Orvana Reports Second Quarter Results
TORONTO, ONTARIO, May 14, 2010 -- Orvana Minerals Corp. (TSX symbol: ORV) announced operating results today for the second quarter ended March 31, 2010. Dollar amounts are in U.S. dollars unless stated otherwise, and fine troy ounces of gold are referred to as “ounces”. Highlights for the second quarter ended March 31, 2010 are:
- Revenues of $6.0 million on sales of 5,406 ounces for the second quarter of fiscal 2010 compared to $16.3 million on sales of 18,244 ounces for the same period a year ago, with lower ounces of gold sold contributing to most of the decline, which was somewhat offset by higher average gold prices realized;
- Net loss of $1.7 million (loss of $0.01 per share) for the second quarter of fiscal 2010 compared to net income of $4.7 million ($0.04 per share) for the same period a year ago;
- Cash from operations before changes in working capital amounted to a use of $0.8 million for the second quarter of fiscal 2010 compared to cash provided of $6.4 million in the second quarter of fiscal 2009;
- Capital expenditures were $6.9 million in the quarter compared to $1.3 million for the same period last year. Expenditures included $1.4 million on the development of the Upper Mineralized Zone of the Don Mario Mine, $4.7 million on the development of the El Valle-Boinás/Carlés project and $0.8 on the Copperwood project; and
- Cash and cash equivalents amounted to $41.3 million at March 31, 2010 compared to $58.0 million at September 30, 2009.
“Results for the second quarter and first half of fiscal 2010 are in line with our expectation during this transitional year as we work towards starting up new mines now in development. The Company has made substantial progress during the last quarter on all three of its gold and copper projects in Spain, Bolivia and Michigan. Through the efforts of the team led by Carlos Mirabal, President and Chief Operating Officer, plans are well underway on underground development, shaft sinking and mill refurbishment on the Spanish El Valle-Boinás/Carlés gold deposits, with production planned for early 2011”, said Roland Horst, Orvana’s Chief Executive Officer.
Discussions regarding senior debt financing to finance this capital cost are progressing well and the Company has no plans to issue equity. In Bolivia, at the Don Mario Mine, construction of the new plant is progressing well and preparations are underway to extend operations to 2019 by starting the Upper Mineralized Zone copper/gold open pit before year end. Mining is currently taking place in the higher cost Las Tojas gold open pit at reduced production levels during this transition period. In summary, Orvana is well on the way in the transition from its current
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position as a Bolivian-focused, 25,000 ounces per annum gold producer to a primarily Spainfocused producer of 120,000 ounces of gold per annum. Additionally, annualized production of copper and silver is expected to be 10,000 tonnes and 750,000 ounces, respectively.
During the quarter, National Instrument (NI) 43-101-compliant technical reports were completed for El Valle-Boinás/Carlés and for the Copperwood copper project in Michigan, U.S. Both reports, based on recent drilling programs, increased measured and indicated resources from previously reported amounts. The El Valle-Boinás/Carlés technical report is being used to determine reserves and develop our mine plan, which we plan to report on next month. The Copperwood report will be used to evaluate the trade-off studies and refine the conceptual mine plan, and will be incorporated into a Preliminary Economic Assessment expected to be released before the end of June.
Orvana has a solid financial position, with US$41.2 million in cash and cash equivalents at quarter end, and are considering proposals for approximately US$50 million of debt financing to supplement internal resources in financing development of these projects. Orvana’s focus is on funding growth in a way that will maximize returns to shareholders.
Don Mario Mine Operations
All dollar amounts (except per unit amounts) in the remainder of this news release are in thousands of United States dollars unless otherwise stated.
