I've been catching up with some old schoolmates of mine lately, and it's uniquely satisfying to see those human bonds stand the test of time. While I haven't known this gold company since kindergarten, I have tracked its progress closely now for several years, and it's held up equally well.
Yamana Gold (NYSE: AUY ) came through again for investors in the third quarter. Its solid performance makes the 74% decline in its share price since March seem all the more overdone. I've made the case elsewhere for the combination of organic production growth and deep value in Yamana's shares. Here, we'll focus instead upon its earnings results, outlook statements, and some developments since the quarter's end.
Yamana posted net income of $150 million on $247 million in revenue. Adjusting for special items, like the $139 million unrealized gain on commodity derivatives, the net looks less inspiring at $31.5 million. However, given the extreme price volatility in gold, silver, and especially copper during the period, it was better than this Fool expected.
On the strength of byproduct credits, Yamana continues to post the most impressive cost metrics in the industry: $140 per ounce. This compares with the $240 cash cost recently reported by Agnico-Eagle (NYSE: AEM ) , $346 for Goldcorp (NYSE: GG ) , and $375 reported by Kinross Gold (NYSE: KGC ) back in August. Even removing the byproduct accounting, Yamana outperformed megaminers like Newmont Mining (NYSE: NEM ) and Barrick Gold (NYSE: ABX ) with a $454 cost basis per ounce.
Signaling even wider margins to come, Yamana CEO Peter Marrone expressed the company's view that we've seen the "high water mark" for cost pressures in the industry. Favorable currency conversion rates and lower oil costs will go a long way towards offsetting the negative impact of metal prices, which continue to languish well below third-quarter realized prices.
Since the close of the third quarter, Yamana has taken several steps to raise and protect capital in light of the global financial turmoil. The company sold a 40% interest in the Rossi mine in Nevada to majority holder Barrick Gold for $29.2 million, capitalized on the major dip in copper prices to invoke long-term hedge contracts for $47 million, and initiated substantial currency hedges following the recent dollar rally. These bold moves brought its cash position back up to more than $200 million, and they represent further proof that time seems to be on Yamana's side.