Adrian Day provides an overview of recent developments at three resource companies on his list. The recent pullback in precious metals stocks has provided opportunities to add to positions, and there is one buy.
Yamana Gold Inc. (YRI:TSX; AUY:NYSE; YAU:LSE) continues to be a mixed bag. Operations are on track at most mines, other than Chapada; despite the Chapada shortfall, the company says it remains on track to meet its production guidance around 1.3 million ounces. The company is taking steps to reduce its debt, selling a small mine, Mercedes. It is also looking at selling part of its Aqua Rica mine. Exploration, particularly around existing mines, has been promising, while its Argentinean properties could see some advance, given the change in government. If Yamana can deliver, the stock could see a rerating, since on many metrics it is undervalued relative to its peer group. But there always seems some stumble with Yamana. It missed the opportunity to sell its Brazilian assets, announced with fanfare last year. The problems at Chapada, representing a quarter of the company’s asset value, were unexpected. We will hold, waiting lower prices and evidence of improving operations and balance sheet.
Short sellers give us a great buying opportunity
Vista Gold Corp. (VGZ:NYSE.MKT; VGZ:TSX) is much the same story, but the last several months have clearly demonstrated the stock’s tremendous leverage to higher gold prices, moving from 27 cents at the beginning of the year to a high of over $2 in June. The move was exaggerated by two newsletter recommendations. Disingenuously, one of these letters that pushed it up then turned and recommended shorting the stock, which—partly—led to the stock plunging. This trade might look good on paper for the letter to boast about, but I wonder how it worked in practice for …read more