Yamana Gold (AUY) is a leading precious metal producer that has gone through some rapid growth in past years. With a $13B marketcapitalization Yamana has just come off another record-breaking year producing an 1.2M oz Au-eq at an approximate cash cost of $245 per oz. This positions them securely in the bottom quartile of the industry cost curve. Their quarterly production in 2012 grew from 278,832 oz in Q1 toestimated 322,800 oz in Q4. They are projecting further production growth to over 1.6M oz per year by 2014. Their debt to equity ratio of just under 10% is also among the lowest in their peer group. Yamana pays a dividend that has been increased every year since its inception in 2009.
(click to enlarge)
Yamana has 7 mines in commercial operation and is ramping up another one. As can be seen on the map above, their mines are spread over South America and Mexico, but there is a definitive focus on Brazil with three producing mines and three more in development located there. All three Brazilian development projects are scheduled for commercial production in 2013. Once these development projects are in production Brazil's contribution to the overall gold production should rise from 25% to 40%.
(click to enlarge)
Here is some information on Yamana's Brazilian mines and development projects:
· The Chapada Mine is the fourth largest gold mine in Brazil with a preliminary 2012 output of 128,173 oz Au and 150M pounds of copper. The 2011 mine plan shows a 15 year mine life.
· The Jacobina Mine is the sixth largest gold mine in Brazil with a preliminary 2012 production of 116,826 oz Au and a strategic mine life of 15 years.
· Fazenda Brasileiro Mine reported a preliminary 2012 production of 67,179 oz Au. This mine has been in production for more than 20 years and has consistently replaced reserves as they were depleted by mining. Current strategic mine life stands at 4 years.
· The Ernesto / Pau a Pique Mine has commenced commissioning in Q3 2012 and is scheduled to produce 90,000 to 100,000 oz Au-eq per year with a strategic mine life of 7 years. Commercial production is forecast for mid-2013.
· Construction of the Pilar Mine is on schedule for start-up in mid-2013 and start of commercial production is estimated for late in the year. The current 9+ years strategic mine life is based on annual production of 140,000 oz Au-eq.
· The C1 Santa Luz Mine is scheduled to announce commercial production of 100,000 oz of Au over a mine life of 10+ years in mid-2013.
For those pondering investment in Yamana Gold, it should be pointed out that Yamana also has significant exposure to Argentina where resource nationalism seems to be on the rise.
(click to enlarge)
Overall we feel that Yamana presents a promising growth story with ample and growing exposure to Brazil. Last year's acquisition of Extorrewas hailed as a corporate masterpiece and bodes well for future strategic moves. Recent weakness in the share price may well present a buying opportunity in the near future.
