Yamana Gold: Production Results And Deep Dividend Cut

| About: Yamana Gold (AUY)

Summary

Yamana Gold is announcing a total 2015 production of 1,275,000 oz, in line with expectation. Good outlook for 2016 to 2018. As always gold price is paramount.

The company announced that it will cut the dividend by 2/3 starting 2016, due to the gold price market. The dividend will be $0.02 per year reduced from $0.06.

I believe cutting dividend payment is the right move for AUY but the stock may suffer from this decision. Any weakness below 1.65 should be considered as an opportunity.

Picture: El Peñon. Yamana Home site.

Yamana Gold (NYSE: AUY)

This article is an update of my preceding article on Yamana Gold published on December 22, 2015.

Today, January 14, 2016, Yamana Gold released the preliminary operational results for the year 2015 and 2016-2018 outlook.

1 - Actual Total Gold Production for Yamana for 4Q'15 and 2015.

Gold Segment Total

Q4'15

Preliminary

Q3'15 Q2'15 Q1'15
Chapada 119,000 34,439 32,029 30,172 22,360
El Peñón 227,000 59,086 51,983 55,404 60,527
Gualcamayo 181,000 73,063 44,076 37,558 46,176
Mercedes 84,000 53,190 20,155 19,306 24,270
Canadian Malartic 286,000 20,269 76,603 68,440 67,894
Minera Florida 113,000 29,600 28,989 26,298 28,113
Jacobina 96,000 28,012 28,080 21,318 18,590
Alumbrera 25,000 9,031 5,552 5,111 5,306
Brio Gold 144,000 39,181 38,430 35,211 31,178
Pilar

(83,000) Brio

- - - -
Fazenda Brazileiro (61,000) Brio - - - -
Total 1,275,000 345,871 325,897 298,818 304,414
Click to enlarge

Graph 2015 Production Snapshot

Note: Chapada mine is producing copper also -- 131 M Lbs in 2015.

Price of Gold per Oz:

4Q'15 Est. 3Q'15 2Q'15 1Q'15 4Q'14 3Q'14
AUY Realized gold price $ 1,104 1,122 1,196 1,217 1,199 1,276
Click to enlarge

Q3'15 Financial Snapshot and revenues estimated for 4Q'15.

Q4'15 Est. Q3'15 Q2'15 Q1'15

Revenue in

$ Million

480~ 448.9 455.0 458.1
Gold Production Oz 345,871 325,897 298,818 304,874

Silver production

M Oz

1.96~ 2.2 2.37 2.48

Copper production

in M lbs

33.5~ 34.0 33.6 29.9
Realized gold price $ 1,104 1,122 1,196 1,217

Net income

$ Million

- (115.0) (7.0) (135.2)

EPS

$/share

- (0.12) (0.01) (0.14)

Adjusted EPS

$/share

- (0.02) (0.01) (0.04)
Mine operating earnings $ million - 49.7 58.4 40.2

Adjusted operating cash flow before change in non-cash working capital

$ million

- 133.9 149.3 96.0

AISC gold

$/Oz

- 841 896 893

AISC Silver

$/Oz

11.32 10.72 10.45

Cash and Cash equivalent

$ Million

138 119 121.1

Long-term debt

$ Million

1,859.0 1,859.0 1,859.0 1,817.0

Dividend per share

$/share

0.005 0.015 0.015 0.015

Shares outstanding (diluted)

in million

946.56 946.56 913.72 913.7

Capex

$ million

- 103 102 76.0
Click to enlarge

Commentary:

Yamana Gold released its production estimate for 2015 today and the production numbers quite positive with a potential revenue up 4% quarter over quarter, despite a depressed price of gold just barely above $1,100/ Oz.

However, the big issue that may affect the stock today is the following:

DIVIDEND POLICY

As part of a regular evaluation of the Company's dividend, the Company has decided to revise its policy and approach to dividends. Given the cyclical nature and current volatility of the gold business, and the volatility in markets generally, the Company strives to strike a proper balance between the financial discipline of paying a dividend and managing its business. In the context of today's markets, the current dividend level is considered too high.

The revised baseline level is now $0.02 per share annually beginning with the declaration and payment of the first quarter 2016 dividend.

Finally, I like the steady stream of production through 2018, it makes me more confident that it is only a down cycle for the company which will survive.

I recommend accumulating the stock at or under $1.65.

Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in AUY over the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.