Yamana Gold Announces Results for the Third Quarter 2012

Mon Oct 29, 2012 4:29pm EDT

* Reuters is not responsible for the content in this press release.

  TORONTO, ONTARIO, Oct 29 (MARKET WIRE) --
YAMANA GOLD INC. (TSX:YRI)(NYSE:AUY)(LSE:YAU) ("Yamana" or "the Company")
today announced its financial and operating results for the third quarter
2012.

    HIGHLIGHTS FOR THE THIRD QUARTER 2012


--  Record production of 310,490 gold equivalent ounces (GEO)(1), an 11%
    increase over the same period a year ago 
    --  Gold production of 266,374 ounces 
    --  Silver production of 2.2 million ounces 
--  Cash costs of $201 per GEO(2)(3) 

--  Significant financial results 
--  Record revenue of $612 million  
    --  Adjusted earnings(2) of $178 million, $0.24 per share 
    --  Cash flow generated from operations(4) of $286 million, $0.38 per
        share 
--  Generated cash margin(5) of $1,479 per ounce  
--  Over $1.15 billion in available funds, including cash and cash
    equivalents of $400 million 

--  Completed the acquisition of Extorre Gold Mines and commenced the
    evaluation of exploration and development plans for Cerro Moro. $5
    million will be spent in 2012 to increase and upgrade mineral resources 

1.  Gold equivalent ounces (GEO) includes silver production at a ratio of
    50:1. 
2.  Refers to a non-GAAP measure. Reconciliation of non-GAAP measures are
    available at www.yamana.com/q32012 
3.  Cash costs are shown on a by-product basis including Alumbrera unless
    otherwise noted. 
4.  Cash flow from operations before changes in non-cash working capital. 
5.  Cash margin is the difference between the average realized gold price
    received less by-product cash costs per GEO. 


    "We delivered record revenue and production in the third quarter and year
to date, which also resulted in strong cash flow. Our cash flow after
changes in working capital reached record levels also. As production
increases, and more production enters a commercial phase, that should
translate into increasing cash flow. Our development projects continue to
advance and delivery of additional future growth is in progress. We also
realized on a further objective in the third quarter with the closing of
our acquisition of Extorre Gold, which is now being evaluated for its
exploration and development contribution to Yamana," commented Peter
Marrone, Chairman and Chief Executive Officer. "We are also confident
that we will deliver production and costs within our guidance this year.
We will continue our efforts at becoming a reliable precious metals
company delivering growth and sustainability across all measures from
production to cash flow."

    KEY STATISTICS


----------------------------------------------------------------------------
                                  Three months ended       Nine months ended
                                        September 30            September 30
----------------------------------------------------------------------------
(In thousands of US dollars                                                 
 except where noted)                  2012      2011        2012        2011
                                --------------------------------------------
Revenues                         $ 611,807 $ 555,211 $ 1,707,257 $ 1,604,571
Cost of sales excluding                                                     
 depletion, depreciation &                                                  
 amortization                      231,660   189,429     624,526     538,308
Depletion, depreciation and                                                 
 amortization                      100,989    93,619     283,544     263,148
General and administrative                                                  
 expenses                           37,241    27,470     106,859      89,038
Exploration expenses                15,336     7,741      42,909      23,318
Operating Earnings                 220,609   229,776     599,268     697,116
Equity earnings from Alumbrera      20,644     9,425      32,496      37,750
Net earnings                        59,965   115,767     272,902     458,696
Net earnings per share - basic        0.08      0.16        0.37        0.62
Adjusted earnings                  177,588   190,267     496,965     528,654
Adjusted earnings per share           0.24      0.26        0.67        0.71
Cash flow generated from                                                    
 operations after changes in                                                
 working capital                   363,059   342,268     790,177     886,932
Per share                             0.48      0.46        1.06        1.19
Cash flow generated from                                                    
 operations before changes in                                               
 working capital                   285,696   330,522     746,883     945,939
Per share                             0.38      0.44        1.00        1.26
Average realized gold price per                                             
 ounce                               1,680     1,697       1,661       1,532
Average realized silver price                                               
 per ounce                           30.76     37.52       30.15       36.42
Average realized copper price                                               
 per pound                            3.54      3.98        3.62        4.15
----------------------------------------------------------------------------


    PRODUCTION SUMMARY - FINANCIAL AND OPERATING SUMMARY


----------------------------------------------------------------------------
                                      Three months ended   Nine months ended
                                            September 30        September 30
----------------------------------------------------------------------------
                                          2012      2011      2012      2011
                                    ----------------------------------------
Total gold equivalent ounces -                                              
 produced                              310,490   279,274   878,021   825,379
 Gold produced                         266,374   230,986   743,597   684,613
 Silver produced (millions of                                               
  ounces)                                  2.2       2.4       6.7       7.0
Total gold equivalent ounces - sold    315,972   277,528   869,376   817,321
Total copper produced - Chapada                                             
 (millions of pounds)                     39.4      41.4     110.1     120.6
Total payable copper sold - Chapada                                         
 (millions of pounds)                     37.1      38.7     101.8     110.0
----------------------------------------------------------------------------
                                          2012      2011      2012      2011
                                    ----------------------------------------
Co-product cash costs per gold                                              
 equivalent ounce(2)                 $     531 $     468 $     529 $     456
 Cash cost per pound of copper -                                            
  Chapada(2)                         $    1.38 $    1.45 $    1.40 $    1.33
By-product cash costs per gold                                              
 equivalent ounce(2)                 $     201 $      94 $     242 $       9
----------------------------------------------------------------------------


    Financial Results for the three months ended September 30, 2012

    Revenues were $612 million in the third quarter compared with $555
million in the same quarter of 2011. Mine operating earnings were $279
million in the quarter, compared with $272 million in the third quarter
of 2011. Higher revenues and mine operating earnings were mainly due to
higher sales volume of gold from the production of the new Mercedes mine,
which was under construction during the comparative period, partly offset
by lower metal prices and lower volume of copper concentrate sales.

    Revenues for the quarter were generated from the sale of 297,406 GEO and
37.1 million pounds of copper, excluding Alumbrera which is accounted for
as an equity investment. This compares to production excluding Alumbrera
of 266,351 GEO and 38.7 million pounds of copper in the third quarter of
2011.

    Adjusted earnings were $178 million or $0.24 basic and diluted earnings
per share in the third quarter of 2012, compared with $190 million or
$0.26 per share in the same quarter of 2011. Lower adjusted earnings is
attributed to lower metal prices, primarily copper and silver prices,
partly offset by higher volume of gold sales and increased equity
earnings from the Company's interest in Alumbrera.

    During the quarter, market fundamentals remained firm for gold and gold
prices started to trend upward largely in reaction to the easing of
monetary policy by most of the major economies. Compared with the third
quarter of 2011, current quarter average realized gold price in 2012 was
$1,680 per ounce versus $1,697 per ounce in 2011, current quarter average
realized copper price was $3.54 per pound versus $3.98 per pound and
current quarter average realized silver price was $30.76 per ounce
compared to $37.52 per ounce in the third quarter of 2011. Although
average realized prices for gold, copper and silver were lower than those
in the third quarter of 2011, average realized prices for gold and silver
trended upward from the second quarter of 2012, increased by 5% and 14%,
respectively, consistent with market prices.

    Net earnings for the quarter were $60 million or $0.08 per share on a
basic and diluted basis, compared with net earnings of $116 million or
basic and diluted earnings per share of $0.16 for the third quarter of
2011. Net earnings for the third quarter of 2012 were impacted by an
increase in the Chilean tax rate, enacted in late September which affects
the tax rates on both current and deferred income taxes. The Company has
applied the new tax rate on all of its Chilean deferred income tax
liabilities resulting in an adjustment to net earnings during the
reporting period although deferred income taxes may never be paid unless
the assets are sold through a direct asset sale. The additional taxes
from the change in the Chilean tax rate may never be paid.

    Depletion, depreciation and amortization ("DDA") expense for the quarter
was $101 million, an increase from $94 million in the third quarter of
2011. The impact in DDA is mainly driven by higher volume of gold sales
and the additional DDA from the Mercedes mine, which was under
construction during the comparative period in 2011.

