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The Gold Stock Strategist analyzes leading junior gold producers and major gold mining companies.

Comments are welcomed!

Tuesday, January 12, 2010

Yamana Gives 2010 and 2011 Guidance

Toronto, Canada-based Yamana Gold Inc. ($AUY) (TSE:YRI) announced its outlook today for production, cash costs, and capital expenditures for fiscal years 2010 and 2011.

Production

The company estimates annual production for 2010to range from 1,030,000 to 1,145,000 gold equivalent ounces (GEO) and 1,045,000 to 1,150,000 in 2011, an increase of 12 percent over 2009.

Yamana CEO Peter Marrone stated, "Our objective has been to create consistency and reliability in our operations with a sustainable production platform of approximately 1.1 million gold equivalent ounces at consistent cash costs. Our outlook for the next few years maintains that objective. Going forward, our development stage and exploration projects, in addition to further value enhancing opportunities, will provide Yamana with a superior organic growth profile and value proposition."

The production estimates do not include additional production from Agua Rica or new discoveries at El Penon. Updates are expected in the first quarter of 2010. QDD Lower West additional production is not included. An update is expected in the second half of 2010.

Growth is expected to ramp up big time in 2012 with four development projects are expected to begin production. These four projects are expected to contribute an additional 390,000 GEO annually.

Yamana assumes gold prices in 2010 and 2011 at $1,050 per ounce, silver prices at $18.80 per ounce, copper prices at $2.75 per pound and zinc prices at $1.00 per pound.

Cash Costs

By-product cash costs, excluding production from Alumbrera, are expected to be below $200 an ounce in both 2010 and 2011. Co-product cash costs from continuing operations are expected to range between $360 and $400 in 2010 and $370 to $400 per GEO in 2011.

Capital Expenditures

Capital expenditures for 2010 are forecast to be $515 million and $455 million in 2011. Sustaining capital expenditures in 2010 are forecast to be $230 million and in 2011 are expected to be $155 million.

Conclusion

Yamana is a solid play for buy and hold investors who see the price of gold setting new highs for 2010 and beyond. Yamana share prices corrected downward by 23% as the price of gold dropped off of all-time highs of $1,226 an ounce in November 2009 and appears to be undervalued at a current share price of $12.27. Yamana remains the premiere growth play in the gold mining sector among majors and mid-tier gold producers.

Yamana Gold is one of the Gold Stock Strategist newsletter “Growth” recommendations. Since being recommended in the August 2009 issue of the Gold Stock Strategist, Yamana’s share price has risen 29.3 percent.

Disclosure: No position

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