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Thank you all for joining us this morning. Before I turn the call over, I need to advise that certain statements made during this call today may contain forward-looking information, and actual results could differ from the conclusions or projections in that forward-looking information, which include, but are not limited to, statements with respect to the estimation of mineral reserves and resources; the timing and amount of estimated future production, cost of production, capital expenditures; future metal prices; and the cost and timing of the development of new projects.For a complete discussion of the risks, uncertainties and factors, which may lead to actual financial results and performance being different from the estimates contained in the forward-looking statements, please refer to Yamana's press release issued yesterday announcing third quarter 2018 results as well as the management's discussion and analysis for the same period and other regulatory filings in Canada and the United States.I would like to remind everyone that this conference call is being recorded and will be available for replay today at 12:00 p.m. Eastern Time. Replay information and the presentation slides accompanying this conference call and webcast are available on Yamana's website at yamana.com.I will now turn the call over the Mr. Daniel Racine, President and Chief Executive Officer.
Thank you, operator. Good morning, and welcome to our third quarter conference call. With me on the call today are Yohann Bouchard, our Senior VP, Operations; and Jason LeBlanc, our CFO. The rest of management is also with us in the room and will be available for the Q&A portion of the call.Talking about management during Q3, some changes have been made. Peter is now in the new role of Executive Chairman, mostly focusing on strategy and longer-term planning on behalf of our board. And I have assumed the President and CEO role with all the normal responsibilities that goes into that role.We have also simplified our operation oversight to have all GMs reporting directly to Yohann and move Gerardo to oversee our technical service and project. Peter is not here today as he deal with some of these item, but we would be able to answer any question.If we now look at our third quarter progress, I'm pleased to say that we have continued to execute. We maintain our focus on operational excellence by delivering production and improving our costs. Building on a strong first half, we produced above our expectation with 279,000 gold ounces equivalent including 247,000 ounces of gold and 2.5 million ounces of silver. We also produced over 20 million pounds of copper. On a by-product basis, taking copper as a by-product credit, our GEO cash costs and all-in sustaining costs were respectively $482 and $739 per ounces. This production was delivered at cost or lower than our guidance across all metrics.We saw strong production contribution from Chapada, El Peñón, Canadian Malartic, Jacobina and, importantly, the first full quarter from our new mine, Cerro Moro. With strong production through 9 months, we are increasing gold production guidance to 920,000 ounces and copper guidance to 150 million pounds. The increased gold production guidance more than offset our lighter-than-planned silver production. So we are still tracking well to our original gold equivalent guidance.Yohann will go through in more detail, but I want to highlight that this increased guidance comes in part due to the performance at Cerro Moro. With the progress at this operation, we're confident that it will meet and exceed the original guidance. That confidence, plus the above expectation production at many of our other mines, led to the decision to increase portfolio guidance.On Cerro Moro, I want to highlight that Q3 production was an impressive 38,000 ounces of gold at an average grade of 16.15 gram per tonne and a recovery of 92.5%. On the cost front, increased production guidance is also contributing to an improving cost outlook, plus we are seeing currently -- currency tailwind, which Jason will discuss in more detail.We are already in line with or below our cost metric, and with an expected strong Q4, we believe full year cost will be below the cost ranges we provided earlier this year. Our exploration program is advancing discoveries with a focus on our existing operation. We are having good success with our drill programs, and we expect reserve and resources to increase at many of our operation when we announce year-end result in February.As you saw last night, we announced the sale of Gualcamayo, an asset that we had already categorized as held for sale. We will receive $30 million in cash on closing with further upside to participate in medium to long-term term, a value creation at the asset. The participation include NSRs on production from Gualcamayo that might come through oxide exploration success and/or if the deep carbonate production is built. There are also a $30 million payment if deep carbonate is brought to commercial