Stick with Yamana Gold despite falling share price
Gold miner Yamana Gold (AUY) has fallen 19% since we said to buy in October but we think it’s worth sticking with a company described by analysts as a ‘stable operator with plenty of upside’.
Gold miners can be leveraged plays on the gold price, and the firm’s falling share price reflects the 5% drop in the value of gold over the past few months as investor nervousness makes way for vaccine-induced optimism.
The company has proven itself to be a reliable operator and investor sentiment should change as it continues to demonstrate its strength. We also believe investor interest will return to gold miners as inflation expectations are rising. Gold is a natural hedge against inflation.
It produced 779,810 ounces of gold in 2020 and generated strong cash flows which has helped to significantly reduce net debt.
Yamana also has the long-term in mind, illustrated by its plan to increase output to 1 million ounces of gold a year through to 2030, underpinned by ‘continued operational success’ at its existing mines, which have consistently replaced mineral reserves above depletion.
The Canadian mining giant said it is ‘well-positioned to fund all exploration, expansions, projects and opportunities’ identified in its guidance and decade-long outlook using available cash and cash flow from operations.
SHARES SAYS: Yamana is a reliable operator with a strong plan for growth. Use the dip as a buying opportunity.