speedybure (< 20)

Yamana Might Want To Buy This...

May 07, 2009 – Comments (5) | RELATED TICKERS: AUY , AEM , GLD

Those who heard the Yamana quarterly results were mixed at best, should take a closer look behind the smoke and mirrors.  

Lets do a quick breakdown on Yamana's quarter= Net pofit increased 36% for Q1 Y/Y. Analysts didn't contribute this to yamana's operations, but rather interpreted it as a lucky decrease in copper derivative losses. In other words, they counted this as a one time item and therefore the reported net income was not indicative of operations. To futher their bearish argument, they looked at the fact gold production was shy of company guidance and analyst expectations. I'm no mining analysts, but I don't judge a book by its cover. So where did anlalysts and the market go wrong? 

1) The copper issue is way overblown! Yes they did have approx 36% of Revenue from the mining of copper in 2008 and copper prices have delcined year over year. This, however, I look at as a positive becuase Yamana will reduce their copper exposure to approx 24% in 2009, 16-18% in 2010 and down to approx 10-12% by 2012.

 2) Gold output increased 15% to about 272k oz but fell shot of their 290k guidance. At first this looks like a negative, but is a net positive if you break down the production by month. March illustrated their accelerating growth, but because that only accounted for 1/3 of their quarterly income. I interpret this as a very positive sign as a small delay in an inherently risky industry actually reduces future mining production numbers. I expect Yamana to blow away second quarter consensus estimates. Another positive lies in my convinction of the gold bull market. I expect gold prices to rise starting in the second half of 2009 taking out all time highs and never looking back. Forecasting is difficult if not impossible to due in the gold market, but I have a strong conviction we are gearing up for the 2 leg up in Gold's run to 2500 and liklely beyond.

 3) Yamana is the cheapest in the mid-tier mining universe. Agnico and Yamana are at the sweetspot and hitting stride at the ideal time. They both should hit or come very close to 2m oz per annum in 2012. Yet they have both been torn apart by analysts comments. Yamana not only trades about 10% above book value, but trades with a 15 P/E.  

Conclusion: Despite Quarters that fell short of expectation Yamana and Agnico-Eagle are still the cream of the crop in the mid-tier mining and the entire Gold Minings Industry. They both have great growth profiles with flagship mines in geo-politically safe areas. Go ahead Analysts downgrade these stocks to presuure the market price down, so i can profit from your stupidity.