Yamana Gold Primed to Keep Its Tier 1 Status

In the eyes of many industry observers, Yamana Gold Inc. (AUY) has stepped up in class and can now be considered among Canada's Tier 1 gold producers. According to RBC Capital Markets analyst Michael D. Curran, there's few reasons to think the gold miner won't keep a seat at the big table for a long time to come.

Mr. Curran said in a note to clients:

With the recent expanded debt capacity and an equity financing, we think Yamana is in a solid position to act on several fronts to deliver the growth over the next few years. We believe the company will proceed with one or two new mine developments, expansions at some of its existing mines, and perhaps look at an acquisition to round out the growth profile for the coming few years.

Yamana said it can deliver one million ounces in 2009 from its existing operating mines and increase that output to two million ounces based on its internal growth profile. Earlier this week, the company updated the market on two of its fledgling exploration projects, releasing a pre-feasibility study for its Mercedes project and a scoping study for its Ernesto/Piq a Pan exploration properties. Mr. Curren was encouraged by results from the studies, but he refrained for the time being on making adjustments to his valuation for Yamana.

He wrote:

At this point in time, we are not convinced of the full slate of growth projects suggested by management, and have assumed growth to 1.5MMoz in our valuation. Over the next few quarters, we look for further details regarding some of the company’s new projects and/or mine expansions thatcould increase our growth forecast beyond the current 1.5MMoz/yr used in our valuation of Yamana shares.

The analyst continues to believe Yamana shares are oversold and maintained his "outperform" rating and C$11 price target.