March 26, 2008 / 8:48 PM / in 11 years

Yamana Gold profit falls short, stock dips

OTTAWA (Reuters) - Yamana Gold (YRI.TO) said 2008 marks the “unveiling” of a bigger, more powerful producer created from last year’s acquisition push, but investors appeared impatient for proof on Wednesday.

Yamana Gold Inc's Chief Executive, Peter Marrone speaks during a Reuters Mining Summit in London March 11, 2008. REUTERS/Luke MacGregor

Yamana, which last October acquired Meridian Gold and Northern Orion Resources for $4.8 billion, said its fourth-quarter results reflect a “transformational” period.

It reported earnings late on Tuesday that fell well shy of estimates, reflecting higher operating costs and a stronger Brazilian currency.

The Toronto-based company, whose mine operating costs rose to $76.6 million from $8.9 million, also said it had not yet received $20.8 million from the sale of copper concentrate in the quarter. It expects payment in the first quarter.

“We created a company that had significantly more assets in different parts of the Americas, parts that we wanted to be in, Chief Executive Peter Marrone said on a conference call. “2008 is the unveiling of that transformation and what that does in terms of our performance.”

Yamana fourth-quarter profit rose to $47.1 million, or 8 cents a share, from $6.1 million, or 2 cents a share, in the year-before quarter.

Analysts expected a profit of 20 cents a share according to Reuters Estimates.

“The issue with the company is that they’ve got to deliver and people are looking for them to be able prove that they can operate,” said an analyst who asked not to be named. “There wasn’t really much in this quarter that alleviates peoples’ concerns on that front.”

Yamana shares were off nearly 5 percent at C$16.42 on the Toronto Stock Exchange and at $16.11 in New York late on Wednesday afternoon.

Canaccord Adams analyst Steven Butler said in a note to clients that much of the miss reflects lower copper concentrate prices, which have turned higher in the first quarter.

Revenue more than tripled in the quarter to $218.6 million on higher production, acquisition gains, and higher prices.

Quarterly gold production was 229,488 gold equivalent ounces. The average realized price was $795 per ounce of gold, $3.19 per pound of copper and $14.14 per ounce of silver.

Average cash costs, factoring sales from other metals, was negative $9 per gold equivalent ounce.

Yamana said it will stick to smaller-scale developments in 2008 that are close to existing infrastructure, an effort to skirt the risk of cost overruns that typically accompany large projects.

It targets production of 1.3 million gold equivalent ounces in 2008 and 2.2 million ounces by 2012.

Yamana, which has seven operating mines and five in development, is targeting first-quarter production of about 220,000 gold equivalent ounces, and copper production from its Chapada mine in Brazil of about 30 million pounds.

Yamana said it will focus on operations at its Chapada and Jacobina mines in Brazil and its Gualcamayo mine in Argentina.

At its El Penon mine in Chile, it now expects to reach annual production of 500,000 gold equivalent ounces by the fourth quarter of 2008, up from its previous 425,000 to 435,000 ounce estimate. In 2008, production is seen at 470,000 ounces.

Exploration efforts will target El Penon, Gualcamayo and its Mercedes project in Mexico, Yamana said.

($1=$1.02 Canadian)

Reporting by Susan Taylor; Editing by Janet Guttsman

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