Yamana Gold's War Chest and Potential Acquisitions

Yamana Gold Inc. (AUY) expects its sale of three mines for $200-million will allow the company to better focus on its core assets and operating jurisdictions. It also plans to advance its high-returning development-stage projects.

“In the end, the plan is aimed at lowering cash operating costs, increasing margins, reserves, production and cash flow per mine,” Wellington West analyst Steve Parsons told clients.

But the senior gold producer has also built up a war chest of approximately C$1-billion in cash and equivalents, undrawn credit and proceeds from mine sales. This has prompted the analyst to suggest Yamana may emerge as a “buyer of significance.”

Yamana operates six mines and has several development/expansion projects in progress in Brazil, Argentina and Chile. Its core operations include the high-grade El Penon gold-silver mine in Chile and the Chapada copper-gold mine in Brazil.

While the disposal of non-core operations will take a bite out of earnings and cash flow, with an acquisition looming, the negative impact may be short-lived, Mr. Parsons said.

He believes Yamana will look to add a larger-scale asset than those it sold. Those relatively near-term, intermediate producers with a long life in stable geopolicitical jurisdictions include Osisko Mining Corp. (OSKFF.PK), Detour Gold Corp. (DRGDF.PK), Jaguar Mining Inc. (JAG) and Romarco Minerals Inc.

Comments

[chux08:]

All of that....speculation about what Yamana may be looking for and you don't mention Minefinders (MFN), which is already producing? One would surely think they'd be on the list....

Jun 11 10:36 PM

[Vuke:]

Detour? An awful lot of gold and priced well for discussion.

Jun 12 09:43 AM

[ScroogeMcduck:]

I hope your right i bought yamana for growth. The analyst seem to think they sold these mines cheap and looking at the stock's performance since they announced the deal its not looking like a good move. I'm pretty disappointed

Jun 12 09:48 AM

[Interested ...:]

Looks like Yamana is short of money, having sold stock earlier. This is just another Yamana disappointment to me.

Jun 12 11:56 AM

[papa don:]

I've been on board Yamana for a long time now..so far they have shown considerable acumen in all their moves..eg., their copper hedges, their non hedges re gold, etc. They have consistently brought down cost of production and increased reserves, and significantly increased reserves of higher and higher quality..I don't see their recent sale as a departure from their game plan. Right now they are fat with cash, poised to gun up production on their best projects, and seemingly bulletproof as we head into what I feel is a major move in gold prices within the next few months. Talk about a tiger ready to roar..that, to me, is Yamana...I'm just waiting for the correction I expect shortly to double up on my # 1 gold stock.

Jun 12 10:46 PM

[ScroogeMcduck:]

I hope your right papa

Jun 15 10:33 AM

[buyforeclos...:]

so your the one who pumped osisko rumor and it is at 52 week highs? Lofl I aint touching it at these levels

Jun 22 01:02 AM