Wall Street Loves Yamana Gold. Should You?

Despite all of Wall Street's conflict and contention, a fortunate few companies enjoy unanimous support among professional analysts. If the market's movers and shakers all believe these companies will beat the long-term averages, well, surely they will -- right?

Not so fast! With help from Motley Fool CAPS, the 180,000-member-driven investor community that translates informed opinion into stock ratings of one to five stars, we'll see whether these high-flying favorites deserve analysts' unwavering support.

Today we'll take a look at Yamana Gold (NYSE: AUY  ) , a premier gold miner that's benefited from byproduct processing to lower its cash costs to $201 an ounce. In the quarter just completed, it achieved record production of almost 310,500 gold equivalent ounces and closed out the year as one of very few miners that actually achieved a gain.

Amongst the analysts that CAPS tracks, 11 have weighed in on the miner; despite the lackluster performance of the rest of the industry, they believe it will outperform the indexes. Yet the investor community isn't quite as sure: While 96% rate Yamana to outperform the broad market averages, its middling three-star CAPS rating suggests they think there are still better places for your money.

Of course, just because Wall Street loves 'em doesn't mean you have to. Analyst sentiment is only just the jumping off place for your own research.

High prices, high costs
Higher costs have weighed on gold miners who've enjoyed high prices to justify their production plans, but as the metal backed away from its highs they've been left with higher expenses that've sapped performance. Goldcorp (NYSE: GG  ) and Kinross Gold (NYSE: KGC  ) ended 2012 down double-digit percentages while Barrick Gold (NYSE: ABX  ) lost a quarter of its value.

Yamana has long been identified as one of Christopher Barker's top gold picks. The Fool's gold guru noted its ability to expand organically its reserves net of production, though in the latest quarter it did cause exploration expenses to nearly double to $15 million, from $8 million in the year-ago period. Still it generated a fairly impressive cash margin of $1,517 per ounce and its cash flows from operations were $0.38 per share and should expand now that it has more mines moving into a commercial phase.

Of course, in addition to its gold production it has silver enough to rival the reserves of some of the producers like First Majestic Silver (NYSE: AG  ) , and copper at its El Penon and Jacobina mines that would make Taseko Mines (NYSEMKT: TGB  ) envious.

Federal policies are playing havoc with the price of gold, which has retreated sharply from its highs. But global concerns such as the tax hikes initiated by Chile have also weighed on gold, and hence on Yamana. Having plenty of financial resources available to it -- over $1.1 billion, including $400 million in cash and equivalents -- gives it the wherewithal to withstand the vagaries of government policy, whether they be tougher environmental regulations, higher royalty and tax impositions, or even the protests from local peoples that have shut mines around the globe.

Yamana more than ever
Most major global gold producers continue opening new mines even as they pull back on spending, which influences their stock prices; even Yamana has retraced about 20% of its gains over the past two months.

It seems to me, however, that if anyone is going to ride the waves higher it will be Yamana Gold. While my own portfolio currently carries some of the smaller players in the field, like Primero Mining (NYSE: PPP  ) and Paramount Gold & Silver (NYSEMKT: PZG  ) , as well as SPDR Gold Shares (NYSEMKT: GLD  ) , Yamana might have to join the stable soon, particularly at this lower price point.

Let me know in the comments section below if you wanna have Yamana in your portfolio too.

Goldcorp is one of the leading players in the gold mining market. For the last several years, investors have been the beneficiaries of several successful acquisitions and strong organic growth. Goldcorp's low-cost production of one of the most sought-after metals in the world continues to make it an attractive choice for long-term investors. Click here for our detailed analyst report to discover more about this mining specialist.


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  • Report this Comment On February 22, 2013, at 2:53 PM, EllenBrandtPhD wrote:

    PZG San Miguel PEA coming out next week - this time they promised!

    Since we know in advance it is going to be very good - maybe terrific? - let's see if we get some humongous Short covering close to the closing bell today.

    We MAY, judging from the spike earlier today, which they seem to have changed their mind about. Granted, PMs are still weak. But they may well improve on Sequestration talk next week.

    That means waiting until the last possible moment to Cover - or establish new positions - may give the Trader contingent here some pause.

    I DO think we get some strong buying into the close today. But let's see how high it takes it. (2.15???)

    If I'm wrong, I'm wrong. Everyone knows I'm not a Momo trader.

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Related Tickers

10/17/2014 4:01 PM
AUY $5.54 Down -0.22 -3.82%
Yamana Gold, Inc.… CAPS Rating: ***
ABX $13.41 Down -0.37 -2.69%
Barrick Gold Corp. CAPS Rating: ***
AG $7.17 Down -0.43 -5.66%
First Majestic Sil… CAPS Rating: ****
GG $22.92 Down -0.96 -4.02%
Goldcorp, Inc. (US… CAPS Rating: ***
GLD $118.99 Down -0.23 -0.19%
SPDR Gold Trust (E… CAPS Rating: **
KGC $2.93 Down -0.01 -0.34%
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PPP $4.44 Down -0.33 -6.92%
Primero Mining Cor… CAPS Rating: ****

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