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Gold/Mining/Energy : Yamana Resources INC. T- YRI -- Ignore unavailable to you. Want to Upgrade?

To: Alex Harrington who wrote (807)	12/22/1997 12:38:00 PM
From: Greg W. Taylor	Read Replies (1) \| Respond to of 2346

Alex: Having good exploration properties was, a year ago, just about all you needed. The second trick was in appropriately spending money so that you could develop them, and prove their value through exploration, particularly drilling. If you had good ground, preferably with proximity to some major deposit, a good reputation (ie. you were credible) and a good technical team, the money for exploration came fairly predicibly, either through JV partners or through equity fundraisings. Today though, land position, even proximity mean next to nothing (no pun intended). Credibility factors changed as well. And now, you're in a bind because investors want you to find something but to not spend money... "burn rate" was almost never in investor vocabularies a year ago. So here we are, in a market that has no time for exploration companies, where even the largest producers are pulling back on their exploration spending. Meanwhile, we are drilling on three different projects -- doing what we are supposed to do in this business. If you had asked us a year ago when we planned to finance again, given our partners and finacial situation, I would have predicted this coming spring. Now, partners have dried up and so has the equity market. Our reaction is to do three main things: a) Cut back on spending; b)intensify efforts for a new partner (so we can spend their money); and, c)Raise money to ensure you can make it through this "sticky bit" alive. A Convertible Debenture has the disadvantage for our current shareholders that it increases the potential number of shares outstanding, thereby diluting the proportion of their positions. The second disadvantage is that such an issue begins as a debt, requiring coupon (interest) payments as well as an eventual (five years) debt repayment, in cash or shares. The advantage for YRI shareholders is that it is dilution for cash which, in turn, keeps us going. There is no way I can foresee that we will raise more than US$10 million on this issue. Perhaps far less than that. Which is fine. The $20 million figure was based on expanding our drilling program. Now, we're not doing that. We're cutting back. Yamana has several very good properties, with many untested drill targets. The chances that one or more of these hides an "elephant" are reasonably good. With a larger bank account, our chances are increased that we'll find one of them. I hope this helps. Greg