and will take all reasonable steps to defend against this application. The hearing on the merits began on October 1, 2018. While the Company believes it is highly unlikely that the annulment will be granted, the Company expects that if the annulment were to be granted, there would be a negative impact on the operations of the Canadian Malartic mine, which could include a reduction in anticipated future production.
*************


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