With Yamana, all that glitters is likely gold

When it comes to running a tight ship, you’d be hard-pressed to ask for a better precious metals miner than Yamana Gold Inc. (YRI–TSX).

For starters, it remains in the lowest quartile of the industry cost curve, notes Anita Soni, a mining analyst with Credit Suisse in Toronto.

Moreover, Yamana obviously knows where to allocate its resources, given that in its most recent quarter, 85 per cent of its core operations yielded 97 per cent of its cash flow.

In the meantime, the company seems to be able to make good on its promises.

Indeed, it cites the 137,000 ounces of gold it produced in August as proof it will reach its 2014 production goal of 1.4 million ounces, as well as a sustainable output in 2015.

In the interim, Yamana is keeping as many irons in the fire as possible, ramping up production at its Chapada mine in Brazil, its El Penon mine in northern Chile and its Gualcamayo site in Argentina.The company is also completing a new life-of-mine plan for Canadian Malartic, Canada’s biggest gold mine, in which Yamana is a joint partner with Agnico Eagle Mines Ltd. (AEM–TSX).

Yamana, though, isn’t overlooking its non-core assets, but is looking for a strategic partner to help it develop Agua Rica, a mining property in northern Argentina.

For Ms. Soni, Yamana merits an “outperform” rating, along with a 12-month price target of US$10.50 a share.

Our other market analysts were onside with Ms. Soni this month regarding Yamana. Of the 12 other analysts we polled, 10 rated it a “buy,” one, a “hold,” and only one, a “sell,” lofting the Toronto-based mining giant into ninth spot in our list of top-10 buys.

And our analysts’ vote of confidence is warranted, if for no other reason than the company is in fair financial shape.

For the three months ended June 30, for example, Yamana swung to net income of US$5.1 million, or $0.01 a share, from a net loss of $7.9 million, or a penny a share, for the similar period in 2013.

Revenue, not surprisingly, also presented a brighter picture, rising $20.3 million, or 4.7 per cent, to US$450.8 million.


Investor’s Digest of Canada, MPL Communications Inc.
133 Richmond St. W., Toronto, On, M5H 3M8, 1-800-804-8846

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