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Shares of Canada-Based Gold Miner Upgraded to Outperform

Streetwise Reports, Streetwise Reports
0 Comments| August 8, 2018

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A BMO Capital Markets report explained the rationale behind the change.

Click to enlarge

In a July 30 research note, Andrew Kaip reported that BMO Capital Markets elevated its rating on Yamana Gold Inc. (YRI:TSX; AUY:NYSE; YAU:LSE) to Outperform to reflect the positive outlook for the company. "Given solid execution at Cerro Moro and a transition to free cash flow generation projected for Q3/18, we expect shares of Yamana to rebound as the company's overall risk profile moderates," Kaip added.

Kaip provided three primary reasons for the rating upgrade.

One, given its Q2/18 numbers, Yamana is expected to exceed full year 2018 production guidance for gold, silver and copper on the heels of starting Cerro Moro ahead of schedule.

Two, now that 18 months of expending capital to construct Cerro Moro are behind Yamana, it can now generate cash and strengthen its balance sheet. "At spot metal prices, we see Yamana moving toward generating free cash flow of $100 million per quarter and net debt:EBITDA declining to 1.2x (current 2.1x) by mid-2019," Kaip noted.

Three, upside remains in Yamana's share price, as it is still trading at a discount to its peers. The two factors that led to its lower comparative share price—high financial leverage due to spending on Cerro Moro and execution risk at that project—are no longer in play. Therefore, Kaip wrote, "we see room for the share price to rise above $4."

In fact, BMO has a target price of CA$4.25 per share on Yamana. The stock is currently trading at around CA$3.05 per share.

1) Doresa Banning compiled this article for Streetwise Reports LLC and provides services to Streetwise reports as an independent contractor. She or members of her household own securities of the following companies mentioned in the article: None. She or members of her household are paid by the following companies mentioned in this article: None.
2) The following company mentioned in this article is a billboard sponsor of Streetwise Reports: None. Click here for important disclosures about sponsor fees.
3) Comments and opinions expressed are those of the specific experts and not of Streetwise Reports or its officers. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
4) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article, until one week after the publication of the interview or article.

Disclosures from BMO Capital Markets, Yamana Gold, July 30, 2018

Analyst's Certification: I, Andrew Kaip, hereby certify that the views expressed in this report accurately reflect my personal views about the subject securities or issuers. I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this report.

Analysts who prepared this report are compensated based upon (among other factors) the overall profitability of BMO Capital Markets and their affiliates, which includes the overall profitability of investment banking services. Compensation for research is based on effectiveness in generating new ideas and in communication of ideas to clients, performance of recommendations, accuracy of earnings estimates, and service to clients.

Analysts employed by BMO Nesbitt Burns Inc. and/or BMO Capital Markets Limited are not registered as research analysts with FINRA. These analysts may not be associated persons of BMO Capital Markets Corp. and therefore may not be subject to the FINRA Rule 2241 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account.

Company Specific Disclosures
Disclosure 8C: BMO Capital Markets or an affiliate has a financial interest in 0.5% or more in the issued share capital of Yamana Gold.
Disclosure 9: BMO Capital Markets makes a market in Yamana Gold.
Disclosure 16: A research analyst has extensively viewed the material operations of Yamana Gold.
Disclosure 17: Yamana Gold has paid or reimbursed some or all of the research analyst's travel expenses.

For Important Disclosures on the stocks discussed in this report, please click here.


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