Yamana Gold (AUY, Financial) released better-than-expected results for the second quarter. This strong performance was a result of higher production and lower costs. Yamana Gold is trying to deliver better results in the coming quarter. It is undertaking several strategic alternatives to achieve better results. Management thinks that Yamana Gold will improve its performance in the coming days. With a prime focus on generating cash flows, Yamana Gold can be good investment option. Let us see how?
Moving on the right track
In the recently reported second quarter, Yamana Gold posted revenue of $450.8 million which is higher than $430.5 million as compared to last year’s same quarter. This improvement in the revenue came in mainly due to increased production that Yamana Gold delivered. It posted a good 22% increase in production. While on earnings part, Net earnings for the second quarter were $5.1 million or $0.01 per share, compared with a net loss of $7.9 million or $0.01 per share from the last year’s same quarter.
Yamana Gold delivered solid results in the second quarter. For the next quarter as well the company is focusing on taking this improvement to a new level. It is evident from the statistics that Yamana Gold is seeing good improvement in production. It is focusing on various aspects to be profitable. It is mainly focusing on production and at the same time balancing it with cost containment and mitigation, capital discipline. All these efforts by the company are expected to maximize its cash flow, which is Yamana Gold’s main objective.
Strategic moves
Yamana, however, has suffered in the past due to a decline in gold prices. As a safeguard move, Yamana Gold is undertaking many steps such as to reduce and contain operating costs; reduced capital spending. Along with these measures it is focusing on the core operations where it can deliver best production and cash flow.
In addition, Yamana Gold is taking many strategic initiatives including the sale of assets. It is taking strategic alternatives for the operations that are underperforming. Also, it will try to focus more on the assets that could perform more value through sale.
Yamana Gold is expecting much from Cerro Moro which is meant to be a corner stone asset for the company. The mine is yet to start production, which is expected to start by 2016. It is focusing on this cornerstone asset also pursuing optimizations, expansions and cost reduction further. However, besides focusing on increasing production, Yamana Gold is also considering other avenues to realize values in the future.
There are certain dormant assets that are potential but they lack in contributing to the growth in the cash flow.
Final words
Yamana Gold also has cost conservative approach for future. It has established a sustainable lower-cost structure. It believes that all its co-products and by-products are sustaining lower costs in line with the new cost structure on a consistent basis. It is expected that the costs will decline over the year. Costs for 2014 are expected to remain on an average below $925 per ounce on a co-product basis and on a by-product basis below $850 per ounce. This is a clear indication that this will lead to more cash flow generation for Yamana Gold in next quarter.
Looking at the fundamentals, Yamana Gold doesn’t have a trailing P/E as of now due to the losses. But, the catchy thing about the stock is its forward P/E of 19.29. Also, the focus on the core assets strengthens its long term prospects. All these facts make it a good investment option.
