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speedybure (< 20)

Yamana Gold Valuation Update: A Leaner Meaner Free Cash Flow Machine (Spreadsheet Published Via Google Docs, Open for Editing)

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June 14, 2009 – Comments (2) | RELATED TICKERS: AUY , AEM , GLD


At First The Divesture of three mines to Aura Minerals Puzzled me, so I decided to look into the reasoning behind such a move and whether or not it would prove to be beneficial. TMFSINCHIRUNA'S post regarding this occurance clued me in an got me thinking, so I decided to look at the dyanmics behind the mines. 

 *Sinch brought my attention to the fact "trimming the fat" by divesting non-core assets will likely ramp production up to full capacity more quickly. But by examining these mines that will be sold, I noticed they were of the highest cost per ounce mines relative to the rest of Yamana's porftolio. This will not only decrease average cash costs,but also free up more capital through reduced capital expenditures. In other words, I know expect Yamana to cross the 2m/oz threshold a year later (2013), it will be more than offset by the cost savings that will recognized immediately. This coupled with a stronger finacial position shoudl equated to a lower discount rate as well as Yaman will recieve 200 million immediately and up to 40m in royalties along with shares in Aura Mines. 

 * Other possible reasons: As we all know Yamana is built upon aquisitions, thus is would not surprise me if they used this cash to help fund a more lucrative projects or project(s)or perhaps an extremely large strategic aquisitions to move them up to Senior Producer status (2.5-3m+ oz over the next 3-5 years). If this is the case, my guess would be this would take place within the next 6 months). I updated the valuation model previously posted to account for lower cash costs, slightly reduced cap-ex and cash position. 

Yamana Gold Valuation    or  http://spreadsheets.google.com/ccckey=rZVIqTDv7wakvjZHw_KX3mA    

2 Comments – Post Your Own

#1) On June 14, 2009 at 8:15 PM, rofgile (99.32) wrote:

Or, perhaps they are already preparing for leaner times with the Gold Bubble bursting in 2009-2010??

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#2) On June 14, 2009 at 9:08 PM, speedybure (< 20) wrote:

HAHA, The massive wave of inflation in that lies in front of us hasn't even been reflected in the price of gold. This is anything but a bubble, but thats just me

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