Yamana Gold profit drops, could sell assets

By Cameron French

TORONTO (Reuters) - Yamana Gold (YRI.TO: Quote) reported a 20 percent drop in quarterly profit on Wednesday and said it may consider selling assets that don't meet its production cost standards.

The Canadian gold miner, which acquired Meridian Gold and Northern Orion Resources last year, earned $42.1 million, or 6 cents a share, in the second quarter. That was down from $52.8 million, or 14 cents a share, in the year-before period.

Stripping out the impact of a $40.5 million foreign exchange loss and other items, Yamana earned $102.7 million, or 15 cents a share.

Analysts had expected a profit of 16 cents a share before exceptional items.

The Toronto-based miner's quarterly revenues rose 83 percent to $336.9 million as realized gold prices surged to $893 an ounce.

Quarterly cash flow rose 94 percent to $176.5 million.

Production rose 122 percent to 257,498 gold equivalent ounces.

Cash costs per ounce, when using by-product silver and copper sales as an offset, were negative $140 an ounce, compared with negative $434 an ounce a year earlier.

Cost inflation has been a headache for miners as energy, labor and equipment have risen sharply in the past year.

Yamana has also had to deal with the sharp appreciation of the Brazilian currency.

MAY TRIM NON-CORE ASSETS

In an interview, Yamana Chief Executive Peter Marrone said the company might sell higher-cost assets as it focuses on its core Chapada and El Penon mines in Brazil and Chile, respectively.

"We have an average cash cost in this company that is below industry average, and when we look at our core assets, well below industry average. Anything that does not perform according to that average, we would look at as non-core," Marrone said.

"We would be looking to trim things that are not producing according to expectations."

Yamana's most expensive operations during the quarter were Sao Francisco in Brazil at $667 an ounce and San Andres in Honduras at $642 an ounce.

Marrone also said the company was not planning any more acquisitions. Other miners such as Goldcorp (G.TO: Quote), Kinross (K.TO: Quote) and Barrick (ABX.TO: Quote) have been buying up small players with development-stage properties to take advantage of low valuations.

Yamana has seven operating mines and five development projects, with properties in Argentina, Brazil, Chile, Mexico, Honduras and the United States.

The company expects to produce between 610,000 and 685,000 gold equivalent ounces over the rest of the year.

It also expects to boost its annual production to 2.2 million gold equivalent ounces by 2012.