Could Yamana Gold Rein In Its Debt in 2017?



Production growth

When it presented its 3Q16 results, Yamana Gold (AUY) maintained its consolidated production guidance at ~1.26 million–1.34 million ounces for 2016. During its earnings call, Yamana chief operating officer Daniel Racine stated that “Yamana has a track record of strong fourth quarter production, which we expect to continue this year.” Its production run rate was running slightly low. Investors look forward to its production growth in 2016 and 2017.

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Cost progression

Yamana Gold’s (AUY) gold cash costs in 3Q16 were $692 per ounce, compared with $643 per ounce in 3Q15. The 8% YoY (year-over-year) rise in gold cash costs was mainly due to the appreciation of the Brazilian real and the Chilean peso. The company’s AISC (all-in sustaining costs) also rose, by 14% YoY to $965 per ounce. During the company’s 3Q16 earnings call, CEO and chairman Peter Marrone stated that the company expects these costs to improve going forward.

Debt reduction

Yamana Gold (AUY) is committed to reducing its net debt by $300 million by the end of 2017. The company is targeting a net debt-to-EBITDA (earnings before interest, tax, depreciation, and amortization) ratio of below 1.5x. Yamana has announced several initiatives including the spin-off of its Brio Gold unit to reduce its debt. It also sold share purchase warrants to purchase 15 million shares of Sandstorm Gold (SAND) for total proceeds of ~$33.6 million. Any further updates during its 4Q16 earnings call should be interesting.

Yamana’s peers (RING) have been involved in similar portfolio restructuring transactions. AngloGold Ashanti (AU) sold its Cripple Creek & Victor mine to Newmont Mining (NEM), and Barrick Gold (ABX) sold its Nevada assets to Kinross Gold (KGC). Next, let’s look at key updates from Kinross.


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