Within a bull market of gold's magnitude and duration, the deepest stores of value become the veritable rockets of outperformance in their due time.
For deep-value sensation Yamana Gold
On the operations end, this is a rocket. Yamana continues to deliver steady progress toward its strategic goal of increasing annual production by 50% over the next few years, and three new mines are slated to commence production in 2012. At the Mercedes and Pilar properties, in particular, ongoing exploration results continue to point toward "significant potential" for further resource expansion prior to start-up of those mines. In the mining world, nothing delivers shareholder value quite like the exploration drill.
Drilling success at Pilar has generated a 32% increase in gold resources already this year, which by itself will expand Yamana's companywide reserves by 7%. At the Jacobina mine in Brazil, successful drill intercepts have led the company to ponder a mine expansion. At the flagship Chapada gold and copper mine, the new Suruca gold discovery is advancing rapidly, and Yamana expects to have a feasibility study complete later this year. As with Agnico-Eagle Mines
All the while, Yamana continues to produce gold at costs that are the envy of the industry. Yamana yielded more than 267,000 ounces of gold equivalent (including silver production) for the third quarter at an industry-leading cost of just $104 per gold ounce equivalent (GEO). As I discussed this week with respect to Newmont Mining
As the cash rolls in, Yamana has seen fit to increase dividend payments to shareholders despite being in the midst of an aggressive growth spurt. As recent dividend hikes from the likes of Barrick Gold
Thanks for the consolation prize, Mr. Bernanke
I consider Yamana primed for phenomenal (and long-overdue) price performance through the next several months, assuming gold will continue its ascent toward my near-term target of $1,500 or higher. By announcing $600 billion in additional Treasury purchases over the next eight months, on top of about $300 billion expected from the Fed's separate reinvestment program, Ben Bernanke's Federal Reserve is effectively topping off the fuel in Yamana Gold's unfired rocket.
Even with the incredible run-up we have already seen in precious-metals prices, I continue to spot plentiful bargains within a mining sector that as a group has dramatically lagged the performance of bullion. I consider some of the more successful junior producers and explorers as persistent stores of value, with names like Gammon Gold
I stated back in August that I believed Yamana would approach fair value at three times its sub-$10 price tag at the time. That value-based assessment is independent from any further long-term price gains in the metals complex. In my opinion, Yamana Gold represents an uncommonly safe investment vehicle for gold, as downside risk is arguably very limited at these prices. Yamana has already outperformed the S&P 500 by more than 140% since I selected the stock for my silverminer CAPS portfolio just over two years ago, and I believe this is just the beginning.
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