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XMFSinchiruna (26.55)

Yamana Just Became 50% More Interesting



May 12, 2011 – Comments (12) | RELATED TICKERS: AUY , GG , AEM

With a huge tip of the Fool's cap to David in Qatar (whereaminow) for cracking me up with his use of percentages (someone please link to his post in a comment below if you know which one I mean -- I couldn't find it this morning, but it was hilarious). Anyway, when drumming up ideas for how to approach Yamana's latest announcement if a 50% dividend hike and -- even more bullishly -- a 25% exploration budget hike, the juxtaposition of arbitrary, subjective percentages with factual ones seemed like perfect fodder. Thanks D-in-Q!

Yamana Gold Just Became 50% More Interesting


A 1.5% yield may not sound like much of a windfall just yet, but it is 83% better than that of larger rival Goldcorp (NYSE: GG  ) , and I believe Goldcorp will now feel at least 20% more compelled to re-raise its own payout. After all, Newmont Mining (NYSE: NEM  ) recently upped its dividend by 33% to yield 1.5%, and Newmont boasts nowhere near the sort of production growth profile that makes Goldcorp such a prominent force in the industry.


Offering further enticement, Newmont has adopted an innovative dividend strategy that will see its quarterly payout raised $0.05 per share for every $100 increase in its realized sales price for gold. While Newmont may be the first to spell it out in an explicit formula, I feel 60% certain that 75% of gold mining executives have contemplated similar dividend increases to correspond with the rising price of gold.


But wait; there is 25% more to this story. You see, after a tremendously successful year of exploration in 2010 -- which yielded a 23% expansion of the company's gold reserves (net of production) before the strategic sale of Agua Rica-- Yamana has decided to hike its 2011 exploration budget by 25% to reach an impressive $105 million campaign. I personally ascribe a 100% likelihood of additional exploration success for Yamana, and I look to that same organic growth potential as a likely catalyst to lessen the stock's 60% discount to my fair value estimate of $30 per share.

12 Comments – Post Your Own

#1) On May 12, 2011 at 9:45 AM, XMFSinchiruna (26.55) wrote:

Fools, competing futures exchangtes have little choice but to mimic the moves of market dominator COMEX. This may be one of several factors contributing to renewed selling in silver, as leveraged positions in Asia are now being similarly flushed.

Remember, the global silver market will be the healthier for it, since the next time we approach $50 longs will hold a far stronger hand with substantially reduced leverage (and therefore vulnerability).

HONG KONG (MarketWatch) -- The Shanghai Gold Exchange said Thursday it will raise margin requirements for silver futures as part of risk-control measures, its third round of increases in less than a month, according to a statement posted on the exchange's web site. Margin requirements will rise to 19% of a contract's value from 18%, while the daily price limit for the one kilogram silver forward contract will rise to 13% from 10% above or below the previous session's close. The new trading requirements will be effective from May 13. The exchange announced previous rounds of increases to margins and price limits on May 5 and April 25.

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#2) On May 12, 2011 at 9:58 AM, XMFSinchiruna (26.55) wrote:

Worth a look:

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#3) On May 12, 2011 at 10:00 AM, reinman60 (< 20) wrote:

When silver reaches $50, I expect leverage will be reduced to something on the order of 5 to 1.  Only the strongest, largest players will be able to participate, volatility will be substantially reduced, and the ability of interested parties to manipulate the price will be sustantially reduced or eliminated.  Just my thoughts...

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#4) On May 12, 2011 at 10:09 AM, reinman60 (< 20) wrote:

Also worth a look, from Dan Norcini:


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#5) On May 12, 2011 at 10:16 AM, XMFSinchiruna (26.55) wrote:

Let me know if you think this is worth a look:


But the market has not merely sneezed at Northgate's shares; it has coughed and wheezed its way to a sub-$700-million enterprise value for a miner with more than $5.2 billion worth of gold reserves in the ground. Zooming out to consider measured and indicated resources in addition to those reserves, Northgate stares Fools squarely in the face with more than $10.5 billion worth of gold at current market value! I know of many junior exploration companies that command a greater premium to their identified gold resources, whereas Northgate is a proven gold producer with 92 years of operations under its belt and a brand new mine set to access its foremost buried treasure at Young-Davidson beginning early in 2012.

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#6) On May 12, 2011 at 10:30 AM, reinman60 (< 20) wrote:


Just started accumulating.

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#7) On May 12, 2011 at 10:39 AM, reinman60 (< 20) wrote:

If you ever had any doubt that we are headed for QEn, this should remove it.

How the Fed is going to keep the stock market aloft, while keeping commodity and precious metals prices  suppressed is anybodys guess.  A balancing act they won't be able to pull off.  

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#8) On May 12, 2011 at 11:10 AM, XMFSinchiruna (26.55) wrote:

MAG Silver's update on arbitration results. A complicated story, but one worth tracking:

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#9) On May 12, 2011 at 12:23 PM, silverminer (30.02) wrote:

Test: can't seem to post

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#10) On May 13, 2011 at 6:58 AM, skypilot2005 (< 20) wrote:

May 12, 2011 at 12:23 PM, silverminer (99.82) wrote:

"Test: can't seem to post"

Sinch:  May need to invest in a new mouse.  All that gold dust may have impaired the fuctionality of your current one.  :)

The real reason for my post is to let everyone know that Alexandria issued a press release, yesterday.

Fool On

Sky Pilot

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#11) On May 13, 2011 at 7:14 AM, skypilot2005 (< 20) wrote:

Here is a link to Niogold's press release at their website.


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#12) On May 13, 2011 at 7:20 AM, silverminer (30.02) wrote:


I saw those, but thanks for posting!!! Terrific news for both companies!!


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