    Other expenses as an aggregate of general and administrative,
exploration, other operating and net finance expenses were $94 million in
the three months ended September 30, 2012, compared to $83 million in the
third quarter of 2011. The increase in other expenses is detailed below.

    General and Administrative expenses were $37 million compared to $28
million in 2011. The increase in administrative expenses was due to the
expanded administration of the Company's growing operations including the
addition of the Mercedes mine. 

    Consistent with the Company's exploration plans to pursue organic growth
while continuing to build on its successful record of replacing and
increasing mineral reserves and mineral resources, exploration expenses
increased to $15 from $8 million incurred in the comparative quarter in
2011. 

    Other operating expenses were $27 million compared to $17 million in the
comparative quarter of 2011 due to non-cash impairment losses recognized
during the period, in particular the impairment losses on
available-for-sale investment which accounted for $10 million.

    Net finance expense was $15 million for the third quarter compared with
net finance expense of $32 million in 2011. Significantly lower net
finance expense in the current quarter, compared to the third quarter of
2011, was mainly due to lower unrealized exchange losses partially offset
by interest expense on higher debt level and lower capitalization of
borrowing cost as Mercedes completed commissioning in February. In the
third quarter of 2011, higher unrealized exchange losses related to
monetary assets and liabilities were recorded as a result of the increase
in the value of the Brazilian and Chilean currencies versus the United
States Dollar.

    The Company recorded an income tax expense of $146 million for the
quarter (2011: tax expense of $82 million) of which $84 million was
related to the impact of increased Chilean tax rates on deferred income
taxes. The potential impact of this Chilean tax rate change was disclosed
and discussed in the Company's second quarter report. As the charge is
non-cash and relates to deferred tax balances recorded in prior years, it
is added back to adjusted earnings. The current quarter income tax
provision reflects a current income tax expense of $47 million (2011: tax
expense $52 million) and a deferred income tax expense of $99 million
(2011: deferred tax expense $30). Although taxes are accrued at a rate of
30% for accounting purposes, the adjusted tax rate for the third quarter
of 2012 was 26%, in line with the comparative third quarter of 2011. The
adjusted tax rate for the third quarter of 2012 excludes the effect of
the Chilean tax increase on deferred income taxes.

    Cash flows generated from operations before changes in non-cash working
capital items for the quarter ended September 30, 2012 were $286 million
compared to $331 million for the same period ended September 30, 2011.
The decrease was due to lower earnings in the third quarter of 2012.
Additionally, the Company did not receive any cash dividends from Minera
Alumbrera in the third quarter of 2012 compared to $0.4 million received
in the third quarter of 2011. Cash flows from operations after taking
into effect changes in working capital items for the period ended
September 30, 2012 were $363 million, compared to inflows of $342 million
for the same period ended September 30, 2011. The increase was mainly
attributed to the increase of trade payables and other payables due to
timing of payments.

    Equity earnings from associate were $21 million for the quarter compared
with $9 million in the third quarter of 2011. Cash distributions from the
Company's equity investment in Alumbrera during the quarter were nil
compared to $0.4 million in the third quarter of 2011. 

    Cash and cash equivalents as at September 30, 2012 were $400 million
compared to $550 million as at December 31, 2011. The lower cash balance
was due to the cash consideration paid upon the acquisition of Extorre in
August 2012.

    The Company has over $1.15 billion in available funds to continue to
invest in future growth. 

    Financial Results for the nine months ended September 30, 2012

    Revenues were $1.7 billion in the first nine months compared with $1.6
billion in the same period of 2011 mainly due to an increase of realized
prices for gold and increased sales of gold partly offset by lower sales
volume of concentrate, copper and silver, and lower prices for copper and
silver. Mine operating earnings were $799 million, compared with $803
million in the first nine months of 2011.

    Adjusted earnings were $497 million or $0.67 basic and diluted earnings
per share in the first nine months of 2012, compared with $529 million or
$0.71 per share in the same period of 2011. Lower adjusted earnings is
mainly attributed to lower prices for copper and silver, lower volumes of
copper and concentrate sold, partly offset by higher average realized
gold prices and gold ounces sold during the period. Lower equity earnings
from the Company's investment in Alumbrera also affected net earnings for
the period.

    Average realized price of gold was $1,661 per ounce, consistent with
market prices, compared with $1,532 per ounce for the same period in
2011. Average realized copper price was $3.62 per pound versus the
average of $4.15 per pound, and average realized price for silver was
$30.15 per ounce compared to $36.42 per ounce in the first nine months of
2011.

    Net earnings for the first nine months were $273 million or $0.37 basic
and $0.36 diluted earnings per share, compared with net earnings of $459
million or basic and diluted earnings per share of $0.62 for the same
period of 2011. In addition to the items impacting adjusted earnings
discussed above, net earnings were impacted by an increase in the Chilean
tax rates, enacted in late September, which affected the tax rates on
both current and deferred income taxes.

    Cash flows generated from operations before changes in non-cash working
capital items for the nine month period ended September 30, 2012 were
$747 million compared to $946 million for the same period ended September
30, 2011. Cash flows from operations after taking into effect changes in
working capital items for the period ended September 30, 2012 were $790
million, compared to inflows of $887 million for the same period ended
September 30, 2011. 

    Equity earnings from associate were $33 million for the first nine months
compared with $38 million in the same period in 2011. Cash distributions
from the Company's equity investment in Alumbrera during the period were
nil compared to $27 million in the first nine months of 2011. 

    Operating Results for the three months ended September 30, 2012

    Total production was a record 310,490 GEO for the third quarter,
including the Company's attributable production from the Alumbrera mine
of 13,633 GEO and production during commissioning of the tailings
re-treatment project at Minera Florida of 1,861 GEO, compared with
production of 279,274 GEO for the quarter ended September 30, 2011.
Commercial production for the quarter of 308,629 GEO was also a quarterly
production record, representing an 11% quarter-to-quarter increase. The
production increase was mainly due to the contribution from the Company's
new mine, Mercedes in Mexico and increased production from Fazenda
Brasileiro. Production from all mines was in line with plan except for
Minera Florida, where the ramp up of the tailings re-processing plant was
delayed in part due to the installation of a zinc recovery plant which is
expected to further improve the cost structure through additional zinc
by-product credits. Build-up of ore stockpiles at Chapada, El Penon,
Jacobina and Gualcamayo continued to provide greater flexibility in
respect to future production.

    By-product cash costs were $201 per GEO, compared with $94 per GEO in the
third quarter of 2011. By-product cash costs were impacted by lower
copper sale credits as a result of lower market prices. The average
market price for copper was 14% lower than that for the third quarter of
2011. 

    Co-product cash costs were $531 per GEO compared with $468 per GEO for
the third quarter of 2011. Planned lower gold grades at certain mines and
higher input costs during the period primarily impacted by-product and
co-product cash costs.

    Copper production for the third quarter was 39.4 million pounds from the
Chapada mine, compared with 41.4 million pounds for the third quarter
2011. Chapada copper production was lower primarily as a result of
expected lower copper grade and recovery rate offset by higher throughput
compared with the third quarter of 2011. Additionally, 10.4 million
pounds of copper produced from Alumbrera were attributable to the
Company, compared with 9.5 million pounds for the quarter ended September
30, 2011. Total copper production for the third quarter was 49.8 million
pounds, compared with 50.9 million pounds in the same quarter of 2011. 

    Co-product cash costs per pound of copper were $1.38 for the quarter from
the Chapada mine, compared with $1.45 per pound for the third quarter in
2011. Co-product cash costs per pound of copper for the quarter including
the Company's interest in the Alumbrera mine were $1.49 per pound versus
$1.48 per pound for the quarter ended September 30, 2011.

    The Company anticipates average by-product cash costs for the year to be
lower than $250 per GEO, in line with previous guidance. By-product cash
costs are highly dependent on copper price assumptions. A downward trend
in co-product cash costs is expected to result from the continued ramp up
of production at Mercedes, additional lower cost production from the
tailings re-treatment material at Minera Florida and the expected grade
improvement during the fourth quarter at El Penon and at Jacobina
beginning in the fourth quarter.

