As reported by a press release published on its website yesterday, Nov. 29, Yamana Gold Inc. (AUY, Financial) will issue a corporate loan for a total amount of $300 million.
The corporate loan is made of a 4.625% bearing interest rate unsecured senior notes. This corporate loan has maturity in 2027 on Dec. 15.
The Canadian precious metal mining company with producing assets in North America, Brazil, Argentina and Chile, gives certain of its subsidiaries as an unconditional guarantee for the corporate loan.
The funds that will be collected through this transaction of corporate financing, the deadline for which is scheduled for Dec. 4, will be allocated by Yamana Gold to lower its general financial burden.
As of the most recent quarter, Yamana Gold has debt of $1.75 billion for a debt to equity ratio of 36% versus an industry median of 34%. This means that Yamana is in line with the industry in which it operates concerning leverage.
This transaction of corporate financing will also contribute to enhancing Yamana Gold’s discretion in using the financial resources to develop its portfolio of assets and for exploration activities.
An injection of $300 million into the company’s treasury that, as of Sept. 30, consists of cash on hand and securities for $230.8 million plus a line of undrawn credit of $768.2, will upgrade Yamana Gold’s flexibility in allocating its financial resources.
An up-trending underlying commodity is, of course, the core factor to the company’s ability to not only keep the financial resources positive, but also to have them increase over time. This can be reasonably expected by Yamana Gold’s investors, and mining the precious metal starting already from a price level of $1,150 per ounce -- a trait of this Canadian miner -- is the hallmark.
In addition, the proceedings that will come from the issuance of this corporate loan together with the completion of Cerro Moro, whose ramp-up is scheduled to commence after the first quarter of fiscal 2018, will also make the repayment schedule of Yamana Gold’s debt more workable. In the short to medium term, the portion is composed of $111.3 million (current share of long-term debt) to be repaid before the end of 2018 and of $500.6 million to be paid for construction and service contract commitments before the end of the third quarter of 2018.
Short- to medium-term obligations also include payments Yamana Gold is obliged to make under the Brazilian tax amnesty.
Yamana Gold is currently trading at $2.54 per share on the New York Stock Exchange, with a market capitalization of $2.52 billion and a price-book (P/B) ratio of 0.57 versus an industry median of 2.01.
The gold stock lost 16% over the last 12 months and is trading below the 50 and 200 simple moving average lines:
The 52-week range is $2.21 to $3.65.
Disclosure: I have no positions in Yamana Gold.