production.The total value of consideration for Gualcamayo is in line with recent market valuation for comparable asset. This valuation are reflective of the current commodity price, which is approximately $100 per ounces of gold lower than as December 31, 2017. This total value is estimated at approximately to $85 million, and as such, the carrying value of Gualcamayo has been reduced to this amount.Separately, the company has optioned its La Pepa project in Chile also to Mineros. Both deal structure provide low-risk approach to surface while preserving exposure to upside value. Our view for some time has been to focus on operation and project where there's more certainty on production, costs, mine life and capital requirements. These transactions are consistent with the company's focus.The operation for the third quarter were solid, both with respect to production and costs, yet decline in metal price weighted on the company's financial result. However, we delivered adjusted earnings of $23.6 million or $0.02 per share. The most notable item was the after-tax $75 million reduction in value related to Gualcamayo. Ultimately, we were able to deliver $49 million in net free cash flow. When looking at our cash flow in the quarter, it is important to account for the impact of the copper prepay program, which Jason will speak to in more detail.As I mentioned, we have updated guidance for all metals. For gold, we are now expecting 920,000 ounces, up from original guidance of 900,000 ounces. Year-to-date, we have produced 675,000 ounces, which leave approximately 250,000 ounces to be produced in Q4, a minimal increase over Q3 production of 247,000 ounces.For silver, we have lightened our guidance to 7.55 million ounces compared to 8.15 million ounces. The reduction in silver guidance is attributable entirely to lower-than-planned silver production at El Peñón. We are on track at Cerro Moro to achieve original guidance.For copper, we are expecting 125 million pounds, up 5 million pounds from original guidance. With 90 million pounds produced year-to-date, we're expecting approximately 35 million pounds in the fourth quarter.We have now updated our cost guidance -- we have not updated our cost guidance, but we are providing directional information that we now expecting operating costs to be below per yesterday provided guidance.Looking at this chart, we see that year-to-date cash cost and all-in sustaining costs are below guidance for all metals already. With the fourth quarter expected to be our highest production level of the year, we anticipated continued improvement to per-unit costs.I will now turn the call over to Yohann to discuss our mine-by-mine results.
Well, thank you, Daniel. For Chapada, we had another strong quarter with production exceeding expectations. Based on Chapada's performance to date and our forecast for higher production in the fourth quarter, full year copper production is now expected to be at about 125 million pounds, which is 5 million pounds more than the original guidance.Furthermore, we had strong build recoveries for both copper and gold in the quarter despite processing of blend that historically has been challenging to process. The blend include about 700,000 tonnes of lower grade and slightly oxidized material from the stockpile. And so reclaiming from stockpile allowed us to focus on the waste stripping in the Corpo Sul pit. We expect to see the benefits of this movement in the fourth quarter as the mine sequence called for a higher proportion of fresh ore from Corpo Sul and the main Chapada pit. This should result in higher grade and recoveries during the fourth quarter. We continue to optimize and improve the operation. Our operation program is advancing discoveries such as the close-to-surface, higher-grade mineralization called Baru Northeast located nearby the processing plant.From a mining perspective, Baru Northeast is preventing a very compelling short-term option to increase gold and copper production as significant to our cost due to low strip ratio and proximities to the crushing facility.Finally, I'm pleased with the progress accomplished at Chapada through the first 9 months of the year. The team continued to advance a feasibility study of our phasing approach that was announced earlier this year. Chapada is a large and long-life asset with significant value that still needs to surface.At El Peñón, gold production was in line with expectation for the quarter, and we are positioned to meet gold production guidance for the year. We are transitioning to higher-grade zones, which was seen since the beginning of October. In addition, we are -- we expect the higher gold grade to continue through the fourth quarter.Silver production has been below expectation, and we have revised full year guidance down to 3.8 million ounces. Silver recoveries have tracked below plan. This is mainly the result of an increase in the proportion of silver sulphides and silver sulphosalts from Ventura and other higher-grade zones. We continue -- we anticipate mitigating the impact of this type of