RE: Insider Selling & general statement/ResponseI just looked at the 2006 Annual Report to get some updated numbers. I did not look at Sedi to review the insider selling. The framework:
378m Shares Fully Diluted:
-345m presently outstanding, 17m warrants, 16m options
Gold Resources, all types:
-22,025,000 ounces
-19,822,500 ounces assumed recoverable at 90%
2007 Cash Flow
-600k ounces assumed, total cash costs of $(100) ounce (after sale of Chapada copper, accounted for as a by product, offsetting costs)
-Admin/Other Costs of $30m
Valuations:
-378m Shares Fully Diluted x $17/share = $6.43B market cap
-$6.43B / 22m ounces in situ gold = $291.94/ounce valuation
-$6.43B / 19.823m ounces recoverable gold = $324.38/ounce valuation
-600k ounces x $750/ounce ($650/ounce revenue, $100 total company negative production cost) = $450m cash flow from operations
-$450m less $30m admin/other costs = $420m cash flow
-$420m / 378m shares fully diluted = $1.11 cash flow per share fd
-$17 share / $1.11 = share price of 15.3 times cash flow
-16m options x $17/share = $274m total revenue if management and insiders exercised all options and sold--does not consider other shareholdings of management and insiders
-2.88m shares already owned by directors x $17/share = $49m--same explanation as immediately above
By all measures in this industry, Yamana is probably overvalued relative to its peers. Primarily, the market cap per ounce of gold, and the times cash flow of 2007 as projected by management. If I can figure this out, you can bet that the management/insiders have as well. You can tinker with some of the assumptions, but at the end of the day this is pretty well on target, using management's numbers from the annual report with some simplifications and rounding to make the calculations easier.
By these measures, insiders have sold about 28% of their total holdings. Considering metals prices rising over the last few years, how much money Marrone was under water due to the share rollback, and failures of Yamana prior to 2003, I would call it hedging my bets by selling one quarter of my holdings.