The ever-optimistic Yamana Gold Inc. (USA) (NYSE:AUY)


Dallas, Texas 09/12/2013 (Financialstrend) – All eyes are now trained on the 17-18 September FOMC meeting and the impending QE tapering announcement from the Fed. There is a distinct possibility that the United States government will reach its debt-limit by the middle of October. The country’s Federal Reserve is expecting to cut down its monthly bond-buying program.

Doubts over tapering

However, there are still some doubts around the tapering as there is a risk of the United States defaulting on debt. Investors have been placing their funds into safer avenues and gold and companies like Yamana Gold Inc. (USA) (NYSE:AUY) have taken a definite hit. Market uncertainty is rife and gold is very volatile right now. Investors might just consider some investments in various producers of gold as the gold market might end up recovering after all.

If the Fed ends up initiating tapering its QE post the FOMC meeting, the prices of actual gold and paper gold might just start fading on a short –term basis, even as investor confidence in the country’s economy strengthens. On the other hand, if the Fed decides against commencing tapering this month, there is a distinct possibility of gold prices rallying as early as October. The rise in gold prices will help gold mining companies like AUY recover their lost margins from the slump that gold has gone through so far this year. Now investors have an opportunity to actually generate alpha from different mining stocks that are currently trading below their book-value in the manner that Yamana Gold Inc. (USA) (NYSE:AUY) is.

Cost-cutting efforts

The company has been on a cost-cutting spree and has been slashing operational costs to bolster margins and free cash-flow per ounce of gold. AUY managed to save $11%M from its extensive cost-chopping initiatives that began in April. Its AISC for the Q2 came in at $950 per ounce which was down from the $1,014 that it stood at, six months ago. AUY expects its production levels to rise and it is also looking forward to a lower AISC in the latter half of 2013. This is the period that will reflect its new cost-structure.