How Is Yamana Using the Proceeds from Recent Monetizing Efforts?



Yamana raises $178 million

Yamana Gold (AUY) announced on October 3, 2016, that it has raised a total of $178 million through the completion of its Mercedes mine sale and the monetization of Sandstorm (SAND) warrant holdings.

The company announced the completion of the sale of gold-silver Mercedes mine in Mexico for a consideration of $122.5 million in cash and ~$22 million in shares, equity securities, and net smelter royalties. The 1% net smelter royalty will be payable on the earlier of these two options:

  • six years from the closing of the transaction
  • date when cumulative production of gold equivalent from mine totals 450,000 ounces

The net smelter royalties will allow Yamana to participate in future exploration and mine-life extension at Mercedes. This mine is a non-core asset for Yamana and is its only mine in Mexico.

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Monetizing Sandstorm warrant holdings

Yamana also sold share purchase warrants to purchase 15 million shares of Sandstorm Gold for total proceeds of $33.55 million. The warrants have an expiry date of October 27, 2020. The company stated that on September 23, 2016, the warrants were in the money. These warrants were originally issued as a part of the consideration for certain metal purchase agreements with Sandstorm relating to copper and silver in 2015.

Use of proceeds

The company stated that it will use the proceeds from this transaction to reduce its net debt. It also said that “this is the first of a series of steps this year to decrease our overall debt.” The company announced in early 2016 that it will reduce net debt by $300 million through 2017. The above chart shows the financial leverage for Yamana compared to its peers.

Yamana’s peers (RING) have also been involved in similar portfolio restructuring transactions. AngloGold Ashanti (AU) sold its Cripple Creek & Victor mine to Newmont Mining (NEM), and Barrick Gold (ABX) sold its Nevada assets to Kinross Gold (KGC).


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