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Actionable news in AUY: YAMANA GOLD Inc,

Yamana Gold's Weakness Is An Opportunity To Buy


AUY posted surprisingly weak results last quarter as it missed earnings estimates by a whisker due to production constraints at Chapada, which led to lower production and higher costs.

Despite the weakness in production last quarter, AUY can still achieve its production target for 2016 as it has made improvements to the in-pit crusher at Chapada.

AUY has been forced to increase its cost guidance due to weakness in the second quarter, but its margins should still stay strong due to improving gold prices.

If current gold prices are sustained, AUY’s cash margin on each gold ounce could go up as much as 25% in the second half of 2016.

Yamana Gold's (NYSE:AUY) shares have lost momentum in August after the company posted a surprise earnings miss for the second quarter despite posting in-line revenue. Yamana's earnings of $0.01 per share missed the estimate by 1 cent, and this is a key reason why the stock has lost 4% of its value this month even though gold prices have continued to improve.

However, I think that the recent weakness in Yamana shares gives investors an opportunity to buy more shares. This is because the weakness in the company's results was a one-off and an improvement in gold prices will help it get even better. Let's see how.

A closer look

Though Yamana did miss the earnings estimate by a whisker, investors should not miss the fact its production improved on a year-over-year basis. More specifically, Yamana produced 313,086 ounces of gold last quarter, up almost 6.6% year-over-year. Due to this higher production and a 6% jump in realized gold prices, Yamana posted net earnings of almost $33 million in the quarter, up from a loss of $7 million in the year-ago quarter.

However, Yamana's results could have been even better and the company would have beaten consensus estimates hands down if its all-in...