Yamana Gold – Update and New Target Price $25

Yamana Gold

Yamana Gold (Photo credit: Wikipedia)

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.

AUY : NYSE : US$14.73  Buy , Target US$25.00

Q1/12 results in line

Recommendation

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%.

Hiighlights

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.

Valuation

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 .

About these ads
Leave a comment

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Follow

Get every new post delivered to your Inbox.

Join 2,137 other followers

%d bloggers like this: