Event: "YRI reports Q2/11 adj EPS of $0.25 above CS estimates of $0.23 and consensus estimates of $0.24 (range $0.22-$0.29). Gold production was a little light (-10kozs) but was offset by stronger than expected copper (+4.7Mlbs) and silver (+80kozs) production. Overall, our revenue estimates were exactly in-line at $573M, with the EPS variance largely the result of lower G&A, taxes and exploration expense. Operationally, we view this as a largely in-line quarter."
Q2 operating highlights: "GEO production of 279kozs was below CS est. of 289kozs. Total copper production 50.1Mlbs was above our forecast of 45.8Mlbs. Co-product cash costs of $451/oz were below CS est. of $472/oz, largely the result of greater by-product metals. Better costs at El Penon, Chapada and Gualcamayo were partially offset by misses at the other ops."
Project updates, Mercedes timeline pushed up, 2012 production guidance to increase?: "YRI is now guiding for first gold production at the Mercedes project in Q4/11 vs. prior guidance of mid-2012. Given Mercedes is now on track for early start-up (Q4/11), we believe YRI's 2012 GEO production guidance could be positively impacted by 30-40kozs GEO to 1235-1355kozs from the current guidance of 1200-1320kozs GEO."
2011FY production guidance maintained, likely to hit top end: "YRI reiterated 2011FY GEO production of 1,040-1,140kozs at by-product cash costs of below $250/oz. We are currently forecasting 1,160kozs GEO (using spot silver prices) at by-product cash costs of $(84)/oz in 2011. At 545kozs YTD and Q2's annualized run-rate of 1,114kozs, the company is on track to achieve guidance. YRI continues to forecast 1.7Mozs GEO by 2014."
Investment Thesis: "We believe Yamana is undervalued on a P/E and P/OpCF basis and warrants a renewed look by investors given its five year growth profile (84%) and continuous steadily improving and consistent performance over the past six quarters, with this positive Q2/11 result."
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