mineralization in the fourth quarter with the increase with linear development that should open additional working and add to blending flexibility. On the other hand, the internalization of some linear development activities caused some delay in the sequence with a greater impact on silver grade. The operation has now reached the desired linear development rate, which positions with positive results so far in October.Higher proportion of gold mined compared to silver impacted unit gold cost in the third quarter as proportionately more costs were allocated to gold. The impact of this allocation on gold cost was partially offset by the depreciation of the Chilean pesos.Lastly, for El Peñón, higher-than-planned gold production through the first 9 months is partially compensating for lower silver production on a gold-exploring basis.Well, Canadian Malartic continues to be a solid and steady operation. Higher-than-planned grade continued to drive higher-than-expected production, and the operation is well positioned to exceed 2018 guidance. The higher production and weaker Canadian dollar contribute to costs that were lower than full year guidance. The Canadian Malartic expansion project is continuing according to plan, and we have revised the total expansionary CapEx to $37.5 million on a 50% basis for 2018, which reflects certain deferral into 2019. $30 million of that is for the expansion project, and from that amount, about $18 million has been invested to date.Jacobina continued to exceed production expectation, and it's on track to exceed the 2018 guidance of 135,000 ounces of gold. The third quarter milling rates were lower than the previous quarter due to planned maintenance. However, the higher grade from Canavieiras Central, Canavieiras Sul, João Belo offset the impact of lower tonne milled. We expect processing rates to normalize in the fourth quarter.Costs are benefiting from the higher gold production and the weaker local currency. In parallel, ongoing optimization and cost control initiatives, driven by our operational excellence teams, are influencing costs positively. The exploration program is continuing to focus on infill drilling at João Belo, Canavieiras Sul. We're also testing potential target at Serra do Corrego. To be more specific, at Canavieiras Sul, drilling has discovered a new zone at Maneira Reef, which opens up potential for future expansion of mineral resources. At João Belo, drilling has continuously intersect mineralization at higher grade than the current mine. And at the Serra do Corrego zone, drilling confirmed the continuity for at least 500 in strike length. So Jacobina is delivering a solid and increasing production while we continue to reduce costs and expand known mineralization on the property. We're progressing with a target of achieving a production rate of 150,000 ounces per year at Jacobina, and I am very pleased that Jacobina has reached the milestone of being a sustainable producer of a minimum of 140,000 ounces per year.At Florida, third quarter production was 31% higher than the second quarter, mainly due to the contribution of higher grade from Pataguas and PVS. The fourth quarter production is expected to maintain the momentum, reflecting the higher grades from Pataguas and PVS, which, in September, averaged 4.2 grams per tonne. The operation is continuing and focusing on the development of the ventilation system in the Pataguas and PVS area, with the effect of improving further productivities of higher-grade workings.All per-unit cost metrics were about 15% lower compared to the second quarter of 2018 due to higher production and the depreciation of the Chilean pesos. The costs for the balance of the year will continue to improve as mining is transitioning to more productive mining area in the new mine. This should also increase production due to higher-grade mine.And Cerro Moro had a successful first quarter of commercial production as this low-cost operation is ramping up. We are well positioned to exceed on the 2018 production guidance with a third quarter production of 38,000 ounces of gold and 1.7 million ounces of silver. Cerro Moro is a strong contributor to the overall performance, and we're seeing production run rate already at levels needed to meet guidance for 2018 and 2019.We are delivering this strong production at costs in line with the levels guided for both years. Inventory at quarter-end was a bit high due to the timing of shipment. Production exceeds sales by about 9,000 ounces and 640,000 ounces of silver. We expect inventory to normalize in the fourth quarter at roughly half the current level. With the operation ramping up, we've been able to increase retention to the exploration potential on the property. We are focused on the conversion of inferred mineral resources with the majority of the work complete on the Veronica vein, Escondida Far West, Martina and the Nini Extension. The conversion number have exceed internal expectation and will likely account for an increase in mineral resources at year-end. Well, I will now turn the call to Jason.
