Despite Solid Quarter, Yamana Stock Still Looks Cheap

Analyst reaction to Yamana Gold Inc.'s (AUY) first quarter operating results has been positive so far as the company shows some early results from the acquisition of Meridian Gold Inc.

Yamana produced 238,690 gold equivalent ounces in the quarter, above the prior guidance of 220,000. Cash costs also came in at negative $123 an ounce because of copper by-product credits. But full-year production was lowered to a range of 1.21 to 1.3 million ounces due to rain.

There's no problem, according to Blackmont Capital analyst Richard Gray. He continues to believe Yamana "represents one of the gold sector's best combinations of risk and reward." He has a "buy" rating, and a target of C$21.00 a share.

Credit Suisse analyst Anita Soni also thinks the stock is still cheap, "perhaps unduly cheap." She noted that Yamana is trading at a price to net asset value multiple of 1.44 times, below peers like Goldcorp Inc. (GG), Kinross Gold Corp. (KGC), and Agnico-Eagle Mines Ltd (AEM). Kinross, for example, has a multiple of 1.99 times with slightly higher co-product cash costs than Yamana.

She noted that the negative revisions for the full year are mostly priced into the stock, apart from a delay at the Gualcamayo project.

She wrote in a note that:

On a co-product basis costs were slightly worse than expected, but positive concentrate adjustments and higher copper prices resulted in by-product costs surpassing our expectations.

Ms. Soni rates Yamana "outperform" with a target of $20.00 a share.

Comments

[NaplesJack]

AUY real asset is the aggressive mind set of their management team. They have a talented bunch capable of "running" the mines, but the real vision belongs to the top Mgt. They said they would grow the Company into a major and are well on there way to do just that. Their "mine buys" are excellant getting full value out of the properties going forward in less than a year
AUY is a Major trying to happen.

[User 42142]

The Cramer indicator is negative.

[User 172811]

Good article - This is still one of Cramers "One Rated" favorite stocks- he had the CEO on and talked about it last night on his show - and he is still actively buying it for his trust fund.

[NI123]

I recently sold AUY (along with all my other gold and silver stocks) after holding for about a year - The volatility was killing me. Now, I hold GLD, and unless one of the miners becomes incredibly cheap, I don't see myself going back to them. That said, AUY IS a good company with excellent management, and I do not doubt that Marrone will grow it into a major miner within the next five years.

[aasgs]

AUY: THE BEST COMBINATION OF MANAGMENT, PROYECTS, OPPORTUNITIES, RISK AND COST. TOP INVESTMENT. I HAVE 7700 SHARES

[your_avid_investor]

Invest in companies with good fundamentals. AUY can be painful, but it has great fundies. Given the current market environment, I don't see Gold falling significantly out of favor in the near and/or long term (even with all those dubious Central Bank policies). AUY was always trading in extreme volatile ranges. If you don't like volatility this is NOT the stock for you. Last year, from the period April - August 2007, the stock lost 45% of its value (from $15 to around $8.50), then ran up 130% to around $19. We all know where it is right now. Be very disciplined trading AUY. Stay diversidied and hedge your gold positions in stocks with poor fundies, such as the financials. It will take a lot of the pain away and you will be encouraged to buy more gold on those seemingly endless dips. For sure, these trades are not for the faint of heart, but without Gold, where would be the fun in investing these days? Retail? Not.

[your_avid_investor]

Here is a little earnings analysis for AUY: The newly (downward) revised 2008 earnings call for an average of 0.85 EPS. That means the stock is trading at a 2008 PE of 16.76. The 2009 PE is even more attractive: 13.44. The growth multiples for 2008-2009 are both well below 1. As I said, fundies are great. Even against a backdrop of gold/commodities falling out of favor (some predict Gold falling below $700, why and how, don't ask me ...) AUY is still attractive.

[mjrcme]

I suspect AUY is cheap because the market is discounting more acquisitions through stock

[mjrcme]

AUY probably cant be taken over because of poisin pill etc