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Yamana streamlines as it prepares for growth

Yamana Gold Inc. (TSX: YRI, NYSE: AUY) announced earlier this week it will sell three of its non-core operating mines for about US$200 million to fellow Canadian miner Aura Minerals (TSX: ORA). Yamana is selling two mines in BrazilSao Francisco and Sao Vincenteand Honduras San Andres mine for US$90 million in cash, US$70 million in deferred cash payments and US$40 million of Aura stock. Moreover, Yamana will receive royalty payments of up to US$40 million from the three mines starting in 2012.
Yamana is among the worlds largest gold producers. It is expected to produce one million ounces of gold this year and to surpass two million ounces by 2012.
This sale will position Yamana for the next wave of growth, said Peter Marrone, Yamanas chairman and chief executive, in a press release. The sale of these non-core mines is expected to result in lower cash operating costs, higher margins and increased reserves, production and cash flow per mine.
Overall, research analysts were positive about the deal, but noted that the sale price was less than the net asset value of the three mines. Among those were Michael Curran, research analyst at RBC Capital. His net asset value for the three mines sold was US$385 million. But that didnt make the deal a bad news story. Curran is bullish on the prospects of Yamanas remaining assets. We believe some of the companys internal growth projects are likely to show better economics than the non-core assets being sold, and therefore the sale will enable Yamana to proceed on several fronts, expanding other operations and/or building new mines, wrote Curran in a note to clients.
Craig West, research analyst at GMP Securities, had a net asset value of $US420 million on the three assets and said the deal was dilutive. However, West noted the deal on the whole was good news for the gold producer. Although our target price has declined from the sale [to $13.50 from $14.25], we view it as positive, allowing the company to better focus on its existing core assets, and advance its development and exploration projects that are essential to achieving long term goals for growth, wrote West in a note to clients. As, weve stated previously, performing in line with expectations operationally is key to success for Yamanaa leaner simplified, portfolio of assets makes this easier in our view.
Yamana, which in the past had a reputation of growth by acquisition, now has a goal of organic growth. This sale of the mines in Brazil and Honduras moves it closer to reaching its goal.