    OPERATING MINES

    A summary of mine-by-mine operating results can be found on the final
page of this press release.

    Chapada, Brazil

    Chapada produced a total of 33,610 GEO contained in concentrate in the
third quarter of 2012 compared with 36,075 GEO contained in concentrate
in the same quarter of 2011. Chapada copper production was 39.4 million
pounds in the quarter compared with production of 41.4 million pounds of
copper in the third quarter of 2011. 

    Production for the quarter was consistent with the mine plan, which
indicated lower grades and recovery rates for 2012 relative to 2011.
Production levels from Chapada will be less in 2012 compared to 2011
levels consistent with the mine plan, however, gold production is
expected to increase late 2013 and in the years to follow, mostly as a
result of the start up of the oxide gold operation at Suruca and the
expected gold and copper production from Corpo Sul beginning in 2014.

    By-product cash costs for the quarter were negative $1,659 per GEO
compared with negative $2,045 per GEO for the same quarter in 2011. Lower
by-product cash cost credits were due to lower copper sale credits as a
result of lower market prices and lower sales volume of copper pounds.
The favourable effects of higher tonnage mined and tonnage processed on
by-product and co-product cash costs per GEO were partly offset by lower
feed grades and lower recovery rates during the quarter compared to that
of the third quarter of 2011. To reverse the trend of lower grades and
lower recovery rates, a study to increase grind capacity has been started
and a CIL project is planned for 2013.

    Co-product cash costs were $341 per GEO in the third quarter, virtually
unchanged from $329 per gold ounce in the same quarter of 2011.
Co-product cash costs for copper were $1.38 per pound in the third
quarter versus $1.45 per pound in the same quarter of 2011.

    Chapada revenues for the quarter net of sales taxes and treatment and
refining costs were $174 million (2011 - $149 million). Revenues included
mark-to-market adjustments and final and provisional pricing settlements
in the quarter of positive $6 million (2011 - negative $42 million).

    In December 2011, the Company completed the feasibility study and basic
engineering on the oxides at Suruca. The deposit will support an
additional average production of 45,000-50,000 gold ounces per year to
Chapada's operations over an initial five years beginning in late 2013. 

    Drilling continued at Corpo Sul, a gold and copper deposit discovered in
2011 at the southwest end of the orebody of Chapada with mineral
resources of higher average grade cores especially near the current
Chapada pit. The additional drilling has further defined the geometry and
grade continuity of Corpo Sul from the southwest limits of the 2011
mineral resources for an additional strike length of 2.9 kilometres.
Mineralization and mineral resources have been traced along a combined
strike length of almost 16 kilometres centered by the main Chapada pit.
These new discoveries have led to the initiation of a pre-feasibility
study, which is currently underway and expected to be completed by year
end. Corpo Sul is expected to enhance throughput through the blending of
this higher grade ore with ore from the main Chapada pit and, as its size
and scale increases, it will be evaluated as a stand alone orebody.

    The Company's strategic plan is to ensure sustainable production from
Chapada of 150,000 gold ounces and 135 million pounds of copper from 2013
for at least five years.

    Jacobina, Brazil

    Gold production at Jacobina was 30,028 ounces in the third quarter,
compared with 31,567 ounces produced in the third quarter of 2011. The
decrease in production in the third quarter compared to that of 2011,
resulted from a decrease in feed grade and lower tonnage processed,
partly offset by improved recoveries. Continued development of access to
higher grade areas is expected to improve average ore grade beginning in
the fourth quarter.

    Cash costs were $768 per ounce for the third quarter compared with $654
per ounce in the third quarter of 2011. Cash costs were impacted by
higher labour inflation and maintenance costs in addition to continued
roof support improvements made during the quarter. 

    The Company continues to focus on upgrading the current mineral resources
at Canavieiras and Morro do Vento and improving overall mineral reserve
grade for the mine. Development of these high grade areas creates the
opportunity for production to increase to approximately 140,000 ounces
beginning in 2014. 

    Fazenda Brasileiro, Brazil

    Production at Fazenda Brasileiro was 18,601 ounces of gold in the third
quarter compared to 14,335 ounces of gold in the third quarter of 2011,
representing a 30% quarter-over-quarter increase. The increased
production was mainly due to higher gold grade and increased tonnage
processed. Compared with the previous quarters of the year, the third
quarter production also represents increases of 15% over the second
quarter production and 32% above the first quarter production.

    Cash costs for the third quarter were $803 per ounce, 15% lower than $940
per ounce for the same period in 2011. Increases in tonnage processed
positively impacted cash costs and more than offset the effect of mining
inflation. Compared with the previous quarters of the year, the third
quarter per ounce cash costs also represent decreases of 3% from the
second quarter and 23% from the first quarter cash costs.

    The Fazenda Brasileiro mine was acquired in 2003 with two and a half
years of mine life remaining based on known mineral reserves. The Company
has been mining at Fazenda Brasileiro for nearly nine years. The mine
continues to further outline exploration potential and mineral resource
additions are expected in 2012.

    Two new mineralization zones, CLX2 and Lagoa do Gato were discovered in
2009. The CLX2 zone is identified as having significant potential for
high grade sources of ore for the mill. Both infill and extension
drilling confirm the continuity of mineralization in both areas. The
Company continues to develop the high grade mineral reserves at CLX2 with
a focus on increasing mineral reserves and mineral resources. The Company
is evaluating the possible extension of mine life. 

    El Penon, Chile

    El Penon produced 118,457 GEO during the third quarter of 2012 compared
to 120,627 GEO in the same quarter of 2011. Production for the quarter
consisted of 83,092 ounces of gold and 1.8 million ounces of silver,
compared with 76,347 ounces of gold and 2.2 million ounces of silver
produced in the third quarter of 2011. 

    Production of gold increased by 9%, compared with the same quarter of
2011, mainly as a result of higher feed grade, while production of silver
decreased by 20% due to lower feed grade and lower recovery rate. These
variations in grade and recovery are consistent with the mine plan for
2012 and the result of the combination of ore from different veins and
mines.

    Cash costs were $422 per GEO in the third quarter, compared with $407 per
GEO in the third quarter in 2011. Higher maintenance costs, increases in
power costs, diesel and other consumables in addition to other mining
cost inflation compared to that of the third quarter of 2011, contributed
to higher per unit cash costs, which are expected to decrease as feed
grades are expected to continue to improve for the balance of 2012,
according to the mine plan.

    Exploration has been ongoing for 20 years at El Penon, which has a long
track record of replacement of ounces mined. Exploration at Pampa Augusta
Victoria ("PAV") is being accelerated as part of the Company's continuous
exploration effort on high grade areas at El Penon. This is expected to
return significant near surface gold and silver values, improve
production and provide mining flexibility for a sustainable production
level of about 440,000 GEO per year and ultimately increase mine life.
Development has commenced at PAV.

    Minera Florida, Chile

    Minera Florida produced a total of 22,339 GEO in the quarter, compared
with 26,577 GEO in the third quarter of 2011. The expected lower
production was mainly a result of the combined effect of lower gold and
silver feed grades, lower gold recovery rate, and lower tonnage mined and
processed. Grade variations are due to the combination of production
areas included in the mine plan compared to that of the third quarter of
2011. Mine and plant production were also affected by weather, which
extended its effects from the second quarter into the third quarter.

    In addition, the mine produced 1,315 tonnes of zinc in the third quarter,
compared with 2,389 tonnes of zinc produced in the third quarter of 2011.
Zinc is accounted for as a by-product credit to cash costs.

    Cash costs for the third quarter were $826 per GEO compared with $588 per
GEO in the same quarter in 2011 primarily as a result of higher cost for
power, increased cost in temporary mine services and labour inflation,
the adverse effect of lower production on unit costs, and lower credit
from sales of zinc as a result of lower production and lower prices for
zinc.

