Yamana Gold: Running a Tight Ship

10/08/2014 7:00 am EST


When it comes to running a tight ship, you'd be hard-pressed to ask for a better precious metals miner than our latest featured "Strongest Recommendation this Month," asserts Investor's Digest of Canada.

For starters, Yamana Gold ((TSX: YRI) and (NY: AUY)) remains in the lowest quartile of the industry cost curve, notes Anita Soni, a mining analyst with Credit Suisse in Toronto.

Moreover, Yamana obviously knows where to allocate its resources, given that in its most recent quarter, 85% of its core operations yield 97% of its cash flow.

In the meantime, the company seems to be able to make good on its promises. Indeed, it cites the 137,000 ounces of gold it produced in August as proof it will reach its 2014 production goal of 1.4 million ounces, as well as sustainable output in 2015.

In the interim, Yamana is keeping as many irons in the fire as possible, ramping up products at its Chapada mine in Brazil, its El Penon mine in northern Chile, and its Gualcamayo site in Argentina.

The company is also completing a new life-of-mine plan for Canadian Malartic, Canada's biggest gold mine, in which Yamana is a joint partner with Agnico Eagle Mines (AEM).

Yamana, though, isn't overlooking its non-core assets, but is looking for a strategic partner to help develop Agua Rica, a mining property in Argentina. For Ms. Sioni, Yamana merits an "outperform" rating along with a 12-month price target of US$10.50 a share.

Our market mavens were onside with Ms. Soni this month regarding Yamana. Of the 12 others we polled, ten rated it a "buy," one a "hold," and only one a "sell."

And our analysts' vote of confidence is warranted, if for no other reason than the company is in fair financial shape. For the three months ended June 30, for example, Yamana swung to net income of US $5.1 million from a net loss of $7.9 million for the similar period in 2013.

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