Since my January analysis Yamana’s cash costs have risen slightly, to $230 per gold-equivalent-ounce, or GEO, but that’s still good enough for tops in the sector by a mile, as Goldcorp’s all-in sustaining cash costs jumped to $360 when including byproduct sales in the fourth quarter. For the year, Yamana boosted its overall gold production to 1.2 million GEOs from 1.1 million last year and noted big production gains at its Fazenda Brasiliero mine and its newly opened Mercedes mine.
The really exciting aspect of Yamana is the potential for growth at its Cerro Moro mine in Argentina, which it acquired last year when it agreed to purchase Extorre Gold Mines for about $404 million. Just two weeks ago, Yamana increased its inferred mineral resource estimates on Cerro Moro by 44%, with indicated GEOs totaling 1.95 million and inferred GEOs equaling 495,000. It’s looking quite possible that Yamana will be able to add possibly 100,000 GEOs for each of the next couple of years as Mercedes production ramps up and Cerro Moro moves toward production.
Payments you can dig
The other factor that makes Yamana so incredible is with regard to what it’s doing for shareholders. Last year, Yamana generated more than $1 billion in free cash flow from operations and boosted its dividend payout by 68% to $168.2 million. In terms perhaps a little easier to understand, Yamana has raised its quarterly stipend from just $0.01 in March 2010 to $0.065 in its most recent quarter.
Yamana may not be turning many heads while yielding “only” 1.8%, but it definitely should, given that it’s paying out only about 22% of this year’s projected profits and new mines like Cerro Moro are going to make it considerably more profitable.
If none of the previous numbers were enough to get your jaw to drop, then perhaps a margin of $1,462 per GEO is enough to change your mind! Yamana’s assets, its byproduct sales, its efforts to return cash to shareholders, and its cost-maintenance efforts are absolutely unparalleled in the gold sector at the moment. Yamana, assuming it gets Cerro Moro up and running in 2014 as originally forecast, could easily, with the additional cash flow generated from the mine, boost its dividend to $0.40-$0.50 annually and still have room to spare based on my estimates. This is a big growth story in the mining sector, and it’s a dividend name you can trust moving forward.
The article 1 Great Dividend You Can Buy Right Now originally appeared on Fool.com and is written by Sean Williams.
Fool contributor Sean Williams owns shares of Thompson Creek Metals but has no material interest in any other companies mentioned in this article. You can follow him on Motley Fool CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong
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