Why Yamana Gold Is a Must Buy

Yamana Gold (AUY) announced first quarter ended March 31, 2016 total revenue of $430.3 million, down 6 percent year-over-year from $458.1 million during the same period last year primarily due to weaker copper and silver sales quantities coupled with weak metal prices.

Yamana declared first quarter of 2016 adjusted net earnings from continuing operations of $28.8 million or $0.03 per share, compared to adjusted net loss from continuing operations of $37.5 million or $0.04 per share in first quarter of 2015.

The key metals mining company reported continued year-over-year decline in its top line primarily driven by the ongoing weaker global commodity demand and pricing environment coupled with the rising exploration expenditures, eating into the margins of the company.

The tailwinds 

The global metals pricing environment seems to be improving gradually with gold price estimated to have achieved a bottom and having notable chances for upside.
The currently active macroeconomic and geopolitical conditions include risk of rising incidence of weak and negative interest rates, inflation risk, global economic imbalances and global economic growth. The favorable gold price trails are beneficial for the company’s net cash flows and would enhance cash flow multiplier of falling costs. Therefore, organized growth restrictions to worldwide economy have traditionally supported favorable movements in key gold prices.

The continuing global growth environment is favorable for silver prices that usually have outperformed gold in the tough global commodity declining pricing environment. The growing gold to silver ration signifies silver decline benefiting gold pricing.

The gradually improving gold and silver pricing environment is believed to significantly benefit the key metals mining company by expanding its margins and delivering sustainable long-term growth and profitability.

A streamlined structure

Yamana’s streamlined organizational structure, superior mine plans, attractive, recalibrated balance sheet and recalibrated mineral resources and mineral reserves makes 2015 as the key transition and repositioning year. During 2015, Yamana targeted cost minimization and efficiencies growth. Going forward into 2016, the company has already taken strong initiatives to expand globally while delivering attractive shareholder returns. The company illustrated superior quarterly production well within the guidance range of nearly 1.28 million oz. of gold, over 9 million oz. of silver and nearly 131 million lbs. of copper, exceeding the guidance for metal. Yamana delivered significant annual production of gold at Minera Florida, Gualcamayo, Canadian Malartic, Jacobina, El Peñón, Chapada and Pilar at smallest all-in sustaining costs, lower than the industry’s average costs that positions it strongly for delivering sustainable long-term company growth.

Going forward, Yamana is focused on achieving strong financial position with reduced total debt and thus, it uniquely concluded a metal purchase and an equity financing contract during 2015 with net proceeds from the transaction utilized in reducing debt and maintaining a significant $350 million of working capital position.

The year-over-year expanding gold production at controlled costs highlights Yamana’s significant confidence in achieving sustainable long-term growth while delivering attractive shareholder returns in form of dividends and strategic share repurchases.

Importantly, The Board of Directors at Yamana Gold, Inc. have recently declared a second quarter 2016 dividend of 0.5 cents per share payable July 14, 2016 to all the key stakeholders as of June 30, 2016 and in line with the company’s continued commitment to deliver attractive shareholder returns.


Overall, the investors are advised to “Hold” their position in Yamana Gold, Inc. considering the steadily improving global commodity demand and pricing environment but, currently weaker company’s financial position with notable total debt of $1.83 billion against weaker total cash position of $228.60 million only, restricting the company to make future growth investments. The profit margin of -107.21% seems disappointing. However, the PEG ratio of 3.92 indicates healthy company growth.
Published on Jun 20, 2016
By Yaggyaseni Mittra

Copyrighted 2016. Content published with author's permission.

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