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Yamana Provides Preliminary Results for Q2, Updates '19 View

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Yamana Gold Inc. (AUY - Free Report) announced preliminary operational results for the second quarter and provided updated production guidance for 2019.

The company produced 257,556 gold equivalent ounces (GEO) in the second quarter. Per the company, production in the quarter surpassed plan. Also, preliminary costs were within the prior guidance for the second quarter. The company expects strong performance in the second half of 2019 and is on track to achieve full year guidance.

Preliminary gold production in the second quarter stood at 232,863 ounces and silver production totaled around 2.2 million ounces. Copper production amounted to 31.2 million pounds.

Yamana expects to deliver positive free cash flow in the second quarter, which is in line with its earlier projection. Moreover, the company anticipates free cash flow to increase in the second half of 2019. Reductions in general and administrative expenses along with lower interest expenses resulting from debt reduction are likely to support higher free cash flow in the latter half of the year.  

In April 2019, Yamana announced the sale of the Chapada mine and closed the deal on Jul 5. It received an initial cash payment of $800 million along with $100 million, contingent on the development of a pyrite roaster by Lundin. It also includes a 2% net smelter return royalty on the Suruca gold project and the right to receive additional cash consideration of up to $125 million based on the gold prices over a period of 5 years from the date of deal closure. Notably, the Chapada mine produced 29,019 ounces of gold in the second quarter.

In the second quarter, Jacobina recorded its 11th consecutive quarter of more than 30,000 ounces of gold production. The mine is emerging as a leading operation for the company in terms of production, costs and safety. Moreover, the company also noted that other major mines including the Canadian Malartic, El Penon and Cerro Moro delivered strong performance during the second quarter.

However, production in the Minera Florida was affected by lower productivity during the second quarter as the company negotiated new collective bargaining deals with several unions. Notably, the company has reached on agreements with all unions.

During the quarter, Yamana also implemented corporate overhead reductions. It streamlined the organizational structure to reflect its current portfolio of assets. Per the company, these initiatives are likely to generate annualized savings worth $15 million, which will lower corporate overhead on a cash basis to $60 million per annum.

Considering the divestment of Chapada, the company revised its guidance for 2019. Yamana now expects total GEO production of 1,010,000 ounces compared with the previous expectation of 1,060,000 ounces. Gold production is expected to be 899,000 ounces compared with 940,000 ounces expected earlier. Yamana continues to expect total silver production of 10 million ounces for 2019. Copper production is expected to be 61 million pounds for 2019 compared with prior projection of 120 million pounds.

Shares of Yamana have lost 9.3% in the past year against the 24.9% rise of its industry.

Zacks Rank & Other Key Picks

Yamana currently sports a Zacks Rank #1 (Strong Buy).

Some other top-ranked stocks in the basic materials space are Materion Corporation (MTRN - Free Report) , Flexible Solutions International Inc (FSI - Free Report) and Fortescue Metals Group Ltd (FSUGY - Free Report) , all flaunting a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Materion has an expected earnings growth rate of 30.3% for 2019. The company’s shares have gained 15.7% in the past year.

Flexible Solutions has projected earnings growth rate of 342.9% for the current year. The company’s shares have surged 171.1% in a year’s time.

Fortescue Metals has an estimated earnings growth rate of 294.2% for the current year. Its shares have rallied 87.9% in the past year.

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