Thank you Yohann, and good morning, everyone. Turning now to our financial performance. We delivered $417 million of revenue in the quarter. Production and mine site costs underpin the strong results at our operations, while revenue and gross margins were impacted by lower prices for gold and silver compared to third quarter last year, along with recent quarters. Revenue in the quarter was also impacted by the timing of shipments at Cerro Moro, reproduction exceeded sales, which was just mentioned by Yohann. Our G&A expense was roughly $19 million for the quarter, and we are tracking well to come in below our full year guidance as we continue to focus on efficiencies. Net loss attributable to Yamana equity holders for the quarter was $81 million or $0.09 per share. Included in earnings are noncash and other items not reflected by the ongoing operation, the most notable being a $75 million after tax reduction of the accounting carrying value of Gualcamayo. This reflects the consideration from the announced sale of this asset and the resulting carrying value of approximately $85 million. However, we think the structure of the sale consideration provides a meaningful opportunity to recognize value beyond this current level over time. Taking the Gualcamayo adjustment, among other items, into consideration, earnings per share would be impacted positively by $0.11, resulting in adjusted earnings of $0.02 per share. Another item I would like to mention is the recently proposed export tax in Argentina that was set at ARS 4 per dollar of exports but capped at 12%. We accrued approximately $2.5 million of related tax expenses on exports during the quarter. However, we continue to discuss the proposed measuring country and pursue solutions to ensure our fiscal stability agreements, which reflect the maximum rate of 5%, are respected. In terms of cash flow, despite the strong operational performance, lower metal prices compressed margins and negatively impacted cash flows in the quarter. However, I do want to point out the effect that our copper advanced sales program had on our cash flow. We delivered about 13 million pounds of copper into that program in this quarter although the associated proceeds of about $41 million were received back in Q1 as part of an overall $125 million payment under the program. If not for that timing difference, cash flows would have been $41 million higher this quarter, which is reflective of what the normalized cash flows look like at about $128 million. Q3 was the largest delivery quarter under this program with the client commitments over the next 3 quarters through Q2 of 2019.Related to cash flows, we had a negative working capital movement of about $22 million in the quarter. This is a little larger than I expected from a quarter ago but was mainly impacted by the timing of sales at Gualcamayo. I still anticipate a positive working capital impact in Q4 in the range of about $30 million to end the year.For Q4, we're positioned to have our highest quarterly production levels of the year across all of our metals. Furthermore, we also expect Q4 to be the lowest unit cost quarter for the year and, consequently, will deliver higher cash flow generation.There's been weakness in a number of our operating currencies relative to the U.S. dollar throughout 2018, but we expect the most significant impact on our cost structure during Q4. The recent devaluation provided a strategic opportunity to lock in the U.S. dollar value of our in-country Brazilian operating cost for 2019. Consistent with our prior approach, we executed foreign exchange option contracts to lock in some of these benefits while still providing flexibility and participation to weaker local currencies. In doing so, we have supplemented our increasing production profile and partly secured our cash flow generation during 2019.I'll wrap up with some final thoughts to put our Q2 -- Q3 performance in a broader perspective. We have rightsized our portfolio, which means we are focusing on assets that contribute most meaningfully to production and financial metrics. We have also rightsized specific assets to ensure their production contributes to cash flow and, ultimately, free cash flow. As we look to create value, we have a portfolio of producing assets that provide significant opportunities to build on the current production platform and either deliver more ounces and pounds or lower unit costs. Our production is diversified across 4 countries, each with a history of mining and within some of the best mining areas of those countries. Furthermore, with production diversified across these countries, in our 3 metals, we also have natural hedges to absorb commodity and input price volatility. The focus on core assets and allocating management time to the most prospective opportunities is supporting our ongoing delivery of operational performance. Yamana has a trend of operational performance going back many years, and 2017 and 2018 year-to-date demonstrates this approach particularly well. Finally, with the continued operational performance that's expected, we'll see this manifested in both short and medium-term step changes in our free cash flow and earning growth. And with that, we'd like to now open the call to questions.
[Operator Instructions] And if the first question is from Ralph Profiti from Eight Capital.
So firstly, I'd like to delve a little bit more into Cerro Moro optimization and how it relates to the unit cost structure. I'm just wondering how much more can be done. For example, is there still higher labor and contractors on site even if -- as you transition to commercial production? And are there any, say, labor productivity issues that could still be addressed?
Ralph, Yohann here on the line. I'd like to say that Cerro Moro just went through a startup. I mean, this is our first month of commercial production, and for sure, there's always opportunities to do better. I had the chance to visit the mine, I would say, 6 weeks ago for the first time, and we have some -- pretty good exchange with the people in place there, and we all see good opportunities. So from my point of view, there's no doubt that we can do some change with maybe a little bit of the mining concept underground and be able to low down our costs further.
But regarding the contractor, Ralph, there's no more construction. It's just limited. Construction is done. It's basically our own people doing the operation underground. The only contractor basically there is the open pit contractor.
Gerardo Fernandez here. Yes. That's why we are pretty much are all completing construction, just wrapping up the EPCM contract. We are closing invoices pretty much, and during Q3, there is maybe 1 or 2 outstanding. As Daniel was saying, the open pit is mined by contractor. It's a company with lots of experience in the type of mining method we do on surface. It's been very successful from the start. There is a running rate with very competitive costs. Please remember that most of the 2 -- over 60% in the first year, and the second year, 60% to 70% of the production for Cerro Moro comes from the open pit and its high-productivity low-cost ore. That gives time for the underground to build and develop it and also build in training and the people and increase the productivity, which is what Yohann was referring to.