The ore from the Lower Mineralized Zone of the Don Mario Mine was exhausted during the last quarter of fiscal 2009 and the processing of the Las Tojas and stockpile ores continued in the second quarter ended March 31, 2010. A total of 144,587 tonnes of ore were treated in the quarter compared to 58,700 tonnes for the same period a year ago as indicated in the table below:
| Quarter ended March 31, 2010 | Mar. 31, 2010 | Feb. 28, 2010 | Jan. 31, 2010 | Quarter ended March 31, 2009 | ||
|---|---|---|---|---|---|---|
| Underground mine | Tonnes | -- | -- | -- | -- | 38,555 |
| g/t | -- | -- | -- | -- | 14.32 | |
| Las Tojas, mini pit & stockpile | Tonnes | 144,587 | 48,682 | 46,337 | 49,568 | 20,145 |
| g/t | 1.70 | 1.67 | 1.59 | 1.82 | 1.93 | |
| Total | Tonnes | 144,587 | 48,682 | 46,337 | 49,568 | 58,700 |
| g/t | 1.70 | 1.67 | 1.59 | 1.82 | 10.07 | |
| Gold recovery rate | 83.3% | 82.7% | 80.8% | 85.6% | 95.2% | |
| Gold production - ounces | 6,565 | 2,169 | 1,910 | 2,486 | 18,091 |
Gold production for the second quarter of fiscal 2010 was 64% lower, at 6,565 ounces, compared to 18,091 ounces for the second quarter of fiscal 2009. This decline was due to processing of the
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tonnages from the lower grade ore of the Las Tojas deposit. The prior year results included the production from the now depleted higher grade ore of the Don Mario underground mine.
The following tables show the cash costs for the three and six-month periods ended March 31, 2010 and 2009. The Company prepares its financial statements in accordance with Canadian generally accepted accounting principles (“GAAP”). The calculations below represent non- GAAP information, which should not be construed as an alternative to GAAP reporting of operating expenses, and may not be comparable to similar measures presented by other issuers (see “non-GAAP measures” below).
| Three months ended March 31, 2010 | Three months ended March 31, 2009 | |||
|---|---|---|---|---|
| Costs | Cost/oz. | Costs | Cost/oz | |
| Direct mine operating costs | $4,389 | $668.61 | $3,209 | 177.41 |
| Third-party smelting, refining and transportation costs | 31 | 4.66 | 63 | 3.52 |
| Cash operating costs | 4,420 | 673.27 | 3,272 | 180.93 |
| Royalties and mining rights | 218 | 33.26 | 502 | 27.69 |
| Mining royalty tax | 423 | 64.50 | 1,138 | 62.92 |
| Total cash costs | 5,062 | 771.03 | 4,912 | 271.54 |
| Depreciation and amortization | 686 | 104.44 | 1,770 | 97.87 |
| Total production costs | $5,748 | $875.48 | $6,682 | $369.41 |
Cash operating costs per ounce were $673.27 on 6,565 ounces produced for the three months ended March 31, 2010 compared to $180.93 per ounce on 18,091 ounces produced for the same period last year. The increase in costs was largely due to the processing of higher volumes of lower grade ore.
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| Six months ended March 31, 2010 | Six months ended March 31, 2009 | |||
|---|---|---|---|---|
| Costs | Cost/oz. | Costs | Cost/oz | |
| Direct mine operating costs | $8,948 | $556.04 | $6,746 | 186.79 |
| Third-party smelting, refining and transportation costs | 80 | 4.96 | 175 | 4.83 |
| Cash operating costs | 9,027 | 561.00 | 6,921 | 191.62 |
| Royalties and mining rights | 599 | 37.25 | 931 | 25.79 |
| Mining royalty tax | 1,252 | 77.82 | 2,126 | 58.87 |
| Total cash costs | 10,879 | 676.06 | 9,978 | 276.28 |
| Depreciation and amortization | 1,782 | 110.77 | 3,475 | 96.23 |
| Total production costs | $12,662 | $786.83 | $13,453 | $372.51 |
Operational Highlights
- On March 5, 2010, Orvana announced that results of an updated measured and indicated resource estimate compliant with NI 43-101 for its Spanish property. Measured and indicated gold ounces at the Carlés North underground and A107 zone located in Northern Spain increased by nearly 60% to 471,000 ounces. The drilling also defined a new vein zone, S107, where 26,000 ounces were added to the inferred category. The measured and indicated resources, at a 2 g/t cutoff, are 7.3 million tonnes of 5.10 g/t gold and 0.65% copper and the inferred resources are 9.5 million tonnes of 4.85 g/t gold and 0.40% copper. The technical report, dated April 19, 2010, was prepared by Ore Reserves Engineering under the supervision of Alan Noble, P.E., an independent qualified person for the purposes of NI 43-101.
