Yamana Gold Inc.

AUY Details

Yamana Gold Inc. (NYSE: AUY) is a Canadian precious metals producer that generates a substantial amount of gold and silver. It also engages in discovering, extracting, processing, and reclamation of precious metals and other allied operational activities. The Canadian Malartic mine in Canada (50% interest), the Jacobina mine in Brazil, the El Peón and Minera Florida mines in Chile, and the Cerro Moro mine in Argentina are the company's primary mining properties. The MARA project in Argentina (56.25% interest) and the Wasamac project in Canada are two of the company's major projects.

Latest News:

• Preliminary Q4 Results: On January 13, 2022, AUY announced its Q4 preliminary results. Production in the Q4 totaled 281,388 gold equivalent ounces (GEO), above the previously reported quarterly projection of 270,000 GEO, with a full-year output of 1.01 million GEO exceeding the yearly guidance of 1.00 million GEO. All-in sustaining costs (AISC) for the Q4 are estimated to be around USD 970 per GEO, lower than previously disclosed cost guidance for the quarter and about 8% lower than AISC reported for the previous three quarters. The business believes that the robust cash flows improved cash balances by more than USD 65 million, resulting in a total year-end cash balance above USD 305 million.

Q3FY21 Results

• Increase in Topline: Revenues increased 2.91% to USD 452.2 million in Q3FY21 (ended September 30, 2021) from USD 439.4 million in Q3FY20, owing principally to more significant gold sales volumes from the Canadian Malartic, El Peón, and Jacobina mines in the current quarter.
• Gold Sold Volumes: In Q3FY21, the company sold 223,229 ounces (oz) of gold at an average realized price of USD 1,789/oz, up from 192,578 oz of gold sold at an average realized price of USD 1,910/oz in Q3FY20.
• Silver Sold Volumes: The company sold 2.02 million oz of silver at an average realized price of USD 24.33/oz in Q3FY21, up from 2.75 million oz at an average realized price of USD 24.86/oz in Q3FY20.
• Production Volumes: In Q3FY21, the company produced 225,556 oz of gold, compared to 201,772 oz in Q3FY20. It had 2.27 million oz of silver in Q3FY21, compared to 3.04 million oz in Q3FY20.

Key Risks:

• Metal Price Risk: Gold, silver, and base metal prices fluctuate dramatically on the global market, putting operations' profitability at risk and resulting in mineral property losses. As a result, any unfavourable price movement may harm the company's financial situation.
• Regulatory Risk: AUY functions as a gold mining company, which requires several ongoing permits from the federal and municipal governments. As a result, tighter limits or noncompliance with necessary legislation may impair the company's revenue.

Outlook:

3-Year Production Guidance (Source: Company's Presentation, January, 2022)

Valuation Methodology: EV / EBITDA Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation:

AUY's stock price has fallen 20.36% in the past nine months and is currently trading around the lower band of its 52-week range of USD 3.70 to USD 5.44. The management has provided its future guidance for the next three years, and it expects production to remain on high levels, which is a huge benefit. Furthermore, the company has an industry-leading margin profile, providing its shareholders with a significant competitive edge. We have valued the stock using the EV/EBITDA-based relative valuation methodology and arrived at a target price of USD 4.90.

Considering the company's growth prospects, steady dividends, optimistic production guidance, robust preliminary results, associated risks, and current valuation, we recommend a "Buy" rating on the stock at the closing price of USD 3.99, down 1.97% as of February 03, 2022.

Three-Year Technical Price Chart (February 03, 2022). Analysis by Kalkine Group

Technical Analysis Summary:

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

Note 1: The reference data in this report has been partly sourced from REFINITIV.  

Note 2: Investment decision should be made depending on the investors' appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the valuation has been achieved and subject to the factors discussed above.

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