UPDATE 1-Yamana Gold quarterly output rises, shares jump

* Yamana gold production up 9 pct from Q2

* Costs in line with forecast for 2009

* Stock gains 7.6 pct, strong options activity (Add details. In U.S. dollars unless noted)

By Cameron French

TORONTO, Oct 6 (Reuters) - Yamana Gold (YRI.TO: Quote, Profile, Research, Stock Buzz) said on Tuesday its third-quarter production rose 9 percent from the previous quarter, while costs remained in line with expectations.

Analysts lauded the results, which followed a somewhat disappointing second quarter.

The company's shares jumped 7.6 percent, driven also by record high gold prices and outperforming most Toronto-listed stocks.

"We view the operating performance as a significant turnaround for Yamana," Macquarie analyst George Albino said in a research note.

Paradigm Capital analysts Don MacLean and Don Blyth called the results strong.

The Canadian gold miner produced 314,200 gold equivalent ounces -- a measure that converts silver production to an equivalent gold value -- in the three months ended June 30.

Higher output was driven mainly by Yamana's El Penon mine in Chile, which enjoyed higher metal grades, and the Gualcamayo mine in Argentina, which reached commercial production in July.

El Penon produced 108,800 ounces, up 18 percent from the second quarter, while output at Gualcamayo rose 61 percent to 39,200 ounces from the second quarter, when it was in preliminary production.

Cash costs for Yamana's core mines were in line with its forecast range for the year of $345 to $375 an ounce, the company said. Costs at Gualcamayo were below $350 an ounce, well under the company's forecast for the mine of below $450 an ounce, the company said.

Toronto-based Yamana operates mines in Mexico, Honduras and throughout South America, and expects to produce about 1.1 million ounces this year.

The company's shares rose 85 Canadian cents to C$12.05 on the Toronto Stock Exchange.

Yamana also attracted heavy options activity, with calls -- the option to buy the stock at a fixed price later -- far outpacing puts.

One investor appeared to be betting on at least a further 10 percent gain in the stock, said Andrew Wilkinson, senior market analyst at Interactive Brokers Group in Greenwich, Connecticut.

($1=$1.06 Canadian) (Additional reporting by Doris Frankel in Chicago; editing by Peter Galloway)

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