Canadian company Yamana Gold (Can:YRI) will once again hang out its shingle in London, pitching a lower-risk gold portfolio than that offered by the incumbent Russia- and Africa-focused miners. Its mines are all in the Americas, ranging from a Quebec operation to one in Chile’s south.
Yamana produces around 1m ounces (oz) a year gold equivalent, which includes its silver production as well.
The main market listing, expected in the coming months, would be the group's third, on top of Toronto and New York. Yamana was listed in London between 2003 and 2013, leaving because of its low trading volumes and the “high costs”.
Yamana executive chairman Peter Marrone told Investors Chronicle that the “scores of billions” in investment available from London’s institutions had brought him back. Canada is comparatively retail-heavy, and Yamana has to compete with the behemoths of Newmont Mining (Can:NEM) and Barrick Gold (Can:ABX) for investors' cash.
There is also plenty of competition at the 1m-ounce-a-year level, although this is where Yamana has an advantage by sticking to mines in the Americas.
Compared with London’s major gold companies, Yamana sits below Polyus (PLZL) and Polymetal (POLY) in terms of production and dividend yield, and well ahead of Centamin (CEY), Petropavlovsk (POG) and more silver-heavy Hochschild Mining (HOC) on ounces produced.
Yamana’s valuation, using Mr Marrone’s preferred metric of price-to-cash-flow, also puts it towards the top of the pack in London.
Yamana is currently valued at 9 times cash flow, according to FactSet. Centamin sits at 6.7 times, while the Russian gold miners are split between the two - with Polymetal at 10 times, Polyus at 7.6 times and turmoil-prone Petropavlovsk at 5.4 times.
Yamana’s costs are at the higher end, with an all-in sustaining cost (AISC) of around $1,000 per oz gold equivalent.
Investors buying into Yamana would have to accept a dividend yield of 1 per cent. Centamin has a 4 per cent yield, even after its similar share price rise of 53 per cent this year, while the Russian players sit between 3 and 4 per cent.
