Yamana Gold Share Discussion Threads

[yf23_1] 26/10/2006 16:14

A Close Look at Yamana Gold
Thursday October 26, 10:15 am ET


Bill Cara submits: When you hear that Yamana (AMEX: AUY - News) is Cramer's favorite gold stock, you have to know that it's over-priced, but also well-known. :-)

Cramer used to like Crystallex (AMEX: KRY - News), but switched to Yamana because the company is mining in South America (Brazil/Argentina) and Central America (Honduras), but not Venezuela. Not being concerned about Venezuela to near the same extent (although the political risk is real), I prefer Crystallex.

What's not to like about the growth of this mid-tier producer Yamana? Annual gold production from existing mines is likely to grow in the following sequence (ounces per year): 352k (2006), 601k (2007), 745k (2008), and 841k (2009).

The company's stated target is to get 1.0 million oz of production for 2008, which means they have to grow the company by at least one-third via acquisitions in the next 12-months. That's a big appetite – a year ago, Marrone said he was targeting 400,000 oz for 2008. What a difference a year makes.

As I see it, the cash cost to produce an oz of gold from existing mines is likely to fall from about $300/oz to under $200 in 2008, so the leverage of increased production and lowered operating costs per oz, in addition to the promotional flair of the CEO, will surely translate to continued investor enthusiasm for the stock.

Aggressive CEO Peter Marrone is a good promoter and a proven acquisitor. He's a bit like Goldcorp's Ian Telfer in that respect.

The problem of course is that when Marrone sits down at a negotiating table for acquisitions, the target company is also interviewing Goldcorp, IAMGOLD, Barrick, Goldfields, Newmont, and a few others.

AUY is not, in my view, the best value in the mid-tier gold producers, but it's pretty good and should be on your watch list.

On a direct comparison basis, I prefer Agnico-Eagle (NYSE: AEM - News) in the mid-tier producers because I think Agnico-Eagle management is more aggressive on cost management and providing shareholder value, while Marrone, given his appetite, is prone to over-pay for acquisitions.

AUY closed yesterday at US$9.69/C$10.95. I have a price target of about C$15, and I recommend buying on the dips because if, as and when it announces its next acquisition, the share price, like with Goldcorp, is likely to drop because the premium to be paid these days is about +35-pct over current market prices.

Notes from Wall Street analysts re Yamana Gold:

• With the RNC, Desert Sun and Viceroy acquisitions, along with the start-up of its Chapada mine next year, Yamana will be one of the largest intermediate gold producers in 2008. Marrone highlighted the company's strong balance sheet (no debt), the recent declaration of a dividend, its leverage to gold (gold unhedged), and its commitment to exploration in Brazil and Central America.

• Over the next months, the company expects to report on several significant milestones: demonstrated performance at Sao Francisco, cost improvements at the Jacobina complex, startup of Chapada, completion of the Viceroy acquisition, delivery of the Sao Vicente feasibility, and expansion plans at the Jacobina complex.

• The Sao Francisco mine was declared commercial on August 1, 2006, ahead of company expectations, and management says the operation is performing better than anticipated. The cash cost structure by year-end is expected by management to be better than $240/oz, whereas Merrill Lynch is currently forecasting 2006 total cash costs of $286/oz and production of 71,000 ounces compared to AUY's forecast of 75,000 to 90,000 ounces. ML's production forecasts include a slight cushion for normal startup issues. Sao Francisco comprises 17% of ML's NAV estimate for the company, will have a mine life of over 8 years, and is expected to produce 130,000 ounces of gold in 2007 at total cash costs of $186/oz.

• Chapada construction is 98% complete. Management indicated that construction is progressing on schedule and is 98% complete at the copper gold Chapada project in Brazil. The company intends to begin first concentrate production in October. Chapada is forecast to produce 15mlbs of copper and 15,000 to 19,000 ounces of gold in 2006 and 128mlbs of copper and 180,000 to 200,000 ounces of gold in 2007. Chapada is Yamana's key asset and comprises 46% of ML's NAV estimate for the company.

• Costs: costs are rising for all producers; however, the market appears not to want to know about it until margins are squeezed. At present price appreciation has outrun cost appreciation, but this will stop when prices peak – industry costs unlikely to come down for some time given labour, equipment, consumables prices etc.

• Development/Permitting Risk: Yamana is exposed to development risk and permitting risk as it brings exploration projects into production. Development risks include construction delays, unforeseen issues and permitting delays.

