Jun 14, 2009

Trimming The Fat - Yamana Getting Down To Business

Yamana Gold recently announced the sale of three low grade, low producing mines to Auro minerals in a cash, stock & future royaly deal. Yamana will recieve 200m up front in addition to Aura stock and potential royalites of 40m. This deal has vast implications in terms of Yamana's strategic view as we enter the next leg of the commoditty bull cycle.

A) Sao Francisco, Sao Vicente in Brazil & the Sao Andres mine in Honduras sale, allowes Yamana to focus on their core asset portfolio of 6 producing mines and develop their promising pipeline at a fast pace. For example the Santa Luz mine may be online before the estimated December 09' projection, The Mercedes Mine, which in my opinion will also come on line before the projected 2011 estimate. Not to mention those further down the pipeline in Amancaya, La Pepe & Jeronimo.

B) Sao Francisco, Sao Vicente in Brazil & the Sao Andres mine had the highest cash posts (or cost per ounce mined ) relative to Yamana;s asset portfolio.

C) Financial Position strengthened, warranting a lower cost of capital

D) The other possibility is a sizeable aquisition producing or nearing production.

Conclusion - The recent strateic initiatives have actually added $2 in Value per share exluding the value of Aura stock and a $40m dollar royalty. The increase in NAV is composed of .20 cents (the 200 million) , 1.70 in cash costs savings and 10-15 cents in reduced capital expenditures.

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