Orvana Minerals Corp.
TSX : ORV

Orvana Minerals Corp.

May 16, 2011 21:49 ET

Orvana Reports Second Quarter Results for the Three Months Ended March 31, 2011

TORONTO, ONTARIO--(Marketwire - May 16, 2011) - Orvana Minerals Corp. (TSX:ORV) announced operating results today for the second quarter ended March 31, 2011. 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 are:

  • Revenues of $6.3 million on sales of 4,628 ounces for the three months ended March 31, 2011 compared to $6.0 million on sales of 5,406 ounces for the same period a year ago, with higher average gold prices realized contributing to most of the rise, partially offset by lower ounces of gold sold;
  • Operating profit of $1.2 million for the three months ended March 31, 2011 compared to $0.8 million for the same period a year ago;
  • Net loss of $3.7 million ($0.03 loss per share) for the second quarter of fiscal 2011 compared to net loss of $1.7 million ($0.01 loss per share) for the second quarter of fiscal 2010; almost all of the current quarter's loss is represented by an unrealized after-tax loss of $3.4 million on the mark-to-market revaluation of the Company's gold, copper and foreign exchange forward contracts. These forward contracts were entered into in the first quarter as required under a credit agreement entered on October 8, 2010 with Credit Suisse AG;
  • Excluding the after-tax unrealized loss on forward contracts referred to above, the reported net loss would have been $0.3 million ($0.00 per share) for the second quarter ended March 31, 2011, compared to net loss of $1.7 million ($0.01 per share) for the same quarter of the previous fiscal year;
  • Cash used by operations was $1.4 million for second quarter of fiscal 2011 compared to cash used by operations of $4.4 million for the second quarter of fiscal 2010;
  • Capital expenditures were $15.6 million for the second quarter of fiscal 2011 compared to $6.9 million for the same period last year. Expenditures included $1.5 million on the development of the Upper Mineralized Zone ("UMZ") of the Don Mario Mine, $12.3 million on the development of the El Valle-Boinás/Carlés ("EVBC") Mine, $1.7 million on the Copperwood Project and $0.1 million for systems improvements; and
  • Cash and cash equivalents amounted to $23.5 million at March 31, 2011 compared to $11.9 million at September 30, 2010, excluding restricted cash.

"Operating profit for the second quarter ended March 31, 2011, is in line with our expectations as we continued to produce gold at our Las Tojas mine up until the start-up of production from the UMZ deposit. Net income was negatively impacted by an unrealized after-tax loss of $3.4 million resulting from the mark-to-market revaluation of the outstanding gold, copper and foreign exchange forward contracts entered into in accordance with the terms of the US$50 million Credit Suisse A.G. credit facility. Excluding this unrealized after-tax derivative loss, the net loss was $0.3 million or $0.00 per share in the second quarter of fiscal 2011. We are in the process of commissioning the Don Mario Mine UMZ copper-gold-silver deposit. Our focus now is on bringing the Spanish gold-copper-silver EVBC Mine into production within the next few weeks, initially at 70,000 ounces per annum of gold production, increasing to about 100,000 ounces per annum once the shaft is completed in early 2012. In addition, we are working towards a pre-feasibility study as well as a mine permit application on our Copperwood copper project in Michigan." said Roland Horst, Orvana's Chief Executive Officer.

Spending on the Company's capital projects and operating requirements has been and is expected to be incurred according to management's plans. However, while production is expected to begin at the EVBC Mine shortly, cash flows will be at a reduced rate during the initial production ramp-up period of several weeks. As well, delays in commissioning at the Don Mario Mine UMZ will reduce the Company's cash reserves to less than desirable levels until cash flow from UMZ and EVBC production commences. As a consequence, the Company entered into an agreement with its majority shareholder, Fabulosa Mines Limited ("Fabulosa"), under which (i) Fabulosa has committed to provide Orvana with $15 million six-month, secured, convertible bridge loan bearing interest at 8% per annum and (ii) certain of Fabulosa's pre- emptive rights are amended. Importantly, the agreement provides Orvana with increased equity financing flexibility in the future. Further information on this bridge loan facility and amendments to Fabulosa's pre-emptive rights are contained in a separate press release dated May 16, 2011.

While Orvana builds up its cash reserves in the future, management will continue to seek gold and/or copper advanced stage properties in politically stable regions, utilizing its mining expertise to increase long-term value for 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 Las Tojas deposit of the Don Mario Mine continued to the end of the second quarter of fiscal 2011, but has now been depleted. A total of 131,525 tonnes of ore were treated in second quarter of fiscal 2011 compared to 144,587 tonnes a year ago as indicated in the table below:


Quarter ended Mar. 31, 2011Mar. 31, 2011
Feb. 28, 2011
Jan. 31, 2011
Quarter ended Mar. 31, 2010
Las Tojas Tonnes131,52541,74241,11348,670144,587
g/t1.421.251.381.591.70
Gold recovery rate83.0%77.3%86.8%84.0%83.3%
Gold production - ounces4,9741,2981,5882,0886,565

Gold production for the second quarter of fiscal 2011 was 24% lower, at 4,974 ounces, compared to 6,565 ounces for the same period of fiscal 2010. This decline was due to processing the lower grade ore of the Las Tojas deposit.

