Best Stock for 2008: Yamana Gold

Ring in the new year with more stocks for 2008.

I can imagine what you're thinking: "Wasn't this the guy yawning over Yamana Gold (NYSE: AUY  ) last spring?" Yes, that was me, and I have few regrets about being negative on the company at the time. I didn't like the old Yamana, ever on the acquisition trail. But now, with a gigantic takeover having been proposed and executed, that bit of unpleasantness is done with, and there are plenty of reasons for the stock to stop trading sideways.

As I've been saying since late summer, and as the company itself has been making clear since its October investor day, Yamana is now an organic growth story. And by that, I don't mean something you might read on a carton of eggs at your local Whole Foods Market. The company has a very deep pipeline of internal development prospects in select mining-friendly districts throughout Latin America. There are also assets in not-so-friendly districts, namely the Esquel property, but Yamana has tabled possible development there, in response to community opposition.

Every gold miner has prospects, of course. Without execution, prospects and a quarter will buy you a gumball. Through its successful construction and ramp-up of the Chapada mine in Brazil, Yamana has proven itself as a mine builder. Agnico-Eagle (NYSE: AEM  ) , which sports an undeniably strong growth profile thanks to a trio of near-producing mines, has yet to do so. That's not to say it won't, but it's not clear to me that start-up risks are being adequately discounted by investors.

If we're looking to be conservative, there are of course larger, more established operators to choose from, like Barrick Gold (NYSE: ABX  ) and Newmont Mining (NYSE: NEM  ) . But having looked at one of these gold giants' grim guidance, it's clear that they don't occupy an especially enviable position in the golden universe. True, Newmont's turnaround story holds some appeal, but just about every large or mid-tier gold miner trades at a premium to its net asset value. So if you're going to be paying up, I figure you'd better get some serious upside potential in return.

Along those lines, Yamana has projected 120% production growth between now and 2012. The company is quite explicit in how this is to be achieved. In fact, there are no fewer than 12 bullet points outlining the roadmap to 2012 in the third-quarter financial report. I've come to recognize the high quality of Yamana's shareholder disclosures. Combined with the tenacity and laser-like focus of its management team, this company is quite likely to be one of the next decade's market-killers.

If you agree that Yamana will have a terrific 2008, then head on over to Motley Fool CAPS and rate Yamana "outperform." We'll be tracking the results of your votes, and will declare a winner early in the new year. New year, new Yamana -- make it happen, Fool.


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