Orvana Reports First Quarter Results for the Three Months Ended December 31, 2010
TORONTO, ONTARIO -- (Marketwire) -- 02/14/11 -- Orvana Minerals Corp. (TSX: ORV) announced operating results today for the first quarter ended December 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 first quarter are:
-- Revenues of $6.4 million on sales of 4,734 ounces for the three months
ended December 31, 2010 compared to $11.9 million on sales of 10,880
ounces for the same period a year ago, with lower ounces of gold sold
contributing to most of the decline, partially offset by higher average
gold prices realized;
-- Operating profit of $0.9 million for the three months ended December 31,
2010 compared to $4.7 million for the same period a year ago;
-- Net loss of $21.0 million ($0.18 per share) for the first quarter of
fiscal 2011 compared to net income of $1.2 million ($0.01 per share) for
the first quarter of fiscal 2010; almost all of the current quarter's
loss is represented by an unrealized after-tax loss of $18.6 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
this 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 $2,400 ($0.02 loss per
share) for the first quarter ended December 31, 2010 compared to net
income of $1,200 ($0.01 earnings per share) for the same quarter of the
previous fiscal year;
-- Cash used by operations before changes in working capital was $0.3
million for first three months of fiscal 2011 compared to cash provided
by operations of $3.1 million for the first three months of fiscal 2010;
-- Capital expenditures were $9.0 million for the first quarter of fiscal
2011 compared to $5.0 million for the same period last year.
Expenditures included $3.8 million on the development of the Upper
Mineralized Zone ('UMZ') of the Don Mario Mine, $3.7 million on the
development of the El Valle-Boinas/Carle's ('EVBC') project, $1.3
million on the Copperwood project and $0.2 million for systems
improvements; and
-- Cash and cash equivalents amounted to $42.7 million at December 31, 2010
compared to $12.7 million at September 30, 2010.
'Operating profit for the first quarter ended December 31, 2010, is in line with our expectations as we continue to produce gold at our Las Tojas mine. Net income was negatively impacted by an unrealized after-tax loss of $18.6 million resulting from the mark-to-market revaluation of the outstanding gold, copper and foreign exchange forward contracts entered into in accordance with the terms of the US$ 50 million Credit Suisse A.G. credit facility. Excluding this unrealized after-tax derivative loss, the net loss was $2.4 million or a loss of $0.02 per share in the first quarter of fiscal 2011. We will continue to produce gold from our Las Tojas operation in Bolivia until the start up of production at the UMZ, with production expected to start in the coming weeks. Our focus continues to be on bringing the Spanish EVBC gold-copper-silver mine into production in the spring of 2011. 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.
After fully funding the capital requirements for the EVBC and UMZ projects and following their production start-up, Orvana expects to begin to accumulate cash reserves from its operating free cash flows. Orvana 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 into the first quarter of fiscal 2011. A total of 148,094 tonnes of ore were treated in first quarter of fiscal 2011 compared to 156,176 tonnes a year ago as indicated in the table below:
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Quarter Quarter
ended Dec. Dec. 31, Nov. 30, Oct. 31, ended Dec.
31, 2010 2010 2010 2010 31, 2009
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Las Tojas Tonnes 148,094 49,465 50,843 47,786 156,176
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g/t 1.33 1.28 1.34 1.38 2.13
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Gold recovery rate 77.5% 81.3% 75.5% 75.1% 89.0%
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Gold production -
ounces 4,920 1,510 1,618 1,792 9,527
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Gold production for the first quarter of fiscal 2011 was 48% lower, at 4,920 ounces, compared to 9,527 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 December 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).
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Three months ended Three months ended
December 31, 2010 December 31, 2009
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Costs Cost/oz. Costs Cost/oz.
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Direct mine operating costs $ 4,274 $ 868.75 $ 4,558 $ 478.46
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Third-party smelting, refining
and transportation costs 38 7.65 49 5.17
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Cash operating costs 4,312 876.40 4,607 483.63
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Royalties and mining rights 227 46.06 381 39.99
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Mining royalty tax 450 91.48 829 87.00
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Total cash costs 4,989 1,013.94 5,817 610.62
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Depreciation, amortization and
accretion 627 127.46 1,097 115.13
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Total production costs $ 5,616 $ 1,141.40 $ 6,914 $ 725.75
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Gold production 4,920 ozs. 9,527 ozs.
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Cash operating costs at $876.40 per ounce were dramatically 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 months ended December 31, 2010 compared to three months ended December 31, 2009 are summarized below:
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Quarter ended
December 31
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2010 2009
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Revenue $6,427 $ 11,876
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Operating profit 850 4,664
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Net (loss) income before derivatives mark-to-
market adjustment, net-of-tax(1) (2,400) -
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Derivatives mark-to-market adjustment, net-of-
tax(1) (18,624) -
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Net (loss) income (21,024) 1,200
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Net (loss) income per share - basic and diluted ($0.18) $ 0.01
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Net (loss) income per share before derivatives
mark-to-market adjustment, net-of-tax- basic
and diluted(1) ($0.02) $ 0.01
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Cash (used) provided by operating activities (6,867) (551)
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Cash and cash equivalents 42,688 52,751
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Total assets 207,178 141,236
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Long-term debt and obligations under capital
leases 50,820 4,515
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Shareholders' equity $89,069 111,719
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(1) These amounts are non-GAAP measures and are derived from the following
amounts in the income statement: Derivatives loss of $26,606 less Future
income tax recovery of $7,982.
The unaudited consolidated financial statements and Management's Discussion & Analysis for the period ended December 31, 2010 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 commencing production at both the Don Mario UMZ copper-gold-silver operation in eastern Bolivia and its EVBC gold-copper-silver project in northern Spain, as well as, advancing its Copperwood copper project in Michigan.
With the start up of operations at the UMZ expected in the coming weeks and the EVBC expected to occur in the spring of 2011, 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 750,000 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 February 15, 2010 at 10:00 a.m. (Eastern Time) to discuss the fiscal 2011 first 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 owns and operates the copper-gold-silver Don Mario Mine in Bolivia and is bringing into production the El Valle-Boinas/Carle's gold-copper-silver project in northern Spain and advancing the 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-Boinas/Carles 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-Boinas/Carle's 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-Boinas/Carle's 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 December 31, 2010 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 December 31, 2010.
Contacts:
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