– By Alberto Abaterusso

On Dec. 23, Yamana Gold Inc. (AUY) announced that it has successfully completed the spin-off of Brio Gold.

Yamana Gold distributed purchase rights of Brio Gold common shares to Yamana’s shareholders instead of distributing cash in the form of dividends.

Yamana’s shareholders, who exercised the option at the price of C$3.25 before Dec. 22, bought 17,324,507 of Brio Gold’s shares. From the spin-off, Yamana Gold received C$56,304,648 (approximately $41.85 million). Yamana Gold will use this to improve its financial situation by paying back debt.

The gold producer had $317.3 million in cash on hand and $1.75 billion in total debt as of the most recent quarter.

These shareholders are now also owners of Brio Gold that will operate as a standalone company. Brio Gold’s shareholders will be directly exposed to the operations that the company is undertaking in Brazil at Fazenda Brasileiro, Pilar and C1 Santa Luz. Since Brazil is facing an economic crisis, Brio Gold’s shareholders will be exposed to a higher risk than those who preferred to not exercise the purchase right and who are only shareholders of Yamana.

Since Brio Gold’s assets are localized in one country, its shareholders will be exposed to the risk of a concentrated portfolio of assets and the risk associated with the local currency. The latter will turn into higher operating costs and capital expenditures when the Brazilian real will strengthen versus the U.S. dollar.

At Fazenda Brasileiro and Pilar, the miner has declared gold deposits of 392,000 ounces and 342,000 ounces of proven and probable reserves as of Dec. 31, 2015.

Fazenda Brasileiro and Pilar produced approximately 5% and 6% of the consolidated production of gold.

The Brio shares will trade on the Toronto Stock Exchange under the trading symbol “BRIO” on Dec. 28.

Yamana shareholders who didn’t exercise their purchase rights will only have exposure to Brio Gold indirectly, that is via Yamana.

Yamana will maintain exposure to Brio through a retained equity interest. The company says it will continue “to be a significant shareholder of Brio Gold, holding approximately 85% of the issued and outstanding Brio Shares.”

Yamana Gold is now trading at $2.54, up 2 cents from the previous close.

The gold stock is trading at 0.49 times its book value and at 6.91 times its Ebitda.

As of today, 56.25% of analysts suggest to hold shares of Yamana Gold with a target price of $5.06 per share.

Disclosure: I have no positions in any stock mentioned in this article.

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This article first appeared on GuruFocus.