1. Homepage
  2. Equities
  3. Canada
  4. Toronto Stock Exchange
  5. Yamana Gold Inc.
  6. News
  7. Summary
    YRI   CA98462Y1007

YAMANA GOLD INC.

(YRI)
  Report
Delayed Toronto Stock Exchange  -  10:09 2022-08-08 am EDT
6.590 CAD   +2.65%
08/03YAMANA GOLD : Second Quarter 2022 Report
PU
08/02Sprott Launches First ESG Gold ETF; Key Partners Include Agnico Eagle, Yamana Gold
MT
08/02GOLD ETF BRIEF : Sprott Launches First ESG Gold ETF
MT
SummaryQuotesChartsNewsRatingsCalendarCompanyFinancialsConsensusRevisions 
SummaryMost relevantAll NewsAnalyst Reco.Other languagesPress ReleasesOfficial PublicationsSector news

Fitch Maintains Yamana's 'BBB-' IDR on Rating Watch Positive

06/16/2022 | 04:49am EDT

Fitch Ratings has maintained the Rating Watch Positive on Yamana Gold Inc.'s 'BBB-' Long-Term Issuer Default Rating (IDR), senior unsecured revolver and note ratings following the announcement that Gold Fields Limited and Yamana have entered into a definitive agreement whereby Gold Fields will acquire Yamana in an all-share transaction.

Yamana Gold Inc.'s ratings reflect the company's portfolio of five operating mines with low jurisdiction risk, average cost positions in the second quartile of the global gold cost curve, and ability to generally replace reserves with modest capital outlays, coupled with moderate financial leverage and solid liquidity.

The Rating Watch Positive reflects Fitch's expectation that the combined company will benefit from greater scale and diversification, as well as improved ability to exploit its project pipeline. The acquisition is expected to close in 4Q22, but may take longer than six months. Should the transaction close as anticipated, Fitch would remove the Rating Watch Positive and rate Yamana under the agency's Parent and Subsidiary Linkage Criteria on a consolidated basis with Gold Fields Limited (Not Rated). If the agreement is dissolved, Fitch would remove the Rating Watch Positive and assign a Rating Outlook.

Key Rating Drivers

Average Cost Position: Fitch believes Yamana's average cost position in the second quartile of the global cost curve in 2021 is consistent with a 'BBB-' rating. Jacobina (21% of 2021 gold production) is in the first quartile; Canadian Malartic (40%) and El Penon (20%) are in the second quartile; Minera Florida (10%) is in the third quartile; and Cerro Moro (9%) is in the fourth quartile.

Size and Scale: Fitch views Yamana's current operating size, scale and diversification as relatively limited compared to other investment grade peers, although the company has a promising pipeline of exploration and development projects. Yamana's production is guided to roughly one million gold equivalent ounces (GEO) per year, which is less than Endeavour Mining plc's (BB/Stable) 2021 gold production at 1.5 million ounces, Kinross Gold Corporation's (BBB/Stable) guidance at about 2.2 million GEO in 2022, Gold Fields 2021 gold production at 2.2 million ounces and AngloGold Ashanti Limited (BBB-/Stable) 2021 gold production at 2.5 million ounces.

Low Operating Reserve Lives: Fitch believes the ratio of reserves to production under-represents Yamana's operating mine lives, as the company finds it more efficient to drill while mining at existing operations. At seven years, however, Yamana's average operating reserve life is shorter than investment grade peers at 10+ years.

Acquisition by Gold Fields: Fitch views the transaction as credit positive since the combined company would have greater scale and diversification and sources of development capital for Yamana, and improve the jurisdiction risk and project pipeline for Gold Fields. Pro forma for the transaction, the combined company would have had 3.4 million GEO production in 2021, low third quartile all-in sustaining costs, a strong project pipeline in favorable jurisdictions, very strong liquidity represented by over $1 billion in cash on hand and more than $2 billion of undrawn revolving credit facilities and low financial leverage at current gold prices.

Derivation Summary

Yamana is a midsize gold producer of roughly one million GEO per year, which is less than Endeavour Mining plc's (BB/Stable) 2021 gold production at 1.5 million ounces, Kinross Gold Corporation's (BBB/Stable) guidance at about 2.2 million GEO in 2022, and AngloGold Ashanti Limited's (BBB-/Stable) 2021 gold production at 2.5 million ounces.

Yamana's operating reserve life at seven years is on the low end for investment grade peers. AngloGold Ashanti's operating reserve life is about 10 years, similar to Kinross' continuing operations and Agnico Eagle Mines Limited's (BBB/Positive) continuing operations at about 11 years. Fitch notes that Yamana has been able to regularly replace reserves.

Total debt/operating EBITDA for Yamana and most peers is roughly 1.0x or below given very high gold prices.

Key Assumptions

Fitch's key assumptions within its rating case for the issuer:

Gold price at $1,800/ounce in 2022, $1,600/ounce in 2023, $1,400/ounce in 2024 and $1,300/ounce thereafter;

Silver at $20/ounce in 20221 and $17/ounce thereafter;

930,000 average annual GEO produced;

Capex at about $450 million in 2022 and about $300 million per year on average, thereafter.

RATING SENSITIVITIES

Factors that could, individually or collectively, lead to positive rating action/upgrade:

Acquisition as contemplated by Gold Fields;

Increase in size to around 1.5 million gold equivalent ounces and diversification while maintaining a cost position in the second quartile of the global cost curve;

Expectations that total debt/operating EBITDA will be below 1.5x on a sustained basis;

Maintaining an average operating mine life greater than 10 years at core mines.

