Yamana Gold, Inc. (USA) (AUY)

Gold and silver have taken a sudden drop during the past week. Many speculators are panicing and claiming that this is the end of the "commodity bubble". I don't think so. If you look at the fundamental reason behind the last 6 months rise in precious metals, you have to ask yourself....has anything changed? I don't think so. The Fed continues to pump liquidity into the market, the interest rate continues to decline, inflation continues to increase and the dollar continues to fall. That being said....if due to demand decreases oil drops sharply from here...there is a possibility that precious metals will follow. Precious metals will experience quite a bit of volatility and the gyrations may be tough to handle but I think due to the fundamentals that I mentioned above that a year from now precious metals will be much higher.

wow.

The psychology of the masses is unbelievable.

Company trading with PE of 53? What is it? Did they design some new revolutionary product? Maybe a substitute for gasoline?

No. Actually, they just mine a shiny metal out of the ground.

So, who cares if the shiny metal is worth $1000 an ounce. Once the economy is back on its feet (give it 12-18 months) gold will plummet just like it always has when the country comes out of a recession.

Take your gains if you are long.

Consider shorting if you are in cash.

At a PE of 53, it would take 53 years of company earnings for you to just break even on your investment. Not to mention the inevitable decline in earnings as gold heads south. The herd is marching up the ramp of the slaughterhouse. Do you really want to follow?

I believe we are still in the early stages of a commodities bull market. Countries (China, Russia, etc.) are hedging their bets against the falling U.S. dollar by greatly increasing their gold reserves. Yamana is perfectly positioned to reap the benefits of this movememt. Gold is positioned to maintain these levels for years to come.

Gold will be an essential component in investor's portfolio and cannot be overlooked in light of all the recent injection of currency around the world. We have learned our lesson for not hedging investments. Besides, this asset will never be zero. This company has several projects that can yield handsome returns in the years to come.

Gold is money and will show its true colors in a nation on the verge of bankruptcy.

Mining shares like ABX and AUY are headed higher in 2009 but not because of monetary inflation. We are sorely in debt and the demand for money (whether that be in dollars or gold) is going higher in 2009.

Commodities will be hit hard in the first half of 2009. I think oil could sink a little lower than $40.

Equities are simply not done bleeding. As long as the experts are still calling a bottom I'm increasing my short positions on the market.

The amount of money the Fed is printing "is just a drop in the bucket" compared to amount of debt and that is why you will see more and more people walking away from their houses next year.

The demand is for money. Stay liquid.

holding auy presently - the speculators will sell at a 50% profit at $12, then will add to my position when it drops back down to $9 or the stochastics bottom out and turn up - way oversold right now, but possible the bull run has started and won't turn back much so jumping in with my caps pick now - believe this is one of the safest gold picks

Yamana Gold... will outperform the other producers in its category, and is a tempting takeover target to boot.

We hate to agree with the uber-annoying Jim Cramer, but he has picked this one right. Cramer says that Yamana is the cheapest and best gold stock and prefers Yamana over more obvious picks such as Newmont or Goldcorp.

We have long been a fan of Yamana Gold and recently announced that we picked up Jan $12.50 call options on Yamana. Why? Let’s take a deeper dive into Yamana Gold.

Yamana Gold Profile

Yamana is a Canadian gold producer with significant gold production from four operating mines in Brazil, as well as gold and copper-gold development stage properties, exploration properties, and land positions in all three major mineral areas in Brazil. Brazil enjoys political stability, has the largest economy of South America (ranked #10 in the world) and offer a large industrial base. The country’s geological potential is abundant and relatively under-explored. Additionally, the government permitting process is efficient and expedient since mining is culturally embedded in Brazil. Yamana has also been benefiting from a weak Real in Brazil, although it has been strengthening with the impressive growth of the Brazilian economy.

In addition to the Brazilian properties, Yamana also owns an operating mine in Honduras and significant exploration concessions in Nicaragua.

Yamana is currently only producing gold, but they expect to have copper production by the end of the year. Yamama is completely unhedged and leveraged to gold, but has hedged 50 million lb. of 2007 copper production and 90 million lb. of 2008 copper production respectively.

Yamana Goes Shopping

Yamana acquired RNC in March of 2006, immediately adding 130,000 ounces of gold production to their business via the San Andres gold mine in Honduras.

Next was the acquisition of Desert Sun, which closed in April 2006. Through this acquisition Yamana added the Jacobina Mine in Brazil to their list of properties. Jacobina is a long-life mine boasting proven and probable gold reserves of over 1.5 million ounces. Measured and indicated gold reserves are 2.3 million ounces and infered reserves are over 3 million ounces.

Yamana has also made a friendly takeover bid for junior minor Viceroy Exploration. Viceroy’s principal asset is the advanced exploration-stage Gualcamayo gold project in San Juan province, Argentina. The measured and indicated resource for Gualcamayo is 1.43 million ounces of gold, with a further inferred resource of 611,000 ounces.

With these acquisitions, Yamana is estimating production of one million ounces by 2008 - impressive growth considering 2005 production of 220,000 ounces.

In total, Yamana can now claim measured and indicated gold resources of 11.8 million ounces, plus inferred resources of 6.9 million ounces. Proven and probable gold reserves of 7.2 million ounces, plus proven and probable copper reserves of 2.3 billion pounds. With a resource base this solid, we think Yamana has significant operational and valuation upside.

