Yamana Gold Stock: Analysis of Fourth Quarter and Full Year 2021 Results
Part I – Presentation
The Canadian company Yamana Gold (NYSE: AUY) announced its production results for the fourth quarter of 2021 and full year 2021 on February 17, 2022.
1 – 4Q21 and full year production overview
Yamana Gold posted strong gold equivalent production of 281,388 GEO in 4Q21 or 1,011,180 GEO for the full year 2021. Full year production was 884,793 ounces Au, exceeding forecast.
Note: The 2021 forecast was one million ounces of gold equivalent, including 862,000 ounces of gold and 10 million ounces of silver, at an all-in sustaining cost of between $980 and $1,020 $ per GEO.
Comparative details by mine are shown below:
The company said net income attributable to Yamana shareholders was $147.5 million in 2021, down from $203.6 million in 2020. However, adjusted net income of $309.0 million was slightly lower than adjusted net income of $311.2 million per year. from.
Yamana also declared a fourth quarter dividend of $0.03 per share ($0.12 annual per share).
CEO Daniel Racine said on the conference call:
We delivered strong operating results across the board and exceeded our 2021 production guidance for gold and gold equivalent ounces. As noted, the fourth quarter was particularly strong with production from the Company’s 5 operating mines reaching an all-time high with Canadian Malartic, Jacobina, Cerro Moro and El Peñón posting outstanding quarters.
2 – Investment thesis
The investment thesis for AUY has not changed since my previous article. With solid production beating expectations and excellent financials, I consider AUY to be in the long-term precious metals group that I recommend hoarding on weakness.
It is crucial for this type of business to trade a short-term LIFO of around 40-50% of your entire position. It allows you to accumulate on a downtrend and take advantage of any reversal while maintaining a basic long position which you will hold for a final payday at a much higher price target.
The price of gold is on the rise again and is now at $1,900 an ounce, but this is a fragile trend. The market believes that the Fed will not act adequately in the face of the threat of high inflation. However, things are about to change and the Fed is now ready to increase interest.
Inflation is a major concern and could spin out of control, forcing the Fed to act even more drastically. We are now talking about 7.50% inflation. I think 2.25% per year is insufficient and can only be justified politically. Ultimately, the Fed will have to act more aggressively. But the more aggressive it is, the more negative it is for gold.
Therefore, AUY requires patience. AUY generally moves slowly and has been quite disappointing as a long-term investment. So, the best strategy for this type of stock is to trade half your LIFO position in the short term and only hold a long term average base position for a much higher target.
3 – Stock market performance
The stock’s performance has changed recently and AUY is leading the pack. AUY is up 12% year on year.
The AUD typically moves slowly in stock appreciation, but drops significantly on weak gold and silver prices. Then this recent rise is quite interesting and may indicate a reversal.
Part II – Yamana Gold: Balance sheet and production in 4Q21 – The raw figures
|Total revenue in millions of dollars||461.7||422.0||437.4||452.2||503.8|
|Net income in millions of dollars||102.8||54.7||-43.9||27.0||109.7|
|EBITDA in millions of dollars||411.6||205.1||217.1||246.0||282.9*|
|Diluted EPS in $/share||0.10||0.06||-0.05||0.03||0.11|
|Cash flow from operations in millions of dollars||181.3||160.2||153.5||190.6||238.2|
|Capital expenditures in millions of dollars||95.1||80.2||93.5||93.2||117.9|
|Free cash flow in millions of dollars||86.2||80.0||60.0||97.4||120.3|
|Total cash in millions of dollars||665.5||698.4||735.6||487.3||552.0**|
|Total debt in millions of dollars||993.8||994.4||994.9||772.8||772.8|
|Dividend per share in $ per share||0.02||0.02||0.03||0.03||0.03|
|Shares outstanding (diluted) in millions||955.1||963.0||965.6||966.0||962.7|
|Production of gold equivalent ounce (“GEO”) K Oz||255 361||231,988||241 341||256,464||281 388|
|Silver production M ounces||2.59||2.13||1.63||2.273||3.143|
|Realized Gold Price $/Oz||1,875||1,793||1,817||1,789||1,796|
|Silver Price $/Oz||24.02||25.66||26.05||24.23||23.24|
|Co-product AISC GEO $/Oz||
Sources: Company material
* Estimated by Fun Trading.
