Yamana Gold Inc. May 2
Note : Yamana is featured in the Precious Metals Watchlist in the new AMP Book – Stock Market Magic and is a feature of my speaking tour.
Q1/12 results in line
We maintain our BUY rating on Yamana Gold following the release of Q1/12 results and a robust reserve update. Yamana’s shares continue to offer growth at a reasonable price (P/NAV 0.78x vs. peer group 0.78x and 2013E P/CF 7.0x vs. peer group 7.6x) and a dividend yield of 1.5%.
Q1/12 adjusted diluted EPS was $0.25 vs. our estimate of $0.25 andconsensus of $0.24. Lower gross margin on lower sales volumes and realized copper price was offset by lower non-operating expenses. CFPS of $0.30 was lower than our estimate due to higher cash taxes paid in the quarter and zero dividends received from the equity stake in Alumbrera.
Gold-eq production was 278,832 oz, but commercial production was 269,873 oz (excluding one month of Mercedes commissioning), and gold-eq sales were 273,494 oz at by-product cash costs of $292/oz (co-product costs $518/oz) vs.our estimate of 275,000 oz at by-product cash costs of $186/oz (co-product cost $533/oz).
Copper production at Chapada was 30.3 Mlb (sales of 27.3 Mlb)at cash costs of $1.51/lb vs. our estimate of 37.4 Mlb at $1.52/lb.
The first partial quarter of commercial production (effective February) at Mercedes came in better than expected, i.e., 14,994 oz at $534/oz vs. our estimate of 12,000 oz at $614/oz, largely due to better-than-expected gold and silver grades.
Our target price of US$25.00 remains unchanged based on 1.2x our 5%/peak NAVPS estimate of US$20.42 Our 2012E EPS was revised to $1.23 .