| All That Glitters...

10th Dec '08 by Murakami

4 comments 1367 reads

Canadian gold producer with most of its operations in Chile and Brazil,
Expects to produce just over one million ounces of gold this year, and sees that figure rising to more than 2 million by 2012.
Yamana’s recent production and cost revisions have not be well-received, sending its share price multiple down significantly and there are suspicions that the ramp up to the revised level of production in 2008 and 2009 may be slower than expected....

Seen as a good candidate for a takeover given its low valuation and a few very good assets, particularly El Penon in Chile
Has significant exposure to copper.

Its primary listing is in Canada where Yamana has just raised C$135 million ($107.5 million). The offering, which is expected to close in late December, will be used for ongoing operating and working capital requirements. "The deal, led by Canaccord Capital Inc. and Scotia Capital Inc. and well oversubscribed, signals that quality resource producers, while beaten up, are welcome again in the new issue market."

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Murakami

10th Dec '08

Interesting email on Gold-prices.biz on November 20th from Yamana management re: their share price performance -http://www.gold-prices.biz/yamana-gold-incorporated-explanation-of-current-performance/

Thank you for your interest in Yamana Gold. We encourage looking at stock performance on a relative basis. When comparing our performance with that of our peers, it is clear that there has been significant pressure across the board. Stock performance is a reaction to the recent state of the market; gold equities have been trading quite closely to the markets, and less closely to the commodity. Having said that, Yamana has been sold off slightly more than most and we are just as frustrated as you are, as we are shareholders as well. A possible reason for this may be the effect of the large transaction we completed last year. Some have a view that it takes one year for full integration of operations and people, and though we don’t agree, as we have fully integrated already, this may have an effect. We have also heard that the transaction resulted in more hedge funds and momentum players holding our stock. With current market conditions, hedge funds are liquidating their positions, which impacts Yamana’s share price.

We remain committed to delivering value to our shareholders. Yamana continues to be one of the lowest cash cost companies in the industry and we are uniquely positioned with a declining cost structure and increasing production all in gold. We have the stability of the jurisdictions in which we mine. Most of our 2009 and 2010 production estimates are based on mines that are or will be built by the end of this year. We are well positioned with cash, cash equivalents, and growth both in production and cash flow, and other valuable assets. We have many upcoming positive events expected for the end of this year and we are currently on track to deliver on these milestones.

We hope this answers your questions. Best Regards, Investor Relations, Yamana Gold Inc.

Mattybuoy

6th Feb '09

Best gold stock on the LSE IMHO. One of the good things about it being that it's not really a London stock. Gold miners trade at much better valuations over the pond.

Having 5 producing mines and several advanced developments reduces risk drastically compared to being a one project wonder.

Look for margin expansion this year as costs (primarily diesel) fall and PoG holds up or increases.

MrT

7th Feb '09

Agreed - there was an interesting initiation of coverage article by Dundee Capital Markets analyst Ron Stewart, albeit from a Canadian perspective (its primary listing). Key points:

Suffered in 2008 due to integration concerns with acquisitions made in 2007 and its exposure to copper
Encouraged by an expected decline in the miner's exposure to copper, given fall in copper prices last year. In 2009, copper is estimated to represent 19% of Yamana's total pie, down from 36% in 2008.
Rated the stock a "buy" with a $13 price target (vs. $10.6 now - 25% potential upside), based on an assumed gold price of US$725 per ounce (gold is trading well above that and some pundits, including Eric Sprott of Sprott Asset Management, believe it could hit $2000 - http://www.bloomberg.com/apps/news?pid=20601087&sid=ao7hCvQA9QZ0&refer=home).
Undervalued given that, based on 2009 estimates, it currently trades at a 15.5x P/E multiple versus the peer average of 24.8x and a 9.9x P/CFPS versus the peer average of 15.0x.
Estimates that Yamana can grow its commercial gold equivalent ounce production by 36% to 1.35 million ounces in 2009. By 2012, he expects production to hit 1.73 million ounces.
Reckons it may add 7 million ounce to its reserve/ resource base, which will add about as much as $1 to his NAV

stopthenewworldorder

18th Feb '09

Yamana is an excellent mid tier play. It is in my Precious Metals Fund and I don't expect to sell a share for some time despite the recent outperformance. Better off buying this in Canada for liquidity.

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Murakami

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