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Why Yamana Gold Inc.’s Stock Is Sinking Today

Matthew DiLallo, The Motley Fool
Updated

What happened

Shares of Yamana Gold Inc. (NYSE: AUY) slumped on Friday and were down nearly 12% at 2:45 p.m. EST. The culprit was the gold miner's poorly received fourth-quarter results.

So what

Yamana Gold reported a loss from continuing operations of $191 million, or $0.20 per share, which was a far cry from the $0.03 per-share profit that analysts expected. The main issue was that the company took a $356 million non-cash impairment charge relating to the remeasurement of Gualcamayo and related exploration properties in Argentina, which the company is in the process of selling. That writedown was one of several non-cash charges and other items that impacted the quarter to the tune of $250.7 million, or $0.26 per share.

A close-up of a gold nugget in a person's hand.
A close-up of a gold nugget in a person's hand.

Image source: Getty Images.

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While the company's financial results underwhelmed, "in 2017 we exceeded our production guidance for all metals and did so at costs in line with expectations," according to CEO Peter Marrone. Further, he noted that, "Throughout 2017 and into 2018 we advanced various initiatives to complement cash flow from operations, including the sale of certain exploration assets, refinancing a portion of our debt to extend the tenor of our fixed term debt profile, and initiating a program of strategic evaluation of our portfolio and certain monetization initiatives."

As a result of those moves, the CEO stated that Yamana is "in a strong financial position and are well positioned to deliver a step change in free cash flow in the second half of 2018 and more significantly into 2019," as its new Cerro Moro mine ramps up.

Now what

That rise in free cash will hopefully start creating value for investors, who have suffered as the stock has done nothing but slump in recent years. This potential upside is what makes Yamana one of the top gold stocks to consider buying, as it seemingly becomes even more attractive after today's slide.

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Matthew DiLallo has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.