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« DOW Jones Industrial Average: Smoke and Mirrors! | Main | The US Dollar rallies, but for how long? »
Sunday
Oct122008

Yamana Gold Incorporated: Suffering!

AUY Chart 13oct08


Yamana Gold Incorporated has had a torrid year losing almost 70% of its stock price to close at $5.54 on Friday having lost 19.48% in one day on heavy volume. Gold took a hammering on Friday too dropping from around $920/oz in Hong Kong to $825/oz in New York before improving to close at $849.90. However the damage to the stocks had already been done.

The technical indicators are in the oversold zone so we are looking for a sizable rally during gold’s next up leg. We do need to see Yamana bounce from these levels in order to restore some confidence in this stock.

Yamana Gold has a market capitalisation of $3.87 billion, with 698.66 shares outstanding and now has a P/E ratio of 18.13. The company’s next set of financial results is due after the close of business on 4th November, which we eagerly await.

Scotia Capital in an article carried by The Financial Post recently, published the following three reasons to own Yamana:

Yamana Gold Inc. (YRI/TSX) should likely benefit from the miseries of the current credit crunch, with its ability to buy up companies that are financially less secure, according to Scotia Capital analyst Trevor Turnbull. "Yamana's core operations generate excess cash even under bearish scenarios," he said in a note to clients.

His three top reasons for owning Yamana stock:

1. Yamana is trading at less than five times estimated 2009 cash flow of $1.28 per share:

2. One-year growth of 43% and two-year growth of 54% is fully financed by cash flow.

3. Yamana can buy and fund opportunities arising from the seized financing environment.

However, this current dash for cash is not taking any prisoners so good quality stocks are not immune from investors who are largely unwinding their positions in order to meet margin calls.

We currently hold both the stock and Call Options on Yamana Gold, so we will be keeping a close eye on it as the various rescue packages for the worlds financial system are revealed and implemented.



Yamana Gold Incorporated is appearing on a screen near you as it trades as AUY on the New York Stock Exchange and as YRI on Toronto Stock Exchange and as YAU on the London Stock Exchange.

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Reader Comments (11)

Thank you! I believe that we really need some encouragment right now, even though long term we should do ok if we can keep our hand on the tiller. Remember, even though we can't control the wind, we can adjust the sails.

Best to everyone,
John

October 13, 2008 | Unregistered CommenterJohn Ell

A nice little jump today of 7.58%, lets hope for more of the same.

October 13, 2008 | Unregistered CommenterGold Prices

I still think we are in for some more short-term pain before gold takes off again. We seem to be in a classic A-B-C Major Wave TWO correction that is re-tracing a good portion of Major Wave ONE that began in 2001 and ended on March 17, 2008. But I believe we are still missing the final C-leg down (JMO). After one more trip to the $750 area we should be ready for take-off. Hope everyone still has some dry powder left and didn't buy too early this year! GLTA...

October 14, 2008 | Unregistered CommenterNorman

Tomorrow, we should get some goods news from the company.

October 14, 2008 | Unregistered CommenterDavid

and how would you know that David?

October 15, 2008 | Unregistered CommenterGold Prices

$5.24 a share. It wasn't that low until Dec. 2005. We'll need a major event to turn that around.

October 16, 2008 | Unregistered CommenterDavid

David, I am wondering what that major event might be. I think that it will have to be extremely good news, if only due to the fact that gold, known as a safe haven in troubled times, could not provide solace in place of cash at this time. I would be interested in hearing comments.

Also, Reuters ran the following today, and since I don't know very much about these data, I am interested to know whether or not you or someone reading this post might see some significance for the future precious metals market. Thanks for all comments.
John

Daily gold transfers rise in September: LBMA
Thu 16 Oct 2008, 15:01 GMT

[-] Text [+] LONDON (Reuters) - Gold transferred between accounts held by bullion clearers rose 6.4 percent to a daily average of 24.8 million ounces in September from a month before, the London Bullion Market Association (LBMA) said on Thursday.

The clearing statistics measure how much gold and silver are transferred on a net basis between the accounts held at the bullion clearers.

Based on an average fixing of $829.93 an ounce, 1.1 percent lower than the August average, value rose to a daily average of $20.5 billion. The number of transfers declined 1 percent to a daily average of 2,251.

Measured year on year, gold statistics were higher. Ounces transferred rose 15.3 percent, value jumped 34.0 percent and the number of transfers increased by 25.8 percent.

Silver transfers fell 4.2 percent to a daily average of 143.7 million. Based on an average fixing of $12.37, 13.8 percent lower than the previous month's average, the value of transfers fell to a daily average of $1.7 billion.

The number of transfers fell 7.8 percent to a daily average of 576. Measured year-on-year, ounces transferred rose 32.9 percent and value increased 22.3 percent. The number of transfers rose 15.9 percent.

© Reuters 2008. All Rights Reserved. | Learn more about Reuters

October 16, 2008 | Unregistered CommenterJohn Ell

Perhaps the gold trading may be transferring to London. I do know that open interest had been falling in the New York market. Perhaps there are more gold contracts going into delivery in London. This should shrink supply in the warehouse.

October 16, 2008 | Unregistered CommenterDavid

I think that all stocks will suffer in the long run but the increasing pressure to meet the demand for Gold as physical
money and as a tangible asset will keep mining stocks supported. Though the prices for Gold Mining Stocks have suffered along with the market due to hedge funds liquidation the reality is that the demand for Gold as a tangible asset will be the vehicle of choice no matter what the market does.
Oil will continue to drop but Gold will hold its historical value and this in turn will cause the miners to increase in there share pricein this bear market.

November 21, 2008 | Unregistered CommenterDoug

We have seen so far for the month of November the bottom price for Gold at 695.00 an ounce. today as I write this comment Gold is trading at $793.00 and it is up at $43.20
an ounce.The price of oil is trading at 48,70 and is going down.
Need I to say any more !!!!!

November 21, 2008 | Unregistered CommenterDoug

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