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Does Yamana Gold’s Exploration Update Suggest Long-Term Value?

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Sep. 9 2016, Published 7:58 a.m. ET

Encouraging exploration update

Yamana Gold (AUY) provided an update on its exploration programs on September 6, 2016. It provided the exploration update for its Chapada, Jacobina, Gualcamayo, Minera Florida, and Monument Bay properties. The main aim of mining companies’ exploration programs is to discover new mineral resources and to convert the existing resources to reserves. The update indicates that Yamana seems to have been somewhat successful in converting its resources to reserves. The company said, “Results to-date from the 2016 exploration programs are encouraging at all levels including target generation, exploration drill testing, and Mineral Resource infill and ore delineation programs.”

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Upside from exploration

After years of cutting back on sustained capital expenditure, precious metal miners (SIL) (GDX) have started to refocus on production growth, as precious metal prices remain buoyant in 2016. The increase in exploration and capital expenditure budgets remained one of the key themes of miners’ earnings in 2Q16. Barrick Gold (ABX) is also pursuing growth through optimization and exploration. Kinross Gold (KGC) expects to convert a substantial part of Bald Mountain’s 4.0 million ounces of resources to reserves.

Silver miners such as Coeur Mining (CDE) and Hecla Mining (HL) also increased their exploration expenses in their 2Q16 earnings in a bid to explore future production opportunities.

Series overview

In this series, we’ll look at the upside from exploration for Yamana Gold. We’ll look into the details of the exploration update provided by the company at each of its properties. These opportunities can drive the company’s medium-term to long-term production growth. Before we start with the exploration update, let’s look at Yamana Gold’s absolute and relative performance year-to-date.

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