Yamana Resources Inc. and Minera Yamana Inc. - MRRS Decision

Headnote

Mutual Reliance Review System for ExemptiveRelief Application -- in connection with a proposed issuer bid,request that the Applicants be exempted from the issuer bidrequirements and that the prospectus requirements not applyto first trades of the common shares issued pursuant to theissuer bid -- the Applicant originally proposed a conversionof preference shares to common shares, which would have beenan exempt issuer bid as it would have been conducted in accordancewith the terms and conditions attaching to the preference shares-- due to tax considerations, the Applicant proposed to purchasepreference shares on the same terms as the conversion -- eachof the 25 preference shareholders voluntarily agreed to selltheir preference shares and agreed to the terms of the proposedpurchase -- all of the 25 preference shareholders are sophisticatedinvestors -- each preference shareholder agreed that receiptof issuer bid materials and compliance with the issuer bid requirementswould be of no assistance in assessing the proposed transactionand would result in unnecessary expense to the Applicant --relief granted.

Statutes Cited

Securities Act, R.S.O. 1990, c. S.5, as amended,ss. 93(3)(a), 95-98, 100, 104(2)(c).

IN THE MATTER OF

THE SECURITIES LEGISLATIONOF

ONTARIO AND BRITISH COLUMBIA

AND

IN THE MATTER OF

THE MUTUAL RELIANCE REVIEWSYSTEM

FOR EXEMPTIVE RELIEF APPLICATIONS

AND

IN THE MATTER OF

YAMANA RESOURCES INC.

AND

IN THE MATTER OF

MINERA YAMANA INC.

MRRS DECISION DOCUMENT

WHEREAS the local securities regulatoryauthority or regulator (the "Decision Maker") in eachof Ontario and British Columbia (the "Jurisdictions")has received an application (the "Application") fromYamana Resources Inc. ("Yamana") and Minera YamanaInc. ("Minera" and, together with Yamana, the "Applicants")for a decision under the securities legislation of the Jurisdictions(the "Legislation") that, in connection with a proposedindirect issuer bid by Yamana, the Applicants be exempted fromthe provisions of the Legislation relating to delivery of anoffer and issuer bid circular and any notices of change or variationthereto, minimum deposit periods and withdrawal rights, take-upof and payment for securities tendered to an issuer bid, disclosure,restrictions upon purchases of securities, identical considerationand collateral benefits (collectively, the "Issuer BidRequirements") and that the requirements contained in theBritish Columbia Legislation to file and obtain a receipt fora preliminary prospectus and a prospectus (the "ProspectusRequirement") shall not apply to first trades of such securitiesby the holders thereof (the "First Trades");

AND WHEREAS under the Mutual RelianceReview System for Exemptive Relief Applications (the "System"),the Ontario Securities Commission (the "OSC") is theprincipal regulator for this application;

AND WHEREAS, unless otherwise defined,the terms herein have the meaning set out in National Instrument14-101 Definitions or in Quebec Commission Notice 14-101;

AND WHEREAS the Applicants have representedto the Decision Makers that:

1. Formerly Wiscan Resources Inc., Yamanawas incorporated under the Canada Business CorporationsAct on February 7, 1995. Its head office is located inToronto, Ontario.

2. The authorized capital of Yamana consistsof an unlimited number of Common Shares (the "CommonShares") and 8,000,000 First Preference Shares, Series1 (the "Preference Shares"). As at March 27, 2003,81,286,553 Common Shares and 6,760,000 Preference Shares wereissued and outstanding.

3. Yamana is a reporting issuer or the equivalentunder the securities legislation of every province of Canada(the "National Legislation") and is not in defaultof the National Legislation. The Common Shares are listedon the Toronto Stock Exchange ("TSX"). The PreferenceShares are not listed on any stock exchange.

4. Minera was incorporated under the OntarioBusiness Corporations Act on March 17, 1994. Its headoffice is located in Toronto, Ontario.

5. The authorized capital of Minera consistsof 100,000,000 Common Shares, of which 9,714,736 were issuedand outstanding as at March 27, 2003, all of which are heldby Yamana.

6. Minera is not a reporting issuer or theequivalent under the National Legislation.

7. The Preference Shares were originally issuedin February 2001, to sophisticated purchasers in Canada pursuantto exemptions from the requirements contained in the Legislationto be registered to trade (the "Registration Requirements")and the Prospectus Requirements of the Legislation, as wellas to accredited investors pursuant to registration exemptionsin the United States and to investors abroad. Each PreferenceShare was issued together with one share purchase warrantentitling the holder thereof to purchase one Common Shareat a price of US$0.15 expiring on February 9, 2004 (a "Warrant").

8. There are a total of 25 holders of thePreference Shares ("Preference Shareholders"), allof whom deal with Yamana on an arm's length basis. Of suchholders, one resides in British Columbia and one resides inLondon, England but holds his Preference Shares in an accountwith an address located in Ontario (collectively, the "CanadianHolders"). The Canadian Holders own an aggregate of approximately11.5% of the issued and outstanding Preference Shares. Eachof the Canadian Holders qualifies as an accredited investorunder the relevant Legislation.