    The Company's expansion project at Minera Florida is expected to increase
annual production by approximately 40,000 GEO per year for five years
through the re-treatment of tailings. The tailings re-treatment plant was
completed in May and ramp up to design capacity was delayed in part due
to the installation of a zinc recovery plant that was not initially
contemplated. The zinc recovery plant is expected to further improve
costs through the application of additional zinc by-product credits.
Production from tailings re-treatment for 2012 is expected to be in the
range of 12,000 to 16,000 GEO and ramp up to 40,000 GEO per year in 2013.
Overall costs are expected to improve with the addition of tailings
production given the lack of mining costs associated with the
re-treatment of tailings. In subsequent periods, mine grade is expected
to be consistent with plan and overall site performance augmented by
ramping up the processing of relatively low cost historical tailings
material.

    The recently strengthened leadership team at the senior management level
in Chile continues to focus on the operations in Chile and Mexico with
the expansion at Minera Florida as their first priority.

    Gualcamayo, Argentina

    Gualcamayo produced 38,248 ounces of gold in the third quarter,
representing a 2% increase, compared with 37,381 ounces produced in the
third quarter of 2011. Higher production was mainly due to higher
recoveries, in spite of lower feed grade. The grade for the third quarter
was consistent with plan. Increased tonnage of ore mined reflects
Gualcamayo's continuous effort in stacking materials in preparation of
transitioning to Phase III of the mine as part of the planned expansion.
Recovery rate improved over the second quarter and the comparative
quarter in 2011 as a result of the production from the new Valle Norte
heap leach pad.

    Cash costs were $669 per ounce in the quarter ended September 30, 2012
compared with $442 per ounce in the third quarter of 2011. Inflationary
pressures on labour and consumable costs, lower grade and re-handling of
waste costs along with increased maintenance to improve availability of
equipment resulted in higher cash costs. Gualcamayo is an open pit
operation along a mountain face and from time to time waste is removed
and stored and then must be moved again once that ore has been accessed.
This movement, or re-handling, of waste will cause costs to increase from
time to time. This re-handling is also expected to have an impact on
fourth quarter cost levels. The Company is evaluating how to reduce the
re-handling of waste and has initiated a maintenance program in an effort
to better contain costs. This is in addition to increased production
through existing facilities, mainly from QDD Lower West, should reduce
costs on a per ounce basis.

    Underground development of QDD Lower West continues to advance and
project completion remains on schedule. Full ramp-up of Gualcamayo's
expansions to be completed by mid-2013 are expected to increase
sustainable production to over 200,000 gold ounces per year beginning in
2014.

    A scoping study on the evaluation of milling higher grade ore at
Gualcamayo, subject to mineral resource increases in 2012 and 2013, has
commenced and is expected to be completed in the first half of 2013.

    Mercedes, Mexico

    Mercedes produced 33,713 GEO in the third quarter, representing increases
of 17% over the second quarter production and 41% over the first quarter.
Third quarter production consists of 31,497 ounces of gold and 0.1
million ounces of silver. Production at Mercedes has increased in
consecutive quarters since the declaration of commercial production for
Mercedes in February 2012.

    Cash costs per GEO were $490 for the third quarter, 2% lower than the
cash costs in the second quarter and 8% lower than the first quarter,
representing decreases in consecutive quarters since the beginning of
commercial production. Cash costs are expected to trend down as
production continues to ramp up, averaging approximately $475 - $500 per
GEO for the year. 

    Development continues at the Barrancas zone with the higher grade Lagunas
Norte vein, one of the newest discoveries at the mine, which started
production from sills in the third quarter. Development of the vein
structure in the Barrancas zone was not included in the original mine
plan and represents a significant opportunity to increase production.
Infill drilling at Lupita is confirming the width and grades of
mineralization and is expected to continue growth of the measured and
indicated mineral resources that will extend mine life, maintain higher
throughput and sustainable production levels.

    Production is initially planned at an annual rate of 120,000 GEO per year
although for 2012 the Company plans to produce approximately 105,000 GEO
as the mine completes its ramp up. With the acceleration of underground
development and plant modifications the Company expects production to
increase to 125,000 - 135,000 GEO in 2013 with a target of 140,000 GEO
thereafter.

    Alumbrera, Argentina

    The Company's interest in the Alumbrera Mine is accounted for as an
equity investment. The Company recorded earnings from its 12.5% interest
in Alumbrera Mine of $21 million for the third quarter, compared with $9
million reported for the same quarter of 2011. Higher earnings were due
to the resumption of export sales by Alumbrera in the second quarter to
comply with a new resolution in respect of repatriation of net proceeds
from export sales set forth by the Argentine Government. Subsequently,
the Argentine Government amended its resolution enabling Alumbrera to
resume export sales of concentrate in July and the backlog of sales is
expected to be realized during the second half of 2012. The Company did
not receive a cash distribution during the nine months ended September
30, 2012, compared with cash distributions of $0.4 million in the third
quarter and $27 million for the nine month period ended September 30,
2011.

    Attributable production from Alumbrera was 13,633 ounces of gold and 10.4
million pounds of copper for the quarter. This compares with attributable
production of 12,712 ounces of gold and 9.5 million pounds of copper for
the third quarter of 2011. 

    By-product cash costs per ounce of gold were negative $2,254 in the
quarter ended September 30, 2012, compared with negative $1,216 in the
third quarter of 2011. Co-product cash costs were $282 per ounce compared
with $259 per ounce in the third quarter of 2011.

    CONSTRUCTION AND DEVELOPMENT PROJECTS 

    Ernesto/Pau-a-Pique, Brazil

    Physical completion is on schedule for end of the year.
Ernesto/Pau-a-Pique commenced the commissioning phase, which will
continue for the remainder of the year as will the process for obtaining
the final operational permits. Commercial production is expected within
4-6 months. As of September 30, 2012, physical advancement continued and
was approximately 96% complete. Mine development and electromechanical
works continued as expected. Underground development at Pau-a-Pique
continued to progress and reached a total length of more than 4,200
metres. Annual production is expected to be approximately 90,000-100,000
gold ounces.

    C1 Santa Luz, Brazil

    Construction is progressing to a planned physical completion by the end
of 2012. Start up of operations is planned for early 2013 with commercial
production expected within 4-6 months after start up. Water availability
for C1 Santa Luz will come from a reservoir for which water is collected
during the rainy season, which usually starts in November. Start up will
depend on how quickly water will be accumulated in the reservoir. As of
September 30, 2012, physical advancement of the project was over 90%
complete. Civil works and electromechanical assembly continued as
planned. Power line construction is expected to be completed in January
2013. Annual production is expected to be approximately 100,000 gold
ounces with average annual production during the first two full years to
exceed 130,000 gold ounces.

    Pilar, Brazil

    Construction progress is on schedule with commissioning and start up of
production expected by mid-2013 with commercial production expected
within 4-6 months of start up. As at September 30, 2012, mine and plant
were advanced to approximately 66% completion. Civil works and
electromechanical assembly continued as planned. Underground development
at Pilar continued to progress and reached a total length of more than
8,000 metres and underground development at Caiamar has progressed more
than 400 metres.

    Annual production from the mine was originally estimated to be 120,000
ounces of gold. The project is being built with 30% additional capacity
to that contemplated in the feasibility study in anticipation of
significant mineral resource growth. Ore feed from Caiamar, a high-grade
satellite deposit located 38 kilometres west of Pilar, is expected to
contribute to production at Pilar thereby increasing production to a
minimum of 140,000 gold ounces per year expected to begin as early as
2014. Mineral resource development and work on a feasibility study
continued at Caiamar during the quarter. The ore from this deposit can be
processed at Pilar with the higher grades offsetting the additional
transportation costs. 

    Jeronimo, Chile

    The Company continues to advance and evaluate additional organic
projects, including Jeronimo and Suyai. At Jeronimo, the optimization
studies, which supplement the feasibility study to further enhance the
project economics and to create greater certainty on costs with the
advanced engineering in progress, are expected to be delivered by the end
of 2012. The pressure oxidation plant final process design is in
progress. The benefit of reduced sulfuric acid consumption will be
achieved with the insertion of a countercurrent decantation circuit. The
review of the tailings disposal project, which relates to the thickening
of tailings, has been completed; this tailings initiative is expected to
reduce capital expenditures over the project life. The Company will
continue discussions with its joint venture partner, Codelco (43% owner
of the project), toward an objective of evaluating a construction
decision.

