AUY Focuses on Organic Growth

Yamana Gold's (AUY - commentary - Cramer's Take) first-quarter 2008 earnings call represented the first quarter following the full integration of Meridian and Northern Orion mines, which caused havoc and confusion on last quarter's call. With the integration complete, the company will begin to ramp up production in its excellent portfolio of mines. Management is now focused on organic growth and operational cash flow.

I think that the stock was unfairly hit due to the fourth-quarter integration issues and the dramatic drop in gold prices. That selloff was way too overblown. I used the weakness in share prices to add to my long position. With the company now in full-production mode, first-quarter results, which handily beast estimates, are more representative of what Yamana can deliver to shareholders.

Another encouraging signal is the huge boost in dividend payout. With gold production expected at just over 1 million gold equivalent ounces (GEO) this year and targeted for 2.2 million GEO in 2012, Yamana will grow at a 15% to 20% year-over-year rate for several years, assuming level commodity prices and no additional acquisitions. I fully expect the shares to make another run at $20 this year.

Yamana Gold released its first-quarter 2008 results after the market closed last evening. The company earned 20 cents per share on an adjusted basis. Revenue at $365.1 million was generated during the quarter.

The company also announced a change it is dividend policy in which it will now pay a monthly dividend of 1 cent per share (annualizes to 12 cents per share). Prior to this announcement, Yamana paid 1 cent per share per quarter (annual rate of 4 cents per share). Management believes that it can now fully fund its operations and will return value to shareholders through a dividend that is a premium to its peers.

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At the time of publication, Rothbort was long Yamana Gold, although positions can change at any time.

Scott Rothbort has over 20 years of experience in the financial services industry. In 2002, Rothbort founded LakeView Asset Management, LLC, a registered investment advisor based in Millburn, N.J., which offers customized individually managed separate accounts, including proprietary long/short strategies to its high net worth clientele. He also is the founder and manager of the social networking educational Web site TheFinanceProfessor.com.

Immediately prior to that, Rothbort worked at Merrill Lynch for 10 years, where he was instrumental in building the global equity derivative business and managed the global equity swap business from its inception. Rothbort previously held international assignments in Tokyo, Hong Kong and London while working for Morgan Stanley and County NatWest Securities.

Rothbort holds an MBA in finance and international business from the Stern School of Business of New York University and a BS in economics and accounting from the Wharton School of Business of the University of Pennsylvania. He is a Term Professor of Finance and the Chief Market Strategist for the Stillman School of Business of Seton Hall University.

For more information about Scott Rothbort and LakeView Asset Management, LLC, visit the company's Web site at www.lakeviewasset.com. Scott appreciates your feedback; click here to send him an email.