5 Reasons Why You Should Consider Yamana Gold Inc. for Your Portfolio

Yamana Gold Inc. (TSE:YRI) (NYSE:AUY) has fundamental strength to profit from a gold recovery.

| More on:
The Motley Fool

SNL Metals & Mining reported in its Industry Monitor Overview (May/June 2014) that the worldwide mining sector is recovering slowly. It noted, “With the gold price appearing steady at $1,300/oz. and strengthening base metals prices and forecasts, conditions appear to be ripening for a recovery in the exploration sector.”

Here are five reasons why I believe Yamana Gold Inc. (TSE: YRI)(NYSE: AUY) will leverage its strength for successful participation in this rebound and why the company should be an investment consideration.

1. Diverse land positions

Yamana Gold has land positions in Canada, Argentina, Brazil, Chile, and Mexico. Its newest operation is the Canadian Malartic mine. This past June, the company and Agnico Eagle Mines Ltd. (TSX: AEM)(NYSE: AEM) acquired Osisko Mining. Yamana and Agnico created the Canadian Malartic Partnership. I believe this move will benefit the partnership and investors because Canadian Malartic is Canada’s largest gold mine and is located in the heart of the prolific Abitibi Gold Belt. In Q1 2014, the mine set a new quarterly production record of 140,029 ounces of gold and had an improvement in the average grade milled of 1.13 g/t Au.

2. Development projects

Along with its producing mines, Yamana Gold has development projects that will bring increased revenue for the company. It has developing and advanced exploration projects in South America, as commissioning at C1 Santa Luz and Pilar in Brazil is on course for completion in Q3 2014.

Cerro Moro is an advanced gold-silver exploration project in Santa Cruz province. Pilar is an underground mine with plant capacity of around 1 million tonnes annually. It is situated in Goiás state not far from the company’s Chapada open pit gold-copper mine.

3. Strong production

I believe the company’s strengthening production will be a boon to its riding the gold rebound. In 2013, it achieved production of 1.2 million gold equivalent ounces (GEO) and for this fiscal year it anticipates production of more than 1.42 million GEO.

For Q2 2014, Yamana achieved a 22% increase in production from Q1, to 331,765 GEO. Furthermore, Yamana produced 33.0 million pounds of copper.

4. Low cash costs

Controlling cash costs is a necessity for mining companies and this is another reason why I have a favourable opinion of Yamana Gold from an investing standpoint. For 2013, the company attained over $115 million in operating cost savings. In 2013, its costs continued to remain in the bottom tenth of the industry. For Q2 2014, its all-in sustaining cash costs were $915 per GEO on a co-product basis. This represents a 6% decrease from Q1.

5. Quality cash flow

For 2013, Yamana Gold achieved $708 million cash flow from operating activities. This is important because it shows how an entity is continually getting its money. It gives an indication of how its everyday operations are contributing to the company’s overall cash inflows.

Yamana is emphasizing capital expenditure controls, deploying money selectively as required in viable projects. This commitment to reasoned spending is a fundamental strength for the company going forward. For example it sees promise in its Cerro Morro operation and the expectation is that its initial capital costs will be approximately $150 million.

Yamana Gold pays a small quarterly dividend and its annual payout is $0.15. The company’s current dividend yield is 1.73% and its five-year average dividend yield is 1.50%. Last week, Yamana announced a quarterly dividend of 0.0375 per share.

I believe Yamana Gold will grow if the forecast global gold rebound continues. Consider this company as a possible gold industry element for your dividend-paying stocks portfolio.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Michael Ugulini has no position in any stocks mentioned.

More on Investing

food restaurants
Dividend Stocks

Better Stock to Buy Now: Tim Hortons or Starbucks?

Starbucks and Restaurant Brands International are two blue-chip dividend stocks that trade at a discount to consensus price targets.

Read more »

Diggers and trucks in a coal mine
Metals and Mining Stocks

1 Canadian Mining Stock Worth a Long-Term Investment

Cameco (TSX:CCO) stock could be a great long-term investment for Canadian growth seekers.

Read more »

Pot stocks are a riskier investment

Could Investing $10,000 in Aurora Cannabis Stock Make You a Millionaire?

Let's dive into whether Aurora Cannabis (TSX:ACB) could be a potential millionaire-maker stock, or a dud, over the long term.

Read more »

stock analysis
Energy Stocks

Is Enbridge Stock a Good Buy in May 2024?

Boasting high-yielding dividends and a stable underlying business, Enbridge (TSX:ENB) might be a great buy for your self-directed investment portfolio…

Read more »

Hand arranging wood block stacking as step stair with arrow up.
Dividend Stocks

1 Growth Stock With Legit Potential to Outperform the Market

Identifying the stocks that have outperformed the market (in the past) is relatively easy, but selecting the ones that will…

Read more »

healthcare pharma
Tech Stocks

Well Health Stock Is Up 7% After Earnings: What Investors Need to Know

Well Health is benefiting from strong demand as it digitizes healthcare and strives to improve patient outcomes.

Read more »

money cash dividends
Dividend Stocks

Passive Income: The Investment Needed to Yield $1,000 Per Annum

Do you want to generate a juicy passive-income stream? Here's a trio of stocks that can generate a yield of…

Read more »

Dividend Stocks

Here’s the Average TFSA Balance in 2024

The average TFSA balance has steadily risen over the last six years and surpassed $41,510 in 2023. Will the TFSA…

Read more »