Why Is Yamana Gold on So Many Analysts’ Wish Lists?

Analysts’ recommendations

According to the consensus compiled by Thomson Reuters, 57% of the analysts covering Yamana Gold (AUY) have recommended “buys” on its stock, while 29% have recommended “holds.”

AUY’s target price represents a potential upside of 35% based on its current market price of $3.3.

Why Is Yamana Gold on So Many Analysts’ Wish Lists?

While Yamana’s relative number of “buy” ratings is high compared to its peers, analysts’ sentiments for its stock have deteriorated in the last few months. Since the beginning of October, AUY’s number of “buy” ratings has fallen from 77% to 57%. Since then, HSBC and BMO Capital Markets have downgraded the stock.

Rating changes

On December 10, BMO Capital Markets downgraded AUY from an “outperform” to a “market perform.” HSBC downgraded Yamana stock from a “buy” to a “hold” on November 16, mainly due to lower commodity prices and the new Argentine export tax on Cerro Morro’s revenue.

Cerro Moro

Despite these downgrades, Cerro Moro remains a game changer for Yamana. It’s a significant operation for the company, and it’s expected to contribute meaningfully to Yamana’s production growth at below-average costs. Once Cerro Moro fully ramps up in 2019, it should triple Yamana’s silver production and increase its gold production by ~20% year-over-year.

Analysts are quite optimistic about the company’s Cerro Moro mine.

Yamana’s peers (GDX) are also trying to increase their profitable productions. Barrick Gold (GOLD) has merged with Randgold Resources, while Newmont Mining (NEM) and Goldcorp (GG) have also announced a merger. Agnico Eagle Mines (AEM) has a strong organic growth production pipeline. The upside to Kinross Gold’s (KGC) production growth lies in its Tasiast Phase Two expansion.