Yamana Gold Inc. (USA) (AUY): Can This Company Survive Gold’s Plunge?

Yamana Gold Inc. (USA) (NYSE:AUY)On Tuesday, Yamana Gold Inc. (USA) (NYSE:AUY) will release its latest quarterly results. The key to making smart investment decisions on stocks reporting earnings is to anticipate how they’ll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you’ll be less likely to make an uninformed knee-jerk reaction to news that turns out to be exactly the wrong move.

Gold mining stocks have performed badly even when gold prices were relatively stable. But in light of the recent plunge in the price of gold, Yamana Gold Inc. (USA) (NYSE:AUY) and its peers face some new challenges. Let’s take an early look at what’s been happening with Yamana Gold Inc. (USA) (NYSE:AUY) over the past quarter and what we’re likely to see in its quarterly report.

Stats on Yamana Gold

Analyst EPS Estimate $0.18
Change From Year-Ago EPS (28%)
Revenue Estimate $564.6 million
Change From Year-Ago Revenue 0.9%
Earnings Beats in Past 4 Quarters 3

Source: Yahoo! Finance.

Can Yamana Gold possibly keep growing?
In light of gold’s plunge, analysts have reined in their estimates for Yamana Gold Inc. (USA) (NYSE:AUY) going forward. Even on the just-ended quarter, they’ve cut their earnings-per-share consensus by more than a dime, but the $0.40 per share downward adjustment for the full 2013 year reflects huge concerns over the future of gold mining. Those concerns have cut more than 30% off Yamana Gold Inc. (USA) (NYSE:AUY)’s stock price since late January.

Yamana has done a better job than many of its peers in fighting many of the challenging trends that the industry has faced recently, especially rising mine operation and construction costs. In last quarter’s report, Yamana managed to sustain profit margins near the company’s historical levels and is aiming to keep its all-in cash costs at the lowest level of any producer.

One way Yamana has kept its competitive cost advantage is through extensive sales of base-metal byproducts like copper and zinc, as both it and fellow low-cost rival Goldcorp Inc. (USA) (NYSE:GG) benefit from utilizing those secondary metals to offset the cost of their gold production. Peers Gold Fields Limited (ADR) (NYSE:GFI) and AngloGold Ashanti Limited (ADR) (NYSE:AU), on the other hand, face much higher costs in part because of their exposure to South Africa and its unstable labor market.

Yet one thing is certain: When gold prices drop, profits will drop with them. Yamana Gold Inc. (USA) (NYSE:AUY) may be the best positioned to handle price declines and still remain profitable, but investors need to prepare for earnings decreases if gold doesn’t bounce back quickly. Already, Newmont Mining Corp (NYSE:NEM) has cut its dividend based on the drop in gold prices and could make further cuts in the future if gold stays at current levels. Yamana has room to sustain its payout even if earnings decline, but a slump could put an end to its fast dividend growth in recent years.

In Yamana Gold Inc. (USA) (NYSE:AUY)’s report, watch for the latest progress update on the company’s Cerro Moro mine in Argentina. The South American nation has been a difficult one for mining companies to navigate because of its volatile political climate, but the mine has too much promise for investors to ignore.

The article Can Yamana Survive Gold’s Plunge? originally appeared on Fool.com and is written by Dan Caplinger.

Fool contributor Dan Caplinger and The Motley Fool have no position in any of the stocks mentioned.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

The 10 Countries with the Highest Suicide Rates

The 10 Most Technologically Advanced Countries in the World

The 10 Safest Countries in the World to Live in Peace

The 10 Top Selling Smartphones in the World 2014

The 12 Biggest Shopping Centers in the World

The 10 Friendliest Countries in the World

Qihoo 360 Technology Co Ltd (QIHU), Actavis plc (ACT), Yahoo! Inc. (YHOO) Among 20 Long Ideas from Sohn Canada

The 10 Laziest Countries in the World

The 10 Most Polluted Countries in the World

The 10 Most Dangerous Cities in America 2014

The Top 10 Gold Producing Countries in the World

The 10 Tallest Buildings in the World

The 10 Richest Stand Up Comedians in the World

The 10 Fattest Countries in the World

The 5 Best Summer Jobs for Teens

The 10 Most Religious Countries in the World Keeping the Faith

The 10 Most Educated Countries in the World

The 10 Most Popular Cell Phones in the World

The 10 Drunkest Countries in the World

The 10 Most Expensive Private Schools in the World

The 10 Smallest Countries in the World

Walking Dead Season 5 Spoilers You’ll Wish You Didn’t Know

The 10 Poorest Countries in the World

The 10 Greenest Countries in the World

The Top 10 Countries with the Highest Population in the World

The 10 Most Visited Countries in the World

The Top 10 Star Wars Characters in the Iconic Series

The 10 Most Expensive Android Phones in the World

5 Reasons Why The Illuminati Is Real and a Threat to Society

The 6 Scariest Halloween Costumes Ever Screamed At

The 4 Biggest Hedge Fund Managers in the World Today

The 15 Most Densely Populated Countries in the World

The 10 Biggest Tea Drinking Countries in the World

Top 6 Ways to Improve Your Checkout Process and Close Sales

The 5 Most Profitable Online Businesses You Can Start Today

The 20 Most Profitable Hospitals in the US

The 5 Most Profitable Home Businesses to Start

The 7 Teams that Will Win the Stanley Cup in 2015

The Top 10 Most Expensive Digital Cameras to Snap Stunning Shots With

The 10 Highest Quality Fast Food Restaurants In America Today

The 8 Best Halloween Decorating Ideas to Spook Up Your House

10 Marvel Women that Should Get a Movie Right Now

The 20 Best Remixes of Popular Songs that Will Make You Forget the Originals

7 Most Expensive Cities in the World

5 Least Expensive Cities in the World

10 Celebrities Who Believe In Scientology

10 High Margin Food Products to Build a Business Around

The 10 Most Expensive Clothing Stores in the United States to Get Decked Out At

The 5 Biggest Kickstarter Scams That Swindled Backers’ Donations

The 10 Most Expensive Boarding Schools In the World

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!