    EXPLORATION

    The Company is committed to developing its future based on its
exploration successes and organic growth with programs targeting mineral
reserve growth and mineral resource discovery in addition to development
projects and discoveries at existing operations.

    The budget for the 2012 exploration program of $125 million will continue
to focus on increasing the Company's mineral reserves and mineral
resources, accelerating the development of new discoveries such as
Jordino and Maria Lazarus at Pilar, the extension of Pampa Augusta
Victoria and definition of a new discovery at El Penon, the expansion of
high grade mineral resources at Jacobina and the development of several
greenfield projects with the potential to be brought into the Company's
project pipeline, enhancing present and future asset values. Included in
the program is $5 million, which is expected to be spent at Cerro Moro,
an advanced exploration and development stage project obtained through
the recent acquisition of Extorre.

    The following summary highlights key updates from the exploration and
development program at the Company since the end of the second quarter of
2012. 

    Cerro Moro, Argentina

    On August 22, 2012, the Company acquired all of the issued and
outstanding common shares of Extorre Gold Mines Limited that owned
several exploration and development stage precious metals projects, the
most advanced of which is the Cerro Moro project, a high grade gold and
silver deposit with approximately 1.36 million ounces of gold equivalent
indicated mineral resources and 1.05 million ounces of gold equivalent
inferred mineral resources, located in the province of Santa Cruz in
Argentina. 

    Evaluation of exploration and development plans is underway. The
evaluations are expected to be completed by the end of 2012. The $5
million is to be spent in 2012 on this newly acquired property to
increase and upgrade categories of mineral resources, with a focus on
certainty in the definition of grade and size of the orebody. The recent
granting of development permits by the Argentine government to a gold
mining company for the building of a new mine in the province of Santa
Cruz further demonstrates the mining friendly position of the provincial
government.

    Gualcamayo, Argentina

    During the quarter, 13 diamond drill holes were completed at QDD Lower
West. Year to date, the Company has completed 60 diamond drill holes
totaling 13,496 metres. The drilling was completed to extend the
southwest extension of the main QDD Lower West deposit and also to
further delineate the Rodado breccia, which was discovered in 2011. 

    Pilar, Brazil

    During the quarter diamond drilling was focused on infill drilling at the
Jordino deposit. A total of 50 diamond drill holes were completed on the
down dip portion of the Jordino deposit to upgrade the inferred mineral
resource to the indicated mineral resource category and further increase
confidence in the deeper parts of the deposit. For the remainder of the
year, drilling will focus on the delineation of the Maria Lazarus deposit
located 10 kilometres west of Jordino.

    Chapada, Brazil

    Exploration at Corpo Sul, the newly discovered mineralized zone located
southwest of and adjacent to the main pit at Chapada, has completed
29,000 metres of diamond drilling out of a total planned program of
32,000 metres.

    Results since the discovery of Corpo Sul, in 2011, have established the
zone as a new porphyry system south of the main Chapada pit with grades
in excess of expected grades being mined in future years at the
operation. With continued drilling at 200 metre spacing, the Company has
increased confidence in the continuity of the higher grades and the
eventual increased size of Corpo Sul.

    In the third quarter, 35 additional diamond drill holes have been
completed on the southwest extension of Corpo Sul. The additional
drilling has further defined the geometry and grade continuity of Corpo
Sul from the southwest limits of the 2011 mineral resource. Results from
the most recently received assays indicate all the high grade
intersections are within 700 metres of the current Corpo Sul mineral
resource and will extend the currently modeled mineral resource to the
southwest.

    The current drill results at Corpo Sul confirm the expansion of the
mineralized zone and continue the recent exploration success at Chapada
which commenced with Suruca in 2010 and Corpo Sul in 2011. Mineralization
and mineral resources have now been traced along a combined strike length
of almost 16 kilometres centered by the main Chapada pit. 

    These new discoveries have led to the initiation of a pre-feasibility
study that is now underway, which will define the role of Suruca and
Corpo Sul in the future production at Chapada. This study is expected to
be completed by the end of 2012, and it is expected to include a new
mineral resource at Corpo Sul using the current drilling information.
Corpo Sul is expected to enhance throughput through the blending of these
higher grade ore with ore from the main Chapada pit and as its size and
scale increases it will be evaluated as a stand alone orebody.

    In 2013, the Company expects to begin evaluating the area to the
southeast of Corpo Sul and Chapada on targets that have already been
identified, with the goal of unlocking further value at Chapada.
Exploration success to date should facilitate targeted sustainable annual
production levels of approximately 150,000 ounces of gold and 135 million
pounds of copper from 2013 for at least five years. Continued exploration
success is expected to extend this sustainable production level for a
longer period within the overall mine life.

    El Penon, Chile

    During the quarter, 105 diamond and reverse circulation drill holes were
completed at El Penon. The majority of the drilling was completed at
Dorada West and the Elizabeth vein at Pampa Augusta Victoria. The new and
additional drilling to be completed in the fourth quarter will allow for
initial mineral resource estimates to be completed at both new vein zones
by the end of the first quarter of 2013.

    Dorada West is located immediately to the west of Dorada, approximately
halfway between the Providencia and Dorada vein deposits. Drilling has
outlined mineralization along a strike length of approximately 900 metres
and a dip length of 150 metres. The deposit remains open to the south and
down dip.

    At Elizabeth drilling has outlined a vein structure that is very similar
in appearance and grade to the Victoria vein located 400 metres to the
west. However, the vein width at Elizabeth is typically narrower than
Victoria with the average width being less than one metre.

    Mercedes, Mexico

    During the quarter, drilling totaled approximately 10,500 metres in 46
diamond drill holes. The drilling was completed at the Diluvio/Lupita
area and the Rey de Oro vein zone.

    At Diluvio/Lupita, drilling was completed to convert inferred mineral
resource at Lupita to indicated mineral resource and to also explore the
gap between the Diluvio and Lupita vein zones and try to establish a link
between the two deposits. Although the drilling did establish a
structural and mineralogical link between the two deposits, the grades of
mineralization were uneconomic.

    The Rey de Oro deposit lies on trend of the Klondike deposit
approximately 200 metres further to the east-southeast. Drilling on 60
metre centers along strike and down dip has identified a wide zone
(greater than 30 metres) of near surface, quartz veinlet stockworking
with locally well developed quartz veins. The stockwork zone is strongly
oxidized and select high grade intervals were previously mined by
artisanal miners. Since the beginning of the year, 31 diamond drill holes
have been completed at Rey de Oro.

    Picacho, Mexico

    The Company commenced its first drilling campaign at Picacho in July with
drilling results expected before the end of 2012.

    OUTLOOK AND STRATEGY 

    The Company is focused on operational reliability with a focus on
increasing cash flows through containing costs and expanding margins,
thereby maximizing shareholder value. The Company continues on a steady
path of organic growth through expanding current, near term and in
development production plans, developing new projects and advancing its
exploration properties. The Company sometimes complements its growth
strategy by adding properties and projects with high development
potential and economic upside through strategic acquisitions.

    Production in 2012 is expected to be in the range of 1.175 to 1.310
million GEO with a target level exceeding 1.2 million GEO. This will
represent an increase from 2011 production of approximately 13%, most of
which will come from Mercedes as production ramps up having completed
commissioning in February 2012. 

    Production in 2013 is expected, to be in the range of 1.48 to 1.66
million GEO with a target level exceeding 1.5 million GEO. Almost all of
the increase over 2012 will come from production from C1 Santa Luz and
Ernesto/Pau-a-Pique, Mercedes being at full capacity for a full year, an
increase in production at Minera Florida, the production coming from the
expansion of Gualcamayo and Pilar, which we expect to start up by
mid-year.

    By 2014, production is targeted to be at a sustainable level of over 1.7
million GEO with a target of approximately 1.75 million GEO. Production
of over 1.75 million GEO thereafter will depend upon construction
decisions for other projects and assets held by the Company which are now
being evaluated, the most advanced of which are Jeronimo, Cerro Moro,
Agua Rica and Suyai.

