Yamana Gold (NYSE:AUY) has held a lot of favor in the market recently, but their luster has somewhat came off of them after production levels fell below expectations.
One thing Yamana has always had going for it was its cost controls, which were as good as any in the gold mining industry. But with the production levels that's a different story, as that's where the long-term growth is, and when you're already the top company for operational costs, your growth in profits can only come from increased production.
To add some insult to injury, some unexpected higher production costs from some of its South American properties had a drag on excitement for the company going forward as well.
The bottom line for Yamana is they're going to have to prove themselves over the next year that they can continue to hold costs down while meeting their projected production goals.
There are too many other gold companies which can increase production levels even if they aren't as good as Yamana at cost management. Many times investors look at production levels before operational costs, and those that do will bypass Yamana for what they perceive as greener pastures.
Right or wrong, that is the case. So Yamana needs to work hard to convince investors they can contain costs while boosting gold production or there won't be a reason to invest in them, in the minds of many people that otherwise would.
Sunday, March 14, 2010