Categories: Base Metals / Precious Metals
Topics: General Base Metals / General Precious Metals

Yamana Gold - Latin Americas Premier Gold Producer

Yamana Gold (AUY-NYSE):  Yamana Gold is determined to become Latin America ’s premier gold producer.  And like many of the larger gold mining companies Yamana used the M&A ladder to ascend to its heights.  Provocatively Yamana wasn’t even a producer in 2003.  But after several Brazilian acquisitions and the subsequent acquisitions of RNC Gold, Desert Sun Mining, Viceroy Exploration, Meridian Gold, and Northern Orion Resources, Yamana is well on its way to senior producerdom.

Now not just any company can go on the M&A warpath in such fast and furious fashion and achieve immediate success, but Yamana Gold has done so.  Led by a spectacular management team, Yamana has methodically developed operations to become one of the most profitable gold miners with cash operating costs at under $375/oz.  And over the next four years it expects to double GE (converting silver production into Gold Equivalent ozs) production to over 2m ozs annually.

One thing you worry about when a company achieves such fast growth via M&As is the cost of doing so.  But Yamana has done a fine job managing the financial implications of such activities.  Its debt is well under control and investors haven’t seemed to notice the massive dilution from the share-based acquisitions.  Though its total common shares outstanding have more than quintupled from mid-2005 to the end of 2007, AUY’s share price quadrupled over this same period of time.

Scott Wright

February 27, 2009

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