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The stock market is currently valuing Yamana Gold (NYSE:AUY) at $12.2 billion. This valuation is in line with AUY's true value based on its assets.

Estimated Reserves (not including Agua Rica joint venture)

Gold

  • 15.565 million ounces
  • $1725 per ounce
  • $26.84 billion

Silver

  • 65.023 million ounces
  • $34 per ounce
  • $2.21 billion

Copper

  • 2.453 billion pounds
  • $3.85 per pound
  • $9.44 billion

Zinc

  • 129 million pounds
  • $1 per pound
  • $129 million

Based on these numbers, AUY's reserves are valued at $38.619 billion. However, this is not the number that should be used to calculate what AUY is worth. Rather, we need to subtract the costs involved in mining the metals. The best way to account for AUY's expenses involved in mining is by looking at AUY's margins.

AUY's operating margins currently stand at 40.63%. By applying this number to the reserve ratio ($38.619 billion) we find that AUY's reserves are really worth about $15.7 billion after mining costs. However, this is still not the final value of AUY. We still need to account for expenses such as taxes and interest payments on debt. The net profit margin will accomplish this.

AUY's net profit margin currently stands at 26.6%. By applying this number to the reserve valuation ($38.619 billion) we find that AUY is worth a minimum of $10 billion based on asset valuation. However, this valuation does not include AUY's 12.5% ownership in the major project that is Agua Rica.

Agua Rica Reserves

Gold

  • 6.559 million ounces
  • $1725 per ounce
  • $11.31 billion


Silver

  • 102.246 million ounces
  • $34 per ounce
  • $3.47 billion


Copper

  • 9.78 billion pounds
  • $3.85 per pound
  • $37.75 billion


Molybdenum

  • 629 million pounds
  • $14 per pound
  • $8.8 billion

The total value of the Agua Rica Reserves is $61.33 billion. AUY owns 12.5% of the project. Thus, AUY has about $7.66 in potential revenue from Agua Rica. By applying AUY's net profit margin on 26.6% to this number, we find that AUY has about $2 billion worth assets from its Agua Rica joint venture.

By combining the original $10 billion with the $2 billion from the Agua Rica joint venture we find that AUY is worth about $12 billion based on asset valuation. AUY currently has a market cap of $12.2 billion, this suggests that AUY is fairly valued.

Conclusion

AUY is fairly valued based on asset valuation.

Source: Yamana Gold Is Fairly Valued Based On Asset Valuation