Extending their southward-bound journey from January, shares of Yamana Gold (AUY -0.95%) fell 13.9% last month, according to data from S&P Global Market Intelligence. The gold stock has, however, kicked off March on a relatively encouraging note, gaining nearly 7.2% so far, of the time of this writing.
After hitting a high of around $1,950 per ounce in early January, gold prices started to fall steadily and lost nearly 11% by the end of February. Gold is considered a safe-haven asset, which is why its price rose in 2020 when the COVID-19 pandemic shook the world. The pessimism abated as 2021 kicked off, starting with Joe Biden's win in the presidential election that spurred hopes of a fiscal stimulus. Gold prices declined further in February as COVID-19 vaccinations rolled out and bond rates inched higher and hurt the yellow metal's appeal against bonds as a store of value.
None of that was good news for Yamana Gold, which makes more money when gold price rises. Investors, in fact, dumped gold stocks last month and flocked to other hot sectors that were primed to benefit from an economic recovery.
Yamana's fourth-quarter and full-year numbers released on Feb. 11 failed to lift investor sentiment. Its 2020 all-in-sustaining cost (AISC) of $1,080 per ounce of gold was at the higher end of the industry spectrum, and its other costs rose as COVID-19 restrictions in Argentina hit operations at Cerro Moro. That, perhaps, was one of the most disappointing takeaways from Yamana's earnings report, as Cerro Moro is its lowest-cost and key growth mine. Furthermore, Yamana's gold production outlook for 2021 and 2022 was also lower than its original guidance thanks to declining gold prices.
So with gold prices hitting a nine-month low as of this writing on the back of an exceptionally strong February jobs report, why is Yamana Gold stock rallying in March? Investors, perhaps, see an opportunity here, given Yamana's prospects.
The miner increased its dividend by 50% in Q4 and foresees a 7.4% drop in AISC in 2021 and steady growth in gold production in the coming years. It has also started construction at Odyssey project at the Canadian Malartic mine, which it owns jointly with Agnico Eagle Mines. There's a lot to like here, which may have fueled investor interest in the stock.