Replying to following message from Jason:
Hi Greg.
Could you please expand on the terms and purpose of the rights plan YRI talked discussed earlier in the year? I've heard rumors of possible takeover of YRI by the seniors, and that the BRE-X chaos killed those talks. Is any of this true? I realize the warrants expire about a year from now. But you suppose the terms may changed at a later date? Such as the exercise price, or expiration date? I see the gold market going nowhere for the next 6-12 months. With no inflationary pressures in sight and the Euoropean banks flooding the market with gold, and the statement Japans leader said on switching from U.S. bonds to gold having no effect on the price I just can't foresee POG moving back to a level profitable for most companies.
Hence, I do not believe the warrants will be in the money again unless
their is extended.
JASON:
Re: RIGHTS PLAN
"On April 28, 1997, Yamana's Board of Directors implemented a shareholder rights plan to provide Yamana's Board and shareholders with sufficient time to assess and evaluate any takeover bid and to explore and develop alternatives to maximize shareholder value. The Plan is not intended to deter takeover bids.
The Plan was effective immediately, and continues until the date of Yamana's annual shareholders' meeting in the year 2000. It will be submitted for shareholder ratification at Yamana's August 15, 1997 special and annual general meeting."
By way of explanation, under current securities regulations, a company can make a take-over bid and force the target company to respond within 21 days. Such a bid MAY BE A GOOD ONE AND COULD BE ACCEPTABLE. However, if, on the face of it and in the opinion of Yamana's board, it is not the best bid for our shareholders, then we would need to have sufficient time to study the bid, to evaluate the bidder -- including gaining an analysis of its intentions-- to look for ways to generate an even better bid from either the potential acquirer or from a "White Knight" and, to communicate with our shareholders. Since we do not feel that 21 days is sufficient to do all of this in the event of a "hostile" bid, the Plan gives the board the ability to "force" a bidder to give us the extra time (60 days). It is critical to understand two other factors here: First, there are no items in the plan that are intended to entrench or reward management for fighting a good bid and, second, a good offer on the table which would obviously be of benefit to Yamana's shareholders would likely cause the waiving of the Plan (ie. if XYZ Megacorp were to offer a high multiple of the current shareprice under the right terms, the Board could simply accept it, without the 60 day extension.)
No, there was no known takeover effort of Yamana pre-Bre-X and none is known of at the moment.
RE: WARRANTS
It is my (biased) opinion that Yamana's share price and warrants will be considerably higher than they are today well before the bulk of our warrants come due in June 1998. This is based partially on my reading of the market -- beginning to turn by July or August and then strenthening more later this fall, based on investor greed, producer demand for reserve increases, as well as a major find by an explorer or an acquisition (no, don't have a particular one in mind.) This optimism is also based on Yamana's specific strengths: our management and board (ie. credibility); properties; exploration programs; partners; investor relations capabilities; and, cash position.
Concerning the price of gold, it has not had an obvious major impact on Yamana. As an exploration company, we are, by definition, a "futures play" on the POG. If it drops much more, we could be affected but what really counts -- beyond that critical issue of perception -- is cash costs: how much does it cost to produce? That's an interesting area in itself for Yamana... and for another day.
Yes, I could be totally and completely wrong, especially based on the randomness of the world which creates monsters we cannot predict. And yes, you can quote me.
With this in mind, no change in the warrant terms is contemplated at this time.
I'm not sure what the delay is on your Investor package so I'm having another sent by Fedex today. Ditto your brother.
Cheers
Greg |