Okay. Yes. Excellent. Maybe one for Jason. And can you address sort of the streamlined management structure? I'd like to get a little bit more flavor on what you think the view or the impact is going to be to annual SG&A?
Yes. Ralph, I'll provide initial thought and then maybe if Daniel wanted to add anything else beyond the financial impact. But we're finding it's really an ongoing attempt. We've talked about this over the last number of years, how we've streamlined our structure here in Toronto. Now that we've had this group here, we're really just building on that process over the last number of years. So a little early to talk about what the 2019 run rate would look like, but I did mention in my notes that we're going to be below our guidance level for the quarter, and I put that in the context of plus or minus $5 million.
The next question is from Mike Parkin from National Bank Financial.
Just a couple of questions here. When do you expect the Gualcamayo sale to close?
Mike, fourth quarter, probably mid-December, something like that.
Okay. And then on Cerro Moro, can you just make a comment on -- the grades look really good there. How are they trending relative to the block model? Are you seeing positive grade reconciliation? And if so, are you seeing it more with gold and silver, similar? Or any comments would help.
But -- both are right in line. So reconciliation for both gold and silver are right in line with our resources and reserve. The main difference is our dilution is a bit lower than planned. But on the grade itself, it's right on target.
Okay. And is that open pit contractor? Did they have any kind of -- how are they kind of compensated? Is there any incentive plan for minimum dilution?
Well, they're following -- they're supervised by our own people. So they're following our mining plan. We have a plan. We have geologists on site all the time to make sure that they follow our drilling patterns. And then the ground, both open pit underground and on the ground, is a bit better quality than we were expecting. So all in all, they're paid by cubic meter or tonne moved at the end of the day of ore and waste, but we make sure that they follow our instruction.
The next question is from David Haughton from CIBC.
Question on the Gualcamayo sale. I'm not familiar with Mineros S.A. Do they have the $30 million in cash? Or is the deal contingent upon some sort of financing at their end?
No. No. They have -- Mineros is a private Colombian company. They're listed in Columbia. Their intent, I think -- they said it in their release, their intent is to be listed in North America, but it's an operator in Colombia and Nicaragua, and they have the cash on hand.
Okay. So there's no financing snags anticipated with the closure of this deal? So it just...
No. Not for this deal. No.
Over to Cerro Moro. Can you just give us a sense as to what kind of production you're getting from the open pit compared to the underground? I didn't see any commentary on the source of ore, and I'm just wondering how that mix will change through time here.
It's about 70-30 this year. This was our -- that was our plan, David. And then it's going to go down with time as we -- the open pit has a shorter mine life than the underground. It's going down a bit next year and then the year after. But with the success we have in exploration, that's changing all the time. Now we have the Veronica vein that's going to be put into production probably next year. So that will maintain the open pit portion of it. But for this year, it's 70-30, and we're achieving that right now.
Okay. Because the open pit, at least on reserves, is -- only got really 600,000 tonnes available to it. It was a slightly lower grade than the underground. So I'm just sort of factoring that in. And the kind of number that we're seeing at 11 -- at 16 grams gold on average, what's your expectation of that moving forward? It's quite a bit better than what I would have anticipated and I presume that it's going to decrease through time.
Yes. It will decrease with time because our average reserve grade is 11.6 if I remember right. So we're mining above reserve grade. It's mostly we're mining Escondida Far West where the grade is the highest on all the zone from both underground and the open pit. And like I mentioned, David, the dilution is way lower underground and also in the open pit. So that explain the better grade.
Okay. So whilst we're still in Argentina, 2 questions probably for Jason, if that's okay. How are you accounting for the Argentine export tax? Are we seeing that as a separate item somewhere in the P&L? Or is it going to be pushed down to the mine level? Or what's -- where is that reflected?
Yes. So David, as I mentioned, we would have accrued $2.5 million, and as an excise tax like that is a reduction in our revenues.
