Gold prices have moved down from their peak of $1,918 an ounce in August 2011 to the current price of $1,571. Gold could well regain its highs and move up even further over the longer term, although it will likely remain volatile. Higher prices would arise from investor fears that inflation or global political and economic instability will weaken key currencies, such as the euro or the U.S. dollar. If you do hold gold stocks, we recommend that you keep them to a reasonable part of the resources component of a well-balanced portfolio. YAMANA GOLD (Toronto symbol YRI; www.yamana.com) owns seven operating gold mines in Mexico, Brazil, Chile and Argentina. It also holds a 12.5% stake in the Alumbrera copper/gold mine in Argentina, and has three other properties in advanced stages of development. In the quarter ended March 31, 2012, Yamana’s revenue rose 17.6%, to $559.7 million from $476.1 million a year earlier (all figures except share price and market cap in U.S. dollars). The company increased its production and benefited from higher gold prices. Earnings per share rose 19.0%, to $0.25 from $0.21. Yamana held a high cash balance of $867.6 million, or $1.16 a share, on March 31. Its $766.0 million of debt is just 6.3% of its market cap. Thanks to the improved results, the company is raising its quarterly dividend by 18.2% with the July 2012 payment, to $0.065 from $0.055. The shares now yield 1.3%. [ofie_ad]
Gold stocks: Yamana to pay $404 million for advanced-stage Cerro Moro mine
Yamana is now using some of its cash to buy Extorre Gold for $404 million U.S. Extorre owns the advanced-stage Cerro Moro project in Argentina, Cerro Moro holds as much as 2.4 million ounces of gold. Argentina recently nationalized the Argentine oil unit of Spanish energy firm Repsol, and investors are concerned about similar moves in the country’s mining industry. Yamana already owns one mine in Argentina. The company will likely produce 1.2 million to 1.3 million ounces of gold in 2012. In 2013, it is starting up new mines at its Mercedes project in Mexico and its three development properties. That should raise its overall production to 1.5 million to 1.7 million ounces. In the latest edition of Stock Pickers Digest, we look at whether the favourable price Yamana is paying for Cerro Moro can offset the above-average risk it faces in a country that has already nationalized one major commodity producer. We conclude with our clear buy-hold-sell advice. COMMENTS PLEASE Do you agree with the widely held idea that gold can act as insurance against troubled markets or economic downturns? How long have you held that view? Do you hold gold stocks or some other form of gold? Let us know what you think in the comments section below. Click here.