    The Company is contemplating certain initiatives that will result in
improved recoveries, reduced costs and/or mine life extension at various
operations. The objective of these initiatives is for cash flow
sustainability and an increase in cash flow. The most significant
potential impacts are at El Penon, Chapada, Mercedes, Gualcamayo and
Jacobina.

    Cash costs are expected to remain below $250 per GEO for 2012. Cash costs
are calculated after only base metal by-product credits. 

    Development capital expected to be spent in 2012 remains to be below $665
million as planned. This will decline in 2013 and the following years as
the Company's development projects are completed. Sustaining capital
expenditures are expected to be $340 million in 2012 and while it will
increase in aggregate as production increases it will decline on a per
GEO basis as the production platform increases. The Company expects to
spend approximately $125 million on exploration in 2012 with a continued
focus on increasing mineral reserves and mineral resources with its
near-mine and regional exploration programs, and exploration of
greenfield targets.

    In addition to over $1.15 billion of available cash and undrawn credit
available at September 30, 2012, the Company expects robust cash flows
from operations under the current and intermediate term pricing
conditions for gold will enable the Company to fully fund its growth,
reward shareholders through dividends and accelerate capital spending to
enhance the Company's production growth profile.

    THIRD QUARTER CONFERENCE CALL


Q3, 2012 Conference Call Information for Tuesday, October 30, 2012 at 11:00 
 a.m. ET                                                                    
                                                                            
Toll Free (North America):                  1-800-355-4959                  
Toronto Local and International             416-695-6616                    
International: Participant Audio Webcast:   www.yamana.com                  
                                                                            
Q3, 2012 Conference Call REPLAY:                                            
                                                                            
Toll Free Replay Call (North America):      1-800-408-3053 Passcode 9088417 
Toronto Local and International:            905-694-9451   Passcode 9088417 
                                                                            
The conference call replay will be available from 2:00 p.m. ET on October   
 30, 2012 until 11:59 p.m. ET on November 13, 2012.                         
                                                                            
Via Webcast                                                                 
Live Audio & Webcast: www.yamana.com                                        


    For further information on the conference call or audio webcast, please
contact the Investor Relations Department or visit our website,
www.yamana.com. 

    About Yamana

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


----------------------------------------------------------------------------
Chile                                                                       
                                Gold                Gold    Silver      Gold
                          Ore  Grade    Silver  Recovery  Recovery    Ounces
                    Processed    g/t Grade g/t       (%)       (%)  Produced
----------------------------------------------------------------------------
El Penon                                                                    
Q3, 2012              361,544   7.72     196.3      93.3      78.1    83,092
----------------------------------------------------------------------------
Q2 2012               355,132   6.32     194.3      94.1      82.5    68,275
Q1 2012               335,741   7.19     212.0      93.5      82.9    72,742
Total 2011          1,452,090   7.05     215.9      93.0      84.0   306,184
Q4 2011               363,796   6.91     200.1      93.1      83.9    75,407
Q3 2011               367,503   6.77     215.4      93.6      86.8    76,347
Q2 2011               362,778   7.64     220.2      93.4      85.1    80,861
Q1 2011               358,013   6.91     227.8      92.0      79.9    73,568
----------------------------------------------------------------------------
Minera Florida                                                              
Q3 2012               227,246   2.97      37.2      80.5      67.3    19,994
----------------------------------------------------------------------------
Q2 2012               224,107   3.15      43.3      80.8      69.6    19,179
Q1 2012               228,994   3.70      25.2      81.4      62.4    22,101
Total 2011            920,388   3.50      38.5      84.0      68.3    86,914
Q4 2011               207,147   3.37      50.2      83.5      68.9    18,326
Q3 2011               242,670   3.45      38.0      84.0      67.6    22,569
Q2 2011               238,287   3.43      31.8      83.9      68.0    22,034
Q1 2011               232,284   3.78      35.2      84.6      68.7    23,986
----------------------------------------------------------------------------
                                                                            

----------------------------------------------------------------------------
Chile                                                                       
                    Silver Ounces Gold Equivalent Gold Equivalent  Cash Cost
                         Produced Ounces Produced     Ounces Sold per GEO(1)
----------------------------------------------------------------------------
El Penon                                                                    
Q3, 2012                1,768,273         118,457         117,390 $      422
----------------------------------------------------------------------------
Q2 2012                 1,848,501         105,245         104,873 $      491
Q1 2012                 1,896,604         110,675         108,011 $      442
Total 2011              8,470,112         475,586         473,607 $      400
Q4 2011                 1,981,806         115,043         116,174 $      413
Q3 2011                 2,213,974         120,627         125,600 $      407
Q2 2011                 2,162,850         124,118         117,030 $      382
Q1 2011                 2,111,482         115,798         114,803 $      397
----------------------------------------------------------------------------
Minera Florida                                                              
Q3 2012                   210,297          24,200          24,371 $      826
----------------------------------------------------------------------------
Q2 2012                   239,931          23,978          23,229 $      811
Q1 2012                   130,191          24,705          26,354 $      748
Total 2011                791,173         102,738         101,565 $      591
Q4 2011                   241,208          23,151          23,219 $      706
Q3 2011                   200,399          26,577          28,717 $      588
Q2 2011                   167,114          25,376          22,831 $      614
Q1 2011                   182,453          27,635          26,798 $      476
----------------------------------------------------------------------------
                                                                            
----------------------------------------------------------------------------
Brazil                                                                      
                        Gold     Gold     Gold    Gold By-Product Co-Product
                   Ore Grade Recovery   Ounces  Ounces  Cash Cost  Cash Cost
             Processed   g/t      (%) Produced    Sold per GEO(1) per GEO(1)
----------------------------------------------------------------------------
Chapada                                                                     
Q3 2012      5,566,744  0.30     58.6   33,610  28,202 $   (1,659) $     341
----------------------------------------------------------------------------
Q2 2012      5,802,649  0.30     59.8   35,697  35,847 $   (2,207) $     302
Q1 2012      4,487,496  0.29     59.6   26,367  25,970 $   (1,473) $     348
Total 2011  20,581,385  0.32     63.8  135,347 129,419 $   (2,454) $     319
Q4 2011      5,559,778  0.32     60.5   34,313  33,146 $   (1,715) $     320
Q3 2011      5,075,556  0.33     66.0   36,075  28,618 $   (2,045) $     329
Q2 2011      4,857,313  0.32     64.3   31,566  34,260 $   (3,555) $     342
Q1 2011      5,088,739  0.32     64.7   33,392  33,395 $   (2,615) $     286
                                                                            
----------------------------------------------------------------------------
                                                              By-        Co-
                                                          Product    Product
                        Gold     Gold     Gold    Gold  Cash Cost       Cash
                   Ore Grade Recovery   Ounces  Ounces        per   Cost per
             Processed   g/t      (%) Produced    Sold     GEO(1)     GEO(1)
----------------------------------------------------------------------------
Jacobina                                                                    
Q3 2012        545,578  1.81     94.4   30,028  31,385             $     768
----------------------------------------------------------------------------
Q2 2012        523,603  1.75     95.1   28,005  27,852             $     735
Q1 2012        526,765  1.94     93.0   30,493  29,706             $     666
Total 2011   2,148,275  1.89     93.3  121,675 123,323             $     643
Q4 2011        527,537  2.03     93.4   31,983  32,904             $     646
Q3 2011        559,207  1.89     92.9   31,567  30,528             $     654
Q2 2011        532,496  1.74     93.4   27,806  28,354             $     663
Q1 2011        529,035  1.91     93.5   30,319  31,537             $     611
----------------------------------------------------------------------------
Fazenda                                                                     
 Brasileiro                                                                 
Q3 2012        255,769  2.52     89.6   18,601  20,448             $     803
----------------------------------------------------------------------------
Q2 2012        251,430  2.27     88.4   16,219  14,048             $     827
Q1 2012        270,292  1.84     88.1   14,059  14,536             $   1,037
Total 2011     936,459  2.07     88.4   55,163  56,907             $     937
Q4 2011        234,767  2.33     88.1   15,568  16,430             $     915
Q3 2011        249,752  1.99     89.9   14,335  14,534             $     940
Q2 2011        246,551  2.02     87.5   14,007  13,052             $     934
Q1 2011        205,389  1.93     88.2   11,252  12,891             $     968
----------------------------------------------------------------------------
                                                                            