- Orvana announced March 22, 2010 that the NI 43-101-compliant mineral resource estimate from the Copperwood stratiform copper deposit located in the Upper Peninsula, Michigan, increased total copper inventory by 12% from the historic estimates. The technical report, dated April 30, 2010, was prepared by AMEC E & C Services Inc. under the supervision of Greg Kulla and Dr. Harry Parker, qualified persons independent of Orvana for purposes of NI 43-101.
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Financial Highlights
Orvana’s financial highlights for the three and six-month periods ended March 31, 2010 compared to the three and six-month periods ended March 31, 2009 are summarized below:
| Three months ended March 31 | Six months ended March 31 | |||
|---|---|---|---|---|
| 2010 | 2009 | 2010 | 2009 | |
| Revenue | $5,978 | $16,311 | $17,854 | $30,476 |
| Net income/(loss) | (1,658) | 4,694 | (458) | 8,608 |
| Net income /(loss) per share – basic and diluted | ($0.01) | $0.04 | ($0.00) | $0.07 |
| Cash provided/(used) by operating activities | (4,352) | $1,279 | (4,903) | $9,085 |
| Cash and cash equivalents | 41,295 | 96,217 | 41,295 | 96,217 |
| Total assets | 137,243 | 123,766 | 137,243 | 123,766 |
| Long-term debt | 3,879 | 3,459 | 3,879 | 3,459 |
| Shareholders’ equity | $110,554 | $105,537 | $110,554 | $105,537 |
Audited consolidated financial statements and Management's Discussion & Analysis for the period ended September 30, 2009 are available on SEDAR and at www.orvana.com.
Outlook
The forward looking statements made in this section are intended to provide an overview of management’s expectations with respect to certain future operating activities of the Company and may not be appropriate for other purposes.
Orvana’s focus is to use its cash resources and mining capability to build long-term value for its shareholders through organic growth and future strategic acquisitions of advanced-stage gold and/or copper properties.
In the short term, Orvana is focused on recommencing production at its recently acquired El Valle-Boinás/Carlés gold/copper project in northern Spain, revising and expanding its Don Mario copper/gold operation in eastern Bolivia, and assessing its Copperwood copper project in Michigan.
With the start up of operations at EVBC and the UMZ, Orvana expects annualized gold production to increase from about 25,000 ounces to over 120,000 ounces. Additionally,
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annualized copper production is expected to increase substantially to over 10,000 tonnes and annualized silver production is expected to increase to over 750,000 ounces.
Over the longer term, Orvana will continue to seek gold and/or copper advanced stage properties in geographically secure regions, utilizing our mining expertise to increase long-term value for shareholders.
About Orvana
Orvana Minerals is a gold producer with a strong balance sheet and is transforming itself into a multi-mine gold and copper producer. Orvana owns and operates the copper-gold Don Mario Mine in Bolivia and is developing the advanced-stage El Valle-Boinás/Carlés gold-copper project in northern Spain and the Copperwood copper project in Michigan, USA. Additional information is available at Orvana’s website (www.orvana.com).
For further information please contact:
Jane Watson Investor Relations (647) 221-9505
Roland Horst Carlos Mirabal Chief Executive Officer President & Chief Operating Officer [email protected] [email protected]
Malcolm King Bill Williams Vice President & Chief Financial Officer Vice President, Corporate Development [email protected] [email protected]
Don Gray Vice President, Mining [email protected]
Forward Looking Disclaimer
Certain statements in this press release constitute forward-looking statements or forward-looking information within the meaning of applicable securities laws (“forward-looking statements”). Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions, potentials, future events or performance (often, but not always, using words or phrases such as “believes”, “expects” “plans”, “estimates” or “intends” or stating that certain actions, events or results “may”, “could”, “would”, “might”, “will” or “are projected to” be taken or achieved) are not statements of historical fact, but are forward-looking statements.
