Yamana Provides Preliminary Production For Q1 2016... What You Should Know

| About: Yamana Gold (AUY)
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Summary

Yamana Gold provided its preliminary production results on March 11, 2016. Gold production excluding Alumbrera mine (12.5%) is 308K Oz, 1.927 M Oz of silver and 26 Mlbs of copper.

AUY updated its 2016-2018 guidance after the acquisition of RDM mine expected to add 30K Oz in 2016, 85K Oz in 2017 and 104K Oz in 2018 to Brio Gold.

I was not very impressed with the production numbers, but the Riachos dos Machados mine acquisition will produce some significant production upside later in 2016 after.

Picture: El Peñon. Yamana Home site.

Yamana Gold (NYSE: AUY)

This article is an update of my preceding article on Yamana Gold published on February 23, 2016.

On April 11, 2016, Yamana Gold provided the preliminary operational first quarter 2016 results.

1 - Actual Total Gold Production for Yamana for 1Q'16 compared

Gold Segment Q1'16

Q4'15

Q3'15 Q2'15 Q1'15
Chapada 21,000 34,498 32,029 30,172 22,360
El Peñón 56,000 59,375 51,983 55,404 60,527
Gualcamayo 37,000 73,063 44,076 37,558 46,176
Mercedes 24,000 52,864 20,155 19,306 24,270
Canadian Malartic 74,000 72,872 76,603 68,440 67,894
Minera Florida 26,000 29,180 28,989 26,298 28,113
Jacobina 30,000 28,727 28,080 21,318 18,590
Alumbrera 12.5% Excluded 8,586 5,552 5,111 5,306
Brio Gold 40,000 39,181 38,430 35,211 31,178
Pilar 22,000 - - - -
Fazenda Brazileiro 18,000 - - - -
Total 308,000 345,788 325,897 298,818 304,414

Graph 1Q'16 Production Snapshot

Price of Gold per Oz:

1Q'16

4Q'15 3Q'15 2Q'15 1Q'15 4Q'14 3Q'14
AUY Realized gold price $ 1,183 1,104 1,122 1,196 1,217 1,199 1,276

Commentary:

Yamana Gold provides its preliminary production results today, March 11, 2016. Assuming a production of approximately 7,000 Oz for Alumbrera 12.5%, total gold production is estimated at 315,000 Oz. Silver production is basically the same as 4Q'15. However, copper production is way down from 43.7 M T to 26.0 M T.

A rough estimate gives a revenue of about $415-$425 million, down approximately 10%, quarter over quarter, whereas gold prices are up 7.2%, quarter over quarter. A "not so good quarter" overall.

The by-product gold AISC is expected to be $811/Oz, which is good, whereas above the 2016 guidance below $800. The by-product silver AISC is expected to be $10.79/Oz and the co-product copper AISC $1.97/lbs. Good numbers overall.

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 rights, 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.

Today, the company indicated:

The acquisition of RDM will increase the production profile of the Brio Gold division to an initial annualized production at full capacity of approximately 250,000 gold ounces, which would further increase to approximately 350,000 gold ounces assuming the recommissioning of C1 Santa Luz. For 2016, the Company is focused on optimizing production and costs from and value for RDM, thereby improving the production and value of the Brio Gold division.

With the addition of the RDM mine to Yamana's portfolio, the Company is updating its 2016, 2017 and 2018 gold production guidance and 2016 gold cash cost guidance.

Conclusion:

The 1Q'16 will be disappointing at first glance. However, the new acquisition of the Riachos dos Machados mine is a positive for the company and will add a significant gold production to Brio Gold.

However, gold prices seem to get a strong positive momentum lately, and it is what has triggered the recent gold miner rally. The question is whether or not, it will continue and push the gold prices above $1,300/Oz?

In my opinion, I believe gold prices will have to go down one more time below $1,100/Oz before eventually resuming the uptrend.

Thus, I recommend to use this impressive rally to take profit, and sell about 30% of your winning position, assuming you bought much lower, of course. AUY is now overbought and RSI is well above 75, which is a clear sell signal.

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.

Additional disclosure: I trade AUY frequently