Yamana Gold Inc. stacks up nicely against its gold producing peers and should offer investors plenty of upside in the coming year, says Dundee Capital Markets analyst Ron Stewart.

Mr. Stewart initiated coverage on Yamana late last week, rating the stock a "buy" with a $13 price target, based in part on a gold price assumption of US$725 per ounce.

Gold is trading at US$908 per ounce on Tuesday morning and some pundits of the yellow metal, including Eric Sprott of Sprott Asset Management, believe it could hit US$2000 in the coming years.

Yamana's share price suffered in 2008 due to integration concerns with acquisitions made in 2007 and its exposure to copper," the analyst said in a note to clients.

"Based on our 2009 estimates, it currently trades at a 15.5x P/E multiple versus the peer average of 24.8x and a 9.9x P/CFPS versus the peer average of 15.0x. We submit that Yamana is under-valued in comparison to its peers offering investors a good entry point."

Mr. Stewart said Yamana can grow its commercial gold equivalent ounce production by 36% to 1.35 million ounces in 2009. By 2012, he expects production to hit 1.73 million ounces.

In addition, he said the gold producer will likely add 7 million ounce to its reserve/ resource base, which will add about as much as $1 to his net asset value for the company.

The analyst is also encouraged by an expected decline in the miner's exposure to copper, which has been a thorn in the comany's side, due to the decimation of copper prices last year. In 2009, copper is estimated to represent 19% of Yamana's total pie, down from 36% in 2008.

Yamana Gold shares closed at $9.48 on Monday, down 46¢ or 4.68%.

David Pett

Hg