Okay. So it's in the revenue, okay. And then for the buildup of inventory at Cerro Moro, understandable, given the early stage. But would you expect for that to unwind in Q4 or a lot of it to unwind in Q4?
Yes. That's exactly it, and we've seen that process start already. So I'd say an approximate halving of that inventory to a normalized run rate. So there's probably a $10 million-odd benefit to -- from that at current metal prices.
Okay. I do have 2 more questions, possibly for Yohann. Looking at Jacobina, your production rate was 5,200 per day around about in Q3. Do you still have a goal of moving that up to 6,000 tonnes a day in 2019? And what kind of trajectory should we be thinking about for that?
Yes. Absolutely. I mean in Q3, we have some little -- I would say, a bigger shutdown because we did some work on our ball mills. So basically, the gold is to be at, I would say, a processing rate of about 6,200 tonnes per day for sure.
In the first half of '19, of 2019?
But we're going to ramp up, I would say. We still need to do some really -- some investment in the processing plant, really minor investments, to gain on reliability, but it will not be a big deal. The gold would be to reach, I would say, a processing rate of 150,000 ounces per year in Q3 or Q4 next year.
Okay. And a similar question for Florida, 2,200 tonnes a day in Q3. I had assumed that the goal was to get up to 2,500. Just wondering what the path looks like for that now.
Yes. Absolutely. I mean, we're still pending our new mining zones, which is Pataguas and PVS. So we're still developing our ventilation circuit. And as soon we have more ventilation, we'll be able to improve our productivities in that area and be able to feed the mill, I would say, with higher mill throughput.
The next question is from Mike Jalonen from Bank of America Merrill Lynch.
So I had 2 questions, Dan, one for you, one for Jason. Just wondered if Yamana's looking at other asset sales. And then secondly, Jason, I noticed debt increased in the quarter. Is there a -- which you mentioned free cash flow growth. Is there a debt reduction target you have for Yamana over the next year?
Mike, for your first question, the -- are we looking for other asset sale, the answer is no, but we -- everybody knows that we're looking at potential for Agua Rica. So that's mainly what we're working. We're working our technical service with Charlie. We're working on a stand-alone operation, but at the same time, there's other parties that are interested. We'll see. But now we have 6 operation and we're pretty happy of all of them. And in Gualcamayo, we put it early this year for an asset for sale. It's a great asset, and we're really happy that Mineros is taking it over. They're going to spend effort on exploration on the oxide and on the deep carbonate and continue to run the mine as we have planned for the next few years.
Yes. So on the debt, Mike, yes, that's definitely the plan. That's what we've talked about and we said we returned free cash late in '18 with the completion of Cerro, then everything kind of lines up for 2019. So that's the more significant debt reduction year for us. I do expect to see that in Q4 to start to kick in. As I mentioned, it's going to be our best production lowest-cost quarter. So what we talked about is that on a leverage basis, I don't know, 1.5 turns over the next couple of years, and then absolute debt put it in the range of plus or minus $300 million over the next several years. That's going to be dependent on commodity prices and we'll try to adjust to those conditions in the market and stay true to those targets.
The next question is from Carey MacRury from Canaccord Genuity.
Just a question on the realized copper price for the quarter. Just -- I understand there's a lot of hedges that you have there in forward sales. Just wondering are there any adjustments -- are there adjustments in there this quarter?
No. Nothing, Carey. I mean the realized prices can be impacted by the copper. Most significantly that reflected through on 13-odd million pounds at about $3.15 per pound, which was quite a bit above the market price.
But your realized price was $2.80 in the quarter, I think?
Yes. That would have been impacted by market prices otherwise.
The next question is from Mark Llanes from Credit Suisse.
I believe most of my questions have already been asked, but just a housekeeping question on my end. I noticed on your MD&A that you have $58 million in sustaining CapEx that you're expecting for Q4. And I believe your guidance for the year was $170 million. So if I take my -- the year-to-date and add that in, it'll be tracking above that. Can you point me to which particular asset that's driving that -- that increase?
Yes. Just, Mark, that would be 2 places that we made some smaller investments at both Chapada and Jacobina in terms of equipment that wasn't initially planned, and just the mix of ore at Chapada over the course of the year was more geared to capital versus OpEx. So in that case, no net change in the effect. It's just a categorization, but it's basically those 2 assets, Chapada and Jacobina.
