Yamana Gold - All You Need To Know

| About: Yamana Gold (AUY)

Summary

Yamana released its 4Q'15 and full year 2015 results on February 18, 2016. The company posted a loss of 0.01 per share, with a revenue of $463.0 million.

Yamana is targeting $300 million in debt reduction in 2016-2017 and lower Net debt/Ebitda ratio to x1.5-X2. This is an important positive step.

The company took a non cash impairment of $1.8 billion after-tax in 2015, due to the depressed precious metal prices.

However, it is difficult to imagine AUY continuing this trend much longer based on the actual fundamental. I recommend holding AUY now and perhaps take some profit.

Picture: El Peñon. Yamana Home site.

Yamana Gold (NYSE: AUY)

This article is an update of my preceding article on Yamana Gold published on January 14, 2016.

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

On February 18, 2016 the company released the 4Q'15 and full year 2015.

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

Gold Segment Total

Q4'15

Q3'15 Q2'15 Q1'15
Chapada 119,059 34,498 32,029 30,172 22,360
El Peñón 227,288 59,375 51,983 55,404 60,527
Gualcamayo 180,674 73,063 44,076 37,558 46,176
Mercedes 84,137 52,864 20,155 19,306 24,270
Canadian Malartic 285,809 72,872 76,603 68,440 67,894
Minera Florida 112,580 29,180 28,989 26,298 28,113
Jacobina 96,715 28,727 28,080 21,318 18,590
Alumbrera 24,555 8,586 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 1,275,375 345,788 325,897 298,818 304,414
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 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

2 - Q4'15 and full year 2015 Financial Snapshot

Presentation Feb.18, 2016. Link here.

Year 2015 Q4'15 Q3'15 Q2'15 Q1'15 Year 2014

Revenue in

$ Million

1,824.9 463.0 448.9 455.0 458.1 1,835.1
Gold Production K Oz 1,275,375 345,788 325,897 298,818 304,874 1,197,652

Silver production

M Oz

9.011 1.960 2.20 2.37 2.48 10.146

Copper production

in M lbs

131.0 43.7 34.0 33.6 29.9 133.5
Realized gold price $ 1,156 1,101 1,122 1,196 1,217 1,256

Net income

$ Million

(2,099.6) (1842.2) (115.0) (7.0) (135.2) (1,194.9)

EPS

$/share

(2.24) (1.95) (0.12) (0.01) (0.14) (1.46)

Adjusted EPS

$/share

(0.08) (0.01) (0.02) (0.01) (0.04) 0.05

Mine operating earnings

$ million

195.0 46.9 49.7 58.4 40.2 285.8

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

$ million

529.8 150.5 133.9 149.3 96.0 647.6

AISC gold

Co-product

$/Oz

868 784 841 896 893 954

AISC Silver

$/Oz

11.35 11.46 11.32 10.72 10.45 11.69

Cash and Cash equivalent

$ Million

119.9 119.9 138 119 121.1 191.0

Long-term debt

$ Million

1,676.7 1,676.7 1,859.0 1,859.0 1,817.0 2,025.4

Net debt

$ million

1,654 - - - - 1,869

Dividend per share

$/share

0.05 0.005 0.015 0.015 0.015 -

Shares outstanding (diluted)

in million

947.039 946.56 946.56 913.72 913.7 878.053

Capex

$ million

379 98 103 102 76.0 662

EBITDA

$ million

506.5 - - - - -
Click to enlarge

Impairment of Assets

During the year ended December 31, 2015, the Company recorded non-cash impairment charges totalling $2.6 billion ($1.8 billion on an after-tax basis).

Brio Gold new development.

On February 17, 2016, the Company's Brio Gold Division ("Brio Gold") entered into an Assignment and Assumption Agreement and a Restructuring Agreement pursuant to which it would acquire all right, title and interests in the Riachos dos Machados gold mine ("RDM") in Minas Gerais State from Macquarie Bank and Carpathian Gold for approximately $51 million in total consideration, subject to certain adjustments, including expenses.

The Company remains committed to debt reduction and cost improvements. Following debt reduction initiatives of over $286 million during 2015, the Company plans a further debt reduction of at least $300 million between 2016 and 2017.

Covenants about the AUY debt.

The Company has the following externally imposed financial covenants on certain of its debt arrangements:
1 - Tangible net worth of at least $2.3 billion.
2 - Maximum net total debt (debt less cash) to tangible net worth of 0.75.
3 - Leverage ratio (net total debt/EBITDA) to be less than or equal to 3.5:1

Commentary:

Yamana gold released its 4Q'15 and full year 2015 results on February 18, 2016. The company posted a loss of 0.01 per share with a revenue of $463.0 million. Revenue for 2015 was $1,824.9 up 0.6% year over year.

A quick look at the guidance until 2018.

M. Peter Marrone, CEO, said in the conference call the following:

We said last night that we are targeting $300 million of debt reduction over 2016 and 2017. Bear with us, we have not indicated how we plan to do that, however, we have lots of weapons in our arsenal to be able to achieve the objective. Clearly, the most significant of which is the organic means of delivering cash flow and increasing our cash balances. We are also targeting net debt EBITDA leverage of 1.5x to 2x.

We remain committed to debt reduction and cost improvements. Following those debt reductions in 2015 of $286 million, we plan further debt reductions this year and into 2017.

This is an important step that will strengthen the company balance sheet, if it is implemented. The actual ratio is still high at x3.3.

However, reserves -- proven and probable -- are down significantly from year over year. In 2014, total proven and probable reserves were 19.6 M Oz. In 2015, they were down to 15.9 M Oz or roughly 18.9%. Tis drop comes with a 2016 production significantly lower year over year.

I am glad that the company dropped the idea of divesting BRIO, because I see a lot of potential in these assets in 2017, and the company will probably get a much better price later.

In short, a mixed basket again with a conclusion at minus 0.01. Some good and exciting moves, but an overall production stagnant or even decreasing.

This is not what an investor wants to see in the long-term. This entire company is lacking the punch. However, the price per share doubled from its lows, due to a refreshing positive momentum the gold price experienced since early this year.

However, it is difficult to imagine AUY continuing this trend much longer based on the actual fundamental. I recommend holding AUY now and perhaps take some profit.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within 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.