Prospecting for Gold at Yamana (AUY)

With its aggressive plan for production growth, Yamana is particularly interesting because of its combination of untapped in-ground assets and un-hedged position in gold.

In terms of gold production, Yamana's numbers are astounding. During the first nine months of 2006, Yamana produced 246,829 ounces of gold, including 88,781 during its most recent quarter (ended Sept. 30). Management expects to achieve an annual production rate of 600,000 ounces of gold by the end of 2007, and reach an annual rate of 1 million ounces by late 2008.

Third-quarter earnings, however, disappointed Wall Street analysts because of production levels that missed expectations and rising costs at some of Yamana's mines. For the quarter, Yamana reported earnings of 2 cents a share on revenue of $50.3 million, missing consensus estimates for earnings of 4 cents a share and revenue of $58.9 million.

But while we believe the company has an attractive mix of potential earnings growth and commodity exposure, we want to maintain our discipline of purchasing stocks at the point when upside potential is significantly greater than risk.

So for now we will remain on the sidelines. Yamana's stock has almost tripled since trading below $4 a share a year ago, while analyst expectations have already priced in the majority of the company's future growth.

A number of risks could drive shares lower in the short term, such as another earnings miss, a delay in the company's growth plans, increasing labor costs or a significant decrease in the expected future price of gold. While we believe shares could reach as high as $15 in the next 12 months, we will wait for a pullback closer to $9 before considering adding Yamana to our model portfolio.

Mi comentario: Una minera de oro de crecimiento... pero las minas de oro tienen PERs muy altos, y ésta que encima es de crecimiento, lo tiene estratosférico, si se mira el de 2006. Ahora bien, considerando el de 2007, sería de lo más barato en minas de oro. Riesgo elevado, pero que puede valer la pena.