Yamana Gold (AUY, Financial) is seeing strong production in terms of ounces of gold. The company is pleased with the results it is seeing. It has made some impressive moves, including the integration of a high quality Canadian portfolio. This focus of Yamana on cornerstone assets has led the company to stand firm in the competitive market. With a number of other strategic moves, Yamana Gold is laser focusing on improving its financial performance. Let us have a look at the overall gold market and Yamana’s position in the market.
Key growth areas
Yamana Gold has pinpointed some key areas which it will be working on. It is streamlining its management, also planning to develop its next Cerro Moro project which is expected to be a key growth driver for it in future. It is exciting to see the growth in the gold production. Its mines seems well in shape and are showing positive production such as El- Penon mine which resulted in 5% improvement in the gold production. Yamana is expecting EL-Penon to further ramp up the gold production in the upcoming fiscal year. With the improving gold grades, Yamana continues to focus on new discoveries as well.
Moving on, Mexico and Canada remains Yamana Gold’s most potential mines as they have been consistent in their performance. As the production of gold is increasing, Yamana is confident of achieving its long term prospects. Besides this, Yamana Gold also has some expansion plans, under which it is planning to incorporate into Brio Gold Brasilerio, Pilar and C1 Santaluz. In addition, it has also announced a fully owned subsidiary to have a laser focus on non-core assets as well.
A look at expected gold prices
Let us have an eye on the gold prices in 2015. Many analysts have different opinion about the gold price movement. According to analyst George Gero gold is expected to reverse its trends in 2015. The reason behind this is that gold is not helped by the dollar’s rally but the serious strength against other currencies has reduced gold’s attractiveness, bringing down gold’s price. This is also affected by the large sell off in the crude oil which is having an anti-inflationary effect. Having seen all these trends, analysts is confident that 2015 will be a good year for gold investors. Gold will be in its historic highs in the upcoming years.
This is a good sign for Yamana Gold as it will surely be in a good position with good ramp up in the production. It is expected to gain good market share in the upcoming quarters on the back of it as the growth in production will further bring down the overall costs for it making it an impressive stock. The trends continues to be friendly for Yamana and helpful to decrease the cost structure again. Yamana thinks that the initiatives that it is taking as improvements in the inputs will yield good produce in the second half of 2015.
Moreover, for 2015, Yamana Gold is increasing its spending on exploration. With this it will be looking for upgrading to new resources which will further trigger its growth story. 2014 might be shaky for it but, for 2015 Yamana is all set with a robust package of mineral reserves and resources.
Conclusion
The effect of the soft gold prices is clearly visible on trailing P/E of the stock but the forward P/E of 20.95 indicates good growth in the earnings in the near term. For the long term as well, the company’s earnings are growing with a CAGR of just 11.55% which is less as compared to the industry average of 20.39%. The large production can be a problem for the company as the higher gold prices will affect the demand of gold in future. Hence, as per investment perspective, I would like to suggest the investors to pick Yamana Gold now and should consider other profitable stock for long-term gains.