Forward-looking statements relate to, among other things, all aspects of the development of the Upper Mineralized Zone (“UMZ”) deposit at the Don Mario Mine in Bolivia, the El Valle-Boinás/Carlés project in Spain and the Copperwood project in Michigan and their potential operations and production; the outcome and timing of decisions with respect to whether and how to proceed with such development and production; the timing and outcome of any such development and production; estimates of future capital expenditures; mineral resource estimates; estimates of
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permitting time lines; statements and information regarding future feasibility studies and their results; production forecasts; future transactions; future metal prices; the ability to achieve additional growth and geographic diversification; future production costs; future financial performance, including the ability to increase cash flow and profits; future financing requirements; and mine development plans.
Forward-looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable by Orvana as of the date of such statements, are inherently subject to significant business, economic and competitive uncertainties and contingencies. The estimates and assumptions of Orvana contained or incorporated by reference in this news release, which may prove to be incorrect, include, but are not limited to, the various assumptions set forth herein and in the Company’s most recently filed Annual Information Form, or as otherwise expressly incorporated herein by reference as well as: there being no significant disruptions affecting operations, whether due to labour disruptions, supply disruptions, power disruptions, damage to equipment or otherwise; permitting, development, operations, expansion and acquisitions at the UMZ deposit, El Valle- Boinás/Carlés and the Copperwood projects being consistent with the Company’s current expectations; political developments in any jurisdiction in which the Company operates being consistent with its current expectations; certain price assumptions for gold, copper and silver; prices for key supplies being approximately consistent with current levels; production and cost of sales forecasts meeting expectations; the accuracy of the Company’s current mineral reserve and mineral resource estimates; and labour and materials costs increasing on a basis consistent with Orvana’s current expectations.
A variety of inherent risks, uncertainties and factors, many of which are beyond the Company’s control, affect the operations, performance and results of the Company and its business, and could cause actual events or results to differ materially from estimated or anticipated events or results expressed or implied by forward looking statements. Some of these risks, uncertainties and factors include fluctuations in the price of gold, silver and copper; the need to recalculate estimates of resources based on actual production experience; the failure to achieve production estimates; variations in the grade of ore mined; variations in the cost of operations; the availability of qualified personnel; the Company’s ability to obtain and maintain all necessary regulatory approvals and licenses; the Company’s ability to use cyanide in its mining operations; risks generally associated with mineral exploration and development, including the Company’s ability to develop the UMZ deposit, the Copperwood project or the El Valle-Boinás/Carlés project; the Company’s ability to acquire and develop mineral properties and to successfully integrate such acquisitions; the Company’s ability to obtain financing when required on terms that are acceptable to the Company; challenges to the Company’s interests in its property and mineral rights; current, pending and proposed legislative or regulatory developments or changes in political, social or economic conditions in the countries in which the Company operates; general economic conditions worldwide; and the risks identified in Orvana’s Management’s Discussion and Analysis for the period ended September 30, 2009 under the heading “Risks and Uncertainties”. This list is not exhaustive of the factors that may affect any of the Company’s forward-looking statements and reference should also be made to the Company’s Annual Information Form for a description of additional risk factors.
Forward-looking statements are based on management’s current plans, estimates, projections, beliefs and opinions and, except as required by law, the Company does not undertake any obligation to update forward-looking statements should assumptions related to these plans, estimates, projections, beliefs and opinions change. Readers are cautioned not to put undue reliance on forward-looking statements.
Non-GAAP Measures
The Company has used Non-GAAP measures, including direct mine operating costs, cash operating costs, total cash costs and total production costs, and related unit cost information, because it understands that certain investors use this information to determine the Company’s ability to generate earnings as cash flow for use in investing and other activities. The Company believes that conventional measures of performance prepared in accordance with GAAP do not fully illustrate the ability of its operating mine to generate cash flow. Non-GAAP measures do not have any standardized meaning prescribed under Canadian GAAP, should not be construed as an alternative to GAAP reporting of operating expenses, and may not be comparable to similar measures presented by other companies. The measures are not necessarily indicative of cost of sales as determined under Canadian GAAP. Cash costs are determined in accordance with the former Gold Institute’s Production Cost Standard. For a reconciliation of the non- GAAP costs and unit costs provided above with the Company’s GAAP-based statement of operations, please see the Company’s Management’s Discussion & Analysis for the period ended March 31, 2010.
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