----------------------------------------------------------------------------
Argentina                                                                   
                             Gold       Gold      Gold      Gold  Cash Cost 
                      Ore   Grade   Recovery    Ounces    Ounces        per 
                Processed     g/t        (%)  Produced      Sold     GEO(1) 
----------------------------------------------------------------------------
Gualcamayo                                                                  
Q3 2012         1,664,568    0.78       94.0    38,248    42,095 $      669 
----------------------------------------------------------------------------
Q2 2012         1,977,398    0.90       71.6    38,297    33,832 $      547 
Q1 2012         2,098,004    0.85       68.1    39,263    39,877 $      436 
Total 2011      7,578,156    0.97       68.4   158,847   160,326 $      441 
Q4 2011         1,955,094    0.99       65.4    40,676    40,908 $      424 
Q3 2011         1,844,293    0.94       67.7    37,381    38,354 $      442 
Q2 2011         1,882,237    1.02       74.4    43,194    46,399 $      399 
Q1 2011         1,896,533    0.95       66.4    37,597    34,665 $      507 
----------------------------------------------------------------------------
Alumbrera                                                                   
Q3 2012         1,271,732    0.45       72.8    13,633    18,566 $   (2,254)
----------------------------------------------------------------------------
Q2 2012         1,218,825    0.44       71.2    12,359     3,242 $      711 
Q1 2012         1,166,630    0.36       67.5     9,317     8,227 $   (1,270)
Total 2011      4,775,130    0.42       69.4    44,502    44,664 $   (1,448)
Q4 2011         1,176,148    0.30       68.3     7,746     9,709 $   (1,351)
Q3 2011         1,239,638    0.44       71.8    12,712    11,177 $   (1,216)
Q2 2011         1,227,348    0.47       68.2    12,670    12,367 $   (1,736)
Q1 2011         1,131,995    0.45       69.3    11,374    11,412 $   (1,452)
----------------------------------------------------------------------------
                                                                            
----------------------------------------------------------------------------
Mexico                                                                      
                                Gold                Gold    Silver      Gold
                          Ore  Grade    Silver  Recovery  Recovery    Ounces
                    Processed    g/t Grade g/t       (%)       (%)  Produced
----------------------------------------------------------------------------
Mercedes                                                                    
Q3 2012               151,415   6.77      74.2      94.5      29.6    31,497
----------------------------------------------------------------------------
Q2 2012               151,425   5.53      70.6      94.9      30.8    26,646
Q1 2012               136,063    5.9      83.6      93.7      28.4    22,016
----------------------------------------------------------------------------
                                                                            

----------------------------------------------------------------------------
Mexico                                                                      
                    Silver Ounces Gold Equivalent Gold Equivalent  Cash Cost
                         Produced Ounces Produced     Ounces Sold per GEO(1)
----------------------------------------------------------------------------
Mercedes                                                                    
Q3 2012                   110,817          33,713          31,835 $      490
----------------------------------------------------------------------------
Q2 2012                   112,729          28,900          28,760 $      499
Q1 2012                    96,887          23,953          29,041 $      534
----------------------------------------------------------------------------
                                                                            
----------------------------------------------------------------------------
Copper                                                                      
 Production                                                                 
                          Copper     Copper      Copper  Copper   Cash costs
                     Ore     Ore   Recovery Produced (M Sold (M per pound of
               Processed   Grade        (%)       lbs.)   lbs.)    copper(1)
----------------------------------------------------------------------------
Chapada                                                                     
Q3 2012        5,566,744    0.40       80.6        39.4    37.1 $       1.38
----------------------------------------------------------------------------
Q2 2012        5,802,649    0.38       83.3        40.4    37.4 $       1.34
Q1 2012        4,487,496    0.36       84.0        30.3    27.3 $       1.51
Total 2011    20,581,385    0.42       87.4       166.1   153.6 $       1.29
Q4 2011        5,559,778    0.43       86.7        45.4    43.6 $       1.20
Q3 2011        5,075,556    0.42       87.5        41.4    38.7 $       1.45
Q2 2011        4,857,313    0.43       88.4        40.8    41.6 $       1.32
Q1 2011        5,088,739    0.39       87.1        38.5    29.7 $       1.21
----------------------------------------------------------------------------
Alumbrera                                                                   
Q3 2012        1,084,296    0.44       85.1        10.4    14.8 $       1.92
----------------------------------------------------------------------------
Q2 2012        1,218,825    0.45       85.9        10.5     2.3 $       1.41
Q1 2012        1,166,630    0.40       79.4         8.0     7.2 $       1.85
Total 2011     4,775,130    0.40       77.2        32.2    31.5 $       1.82
Q4 2011        1,176,148    0.30       78.9         6.2     7.7 $       2.59
Q3 2011        1,239,638    0.44       79.5         9.5     7.9 $       1.58
Q2 2011        1,227,348    0.45       77.2         9.3     8.8 $       1.54
Q1 2011        1,131,995    0.39       73.1         7.1     7.1 $       1.85
----------------------------------------------------------------------------


    CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS: This news release
contains "forward-looking statements" within the meaning of the United
States Private Securities Litigation Reform Act of 1995 and applicable
Canadian securities legislation. Except for statements of historical fact
relating to the Company, information contained herein constitutes
forward-looking statements, including any information as to the Company's
strategy, plans or future financial or operating performance.
Forward-looking statements are characterized by words such as "plan,"
"expect", "budget", "target", "project", "intend," "believe",
"anticipate", "estimate" and other similar words, or statements that
certain events or conditions "may" or "will" occur. Forward-looking
statements are based on the opinions, assumptions and estimates of
management considered reasonable at the date the statements are made, and
are inherently subject to a variety of risks and uncertainties and other
known and unknown factors that could cause actual events or results to
differ materially from those projected in the forward-looking statements.


    These factors include the Company's expectations in connection with the
projects and exploration programs discussed herein being met, the impact
of general business and economic conditions, global liquidity and credit
availability on the timing of cash flows and the values of assets and
liabilities based on projected future conditions, fluctuating metal
prices (such as gold, copper, silver and zinc), currency exchange rates
(such as the Brazilian Real, the Chilean Peso, the Argentine Peso, and
the Mexican Peso versus the United States Dollar), possible variations in
ore grade or recovery rates, changes in the Company's hedging program,
changes in accounting policies, changes in the Company's corporate
mineral resources, risk related to non-core mine dispositions, risks
related to acquisitions, changes in project parameters as plans continue
to be refined, changes in project development, construction, production
and commissioning time frames, risk related to joint venture operations,
the possibility of project cost overruns or unanticipated costs and
expenses, higher prices for fuel, steel, power, labour and other
consumables contributing to higher costs and general risks of the mining
industry, failure of plant, equipment or processes to operate as
anticipated, unexpected changes in mine life, final pricing for
concentrate sales, unanticipated results of future studies, seasonality
and unanticipated weather changes, costs and timing of the development of
new deposits, success of exploration activities, permitting time lines,
government regulation and the risk of government expropriation or
nationalization of mining operations, environmental risks, unanticipated
reclamation expenses, title disputes or claims, limitations on insurance
coverage and timing and possible outcome of pending litigation and labour
disputes, as well as those risk factors discussed or referred to in the
Company's annual Management's Discussion and Analysis and Annual
Information Form for the year ended December 31, 2011 filed with the
securities regulatory authorities in all provinces of Canada and
available at www.sedar.com, and the Company's Annual Report on Form 40-F
filed with the United States Securities and Exchange Commission. Although
the Company has attempted to identify important factors that could cause
actual actions, events or results to differ materially from those
described in forward-looking statements, there may be other factors that
cause actions, events or results not to be anticipated, estimated or
intended. 

