Hope this makes things easier for everyone!
Cheers RonS
Bunka's Outsider's Report
Monday, June 02, 1997
VOL II, NO. 6 JUNE - OUTSIDER'S OVERTURE REPORT
THE ROAD-KILL REPORT - YAMANA RESOURCES INC (YRI-T)
Buy
Current $2.81 Buy @ 2.80
Ph 509-838-6615 Fax 509-838-0714 WC:$18mUS
Shares Out: 27,300,000 Fully Diluted: 35,500,000
TIMING IS EVERYTHING!
Yamana's management may think I am an opportunistic vulture, since I've been
watching their company for some time without making a decision on when the time
was right to buy. Well, its amazing how two months and a 50% drop in share price
can turn your perspective around! YRI has already received a lot of attention from
several newsletter writers, and is not wanting for an audience. In fact, several buy
recommendations were made on it last fall and winter, and helped to attract enough
buying to push the stock from the $3.75 level up into the $6.00 range. Bre-X
managed to pull it back down.
There is very little about this company that I don't like. Even when I was looking at
it several months ago, only the higher share price stopped me from becoming more
serious about it. I suppose their relatively high burn rate of cash might be
considered a negative by some, but the multitude of properties under active
exploration demands funding. In effect, shareholders of this company receive a
quantity of news and results in one year that shareholders of other companies often
receive in four or five years. If the share price does not recover to higher levels as an
incentive for the holders of the 8.3 million existing warrants to convert, then there
may be a danger of the company running out of money. However, it will take at least
a solid year of negative results for that to happen. IF everything comes up empty
during the next 12 months, AND the share price does not rise to a level allowing for
warrants to be exercised, THEN I estimate the company will have only a little over $1
million in working capital remaining by the summer of 1998.
YRI is actively exploring literally around the world. They have major projects in
Argentina (5), Paraguay, Chile (3), Indonesia, Papua New Guinea, and in
Washington State. YRI has joint ventures with Barrick (Indonesia), Northern Orion
(Argentina), Rio Algom (Argentina), Union Mining (Papua New Guinea), and
Westmin Resources (Argentina). In all, YRI has assembled 96 properties in six
countries since its inception in March 1994. The 1997 exploration program is well
under way, with nearly US$17 million in exploration spending budgeted between YRI
and its joint venture partners.
Measured simply by land mass, their largest property accumulation is in Indonesia
(2.7 million hectares). The value of this property is in question in the post Bre-X
world, and accounts for much of the recent decline in share price. Although the joint
venture with Barrick will be spending nearly $5 million during the 1997 season, I am
assigning this property no value for the rest of the year, since the market is likely to
do the same. Of course, a major discovery will change this point of view, although
anything discovered in Indonesia will be discounted by the marketplace.
One of Yamana's other important properties is the Santa Cruz project in Argentina.
Joint venture partner Rio Algom is funding the 1997 program here for $4 million.
Initial results have confirmed gold mineralization, but far too weak to be economic.
The best drill results to date have been 132 metres of 1.0 g/t, and 98 metres of 1.2 g/t,
although many other holes have not been as good. However, these are fairly early
results and should not in any way be considered as the final word.
Initial results at the Fergusson Island project in Papua New Guinea have been
encouraging. In target #4, hole #7 returned 14 metres of 5.64 g/t, and three other
holes nearby all returned over 1.00 g/t over widths of 8 to 26 metres. At other
targets, thin intercepts of 3 metres of 21.83 g/t; 5 metres of 12.17 g/t; and 5 metres of
10.83 g/t are interesting. Union mining of Australia is the owner and operator of this
property, in which YRI can earn a 51% interest. YRI also owns 11.1% of the
undiluted equity of Union, or 17.6% fully diluted.
Unfortunately, I cannot report in detail on all of YRI's properties in this single issue,
since there would be no room left for other examinations. Potential investors really
need to contact Amy Martin or Greg Taylor and receive an information package.
Insiders own about 2.4 million shares, with options on another 2.5 million. Noranda
owns 2.4 million shares, with warrants on another 0.9 million, and Barrick owns 3.6
million shares, with warrants on another 1.8 million. The vast majority of all warrants
outstanding come due between May and October of 1998. For the cynical investor,
this means that management needs to come up with news which will move the share
price up before then, in order for these warrants to be exercised.
YRI's diversity of projects is virtually unmatched for a junior exploration company.
Management is very good. The company is funded for 12 - 18 months at the current
burn rate, and existing warrants, if the share price appreciates, can be exercised to
produce another US $23.7 million for the treasury. With the information I have
today, I am pretty comfortable saying that if market conditions bring the share price
down to the $2.40 - $2.50 range, I will upgrade Yamana to a strong buy. |