• Political and Foreign Exchange Risks: Yamana is also exposed to potential political risk as most of its operations are located in Central and South America, with one in Honduras, one in Argentina and the remainder in Brazil, and to currency risk, as 30% of operating costs for the company are based in Brazilian Reais. In our (ML Mining Research) cost forecasts we have assumed Real/USD exchange rate of 2.2, which is slightly more conservative than Merrill Lynch's official forecast of 2.3 in 2006 and 2.45 in 2007.

• Industrial Risk: While industrial risks such as strikes and shutdowns are a concern for all industrial companies, we believe that Yamana has employed sufficient measures, particularly active community, industrial, and political relations.

[yf23_1] 17/10/2006 02:26

header updated for 2.1 exchange rate

[chipperfrd] 16/10/2006 07:37

Production update. Not showing on advfn yet - so here is the link ...

[wassapper] 09/10/2006 08:26

Further discussion of price movement in Minesite weekly review

That Was The Week That Was ... In London

By Henry Sandford

MInews.It seems that talk of a recovery last week was premature, and it was another difficult week for the mining shares small and large.

HS. Yes. Weakness in the gold price didn't help, but miners were down across the commodity spectrum. Nevertheless, there was plenty going on worth discussing. .. more..

[lovegod] 12/9/2006 13:53

yamana mentioned on the daily reckoning today all good stuff

[chipperfrd] 06/9/2006 00:13

Hi Dave - thanks for the link. Good to know there is someone else out there!

edit: sorry YF, I missed seeing your post.

I guess we will know when it is time to take some profits - there will be more than 1 post a day on this BB :-)

All the best
Chip

[yf23_1] 05/9/2006 23:21

Dollar UP Gold UP
DOllar Down Gold DOWN
Duh ?

Nice 3 day rise from a double bottom but the cross (doji star) on the candlesticks could be bearish if we gap down tomorrow.
Could be a consolidation before it breaks out of the 12.50 zone.
There arent any bullish candlestick formations from a rising trend doji but another white candlestick should confirm significant new momentum.
I would give the chances at 25%, 50% and 25% for each scenario.

[davepower] 05/9/2006 21:49

Hi Chipps
Yes I'm interested ... big time.
Check out this comment from a blog site.
"Very interesting article in Forbes on Gold Stocks by Andrew Swann.

Link is


Quoting Swann: I am a very focused investor and on Jan. 1, 2003, moved my portfolio 100% into hard assets, 50% oil and gas and 50% precious metals. I rely 99% on fundamental analysis. I find companies in the sector I am interested in and look for value with a good growth profile and just buy and hold, for the most part.

The most important thing is identifying what sector is in a long-term secular bull market. At the end of 2000 it became very evident that "paper assets" had peaked and that after a 20-year bear market, "hard assets" were very unloved and very, very undervalued. A big key for me was figuring out a way to get leverage to the rising hard-asset prices, but leverage with a long fuse. After a lot of research, I started accumulating warrants on junior Canadian mining stocks in 2001. That has been a very rewarding investment.

Right now there are several Canadian mining stocks with great growth profiles that are incredible values. My top holding is Yamana Gold. I have been a shareholder since the company was created in 2003. When Chapada, their giant copper/gold mine in Brazil, comes on line this fall, their cash flow will kick into high gear. By 2008 they should be producing over 1 million ounces of gold with a negative cash cost, using copper as a credit. I think the stock price could easily double in the next 12 months even if gold goes nowhere".

Yes this is the reason I own loads (for me anyhow) Gold going up today big time here in the States. Yipppppeeee :-)
cheers Dave

[chipperfrd] 25/8/2006 01:36

Interesting comment from RI on the YAU-VYE merger - if there is anyone out there who is interested that is?

[davepower] 24/7/2006 02:38

Gone very quiet here. Any views on recent aquisition of Desert Sun Mining or the sale of La Libertad gold mine in Nicaragua and a 60% share of the Cerro Quema gold project in Panama to Glencairn. The deal was worth approximately $22.7 million are Yaman up to something else??? another aquisition maybe?
I still like the cash flow for AUY in July 3rd version of Precious metals roundup... going from 0.23 for 2006 to 1.00 for 2007.
check out

don't know where the most recent version is. This news letter used to be published every week but there has been a gap of late. Perhaps Bill is on holiday! Still Yamana are moving on to greater things that is for sure.
DYOR
cheers Dave

[dogberry202000] 20/6/2006 23:21

It's a great story, Hot.