* Cash and cash equivalents were $460.2 million and total cash was $487.3 million in 3Q21. Based on what is disclosed in the press release, the company had approximately $525 million in cash and cash equivalents in 4Q21 and approximately $540 million in total cash.
Part III – Gold Production Details for the Third Quarter of 2021
1 – Quarterly production of gold and silver
The company produced 240,718 Au Oz and 3,142,781 Ag Oz as shown below.
2 – Quarterly Production of GEO Gold Equivalent
The price of gold was $1,796 per ounce and silver was $23.24 in 4Q21.
Part IV – Balance Sheet Analysis
1 – Revenue was $503.8 million in 4Q21
Yamana Gold reported revenue of $503.8 million in 4Q21, up 9.1% from the same quarter a year ago. Net income was $109.7 million or $0.11 per diluted share.
Cash flow from operations was $238.2 million in 4Q21 compared to $181.5 million in 4Q20.
2 – Free cash flow was estimated at $120.3 million in 4Q21
Note: Free cash flow is operating cash flow minus capital expenditures.
Trailing twelve-month free cash flow was estimated at $357.7 million, and 4Q21 free cash flow was estimated at $120.3 million.
On July 29, 2021, Yamana Gold announced a share buyback program of approximately 48.322 million shares. The company purchased 6.673 million shares as of December 31, 2021 for approximately C$35.6 million.
The company pays a quarterly dividend of $0.03 per share covered by free cash flow.
3 – Debt and cash position. Total cash was $552 million in 4Q21 and total debt was $772.8 million.
4 – The company’s mineral reserves are relatively unchanged from 2020.
Gold Yamana declared mineral reserves of 13.7 Moz of gold, 111 Moz of silver and 6.7 billion pounds of copper.
5 – Production outlook: 2022-2024 and beyond
On February 17, 2022, the Company announced that it maintains its production guidance for 2022 and expects production to be no less than 1 million gold equivalent ounces.
By 2023, the company is increasing its production forecast from 1 million GEO to 1.03 million GEO. The company expects further near-term growth in 2024, with production reaching 1.06 million GEO.
For 2022, the Company expects total cost of sales, cash costs and AISC not to exceed $1,215, $725 and $1,080 per GEO, respectively.
The company plans to release the next update to its ten-year outlook in 2023. It plans to increase its annual sustainable baseline production in current operations from 1 million GEO to at least 1.05 million GEO from of 2025.
Technical analysis and commentary
AUY is forming an ascending channel pattern with resistance at $5 and support at $4.10. The trading strategy is to trade your LIFO position short term and allocate around 50% to short term volatility.
I recommend selling about 30% of your position between $4.90 and $5.1 and selling another 20% at $5.25 or higher on a breakout.
Conversely, suppose the price of gold turns bearish and returns to $1,800. In this case, AUY could quickly fall back to $4.30 (200MA) or below and possibly retest the support at $4.10, where it is reasonable to start accumulating again.
So far, the price of gold has been rising and closed at $1,900 an ounce last week (resistance was at $1,912). The recent news indicates record inflation not seen in decades. This is a good boost for gold.
Overall, consumer prices have risen in 2021 at the fastest rate in 39 years, meaning this is the worst inflation experienced by anyone not on the cusp of retirement. or older.
Moreover, the potential conflict between Russia and Ukraine also helps.
Conversely, the Fed is now laying the groundwork to fight inflation by raising interest rates starting next month, ending gold’s recent uptrend or even reversing it, depending on frequency and timing. magnitude of the increase.
So, watch gold and silver prices like a hawk.
Warning: The TA table must be updated frequently to be relevant. This is what I do in my stock tracker. The table above has a possible validity of approximately one week. Remember that the TA chart is a tool only to help you adopt the right strategy. This is no way to predict the future. Nobody and nothing can.
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