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The Quarter We've Been Waiting For

Christopher Barker
May 6, 2009

I needed all of 30 seconds at the animal shelter to know which dog had to be ours. That's how Yamana Gold's (NYSE: AUY  ) latest earnings release makes me feel. I just want to take it home, give it a name, and feed this result some well-deserved kibble.

Yamana is executing beautifully on its much-anticipated growth spurt, despite hitting the low end of production guidance with more than 270,000 ounces of gold equivalent. At a co-product cost of $379 per ounce and falling, margins are set to expand just as production starts to really heat up for the remainder of the year.

The company's net earnings of $86 million were 70% better than analysts expected, and 33% higher than the first quarter of 2008 (when realized gold prices averaged $927 per ounce). Incredibly, these robust earnings coincided with a 37% drop in revenue associated with metal price declines for copper (down 57%) and silver (down 29%) from prior-year levels.

The real fun for Yamana starts as production continues to ramp up for the remainder of 2009. Recently commissioned mines at Gualcamayo and Sao Vicente are producing gold and are expected to reach commercial production by mid-year. The expansion of the Minera Florida mine is complete, with a big boost to production expected in the second quarter. For Fools with firsthand experience of the frustrations of operational setbacks and mine delays, including a surprising delay from my top pick Agnico-Eagle Mines (NYSE: AEM  ) , I recommend this quarter's status report as a