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Yamana Gold Insiders Increase Stakes

- By Alberto Abaterusso

Yamana Gold Inc. (AUY) soared 6.51% to $2.29 per share on the New York Stock Exchange on Thursday following the company's announcement that Executive Chairman Peter Marrone has increased his ownership of the Canadian miner. President and CEO Daniel Racine also invested in additional shares.

Marrone's stake increased 66.4% to 1,628,395 common shares, while Racine's position was boosted 41.4% to 239,176 common shares.

Including restricted, deferred and performance shares, Marrone owns 4,841,792 shares, while Racine's total holding amounts to 731,122 units.

As part of an individual plan to increase their ownership in Yamana Gold, Marrone and Racine have bought more than one million ordinary shares combined over the last 12 months.

Marrone now holds 0.17% of Yamana Gold, while Racine now owns 0.03%.

When top executives increas their holdings, it is good news for shareholders because it means that interests of the management team is aligned with that of the shareholders. Usually, such news suggests some upside in the stock's price.

December surveys indicate investors should hold Yamana Gold since the mean recommendation rating is 2.6 out of 5. The recommendaton results from one strong buy, four buys, seven holds and two underperform ratings.

Consensus is for a 68.6% upside in the market value of Yamana Gold from the closing share price on Thursday to $3.86 over the next 52 weeks.

Yamana Gold's performance over the next year will depend on commodity prices.

The miner has a market capitalization of about $2.18 billion. The share price has tumbled 23% for the 52 weeks through Thursday. The price of $2.29 is slightly below the 50-day simple moving average line and well below the 100- and 200-day lines.

The stock has a price-book ratio of 0.55 versus an industry median of 1.74, an EV-to-EBITDA ratio of 6.66 compared to an industry median of 9.3 and a trailing 12-month EBITDA margin of 18.6% versus an industry median of nearly 24%.

The Canadian miner needs high commodity prices to surpass most of its competitors in terms of operating profitability. Fortunately, metals could rise substantially next year. According to Exploration Insights' independent exploration analyst Brent Cook, a mix of geopolitical and economic uncertainties should bode well for gold in 2019, with mining companies outperforming the yellow metal.

The same risks should also propel copper through 2019.

Yamana Gold is a Canadian producer of gold, silver and copper. The company holds mineral deposits in Canada, Brazil, Chile and Argentina.

For full 2018, the miner sees gold output of 920,000 ounces, which, based on strong year-to-date production, is up 20,000 ounces from earlier guidance. Full-year silver production is at 7.55 million ounces, lower than the original guidance of 8.15 million ounces. Copper production guidance has also been increased to 125 million pounds versus the previous 120 million pounds.

Analysts are expecting Yamana Gold to close the year with net earnings of 12 cents per share, mirroring 4 cents upside from 2017, and $1.96 billion in revenue. The top line is projected to jump 8.6% year over year.

GuruFocus has assigned a financial strength rating of 7 out of 10.

The miner is reporting 949.34 million shares outstanding. Of that, 65.22% is institutional ownership.

During the third quarter, Joel Greenblatt added 45.01% to his holding, while Donald Smith reduced his position by 49.29% to 21,845,224 shares.

Disclosure: I have no positions in any securities mentioned in this article.

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This article first appeared on GuruFocus.