This Canadian stock has six operating gold mines and several more properties in development.
One of those, a major gold-silver project in Chile, is due to start in mid-2018. While the company’s output fell in the most recent quarter, its strong production outlook and positive cash flow add to the stock’s appeal.
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YAMANA GOLD INC. (symbol YRI on Toronto; www.yamana.com) operates six gold mines, in Canada, Mexico, Brazil, Chile and Argentina. It also holds 79.3% of Brio Gold (symbol BRIO on Toronto); that firm has three of its own mines in Brazil.
Vancouver-based Leagold Mining Corp. (symbol LMC on Toronto) has reached an agreement to buy Brio Gold. Investors would receive 0.922 of an LMC share for every Brio Gold share they hold. Based on the current price for Leagold Mining, the bid is equal to $2.80 per Brio Gold share. Brio Gold was trading for $1.77 before Leagold’s offer.
Leagold’s bid has the support of Yamana, which would get 58 million LMC shares. That’s equal to a 22% stake in an enlarged Leagold.
Yamana holds a number of other properties in advanced stages of development. They include the Cerro Moro gold/silver project in Argentina. Construction of its mine is now finished, with start-up expected by mid-2018. Annual output at Cerro Moro should reach 150,000 ounces of gold and 7.2 million ounces of silver.
Mining Stocks: Sale of Ontario exploration sites brings in $162.5 million
Yamana Gold also holds the Canadian Malartic mine in a 50/50 joint venture with Agnico Eagle (symbol AEM on Toronto).
Yamana has now completed the sale of its 50% interest in the partnership’s exploration sites, including the Kirkland Lake and Hammond Reef properties. Agnico Eagle has bought those exploration prospects from Yamana for $162.5 million. The transaction does not affect the Canadian Malartic mine.
Under the agreement, if Agnico Eagle sells either the Kirkland Lake or Hammond Reef property within 24 months, Yamana will receive a portion of any increase in net proceeds.
In the three months ended December 31, 2017, Yamana’s overall gold production fell 3.4%, to 259,606 ounces from 268,788 a year earlier. The decrease came mostly from the mining of lower-grade ore.
The reduced production, plus higher costs, pushed down Yamana’s cash flow by 17.2%, to $122.3 million, or $0.13 a share, from $147.7 million, or $0.16, a year earlier. (All figures in U.S. dollars.)
The company held cash of $148.9 million, or $0.15 a share, on December 31, 2017. Its debt of $1.7 billion U.S. is a high, but manageable 64% of its market cap.
Yamana’s shares are heavily influenced by the direction of gold prices, as are all gold stock shares. Still, its positive cash flow and rising production give it speculative appeal.
Recommendation in Stock Pickers Digest: Yamana Gold is a buy.
For our recent report on the creation of a new resource giant, read Canadian merger creates dominant firm in fertilizer industry.
For our views on making the best of your investments in resource stocks, read How to Invest in Commodities: Guidelines for Making Smart Decisions.