Factors that could, individually or collectively, lead to negative rating action/downgrade:

Deterioration in gold prices and internally generated cash flows without an equal management response through lower costs, reduced spending, asset sales or raising additional equity;

Sustained negative FCF;

Expectations that total debt/operating EBITDA will be greater than 2.5x on a sustained basis.

Best/Worst Case Rating Scenario

International scale credit ratings of Non-Financial Corporate issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are based on historical performance. For more information about the methodology used to determine sector-specific best- and worst-case scenario credit ratings, visit https://www.fitchratings.com/site/re/10111579.

Liquidity and Debt Structure

Solid Liquidity: Cash on hand was $516 million at March 31, 2022, and the $750 million revolver due 2026 was fully available. Cash includes $217.3 million held by the MARA project. The next note maturity is the $282.9 million, 4.625% 10-year notes due December 2027.

Fitch expects FCF to be fairly neutral at its gold price assumptions in 2024 and 2025 given opportunities for capital spending and the company's dividend policy.

Issuer Profile

Yamana Gold Inc. is a mid-tier producer of gold and silver, domiciled in Canada, with mines in Canada (40% of gold production from continuing operations in 2021), Chile (30%), Brazil (21%) and Argentina (9%).

Summary of Financial Adjustments

No material financial adjustments have been made outside standard criteria.

REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING

The principal sources of information used in the analysis are described in the Applicable Criteria.

ESG Considerations

Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. For more information on Fitch's ESG Relevance Scores, visit www.fitchratings.com/esg.

RATING ACTIONS

Entity / Debt

Rating

Prior

Yamana Gold Inc.

LT IDR

BBB-

Rating Watch Maintained

BBB-

senior unsecured

LT

BBB-

Rating Watch Maintained

BBB-

Page

of 1

VIEW ADDITIONAL RATING DETAILS

Additional information is available on www.fitchratings.com

(C) 2022 Electronic News Publishing, source ENP Newswire

Stocks mentioned in the article
ChangeLast1st jan.
ANGLOGOLD ASHANTI LIMITED 4.37% 246.8 End-of-day quote.-24.92%
ENDEAVOUR MINING PLC 0.15% 27.12 Delayed Quote.-2.27%
GOLD FIELDS LIMITED 0.72% 156.12 End-of-day quote.-10.35%
KINROSS GOLD CORPORATION 3.93% 4.5 Delayed Quote.-41.01%
YAMANA GOLD INC. 2.49% 6.59 Delayed Quote.20.68%
All news about YAMANA GOLD INC.
08/03YAMANA GOLD : Second Quarter 2022 Report
PU
08/02Sprott Launches First ESG Gold ETF; Key Partners Include Agnico Eagle, Yamana Gold
MT
08/02GOLD ETF BRIEF : Sprott Launches First ESG Gold ETF
MT
08/02Sprott Launches First ESG Gold ETF (“SESG”)
AQ
08/02Deals of the day-Mergers and acquisitions
RE
08/02GOLD FIELDS CEO : Shareholder buy-in for Yamana takeover is still 'work in progress'
RE
07/29RBC Capital Markets Says Yamana's Q2 Results In Line With Estimates
MT
07/29TRANSCRIPT : Yamana Gold Inc., Q2 2022 Earnings Call, Jul 29, 2022
CI
07/29Earnings Flash (AUY.L) YAMANA GOLD Posts Q2 Revenue $485.6M
MT
07/29Earnings Flash (AUY.L) YAMANA GOLD Posts Q2 EPS $0.07
MT
More news
Analyst Recommendations on YAMANA GOLD INC.
More recommendations
Financials (USD)
Sales 2022 1 828 M - -
Net income 2022 272 M - -
Net Debt 2022 59,0 M - -
P/E ratio 2022 18,0x
Yield 2022 2,19%
Capitalization 4 766 M 4 766 M -
EV / Sales 2022 2,64x
EV / Sales 2023 2,55x
Nbr of Employees 5 091
Free-Float 99,6%
Chart YAMANA GOLD INC.
Duration : Period :
Yamana Gold Inc. Technical Analysis Chart | MarketScreener
Full-screen chart
Technical analysis trends YAMANA GOLD INC.
Short TermMid-TermLong Term
TrendsBullishNeutralNeutral
Income Statement Evolution
Consensus
Sell
Buy
Mean consensus BUY
Number of Analysts 11
Last Close Price 4,96 $
Average target price 6,97 $
Spread / Average Target 40,6%
EPS Revisions
Managers and Directors
Daniel Racine President, Chief Executive Officer & Director
Jason LeBlanc Chief Financial Officer & Senior VP-Finance
Peter J. Marrone Executive Chairman
Yohann Bouchard Chief Operating Officer & Senior Vice President
John A. Begeman Independent Director
Sector and Competitors
1st jan.Capi. (M$)
YAMANA GOLD INC.20.68%4 766
BHP GROUP LIMITED-6.48%135 408
RIO TINTO PLC0.73%99 092
GLENCORE PLC24.50%73 391
ANGLO AMERICAN PLC-3.95%42 366
SAUDI ARABIAN MINING COMPANY (MA'ADEN)53.63%39 497