Yamana Moves to the Black After Five Straight Quarters in the Red
By Todd Flagg
21 Mar 2007 at 03:30 PM GMT-04:00
resourceinvestor.com
St. LOUIS (ResourceInvestor.com) -- Yamana Gold Inc. [TSX:YRI; NYSE:AUY] posted its first profit in five quarters following a huge increase in sales from a year ago.
Yamana posted quarterly earnings of $6.1 million, or 2 cents per share, during the fourth quarter of 2006. Last quarter, the company posted a $12 million loss in earnings and loss of 4 cent per share.
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With an increase in production and gold price, the company was able to translate those increases into additional revenues for the fourth quarter to $60 million, up from $50.3 last quarter. From time a year ago, revenues for Yamana are up 260%. In Dec. 2005, Yamana revenues were $16.7 million.
Earnings for the fourth quarter included $19.3 million in income-tax recovery, the company said. Profit adjusted for certain items including foreign exchange losses was $23 million before income tax effects and $500,000 after tax, or less than a penny a share. On that basis, Yamana was expected to earn 3.2 cents.
Analysts see the increase in revenues and earnings as a step in the right direction for a company whose stock price has nearly doubled in two years.
“There were lots of moving parts in the 2006 results, but I see them broadly in line with my expectations,” said John Doody, editor for GoldAnalyst.com. “The stage is now set for great performance in 2007 as production ramps up to one million ounces in 2009.”
While the Toronto-company did post a profit for the fourth quarter, net earnings were pulled down to nearly a 70.2 million loss by non-cash items. The loss, worth 25 cents per share, included $41.1 million in stock-based compensation, $35.8 million in unrealized commodity contract losses, $24.8 million in debt repayment charges and other non-recurring items which swelled the pre-tax loss to $95.2 million, before a $25-million tax recovery.
During 2006, Yamana acquired RNC Gold, Desert Sun Mining and Viceroy Exploration, representing two mines and an advanced development-stage project. Also, the company increased its exploration budget to $32 million. Yamana acquired RNC Gold Inc. for $53 million in February, Desert Sun Mining Corp. for $632 million in April and Viceroy Exploration Ltd. for $549.1 million in October.
Commercial production began in August at its Sao Francisco mine in Brazil, and in February at the Chapada copper-gold project, also in Brazil, the company's largest mine.
Full-year commercial production was 283,460 ounces at an average cash cost of $326 per ounce, up from $289 per ounce in 2005. The average realized price for the year was $613 per ounce, up 28% from the 2005 price of $448.
Peter Marrone, president of Yamana, told listeners in a conference call that the company plans to be able to produce 1 million ounces of gold per year by the end of 2008.
However, the impact of a higher average gold price on mine operations was partially offset by a strengthened Brazilian real relative to the U.S. dollar and higher operating costs, said Marrone.
These costs included increases in maintenance costs, the price of fuel, the price of power, and other consumables. Yet, after a $170-million equity issue, Yamana ended 2006 debt-free and holding $69.7 million in cash.
Revenues for the year were accumulated from the company’s five mines. Revenues distribution from each includes: 75,321 ounces of gold sold from the Fazenda Brasileiro Mine; 28,484 ounces of gold sold from the Fazenda Nova Mine; 55,551 ounces from the Sao Francisco Mine; 64,102 ounces from the Jacobina Mine; 7,881 ounces from the Chapada Mine; and 54,484 ounces from the San Andres Mine.
A total of 277,942 ounces of gold were sold in 2006. A total of 103,772 and 79,822 commercial ounces were sold during the comparative period ended December 31, 2005, and during the 10 month period ended December 31, 2004, respectively.
Marrone said that the company’s development in Sao Vincente, Brazil should be ready for production by spring 2008. The other development in Brazil, name the C1 Santa Luz is expected to be in production by the end of 2008.
The company’s Gualcamayo development in Argentina is expecting a feasibility study by June with production starting by the middle of 2008. The company forecasting 90,000 to 100,000 ounces of production material once mining has begun.
The Jacabino mine purchased from Desert Sun in 2006 is going under expansion but is expected to yield 130,000 to 150,000 ounces of gold per year, Marrone said.
Following the release of the results, the price per share increased by about 53 cents to $14.87 on NYSE for about a 3.7% change. Two years ago, shares of Yamana sold for about $4.15. |