Seasoned Management

Another bright spot for Yamana is their management. Led by Peter Marrone, President and Chief Executive Officer of Yamana, their management team consists of long-time Brazilian industry veterans, who know the country, the culture, the politics and the labor force. They’ve been very strong operators, showing the ability to increase production efficiently and quickly from acquired mines and also to build their own new mines, which is another skill entirely. Jim Cramer referenced falling gold prices and asked Mr. Marrone if his company could continue to produce at a profit with gold prices dropping below $600. Peter Marrone replied that Yamana will enjoy near zero-cost gold production, taking into account the sales of copper as a byproduct. So the entire price they fetch per ounce of gold is all profit. 100% margin is an attractive proposition, although it would be nice to see the data supporting this claim. Overall, Mr. Marrone came across as very competent and confident in the future for gold and Yamana.

Investment Options

While we picked up Jan06 options, expecting a powerful rise in gold prices before the end of the year, you might want to consider the newly-available warrants. Yamana’s publicly traded warrants result from the acquisition of Desert Sun Mining which had public warrants outstanding. These warrants now trade on the TSX in Toronto under the symbol YRI.WT.A. Each warrant is exercisable at C$2.50 to receive 0.60 of a Yamana Gold share. The warrants expire on Nov. 20, 2008.

Q1 2007 Yamana`s Chapada gold and copper mine start full scale commercial production.Managment expect to achive an annual production rate of 600,000 ounces of gold by the end of 2007,and reach an annual rate of one million ounces by late 2008.This will be a true money or gold machine
Yamana is also no-hedge gold company

With one of the lowest cost per ounce ratios, buying Yamana Gold is a surefire winner. Gold prices are being suppressed through paper manipulation, and like holding a balloon under water, eventually it will slip and shoot upwards. Gold could double over the next two years, and this stock would probably more than double. With the fed printing money at astronomical rates, inflation is going to hit us hard in 2009. This stock is as good as gold.

Yamana's been on the "short list" of good gold stocks to own as of late. Cool thing about the company, though, is it's also a growth stock. Share price might get bumped around a bit with the price of gold, but long-term I see some nice potential here.

Yamana seems to be as still pretty much on plan as espoused in their 2005 annual report. Things are happening a bit slower than they projected, but they are happening. The Sao Francisco mine went to commerical production later than originally expected (8/1/06 instead of early 2006), but now is producing 10,000+ ounces a month. It's hard for me to judge whether the various acquisitions (the latest being Viceroy) will work out, so I guess I am trusting the management there and will try to analyze more as data becomes available. The biggest thing now is that Chapada has supposedly moved to production. We'll need to see how that is reflected in the 4Q numbers and whether they can produce what was projected there. That to me is tthe biggest risk with Yamana - can they really produce what they are saying they will produce. I don't doubt management's intentions or focus.

I like this gold company, Yamana is in a growing economy (Brazil, also Argentina), and is in a great position for 2007. I think we'll see some satisfying returns over the long run.

One million ounces of gold! I like the sound of that. Especially if they can get it for nothing.

We'll see how good this works out, but production is ramping up nicely, with more coming next year. I think these guys make a lot of money even if gold stays where its at.

Uhhhhh... Let's see...
Yamana owns a majority of Brazil's gold mines and uses their copper ore mining to offset gold mining expenses.They, in my estimation, very conservatively, price copper at $2.50/lb in their predictions.
I figure Brazil is a very economically and politically stable area to base the majority of your investments.
They have smaller mines in Mexico, Honduras, and Argentina (and maybe others as well).
They have approx.341 million shares outstanding after their purchase of Viceroy .
I'm guessing that - as I expect gold to be at over $800/oz by this summer and possibly over $1000 by
next year, that their stock should be
ehhhhhhhh... near cloud #9 by then.

Yamana's valuation is not reflecting the eps it has coming from copper mining. It is levered to gold as well, and we see significant opportunity there with the instability in the world, especially due to Iran and Korea.

Yamana is a Canadian company that explores, acquires, develops and operates gold mines in Brazil, and Central America. They own five operating mines in Brazil and have three more coming/in development. They own two operating mines in Honduras and one in Nicaragua. They own an option to purchase another mine in Nicaragua, and have projects in Argentina, Mexico, and Panama. In 2006 the company acquired two other mining companies; Desert Sun Mining, and Viceroy Exploration Ltd. They have over 5.2 million ounces of proven and probable gold reserves in their operating mines, and expansion plans call for them to begin mining copper soon. More than 5 analysts cover the company, and they estimate sales growth of over 300% in 2007, and company growth of 100% yearly for each of the next five years. They have little or no debt and recently reported positive exploration testing results. This stock offers both the synergy of an aggressive growth company, with the potential appreciation of Gold and Copper commodity prices.

GG just acquired GLG with a rich resource of ore mining capability, to include more gold reserves which many think were dwindling. This and the sagging dollar, about to be abandoned by China and Europe as the currency of course over the next year leaves gold and gold miners at the top of the heap. GG is best of breed, with an expected miniscule $150 cost to mine a $600 ounce of gold, and gold is $100 behind its inflation value (pegged in 1971 as $105/ounce) and should be $666 right now. The devil you say? Then buy at current prices, and sell some covered calls against your position and play the middle.

It's a sweet deal for a 30% gain, and the stock price doesn't have to move at all.

Yamana is a mid cap gold producer who's growth in Gold production profile is very attractive over then next several years.

Because of its currency exposures it is a bit more gamey than other names but I feel once the cash flow numbers start comming in over the next several quarters the street will give it a healthier P/NAV multiple.

A solid land package in Latin America, combined with the explosive growth profile is why I recommend this stock.

The negatives from my perspective is the huge volume of insider selling over the last year, the FX exposure, and grades of gold.

I pick this as my mid cap GAMEY gold pick