Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Yamana Gold Inc. (USA) (AUY) Remains a Flawless Gem

In a gold industry that is positively plagued by broken promises and missed opportunities, Yamana Gold Inc. (USA) (NYSE:AUY) continues to earn special distinction as the most effective and reliable operator in the business. Goldcorp Inc. (USA) (NYSE:GG) takes a close second, even with the uncharacteristic challenges that company faced (and overcame) during 2012. Primero Mining Corp (NYSE:PPP) takes honorable mention, and will soon join their ranks if former IAMGOLD Corporation (USA) (NYSE:IAG) CEO Joe Conway continues apace with his outstanding, value-multiplying achievements.

Yamana Gold Inc. (USA) (NYSE:AUY)For his part, Yamana CEO Peter Marrone proved once again that his rather lucrative compensation package is money well spent. Yamana met consensus estimates for the fourth quarter of 2012 with adjusted earnings of $0.26 per share. Impressively, even as the industry at large has suffered disappointing margin contraction as construction costs and mine operating costs have risen sharply, Yamana’s net profit margin of 31.3% stands almost exactly where it did two full years ago when I hailed: “They Broke the Mold With Yamana Gold.”

Yamana has not been immune to cost pressures, but has proven far more effective than most at keeping them contained. The company still expects cash costs to remain below $365 per GEO after by-product copper production from Chapada is factored in, while Yamana’s target for keeping all-in sustaining cash costs beneath $800 per GEO for 2013 continues to clinch its position as the industry’s lowest-cost operator (bar none!).

One of the industry’s most substantial growth spurts continues to proceed smoothly, as the company reiterated guidance for 1.75 million gold-equivalent ounces (GEOs) as next year’s target (representing a 46% increase over 2012 output of 1.2 million GEOs!). The capacity to then sustain long-term output at that level is beautifully supported by Yamana’s consistent success on the exploration front. I have long-touted Yamana’s uncommon potential for organic resource expansion throughout its property portfolio as one of the company’s most substantial engines of shareholder value creation, and Yamana delivered on that thesis in spades during 2012!

The miner’s expanded reserve base of 19.3 million GEOs — an incredible 93% of which corresponds to existing operations and projects under development — is sweetened further by the uncommonly conservative gold-price assumption of $950 per ounce on which the estimate is based. That doesn’t mean Yamana sees $950 gold on the horizon, but rather reflects an ethos of conservative project assessment and mine management that focuses appropriately upon higher-quality, higher grade ounces. That new guiding paradigm that the gold mining industry is finally adopting after running far astray of shareholder interests, Yamana Gold has maintained all along. That’s why the $30 price objective for Yamana’s shares that I outlined back in 2011 remains etched in Foolish stone, and frankly I consider this stock at present levels one of the deepest and lowest-risk bargains available in the gold patch.

The article Yamana Gold Remains a Flawless Gem originally appeared on and is written by Christopher Barker.

Fool contributor Christopher Barker owns shares of Goldcorp (USA), Primero Mining, and IAMGOLD (USA). The Motley Fool owns shares of Primero Mining.

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

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
This is a FREE report from Insider Monkey. Credit Card is NOT required.