Yamana Gold Inc.

AUY Details

Yamana Gold Inc. (NYSE: AUY) is a precious metals producer based in Canada that produces a significant quantity of gold and silver. In addition, it is involved in the discovery, reclamation, processing, and extraction of precious metals and other allied operational activities. Canadian Malartic (Canada), Jacobina (Brazil), Cerro Moro (Argentina), El Peñón (Chile), and Minera Florida (Chile) are the five mines where the business operates. The Canadian Malartic mine, a 50% collaboration with Eagles Mines Limited (AGNICO), produces the majority of the company's revenue. As of September 21, 2021, the company's market capitalization stood at USD 3.93 billion.

Portfolio Overview (Source: Corporate Summary, September 2021)

Positive Initial Exploration Results at Wasamac: AUY announced robust early drill findings at its Wasamac project in the Abitibi-Témiscamingue Region of Quebec, Canada, on September 13, 2021. These early findings support the company's objective of maintaining 200,000 oz/year of production at Wasamac while attaining a strategic mine life of over 15 years. From 2028 to 2041, AUY aims to increase the average annual output in Quebec to above 500,000 oz.

Share Repurchase Program: AUY reported on August 24, 2021, that it has repurchased an additional 1,584,500 common shares, bringing its total to 3,321,276 common shares, for approximately CAD 18 million, under the company's normal course issuer bid since the start of its share repurchase program for up to 5% of outstanding shares. It bought back the initial 1,736,776 shares on August 16, 2021, for an aggregate of CAD 10 million.

H1FY21 Results: The company reported a 30.25% increase in revenue to USD 859.50 million during H1FY21 (ended June 30, 2021) compared to USD 659.90 million during H1FY20, primarily due to high gold sales volume and high realized prices for both gold and silver. However, AUY reported a net loss of USD 41.80 million during H1Y21 vs. a net income of USD 45.10 million in H1FY20. As of June 30, 2021, the company had cash and cash equivalents (including short-term deposits and other financial assets) of USD 735.60 million, with a total debt of USD 994.90 million.

Key Risks: Prices of gold, silver, and other base metals fluctuate widely on the global market, posing a risk to operations' profitability and resulting in mineral property impairments. As a result, any unfavorable price movement might have a detrimental influence on the company's financial state of affairs. In addition, AUY also operates as a gold mining firm, which needs several continuing permissions from the government and municipal authorities. As a result, stricter restrictions or non-compliance with the mandatory legislation might harm the company's profitability.

Outlook:

3-Year Production & Cost Outlook (Source: Corporate Summary, September 2021)

Valuation Methodology: EV / EBITDA Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

AUY Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: AUY's stock price fell 30.26% in the past twelve months and is currently leaning towards the lower band of its 52-week range of USD 3.94 to USD 6.30. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is at 42.01. We have valued the stock using the EV/EBITDA-based relative valuation methodology and arrived at a target price of USD 4.92. Considering the significant correction in the stock price, consistent dividend yield, current valuation, and associated risks, we recommend a "Buy" rating on the stock at the closing price of USD 4.08, traded flat, as of September 21, 2021.

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.

* Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.

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