Topic: Mining Stocks

Cash flow shores up this miner’s appeal

This major gold miner produces nearly a million ounces of gold each year and generates positive cash flow from seven mines in four countries. For added diversity, it owns 20.5% of another gold producer.

Altogether, that steady output adds to this gold miner’ speculative appeal and supports its modest 0.8% dividend.


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YAMANA GOLD $3.19 (Toronto symbol YRI; www.yamana.com) owns and operates seven gold mines, in Canada, Brazil, Chile and Argentina. This includes the Cerro Moro gold/silver mine in Argentina. It started up in mid-2018.

The company expects Cerro Moro to produce 85,000 ounces of gold and 3.75 million ounces of silver in 2018. That will rise to 125,000 ounces of gold and six million ounces of silver this year. Yearly output then rises to 130,000 ounces of gold and seven million ounces of silver by 2020.

Yamana also holds 20.5% of Leagold Mining (symbol LMC on Toronto). That gold producer owns mines in Mexico and Brazil.

In the three months ended September 30, 2018, the company’s overall gold production rose 10.5%, to 246,788 ounces from 223,272 a year earlier.

Mining Stocks: Shares trade at just 3.3 times 2019 cash flow

Higher costs and lower gold prices offset Yamana’s increased output, and that pushed down its revenue by 10.0%, to $416.8 million from $493.4 million. (All figures except share price and market cap in U.S. dollars.) In addition, cash flow fell by 36.2%, to $120.7 million, or $0.09 a share, from $135.8 million, or $0.14, a year earlier.

The company held cash of $148.9 million, or $0.13 a share, on September 30, 2018. Its debt of $1.8 billion U.S. is a high, but manageable 77% of its market cap.

With a full year’s contribution from Cerro Moro, Yamana should produce 956,000 ounces of gold in 2019. Cash flow per share should be $0.65 U.S. for 2019, with shares trading at just 3.3 times that estimate.

Like most gold stocks, the company’s shares are heavily influenced by gold prices. Still, Yamana’s positive cash flow and steady production give it speculative appeal.

Recommendation in Stock Pickers Digest: Yamana Gold is a buy.

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