Yamana Gold: Underwhelming

Feb.27.11 | About: Yamana Gold (AUY)


AUY Chart 24 Feb 2011.JPG

Try as we may we just cannot get excited about Yamana Gold Incorporated (NYSE:AUY) it is range trading at a time when gold prices are close to hitting new highs. This stock touched $14.00 in November 2009 and here we are as of Friday closing at $12.60. Still, Thursday, Yamana Gold published figures regarding its mineral reserves so we will take a quick look at the highlights.

Yamana’s mineral reserves and mineral resources for the year ended December 31, 2010. The Company’s total proven and probable mineral gold reserves increased by 4.5 million ounces to 22.1 million ounces, which represents a 26% increase over the previous year. Measured and indicated gold resources increased by 12% from 2009 to 14.5 million ounces. Silver and copper proven and probable mineral reserves increased by 3% and 9%, respectively.

HIGHLIGHTS:

  • Total proven and probable gold equivalent (1) mineral reserves increased to 25.1 million ounces, a 23% increase from 2009 and includes:
    • Total gold mineral reserves of 22.1 million ounces, an increase of 26%

    • Total silver mineral reserves of 167.3 million ounces, an increase of 3%

  • Total measured and indicated gold equivalent mineral resources increased to 15.3 million ounces, an increase of 9% over 2009 and includes:
  • Total gold mineral resources of 14.5 million ounces, an increase of 12%

  • Total silver mineral resources of 46.0 million ounces, a decreaseof 23%

  • Initial reserve estimate was declared at Jeronimo of over 1.6 million ounces (on a 100% ownership basis). A pre-feasibility has recently been completed on Jeronimo with a feasibility expected at the end of 2011.
  • Initial reserve estimate was declared at the Suruca gold area of Chapada, which was previously announced, a feasibility study expected by year end.
  • Jacobina’s total mineral resources and grade increased significantly. The Company will continue evaluating options to increase production.
  • Pilar’s mineral reserves to 1.4 million gold ounces, supporting the Company’s earlier decision to develop the project with a 30% throughput increase for higher production levels.

Chairman and Chief Executive Officer, Peter Marrone. Commented as follows:

We have clearly demonstrated our ability to grow resources through the increases in the past and the significant increases this year. Our exploration budget for 2011 of $85 million is similar to last year’s budget. Part of the focus of this year’s program is to continue to show substantial growth in resources. We expect to deliver on our track record of doing so and of building sustainable and predictable production and growth by continuing our aggressive exploration program throughout 2011.

August 12th, 2010 we wrote the following about our stock holding in Yamana:

We sold 80% of our stake in Yamana Gold Incorporated (AUY) for an average price of $9.53 and moved the proceeds onto the sidelines for redeployment at a later date.

Some of the cash went into Silver Wheaton (NYSE:SLW) which has doubled since then and some went into options trades as recommended by skoptionstrading.com.

So as the lady once sang; Non, je ne regrette rien.

Yamana Gold Incorporated trades in Toronto, TSX: YRI and in New York, NYSE: AUY and in London LSE: YAU as one would expect from such a large company.

Yamana Gold Incorporated has a market capitalization of $9.22 billion, a very reasonable P/E ratio of 27.61, a 52 week price range of $9.16 - $13.13, with shares outstanding of 741.10 million.

Disclosure: I am long AUY, SLW.

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