[holdontightuk] 20/6/2006 22:37

Check out the TMG thread...Thistle Mining. AXA now have a notifiable position; Zar:$ now above 7; producing 160k oz/year; increasingly profitable; Masbate project with 3 mill oz; RR stake valued ca £10 mill; TSXV listing imminent. Total resource over 21 mill ozs (excl RR). Current mkt cap is just £6 million.

I see :
- ZAR:$ at 8 before end 06;
- zar gold at 5500/6000;
- costs for PS sub 400 with US gold at 700+;
- masbate funded via TMG profits, reducing dilution/need for hedge

Fair value hard to confirm, but I would not consider a 20 bagger from here in any way out of the question. BIG Business in SA want the Zar:$ above 10. I think the SA's are gonna go ballistic, with their increased efficiencies developed while Rand strong working way through to significantly enhanced bottom line profits with weaker Rand. There is not a producer out there in the world with a market cap like TMG for the potential now being delivered. DYOR but don't wait too long, IMO!

[yf23_1] 20/6/2006 01:05

Yamana Gold Inc. (TSX:YRI - News) will replace BlackRock Ventures Inc. in the S&P/TSX MidCap and Equity MidCap indices.

[yf23_1] 31/5/2006 02:21

chipperfrd
That sounds incredibly risky, is the remaining 3% in PUT options, LOL !

[chipperfrd] 31/5/2006 01:13

More corporate activity!

[chipperfrd] 27/5/2006 18:20

Hi Simon,

Sorry for late reply.
I am currently 18% gold, 25% base metals and 54% O&G. I will probably switch a bit more into gold during 2006.

Re SCR: I have had a look because I am keen on GFM and interested in the potential of the Cu/Moly angle in China. However, feel that I would like to see a bit more proven progress before I get involved. Their tie-up with the Xi'an Institute looks encouraging so I will continue to keep a close eye on them.
All the best
Chip

[simon54] 25/5/2006 23:02

Hi Chip,

Yeah, the carnage was a larf - better than the drip from open veins in the week following ;-) Yeah, I'm fine - a tad poorer than I was! I pulled back into some cash pretty quickly, so am on the prowl for defenceless shares looking for a new home ;-)

I thought this was a great RNS, hence my purchase (albeit a day late - but the PoG was still tanking yesterday). The TSX tonight seems to agree - but really, a share for a decent run, I think, rather than for daily fretting.

I've shifted quite a bit into gold recently, which is not exactly highly original or contrarian, but I'm not proud.

Hope you're doing fine. Shoulder-shrugging is the best physical exercise at times like this ;-)

Regards,

Simon


P.S. This isn't a 'ramp' or any such nonsense, but have you ever had a look at South China Resources - SCR? If you have, I'd be quite interested to know why you turned away.... Only if you're bored!

[chipperfrd] 25/5/2006 14:00

Hi Simon!

Yes, still in with some core shares but stopped out from a couple of cfd's during the carnage last week.

Pretty muted reaction in London for what, I thought, was pretty positive news. Perhaps a degree of caution has crept in after the severe falls.

Hoping all is well with you.
Regards
Chip

[simon54] 25/5/2006 12:34

Hi folks. Are you still in, chip?

I liked the Chapada hedging arrangement, so have decided to join you. A bit of a timing gamble on the PoG in the short term, but ah well.

[yf23_1] 18/5/2006 04:28

Yamana Announces Positive Drill Results at Canavieiras, C1 Santa Luz and Pau-a-Pique Targets, Brazil
Tuesday May 16, 4:01 pm ET

[yf23_1] 09/5/2006 18:21

BTW, Yamana 1st qtr results today, $5m profit and a nice move up.

[yf23_1] 09/5/2006 18:20

You would have thought with such a big issue, they could at least give some claw-back to existing shareholders.
This should give you an idea that there is strong demand for the issue and that the shareprice has been stalled artificially by the institutions who wanted the issue done at the lowest price possible.
After the issue ACU should be on the radar of a lot more institutions so if they wanted to offload they should have a ready market.
All IMO of course.

[yf23_1] 01/5/2006 21:14

Investor presentation Apr 18th



highlights how cheap Yamana is compared to its peer group