No fool's gold in Yamana's earnings report

Posted Mar 28th 2007 10:48AM by Victoria Erhart
Filed under: Earnings Reports, Forecasts, Good news, Brazil, Yamana Gold (AUY)

Yamana Gold Inc. (NYSE: AUY) recently released FY 2006 earnings as well as an update on its latest mining operation. Overall, the news is very positive. Yamana Gold operates mines in Honduras, Argentina, Nicaragua and Brazil, including its flagship Chapada mine in Goias, Brazil.

Processing operations at Chapada commenced in November 2006, ahead of schedule. The ore processed thus far has been above estimate in terms of amount and higher in grade. Copper in concentrate is 27.7-28.4% in grade. Gold is 26.3-29.1 grams per ton. At these numbers, Yamana expects to produce 180,000-200,000 ounces of gold and 130-145,000,000 pounds of copper in FY 2007, both above estimates.

Because the Chapada mine came into production earlier than scheduled, Yamana already received its first payment of almost $27 million for the first concentrate shipment. Larger concentrate shipments for both copper and gold will be shipped by the end of 1Q 2007. Presently, spot market prices for both gold and copper remain favorable for Yamana.

Other operations are also performing well for Yamana. For FY 2006, Yamana had annual sales of $169.2 million. This represents 270% increase over FY 2005. Mine operating earnings of $35 million for FY 2006 increased 300% over FY 2005. Yamana raised $170 million in net proceeds from issuing 17.4 million new shares of stock. This amount was enough to retire Yamana's outstanding long term debt.

As a result of improvements in its cash flow and balance sheet, almost $68 million on hand as of 31 December 2006, Yamana declared a quarterly dividend of $0.01 per share. Yamana has also acquired the mining operations of RNC Gold Inc., Desert Sun Mining Corp., and Viceroy Exploration Ltd. Total production of gold for FY 2006 was 359,272 ounces at an average cost of $326 per ounce. The average realized sale price of gold per ounce was $613, up from an average realized sale price of $448 in FY 2005.

Yamana's management forecast total gold production by FY 2008 to be 1 million ounces should prices on the spot remain favorable.

Tags: auy, Brazil, copper, copper mining, CopperMining, gold, gold mining, GoldMining, yamana, Yamana Gold Inc., YamanaGoldInc.