Yamana (AUY) Still Has Questions to Answer

Yamana (NYSE:AUY) continues to be the company that is always just about to make it, but leaves shareholders and investors disappointed.

One thing it does have going for it, as do other gold equity companies, is the recent sell off, which may have provided a decent entry point, although the company has regained some of that.

As usual, a number of things have to align right for Yamana to provide solid returns, but it also comes with more downside risk than its peers and larger competitors.

The recent sell off has placed Yamana close to its 50 day moving average and in the process of forming a reverse head and shoulders pattern

If the company can find support, it may have the strength to make a decent run.

One major challenge Yamana faces is in currency risks in South American countries where inflation has been rising.

A short-term negative but long-term positive for Yamana is its selling of its 87.5% stake in the Agua Rica project to Alumbrera partners Goldcorp (NYSE:GG) and Xstrata.

As a result, development costs will drop while the company will get a royalty stream once production at the project begins. Royalties with little in the way of capex will strengthen the company going forward.

Yamana closed Monday at $12.48, gaining $0.38, or 3.14 percent.

Goldcorp (NYSE:GG), Yamana (NYSE:AUX), Barrick (NYSE:ABX), Extorre (TSE:XG) and Argentine Glacier Law

The new glacier law in Argentina, which was approved by the Argentine Senate, and which President Cristina Fernandez has said she will sign, has generated some concern for the mining industry, especially gold miners in the country.

Fortunately, most of this is posturing and show, as very little in the way of mining will be affected by the law, either now or in the future.

Companies with projects in the country like Goldcorp (NYSE:GG), Yamana (NYSE:AUX), Patagonia (OTC:PATAF) and Extorre (TSE:XG) shouldn't have any problems as all, as they don't have mines in the zone being supposedly protected.

What this does is give the appearance of the government protecting the region, when in fact there is really little to be protected because no one is mining the area.

The new law will limit any economic activity in areas close to glaciers in the country.

As far as mining exposure in Argentina, Goldcorp now has it through their recent acquisition of Andean Resources, whose flagship mine is the Cerro Negro gold-silver mine being developed in the country. That won't be affected by the new law.

Extorre Gold Mines is developing the Cerro Moro gold mine, Yamana the Agua Rica copper-gold- molybdenum mine, and Patagonia Gold PLC (OTC:PATAF) its Lomada project. All of which won't be affected by the new law.

There is one exception to this, and that is Barrick Gold Corp. and their huge Pascua Lama gold and silver mine.

Radical environmental groups have attempted to derail the project, saying the company has been destroying glaciers through their practices.

Rodrigo Jimenez, Barrick vice president of corporate affairs said, "We do not mine on glaciers and, in fact, Barrick has already implemented a comprehensive range of measures to protect them as well as other sensitive environmental areas around both the Veladero mine and the Pascua-Lama project."

It remains to be seen if environmentalists use the new law to attempt to disrupt the project. They almost assuredly will.

Barrick has began the construction of the mine after many legal battles and challenges. Now they are waiting on an agreement between between Chile and Argentina over a tax-sharing agreement, and permits.