Gold being at these stratospheric levels causes a particular problem. Boards start to develop ambitions of cashing in via a stock market. Result? Too many gold company shares around the world to follow! We’re spoilt for choice! Sounds terrible to complain, we know, but we’ve been having a good grumble nontheless!
At least the present awful financial markets have brought some relief. The pace of gold company debuts has screeched practically to a halt. Like, of course, the rest of the IPO business. None but the best are going to find a bank and broker to take a risk on a float right now!
The attention given to the prices on gold and commodities markets has left companies in the shade. Some miners have just got lost in the crowd! A good case in point is Canada’s Yamana Gold. In the UK its following is very limited. It gets scant, if any, coverage. Yet it has loads going for it!
Yamana — the undiscovered Canadian
Yamana has eight producing mines, and five development-stage projects, all advancing positively. Yamana does not hedge its gold. And its potential is massive! There’s a large exploration portfolio and significant gold production, development-stage properties, and land positions in Brazil, Argentina, Chile, Mexico, Central America and the United States.
While it may be only five years old, it is already quoted in six markets, including London. It is certainly no minnow. In fact it’s huge! The market cap is now £4.74 bn, it is a producer that moved strongly into profits last year. It must have enough of a following on its home turf not to worry about making itself conspicuous to the rest of us!
In 2007, at the pre-tax level, it delivered $223m of profits, with 38 cents of earnings and even paid a 4 cents dividend. You can’t ask for much more than that. Net debt is right down, at 6% of shareholders’ funds.
Yamana has just announced its first quarter 2008 profits and things are even better. Revenues soared and profits were doubled at $157m. Attributable production was 90% higher at 597,304oz of gold and silver. Proven and probably reserves showed a good gain too, up to 17.9moz from 11.1m.
This spectacular performance is not all home grown. In the last year the group spent $4.8bn on acquisitions. Yamana Gold, Meridian Gold and Northern Orion agreed to a $3.5 billion three-way cash-and-stock merger deal in September last year after a very tough fight. The attraction of Meridian was its gold/silver resources.
There’re assets in Chile and Brazil
Within its production portfolio, it is the Chilean El Penon mine that is considered Yamana's top priority. This is a big cash-flow generator. Other acquisitions are still in the development stage. Yamana said in January it expected production at El Penon to rise to above 500,000oz by 2010.
"We have taken this mine from 340,000oz gold equivalent in 2006... to a planned 425,000 ounces, which was our guidance in January, and now we can say to you that we will be increasing annual production by the end of this year to 500,000 oz of gold and gold equivalent, which is almost one year ahead of schedule," CEO and chairman Peter Marrone said during a conference call.
"With sufficient reserves and resources, multiple high-grade veins, the availability of plant capacity, we are now targeting a production rate of 470,000 ounces this year based on that annualized 500,000 ounces in the fourth quarter." This represents an increase of approximately 38% over 2006 production, and 11% above Yamana's previous guidance in January, he said.
Elsewhere the group is exploring hard. In Brazil, Yamana finished a feasibility study on its Cl Santa Luz gold project. In Argentina the production schedule for its Gualcamayo project is supposed to start in a few months’ time with initial construction work
Looks like more bids are possible
Costs at Yamana are running in the range of $335 an oz. The plan is that these should be able to fall towards $275 an oz, gold and silver. This, however, may not be possible as costs soar. "The cost challenges are not Yamana cost challenges, they're industry cost challenges and we're handling them better," says Marrone, understandably a mite defensive.
Any more bids up Yamana’s sleeve? CEO Marrone says the company is not actually at there searching at the moment. But, "If we looked at anything from an acquisition point of view right now it would be an on-the-ground event, where we buy exploration concessions in a part of the world that we're in or in another part of the world that we want to be in, where we see huge prospectivity to be able to discover that next great deposit." So, that sounds like the purse is still open for shopping!
On its present assets overall Yamana plans production of 1.3 million gold equivalent oz in 2008 and increasing to 2.2 moz of gold starting in 2012. Looks like only good times are ahead now. Its broker, according to the press, is forecasting that earnings could near triple this year, at 38 cents, and the dividend double to 4 cents.
Now, forget the grumbles, we could do with more like this one on the market!
Keep floating!
Erin and Isabel
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