Yamana Gold Inc. (USA) (NYSE:AUY)’s outlook was recently adjusted to Stable from Negative at S&P Global Ratings. In addition to revising Yamana’s outlook, the firm also reiterated its BB+ rating on the company’s debt.
What’s the meaning of the outlook revision?
S&P Global Ratings said that the revision of Yamana Gold Inc. (USA) (NYSE:AUY)’s outlook reflects the company’s improved earnings and cash flow prospects. For instance, the firm notes that prospects for higher earnings at Yamana have improved following the rise in gold prices. There has been a string of upward rally in the prices of the yellow metal amid mixed economic data flowing out of the U.S. and deepening economic uncertainty in Europe and Asia.
For instance, downbeat U.S. employment report for August has dimmed expectations of a near-term interest rate hike by the Federal Reserve. The central bank at pegged its rate review move on the quality of U.S. economic data whereby it left options open that data showing strong economic recovery could see it hike rates as early as this month. But those hopes are fading following recent mixed labor data.
Traders tend to buy more of so-called safe-haven assets when they sense economic uncertainty and there have been plenty of reasons to buy gold.
The other reason S&P Global Rating has a Stable outlook on Yamana Gold Inc. (USA) (NYSE:AUY) is that it sees continued upward trend in the prices of commodities such as gold, zinc, aluminum and iron ore. These trends should benefit Yamana by boosting margins, thus robust cash flow.
Yamana has set itself a target to lower its indebtedness by $300 million by the end of 2017. S&P Global Ratings believes that goal is attainable in light of its price assumptions and rising gold prices.
Low-cost profile – Yamana Gold Inc. (USA) (NYSE:AUY)
S&P Global Ratings is excited about Yamana Gold Inc. (USA) (NYSE:AUY)’s business risk profile, which it says is characterized by low-cost production and strong profitability. The firm says that the low-cost nature of Yamana’s business model can be seen in the production of silver and copper. On top of that, the firm likes the company’s diversified operations.