Yamana Gold Inc.'s (NYSE:AUY) stock fell 11% in September, according to data provided by S&P Global Market Intelligence. The drop started early in the month, apparently on news out of Argentina, where the company has two mines.
Argentina has been struggling financially for some time. That's a problem for Yamana because its Gualcamayo and Cerro Moro mines are located in the country. Gualcamayo is expected to produce 100,000 ounces of gold in 2018. Cerro Moro, a mine that successfully started operations earlier this year, is expected to produce 85,000 ounces of gold and 3.75 million ounces of silver in 2018. Production will likely be higher in 2019, since 2018's numbers represent only a portion of the year. The company considers Cerro Moro a core mine asset. Although these are just two of the seven major mines in Yamana's portfolio, they are important assets.
So it is understandable that Yamana investors reacted poorly when Argentina's government announced export taxes in early September to help shore up its finances. The imposition of taxes was clearly expected to reduce the miner's profitability. That fact was hammered home later in the month when Yamana put out a news release stating, "While the Company's favourable positioning relative to production and costs bodes well for the near and medium term, Argentina's export tax has the potential to offset a portion of these benefits." In other words, the Argentina tax is, indeed, a big deal.
Yamana's portfolio extends beyond Argentina, so it's hard to suggest that the tax change in this one country will be more than a headwind. That said, Argentina's economy is in pretty rough shape, so this headwind could be with Yamana for a while. Investors interested in this miner should take some time to review the financial and political situation in Argentina before investing.