    There can be no assurance that forward-looking statements will prove to
be accurate, as actual results and future events could differ materially
from those anticipated in such statements. The Company undertakes no
obligation to update forward-looking statements if circumstances or
management's estimates, assumptions or opinions should change, except as
required by applicable law. The reader is cautioned not to place undue
reliance on forward-looking statements. The forward-looking information
contained herein is presented for the purpose of assisting investors in
understanding the Company's expected financial and operational
performance and results as at and for the periods ended on the dates
presented in the Company's plans and objectives and may not be
appropriate for other purposes.

    NON-GAAP MEASURES

    The Company has included certain non-GAAP measures including "Co-product
cash costs per gold equivalent ounce", "Co-product cash costs per pound
of copper", "By-product cash costs per gold equivalent ounce", "Adjusted
Earnings or Loss and Adjusted Earnings or Loss per share" to supplement
its financial statements, which are presented in accordance with
International Financial Reporting Standards ("IFRS"). The term IFRS and
generally accepted accounting principles ("GAAP") are used
interchangeably throughout this MD&A, except that 2010 financial data is
presented in accordance with previous Canadian GAAP. 

    The Company believes that these measures, together with measures
determined in accordance with IFRS, provide investors with an improved
ability to evaluate the underlying performance of the Company. Non-GAAP
measures do not have any standardized meaning prescribed under IFRS, and
therefore they may not be comparable to similar measures employed by
other companies. The data is intended to provide additional information
and should not be considered in isolation or as a substitute for measures
of performance prepared in accordance with IFRS.

    AVERAGE CASH COSTS

    The Company discloses "average cash costs" because it understands that
certain investors use this information to determine the Company's ability
to generate earnings and cash flows for use in investing and other
activities. The Company believes that conventional measures of
performance prepared in accordance with International Financial Reporting
Standards ("IFRS") do not fully illustrate the ability of its operating
mines to generate cash flows. The measures, as determined under IFRS, are
not necessarily indicative of operating profit or cash flows from
operations. Average cash costs figures are calculated in accordance with
a standard developed by The Gold Institute, which was a worldwide
association of suppliers of gold and gold products and included leading
North American gold producers. The Gold Institute ceased operations in
2002, but the standard remains the generally accepted standard of
reporting cash costs of production in North America. Adoption of the
standard is voluntary and the cost measures presented herein may not be
comparable to other similarly titled measures of other companies. Cash
costs include mine site operating costs such as mining, processing,
administration, royalties and production taxes, but are exclusive of
amortization, reclamation, capital, development and exploration costs.
Average cash costs are computed both on a co-product and by-product
basis. 

    Cash costs per gold equivalent ounce on a by-product basis is calculated
by applying zinc and copper net revenue as a credit to the cost of gold
production and as such the by-product gold equivalent ounce cash costs
are impacted by realized zinc and copper prices. These costs are then
divided by gold equivalent ounces produced. Gold equivalent ounces are
determined by converting silver production to its gold equivalent using
relative gold/silver metal prices at an assumed ratio and adding the
converted silver production expressed in gold ounces to the ounces of
gold production.

    Cash costs on a co-product basis are computed by allocating operating
cash costs to metals, mainly gold and copper, based on an estimated or
assumed ratio. These costs are then divided by gold equivalent ounces
produced and pounds of copper produced to arrive at the average cash
costs of production per gold equivalent ounce and per pound of copper,
respectively. Production of zinc is not considered a core business of the
Company; therefore, the net revenue of zinc is always treated as a credit
to the costs of gold production.

    Cash costs per gold equivalent ounce and per pound of copper are
calculated on a weighted average basis.

    The measure of average cash costs, along with revenue from sales, is
considered to be a key indicator of a company's ability to generate
operating earnings and cash flow from its mining operations. This data is
furnished to provide additional information and is a non-GAAP measure. It
should not be considered in isolation as a substitute for measures of
performance prepared in accordance with IFRS and is not necessarily
indicative of operating costs, operating profit or cash flows presented
under IFRS.

    ADJUSTED EARNINGS OR LOSS AND ADJUSTED EARNINGS OR LOSS PER SHARE

    The Company uses the financial measures "Adjusted Earnings or Loss" and
"Adjusted Earnings or Loss per share" to supplement information in its
consolidated financial statements. The Company believes that in addition
to conventional measures prepared in accordance with IFRS, the Company
and certain investors and analysts use this information to evaluate the
Company's performance. The presentation of adjusted measures are not
meant to be a substitute for net earnings or loss or net earnings or loss
per share presented in accordance with IFRS, but rather should be
evaluated in conjunction with such IFRS measures. Adjusted Earnings or
Loss and Adjusted Earnings or Loss per share are calculated as net
earnings excluding (a) share-based payments and other compensation, (b)
unrealized foreign exchange (gains) losses related to revaluation of
deferred income tax asset and liability on non-monetary items, (c)
unrealized foreign exchange (gains) losses related to other items, (d)
unrealized (gains) losses on commodity derivatives, (e) impairment losses
and reversals, (f) deferred income tax expense (recovery) on the
translation of foreign currency inter-corporate debt, (g) mark-to-market
(gains) losses on share-purchase warrants, (h) write-down of investments
and other assets and any other non-recurring adjustments. Non-recurring
adjustments from unusual events or circumstances are reviewed from time
to time based on materiality and the nature of the event or circumstance.
Earnings adjustments for the comparative period reflect both continuing
and discontinued operations.

    The terms "Adjusted Earnings (Loss)" and "Adjusted Earnings (Loss) per
share" do not have a standardized meaning prescribed by IFRS, and
therefore the Company's definitions are unlikely to be comparable to
similar measures presented by other companies. Management believes that
the presentation of Adjusted Earnings or Loss and Adjusted Earnings or
Loss per share provide useful information to investors because they
exclude non-cash and other charges and are a better indication of the
Company's profitability from operations. The items excluded from the
computation of Adjusted Earnings or Loss and Adjusted Earnings or Loss
per share, which are otherwise included in the determination of net
earnings or loss and net earnings or loss per share prepared in
accordance with IFRS, are items that the Company does not consider to be
meaningful in evaluating the Company's past financial performance or the
future prospects and may hinder a comparison of its period-to-period
profitability. Reconciliations of Adjusted Earnings to net earnings are
provided in the Company's MD&A Section 5 "Overview of Annual Results" and
Section 6 "Overview of Quarterly Results" for both the yearly and
quarterly reconciliations, respectively, found on the Company's website
at www.yamana.com.

    ADDITIONAL MEASURES

    The Company uses other financial measures the presentation of which is
not meant to be a substitute for other subtotals or totals presented in
accordance with IFRS, but rather should be evaluated in conjunction with
such IFRS measures. The following other financial measures are used:


--  Gross margin - represents the amount of revenues in excess of cost of
    sales excluding depletion, depreciation and amortization.  
--  Mine operating earnings - represents the amount of revenues in excess of
    cost of sales excluding depletion, depreciation and amortization and
    depletion, depreciation and amortization.  
--  Operating earnings - represents the amount of earnings before net
    finance income/expense and income tax expense.  
--  Cash flows generated from operations before changes in non-cash working
    capital - excludes the non-cash movement from period-to-period in
    working capital items including accounts receivable, advances and
    deposits, inventory, accounts payable and accrued liabilities. 


    The terms described above do not have a standardized meaning prescribed
by IFRS, and therefore the Company's definitions are unlikely to be
comparable to similar measures presented by other companies. The
Company's management believes that their presentation provides useful
information to investors because gross margin excludes the non-cash
operating cost item (i.e. depreciation, depletion and amortization), Cash
flows generated from operations before changes in non-cash working
capital excludes the non-cash movement in working capital items, mine
operating earnings excludes expenses not directly associate with
commercial production and operating earnings excludes finance and tax
related expenses and income/recoveries. These, in management's view,
provide useful information of the Company's cash flows from operations
and are considered to be meaningful in evaluating the Company's past
financial performance or the future prospects. 

Contacts:
Yamana Gold Inc.
Lisa Doddridge, Vice President,
Corporate Communications and Investor Relations
416-945-7362 or 1-888-809-0925
lisa.doddridge@yamana.com
www.yamana.com

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