The following table shows the cash operating costs and total production costs for three months ended March 31, 2011 and 2010. 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 endedThree months ended
March 31, 2011March 31, 2010
CostsCost/oz.CostsCost/oz.
Direct mine operating costs$4,240$852.40$4,389$668.61
Third-party smelting, refining and transportation costs357.01314.66
Cash operating costs4,275859.414,420673.27
Royalties and mining rights22745.7021833.26
Mining royalty tax44589.5242364.50
Total cash costs4,947994.635,061771.03
Depreciation, amortization and accretion668134.24686104.44
Total production costs$5,615$1,128.87$5,747$875.47
Gold production4,974 ozs.6,565 ozs.

Cash operating costs at $859.41 per ounce were affected by the decline in gold production from the lower grade Las Tojas deposit. These costs are not representative of the expected costs of the operation of the UMZ.

Financial Highlights

Orvana's financial highlights for the three and six months ended March 31, 2011 compared to three and six months ended March 31, 2010 are summarized below:

Three months ended
March 31
Six months ended
March 31
2011201020112010
Revenue$6,330$5,978$12,757$17,854
Operating (loss) profit1,1897802,0395,444
Net (loss) income before derivatives mark-to-market adjustment, net-of-tax (1)(327)(1,658)(2,727)(458)
Derivatives mark-to-market adjustment, net-of-tax(1)(3,360)-(21,984)-
Net (loss) income(3,687)(1,658)(24,711)(458)
Net (loss) income per share – basic and diluted$(0.03)$(0.01)$(0.21)$0.00
Net (loss) income per share before derivatives mark-to-market adjustment, net-of-tax – basic and diluted(1)$0.00$(0.01)$(0.02)$0.00
Cash (used) provided by operating activities(1,402)(4,352)(8,218)(4,903)
Cash and cash equivalents23,54641,29523,54641,295
Total assets211,566137,243211,566137,243
Long-term debt, net of financing fees47,3043,87947,3043,879
Obligations under capital leases3,0221,0413,0221,041
Shareholders' equity$86,242110,554$86,242110,554
(1)These amounts are non-GAAP measures and are derived from the following amounts in the income statement: Derivatives loss for the three and six months ended March 31, 2011 of $4,800 and $31,406 respectively less future income tax recoveries of $1,440 and $9,422 respectively.

The unaudited consolidated financial statements and Management's Discussion & Analysis for the period ended March 31, 2011 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 it mining capability and future cash flow to build long-term value for its shareholders through organic growth and strategic acquisitions of advanced-stage gold and/or copper properties.

In the short term, Orvana is focused on the start-up of production at the Don Mario UMZ copper- gold-silver operation in eastern Bolivia, start up of production at its gold-copper-silver EVBC Mine in northern Spain and advancing its Copperwood copper project in Michigan.

With the start up of operations at the UMZ and the EVBC production expected to occur in the next few weeks, Orvana expects annualized gold production to increase from about 28,000 ounces to approximately 120,000 ounces, early in 2012. Additionally, annualized copper and silver production are expected to increase substantially to over 12,000 tonnes and to 700,000 ounces respectively.

Over the longer term, Orvana will continue to seek gold and/or copper advanced stage properties in politically stable regions, utilizing our mining expertise to increase long-term value for shareholders.

The Company will hold a conference call on Tuesday May 17, 2011 at 10:00 a.m. (Eastern Time) to discuss the fiscal 2011 second quarter results. Following the presentation there will be a question and answer period for analysts and investors.

The conference call can be accessed at 1-416-340-2217 or the North American toll-free number at 1-866-696-5910, using the passcode 2207757 followed by the number sign.

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's primary asset is the El Valle/Boinás-Carlés ("EVBC") gold-copper project in northern Spain, which is expected to be in production in mid- 2011. Orvana owns and operates the Don Mario Mine in Bolivia where a newly completed leaching-precipitation-flotation ("LPF") plant is processing its copper-gold-silver Upper Mineralized Zone ("UMZ") deposit. In addition, Orvana is advancing its Copperwood copper project in Michigan, USA. Additional information is available at Orvana's website (www.orvana.com).

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 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 March 31, 2011 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, 2011.

Contact Information

  • Orvana Minerals Corp.
    Natalie Frame
    Investor Relations
    (289) 200-7640

    Orvana Minerals Corp.
    Roland Horst
    Chief Executive Officer
    (416) 369-1629

    Orvana Minerals Corp.
    Malcolm King
    Vice President and Chief Financial Officer
    (416) 369-1629
    ask_us@orvana.com
    www.orvana.com