wellington west
Investment Summary
Senior gold producer with excellent near-term growth. Yamana operates
seven mines and has several development/expansion projects in progress in
Brazil, Argentina and Chile. The Company’s core operations include the high
grade El Penon gold/silver mine in Chile and the Chapada copper-gold mine in
Brazil. Total expansionary capex of $210M-$380M is targeted for 2009. We
estimate production to rise from 0.95M oz in 2008 to 1.68M oz by 2012, with
management targeting over 2.0M oz.
The shares are recommended as Buy with a target of $12.00 per share.
Yamana is currently trading at a 2009E P/CFPS multiple of 6.0x and at a P/NAV
multiple of 0.73x, which represents attractive valuation levels relative to its
peers. We believe that strong upside potential exists from current price levels if
the company can achieve its stated growth objectives. Our net asset value
amounts to US$8.07 per share based on mine plans as currently announced,
however incorporating management’s more aggressive targets suggest a NAV of
US$10.08. We are maintaining our one-year $12.00 target and Buy
recommendation for Yamana.