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Yamana Gold (AUY) Hits New 52-Week High: What's Driving It?

Zacks Equity Research

Yamana Gold Inc. AUY scaled a fresh 52-week high of $4.00 on Dec 30, before closing the session at $3.95.

The company has a market cap of around $3.8 billion. Average volume of shares traded in the past three months has been 15,337.8K.

The stock has surged 67.4% in the past year compared with the industry’s rally of 49.9%.



Factors Driving the Rally

Back-to-back dividend hikes, healthy prospects of major mines and expectations of a strong fourth-quarter performance are primary factors driving the company's shares.

Earlier this month, Yamana Gold announced an additional 25% hike in dividend to 5 cents per share per year. The dividend increase is effective first-quarter 2020. Notably, the latest dividend hike follows its previously announced 100% hike in dividends in third-quarter 2019.  As such, the company has increased dividends by 125% since third-quarter 2019.

The move highlights the company’s commitment to gradually hike dividend following an increase in free cash flows. It also reflects Yamana Gold’s continuing initiatives to monetize its portfolio of non-producing financial instruments and assets.

The company's fourth quarter is generally the strongest quarter traditionally and the trend is likely to have continued in 2019. A strong fourth-quarter performance is expected to bring production costs in line with annual guidance.

Moreover, the fourth-quarter operating costs are expected to benefit from strong performance at Minera Florida and El Penon due to improvement in grades. The company is also expected to gain from the start of production of four underground mines at Cerro Moro, which includes the high-grade Zoe underground mine.

It may also be noted here that in third-quarter 2019, higher gold and silver feed grade primarily drove the improvement in El Penon mine. The company expects this trend to continue in the fourth quarter. El Penon and Minera Florida are likely to be key factors influencing the company’s upcoming fourth-quarter earnings release.

Yamana Gold Inc. Price and Consensus

Yamana Gold Inc. Price and Consensus

Yamana Gold Inc. price-consensus-chart | Yamana Gold Inc. Quote

Zacks Rank & Key Picks

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

Some better-ranked stocks in the basic materials space are Impala Platinum Holdings Limited IMPUY, Pan American Silver Corp PAAS and B2Gold Corp BTG. While Impala Platinum and Pan American Silver currently sport a Zacks Rank #1 (Strong Buy), B2Gold carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Impala Platinum Holdings has projected earnings growth rate of 255.2% for fiscal 2020. The company’s shares have skyrocketed 307.6% over a year.

Pan American Silver has an estimated earnings growth rate of 56.4% for 2019. Its shares have returned 63% in the past year.

B2Gold has an expected earnings growth rate of 43.8% for 2019. The company’s shares have gained 35.6% in the past year.

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