The next question is from Dan Rollins from RBC Capital Markets.
Dan, I was wondering if you maybe touch base on some of the assets where you expect to see reserve growth this year. I know that you guys are spending a lot of money building up the resource side of things, but I think the market would like to see that converted to reserves this year. So maybe you could touch base where you're seeing some upside and then where you see that potentially going over the next couple of years.
Good question, Dan, I'll let Henry answer that one.
Yes, Dan. Henry Marsden from exploration. Our main success and focus in increasing reserves has been in Brazil. We expect to see a really significant increase in Jacobina not only on reserves but also in the grade. We've been focusing on increasing grade with the Serra do Corrego area as well as the incentive drilling depth on Canavieiras. And Chapada as well, we've really been looking to fill a gap, a future gap that we saw in gold production. So we're going to see a significant increase in reserves, both at the new discovery we have at Baru Northeast as well as an increase in reserves on Sucupira in Baru itself and continuing to increase reserves as well on our Suruca deposit. And the other success we're having is in Chile. We'll see an increase in reserves at La Florida. We're building on the inferred that we discovered last year and declared last year, and we're converting Pataguas, Don Leopoldo and PVS sectors to reserves this year.
And at El Peñón, have you had much success? Because I know when we had said about 1.5 years ago, you're starting it to skin your systems. But is that a system where you think you can continue to replenish reserves? Or do you really need to find a new productive discovery there?
I think at El Peñón, we're going to see probably a slight decrease. We're probably going to see more depletion than the replacement of reserves, although we will have a significant number for new reserves in the year. And the other site, which I haven't mentioned, is Cerro Moro. We just -- we mentioned last fiscal year, the end of last year the Veronica discovery. So at Cerro Moro, we've also -- going to see an increase in reserves replacing the 2018 production there.
Okay. That's great. Jason, maybe you can just provide a little bit more color. Year-to-date, you've had a fairly significant working capital drawdown there. When do we start to see that begin to unwind? Or have they said -- I expected we might have started to see that already here in Q3. But just with respect to that, the free cash flow generation that's supposed to be coming, just trying to get a little bit of clarity on that. And also second question is, when do you get to a point in time where you're not having to rely on drawing and paying down the revolver within a fiscal quarter? Because I think that would further strengthen the view that the free cash flow generation is here to stay for Yamana.
Yes. Sure, Dan. Yes. I think previously, I would have referenced a 2H level of working capital, but that's a little bit more back-end loaded as we knew -- we thought probably 3 months ago. And as I said, there's a few factors to that primarily with the Cerro Moro timing there. And I also had mentioned before, think about what happened this year, most significantly with Cerro Moro, a new startup. So we're building inventory there, paying down the buildup of the payables that accrue over the course of the construction project. So that's a $20 million to $30 million impact. VAT through year-to-date is probably $20 million. So those are the 2, I'll call it, onetime effects that we don't see. And then also we said our payables are running a little bit as we went into the year 2017. So we've normalized those. We're down about $70 million, $80 million year-to-date. So again, we're back to a more normalized level. And as I referenced on the call, we'll see positive working capital inflow in Q4. And associated with the strong production quarter, yes, we don't expect to be relying on that for us.
The next question is from Steven Butler from GMP Securities.
Jason, you talked earlier in your remarks about devaluation of local currencies, obviously, Argentina and Brazil being the biggest culprits or beneficiaries for you. How much of an impact should we expect? And maybe we can glean that from your financials and your level of hedging or FX options. But what have made you -- or maybe based on where we are today, what kind of impact would you expect on either cash cost or millions of dollars of impact from Q3 to Q4 for currency devaluation?
I think on a consolidated basis, Steve, I'd be conservative and say it's somewhere in like $5 to $10 of consolidated impact.
There are no further questions at this time. I'd like to turn the meeting back over to Mr. Racine.
Operator, thank you, everyone, for attending our third quarter conference call. I think we had a great quarter again on production and costs. Q4 is going to be even better for us. We're quite happy about the fact that we had an agreement, and we work hard to have an agreement and a good partner coming to Gualcamayo and La Pepa with Mineros. So it was a busy quarter for -- first quarter for me, but a lot more interesting ones to come. Thank you very much.
The conference has now ended. Please disconnect your lines at this time, and thank you for your participation.