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

To: G who wrote (1387)	6/26/1998 12:02:00 PM
From: Greg W. Taylor	Read Replies (1) \| Respond to of 2346

G. The value of a property with 100 mm oz of Ag depends on two primary factors, above and beyond the actual price of silver. Factor one: Level of Certainty. As is, examined by analysts and major producers, Yamana's deposits are worth little hard cash because there isn't enough drilling to demonstrate continuity, size or grade with bankable certainty. The market may give us 10-cents to 25-cents per ounce for it. As an inferred resource -- a term not accepted by the SEC but one commonly used in the industry, you might get a few cents more, perhaps as high as 50-cents/oz. At a level of possible reserve, in a good market, you could likely end up with the same thing but based on a discount. In other words, the market or a silver investor might give you to $1/oz. but this would likely be discounted by 25 to 75%, based on the feeling that only a portion of the possible resource will likely prove to be mineable. At the level of probable reserves, chances are the number crunching gets more specific. Here, discounts are considered for recoveries as well as for how much is actually there. Here we are looking at other considerations / mitigations such as metallurgy, capital costs, transportation etc. etc. At the proven stage, the value typically has been calculated on margins with a discount. By then, we should know all of our costs and be able to project profits. This will obviously be discounted or, even, given a premium, if it is believed that there is a still greater resource which will come in time or if people are bullish on silver prices. And having said all of this, there is the important issue of metal credits. Cerro Vanguardia, for example, has stated mineable reserves of about 35 million ounces of silver. They also have one-tenth of that amount in gold, a metal which is valued at about 50 times the silver.... which, in the end, makes that a gold project with silver credits. (At Lejano, gold is a serious kicker but the base metals add much more. At Bacon, it's silver with gold.) Here, you could well see a company getting anywhere from $1 to $4/oz of silver, even higher, with credits. The second major factor: Market Attitude. This is a reflection both on the speculative/expected price of silver and the general psychology of the market on the metal. A year ago, you would have been lucky to see 50-cents/oz for mineable silver without credits. Four or five months ago, the same situation might have given $2/oz to the exploration company that hit the great deposit. If you look at our situation, we have gone north of Cdn$2 a share based on our announcements, in an atmosphere which was very hot on silver. Then, silver softened and people started thinking differently about the commodity. Add to this the general feelings about exploration plays, the time until we have our next results, other concerns and rumours and bingo: the valuation of the same discovery, with far more information giving it greater certainty, is lower than when there was less information giving it less certainty. This doesn't need further comment beyond the fact that this is one of the greatest unknowns over time. As to your "rumour", I'd find it laughable except for the fact that you are spreading another one. I hope this helps. Greg