This week, Yamana Gold (NYSE: AUY) will release its first quarter earnings report. In anticipation for its publication, here is a last minute breakdown of the current expectations.
Expectations
Analysts estimated the company’s revenue reached nearly $450 million — a 14.7% drop, year over year. Furthermore, Yamana Gold’s earning per share declined to $0.06. Most of this fall is related to the 20% plunge in the average quarterly price of gold. Silver also tumbled down by over 31%.
The decline in the company’s profitability has already resulted in a 42% slash in its divided payment. Despite this fall, the company’s annual dividend yield, which is currently around 2%, isn’t far off other gold producers’ yield; Goldcorp’s (NYSE: GG) dividend yield is roughly 2.4%.
Nonetheless, Yamana Gold expects to increase its production in 2014; a rise in production could partly offset the negative impact the low prices had on revenue and profitability during the first quarter.
Gold production
The company has revised down its 2014 outlook from an average of 1.685 million of gold equivalent ounces produced to 1.4 million of GEO produced. Most of this drop is attributed to the reduced production projections in the Chapada, C1 Santa Luz, and Pilar mines. Despite this lower estimate, on a yearly basis the company expects to augment its gold equivalent production by nearly 17%, year over year. Based on this estimate, during the first quarter of 2014, the company’s gold production should reach around 350 thousand GEO. This means, Yamana Gold’s production rose by roughly 20%, year over year. If the company doesn’t reach these levels, it could result in lower revenue. Moreover, the recent decision to purchaseOsisko Mining with Agnico Eagle Mines (NYSE:AEM) for $3.9 billion may improve Yamana Gold’s operations. This agreement was higher by 11% than Goldcorp’s hostile offer, which was priced at $3.6 billion. Yamana Gold’s will form an equally joint acquisition entity, which will hold Osisko Mining. Yamana Gold may further address this acquisition in the upcoming earnings report.
Besides reaching its gold production goals, the company’s production costs are also a factor that could impact its bottom line.
Cost of production
In 2013, the company’s all-in sustaining cost reached $814 per GEO. Moreover, during the first quarter last year, the all-in sustaining cost was higher at $856 per GEO. This year, however, Yamana estimates its all-in sustaining cost to fall below $850 per GEO. If the company reaches this goal in the first quarter, this could result in a 0.7% drop in its year over year production costs. Nonetheless, even if the company reaches this figure, it won’t have a strong impact on its profitability mainly due to plunge in gold and silver prices. The lower prices of precious metals also contributed to the company’s decision to cut down its capital expenditure in 2014.
Take away
Yamana’s upcoming earning report could impact its stock price. Specifically, the company’s gold production and cost of production will be the main uncertainties that could influence Yamana’s traders. If the company doesn’t meet its goals, this could drag further down its stock price.
For further reading:
- Will Gold Recover from its Recent Fall?
- What Could Impede This Gold Company?
- Will The Gold Market Continue to Cool Down?
- Will Gold Continue to Dwindle?
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