9. Pursuant to the rights and restrictionsattached to the Preference Shares, such shares:

(a) are non-voting;

(b) bear cumulative dividends at the rateof US$0.0375 per share per annum as and when declared bythe Directors out of "Available Cash Flow" asdefined in the rights and restrictions and payable at theoption of the holder in Common Shares;

(c) are redeemable at the option of Yamanaat a price of US$0.125 per share together with unpaid cumulativedividends, and they are mandatorily redeemable if AvailableCash Flow exceeds the aggregate amount of dividends requiredto be declared, such that one-third of such excess shallbe allocated to such mandatory redemption on a pro ratabasis;

(d) are convertible at the option of theholder into Common Shares at a prescribed ratio, presentlyone Common Share for each Preference Share; and

(e) may be purchased for cancellation atthe lowest price at which, in the opinion of the Directors,such shares are obtainable but not exceeding US$0.125 pershare plus all unpaid cumulative dividends.

10. In the summer of 2002, Yamana proposedan alteration to its capital providing for the immediate conversionof the Preference Shares to Common Shares at an improved conversionratio per Preference Share of 1.28205 Common Shares plus oneCommon Share for each US$.0975 of accrued and unpaid dividends(the "Capital Alteration"). Concurrently, Yamanaproposed to alter the terms of the Warrants by reducing theirexercise price to US$0.125 and extending their terms untilDecember 31, 2004 (the "Warrant Amendment" and,together with the Capital Alteration, the "Proposed Conversion").The Capital Alteration was approved by a written consent resolutionsigned by all the Preference Shareholders, and all of suchholders also agreed to the Warrant Amendment in writing.

11. The Proposed Conversion was conditionallyapproved by the TSX on July 11, 2002.

12. Following such conditional approval, Yamanareceived advice from its Canadian tax advisor that the PreferenceShareholders might receive improved tax treatment if, in lieuof the Proposed Conversion, Minera purchased the PreferenceShares on the same terms. Therefore, in lieu of the ProposedConversion, Yamana proposed a transaction (the "ProposedPurchase") under which Minera would purchase the PreferenceShares on the same terms as under the Proposed Conversion.

13. The Proposed Purchase is a non-exemptissuer bid under the Legislation and must therefore complywith the Issuer Bid Requirements.

14. The Proposed Conversion would have qualifiedas an exempt issuer bid, as the Preference Shares would havebeen acquired in accordance with terms and conditions attachingthereto. However, the Applicants cannot now rely on this exemptionfrom the Issuer Bid Requirements because of the change instructure occasioned by tax considerations.

15. The Applicants cannot rely on the "deminimis" exemption from the Issuer Bid Requirements inthe Legislation because although there is only one CanadianHolder in each Jurisdiction, each of them holds over 2% ofthe outstanding Preference Shares in the respective Jurisdiction.

16. In order to gain the concurrence of allPreference Shareholders, Yamana was required to negotiatedifferent consideration with two non-Canadian Preference Shareholdersas follows:

(a) one holder wishes to tender 50% of itsPreference Shares pursuant to the terms of the ProposedPurchase and in exchange for the other 50% wishes to takea 2% net smelter return on a property in the Santa CruzProvince of Argentina; and

(b) one holder wishes to tender its PreferenceShares in exchange for a convertible promissory note, payablein cash on or before October 1, 2003 and bearing interestat 15% from October 1, 2002. The conversion price is US$0.055per share.

(the "Proposed Ancillary Purchase")

17. The terms of the Proposed Purchase havebeen conveyed to the Preference Shareholders and, other thanthe Preference Shareholders referred to in paragraph 16 above,they have accepted the terms thereof. However, the ProposedPurchase and the Proposed Ancillary Purchase have not beencarried out.

18. All Preference Shareholders have voluntarilyagreed to sell their Preference Shares. The Canadian Holdersare aware of the differential treatment being accorded tothe two Preference Shareholders under the Proposed AncillaryPurchase referred to in paragraph 16 above.

19. Each of the Preference Shareholders hasagreed that the receipt of issuer bid materials from Yamanawould be of no assistance to it in assessing the proposedtransaction and, accordingly, would result in unnecessaryexpense to Yamana and that compliance with the other IssuerBid Requirements would similarly be of no benefit to them.

20. No further approval from the TSX is requiredin connection with the Proposed Purchase.

21. The issuance of Common Shares to the PreferenceShareholders upon the sale of the Preference Shares to Minerawill be effected in reliance on exemptions from the RegistrationRequirements and the Prospectus Requirement of the Legislation.

22. The Canadian Holders have been advisedof the Application and do not object to it.

23. Yamana has filed an annual informationform and fulfils its other continuous disclosure obligationspursuant to the National Legislation such that current informationabout the business and affairs of Yamana is in the publicdomain.

24. As each Preference Shareholder is a sophisticatedinvestor, he is able to assess the merits of the transactionwithout the need for protection from the Issuer Bid Requirements.

AND WHEREAS under the System, this MRRSDecision Document evidences the decision of each Decision Maker(collectively, the "Decision");

AND WHEREAS each of the Decision Makersis satisfied that the test contained in the Legislation thatprovides the Decision Maker with the jurisdiction to make theDecision has been met;

THE DECISION of the Decision Makers underthe Legislation is that:

1. the Proposed Purchase and the ProposedAncillary Purchase are exempt from the Issuer Bid Requirements;and

2. in British Columbia, the Prospectus Requirementshall not apply to the first trade in Common Shares acquiredpursuant to the Proposed Purchase and the Proposed AncillaryPurchase provided that the conditions in subsections (3)or (4) of section 2.6 of Multilateral Instrument 45-102Resale of Securities are satisfied.

April 4, 2003.