Yamana Gold shares suffer after earnings miss
That doesn't mean you should snap up the stock, however. It's tough to call a bottom for mining stocks.
Worst, though, is a huge increase in cash costs of 31% year-to-year, due in good part to falling prices for the copper that Yamana produces as a “byproduct” of its gold mining activity.
These stocks are caught in a vise of lower gold and copper prices and rising production costs. I think Wednesday’s price of $11.39 on Yamana Gold is a reasonable price for adding to positions. However, I certainly would leave myself some room in any portfolio allocation to Yamana, in case gold goes lower. Adding pluses and minus, I guess that makes me neutral on buying the stock here. One thing I’d like to see is the near-term results of Yamana’s efforts to cut production costs by $100 an ounce by mid-2013 and $150 an ounce by the end of the year. If I saw signs of success in that endeavor, I’d go from neutral to buy.
Relatively low costs. The all in cost of $856 per ounce of gold gives Yamana a solid profit margin, even at current gold prices. The by-product cash cost is a low $383 an ounce.
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The company is scrambling to protect its equities arm, which could face declining volume and revenue as competitors close the gap.
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