Yamana Gold: Go Long...Really Long

| About: Yamana Gold (AUY)

Summary

A summary of financial and gold operating results of Yamana Gold Inc. is presented.

Yamana Gold Inc. achieved impressive gold operating results in 2015.

I would be long on this gold stock.

Yamana Gold Announces Fourth Quarter and Full Year 2015 Results

"TORONTO, ONTARIO--(Marketwired - Feb 18, 2016) - YAMANA GOLD INC. (TSX: YRI)(NYSE: AUY) ("Yamana" or "the Company") is herein reporting its financial and operating results for the fourth quarter and full year 2015, and its mineral reserve and mineral resource estimate for the year ended December 31, 2015, with some highlights provided as follows." (HERE).

Yamana Gold Inc. is a Canada-based gold producer. The company is engaged in gold mining and related activities, including exploration, extraction, processing and reclamation. The company's production mines include Chapada, Brazil; El Penon, Chile; Canadian Malartic, Canada; Mercedes, Mexico; Gualcamayo, Argentina; Jacobina, Brazil; Minera Florida, Chile and other Producing Mines. Its development properties include Cerro Moro, Agua Rica and Suyai in Argentina. The company has a total gold proven and probable mineral resource of around 18.750 million tons at Alumbrera, 126.95 million tons at Canadian Malartic, 509.15 million tons at Chapada, 1.96 million tons at Cerro Morro, 10.41 million tons at El Penon, 29.16 million tons at Gualcamayo, 22.85 million tons at Jacobina, 8.68 million tons at Jeronimo, 4.01 million tons at Mercedes, 7.89 million tons at Minera Florida, 24.03 million tons at C1-Santa Luz, 2.05 million tons at Fazenda Brasileiro and 10.58 million tons at Pilar.

Table1: Financial results of the gold stock, a summary:

In Millions of USD

12 months ending 2015-12-31

12 months ending 2014-12-31

12 months ending 2013-12-31

12 months ending 2012-12-31

12 months ending 2011-12-31

Revenue

1,824.9

1,835.12

1,842.68

2,336.76

2,173.32

Gross Profit

736.9

789.29

941.89

1,505.01

1,456.63

Net earnings/(loss) attributable to Y..

-2,114.8

-1,383.07

-446.25

442.06

548.29

Cash and Short Term Investments

222.2

302.80

301.27

349.59

550.44

Total Assets

9,518.1

12,401.80

11,410.72

11,800.16

10,769.94

Total Debt

1,676.7

2,025.40

1,204.76

765.91

431.77

Total Liabilities

4,653.5

5,687.70

4,271.31

3,985.09

3,325.22

Total Equity

4,864.6

6,714.10

7,139.41

7,815.08

7,444.72

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The company improved its financial situation by reducing total debt with 17%. The company remains committed to debt reduction and cost improvements. Following those debt reductions in 2015 of $286 million, Yamana plans further debt reductions this year and in 2017

The company is now targeting $300 million of debt reduction over 2016 and 2017.

The company doesn't know how to further reduce debts yet. The most significant is the organic means of delivering cash flow and increasing its cash balances. (Yamana Gold's CEO Peter Marrone on Q4 2015 Results - Earnings Call Transcript).

Table 2. Operating results (GOLD), summary:

Revenues and gross profit decreased from 2014 to 2015 (see table 1), respectively by 0.56% and 6.64%. Higher volume of gold sold was offset by lower metal prices related to 2014.

Gold sold in 2015: 1,248,401 X average realized gold price per ounce $1,156 = $1,443.2 million of USD.

Eighty percent of 2015 revenue came from the sales of gold.

Production of gold increased with 6.5% in 2015. AISC decreased with 1.8%.

Table 3. Gold production at each mine and P&P reserves as of 2015.

Click to enlarge

The increase in the production of gold mainly came from Chapada (9.3% of the total gold production in 2015), with an average grade of 0.20 (g/t); from Canadian Malartic (22.4% of the total gold production in 2015), with an average grade of 0.97 (g/t); from total Minera Florida (8.8% of the total gold production in 2015), with an average grade of 1.50 (g/t); from Jacobina (7.6% of the total gold production in 2015), with an average grade of 2.03 (g/t); and from Pilar (6.5%), with an average grade of 4.09 (g/t).

Yamana Gold Mineral proven reserves has an average grade of 0.44 (g/t) and total gold proven mineral reserves (Yamana Gold Mineral proven reserves plus BRIO Gold mineral proven reserve) has an average grade of 0.47 (g/t). Pilar proven reserve is not included either in Yamana Gold Mineral proven reserves or in the total gold proven mineral reserves.

Table 4. Revenues (gold sold), Cost of gold sold, Cost-to-sales ratio, Multiplier and avg grade proven reserves.

Year

Revenue (gold sold)

Cost of Gold sold

Cost-to-Sales Ratio

Multiplier Profit Gold Price

AVG GRADE (Proven reserves)

2015

$1,443,151,556.00

$1,073,865,750.00

0,74

3,91

0,47

2014

$1,342,239,472.00

$1,026,387,764.00

0,76

4,25

0,63

2013

$1,302,687,000.00

$975,280,261.00

0,75

3,98

0,62

Click to enlarge

The cost-to-sales of gold ratio slightly decreased from 2013 to 2015, but in 2015 the ratio is more or less at the same level of 2 years before when the price of the precious metal started to fall. The average grade of total gold proven reserves decreased from 2013 to 2015. It means that in 2015 the company was able to increase operations at lower grade mines that normally involve higher cost of extraction, to increase the production of gold and to contain costs, while the price of gold fell by 13% from $1,227.188 (February 2015) to $1,068.253 (December 2015).

My point of view:

I was impressed by the financial and operating results of this gold stock. That's why I would be long on this stock. I wouldn't be worried about no substantial increase in the price of gold because the management of this company is making the right moves. The company increased production and revenue, contained costs during falling gold prices.

And if the price of gold goes up, well…even better.

How about recommendation trend on this stock?

Click to enlarge

Ten analysts out of sixteen recommend holding this stock.

I would hold this gold stock and being really long on this one.

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.