Yamana Gold Inc. AUY produced 164,141 ounces of Gold and 2.01 million ounces of silver in second-quarter 2020. The company produced total 183,582 gold equivalent ounce (GEO) during the quarter. Overall production exceeded planned production guidance for the period in discussion. Operational performance across Jacobina, El Peñón, Canadian Malartic, and Minera Florida mines also topped the planned production targets during the same time frame.

All-in sustaining costs (AISC) for the quarter were $1,125 per GEO sold on higher production, driven by the ramp-ups of the Cerro Moro and Canadian Malartic mines. However, this was partly offset by weak foreign-exchange rates. The company now expects AISC between $1,020 and $1,060 per GEO for the remaining period of the year.

The Jacobina mine produced record gold production of 5,646 ounces, marking the sixth consecutive quarter of record gold production. This was driven by higher grade and increase in throughput. El Peñón mine delivered better-than-expected gold and silver production performance during the quarter on processing higher grade ore. The Canadian Malartic mine performed well on the faster ramp up of operations and higher mill throughput following its temporary shutdown due to the coronavirus-related restrictions. The Minera Florida mine also exceeded the production plan on increased processed tons and higher feed grades. However, the Cerro Moro mine operation in the second quarter was affected by reduced workforce due to travel restrictions.

Yamana Gold projects increase in production, cost improvement and strong free cash flow in the second half of 2020. Production is expected to improve 54% in the second half compared with the 46% witnessed in the first half. The company has reaffirmed its current-year production guidance, which was revised on Apr 30, 2020, to reflect the impacts of temporary suspensions at the Canadian Malartic and Cerro Moro mines due to the coronavirus-related restrictions.

Yamana Gold strengthens the balance sheet by lowering net debt by approximately $100 million. Net debt at the end of the second quarter was below $769 million compared with the $869 million recorded in the first. In March 2020, the company drew $200 million under its revolving credit facility of $750 million, given the uncertainty related to the pandemic. In June, the company repaid $100 million while it expects to repay remaining funds before the end of the current year. At the end of the June-end quarter, the company had cash in hand of more than $320 million.

Gold prices have been up 19% so far this year mainly fueled by the coronavirus crisis. With the pandemic showing no signs of dissipating any time soon, the uncertainty regarding its impact on the global economy will continue to trigger safe-haven demand for gold. The combination of lower mined gold supply and higher demand, and geopolitical tensions are likely to drive prices north. This bodes well for Yamana Gold.

Price Performance

In the past year, shares of Yamana Gold have appreciated 112.7%, outperforming the industry’s gain of 50.2%.

Zacks Rank & Key Picks

Yamana Gold currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the basic materials space are Sandstorm Gold Ltd SAND, Harmony Gold Mining Company Limited HMY and AngloGold Ashanti Limited AU, all carrying a Zacks Rank #2 (Buy) currently. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Sandstorm Gold has an expected earnings growth rate of 33.3% for 2020. The company’s shares have surged 71.8% in the past year.

Harmony Gold has a projected earnings growth rate of 28.6% for fiscal 2020. Its shares have soared 87.7% in a year’s time.

AngloGold has an estimated earnings growth rate of 109.9% for the ongoing year. The company’s shares have appreciated 71.3% in the past year.

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