Yamana Gold Inc. (USA)(NYSE:AUY) Diversified Gold Producer Rebounds

Yamana Gold Inc. (USA)(NYSE:AUY) Diversified Gold Producer Rebounds


Yamana Gold Inc. (USA)(NYSE: AUY) is a mid-cap gold producer on the rebound. 2016 was a good year for investors who put their money into diversified gold producers, and now 2017 is shaping up to be an equally good year. Shares of Yamana Gold Inc. (USA) (NYSE: AUY) are already up 28.83 percent YTD and are up more than 58 percent over the most recent 12-month period.

Shares of AUY are trading at $3.62, giving the company a total stock market capitalization of $3.1 billion. Shares have been trading in a range of $3.55 – $3.65. Over the most recent 52-week period, shares have traded as low as $2.16 and as high as $5.99. Institutional owners control nearly one-half (47 percent) of the shares of the company.

Yamana Gold Inc. (USA)(NYSE:AUY) has grabbed traders attention of late. What makes Yamana so attractive to investors is not just its stable, diversified portfolio of 7 different producing mines across the Americas – it’s also the fact that the company has been relentlessly reducing debt and improving its operations by focusing on its highest-producing core assets. At the same time, the company now has three advanced stage development projects on tap – including the Cerro Moro mine in Argentina.

So it’s not just the fact that the fortunes of gold and precious metals appear to be headed higher in 2017, it’s also the fact that Yamana has carved out a position as one of the most financially attractive of these gold producers. In 2015, for example, the company reduced its debt load by $285 million, and over 2016 and 2017, plans to reduce its debt by another $300 million. That gives the company just $1.75 billion in debt, as compared to a cash position of $317 million.

Making this debt reduction strategy possible is a systematic sell-off of any non-core mining assets. In September 2016, for example, the company sold off its Mercedes gold mine in Mexico to pay down debt. The company also spun off its Brio Gold subsidiary via an IPO. The goal overall is to sell off or spin off these non-core assets while simultaneously bringing high-value new gold mining projects into production.

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Despite all these moves, though, the company is still getting mixed reviews from Wall Street analysts. On January 13, Credit Suisse downgraded AUY to “Neutral.” However, just one month earlier on December 12, RBC Capital Markets had upgraded AUY to “Outperform.”

The big question mark appears to be how much momentum this gold rally still has left. Yamana finished 2016 on a high, as gold rallied from $1100 per ounce to $1300 per ounce. That resulted in a blistering pace for the stock in the first half of the year (when it was up as much as 160 percent by July), but then a cooling off at the end of the year. For the year, Yamana still closed up 46 percent.

Recently, the company received more good news – a worker’s strike at the company’s El Penon gold mine in Chile that started January 7 was over after a nearly two-week period. That means the company’s core portfolio of 7 gold mining assets (including El Penon) should keep on rolling. As the company’s management has pointed out in investor presentations, the company’s gold mining projects are in “the most stable mining jurisdictions,” so there are few external risks.

As gold goes, so goes Yamana. From August 10 to December 22 last year, the company’s stock fell from $5.73 to $2.51. But now it’s back to $3.62 and all signs are that the same gold momentum that we saw in the first six months of 2016 could be returning in 2017. If that’s the case, the company’s fortunes are just solid gold. For more news on Yamana Gold Inc. and other fast-moving penny stocks, please subscribe to OracleDispatch.com now.

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