Orvana Reports Third Quarter Results for the Three Months Ended June 30, 2011
TORONTO, ONTARIO -- (Marketwire) -- 08/15/11 -- Orvana Minerals Corp. (TSX: ORV) announced operating results today for the third quarter ended June 30, 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 third quarter are:
-- Commissioning is in progress in both the Upper Mineralized Zone ('UMZ')
of the Don Mario Mine and the El Valle-Boinas/Carle's ('EVBC') Mine;
-- Revenues of $1.8 million on sales of 1,297 ounces for the three months
ended June 30, 2011 compared to $7.8 million on sales of 6,535 ounces
for the same period a year ago, with the current quarter decline
resulting from the depletion of the Las Tojas gold deposit at the end of
the second quarter;
-- Operating loss of $0.1 million for the three months ended June 30, 2011
compared to operating profit of $1.3 million for the same period a year
ago;
-- Net loss of $7.0 million ($0.06 loss per share) for the third quarter of
fiscal 2011 compared to net loss of $1.1 million ($0.01 loss per share)
for the third quarter of fiscal 2010. The current quarter's loss was due
to significantly lower revenues after the depletion of the Las Tojas
deposit at the end of the second quarter of fiscal 2011 and stock-based
consideration expense of $5,214 reflecting the fair value of shares
issued to the Company's majority shareholder in connection with
amendments made to its pre-emptive rights and its provision to Orvana of
a US$15 million bridge loan;
-- Cash used in operating activities of $4.5 million for third quarter of
fiscal 2011 compared to cash generated by operating activities of $0.9
million for the third quarter of fiscal 2010 with lower revenues in the
current quarter contributing to the decline;
-- Capital expenditures were $20.3 million for the third quarter of fiscal
2011 compared to $13.1 million for the same period last year.
Expenditures included $8.9 million on the development of the UMZ, $9.9
million on the development of the EVBC Mine, $1.3 million on the
Copperwood Project and $0.2 million for systems improvements; and
-- Cash and cash equivalents, excluding restricted cash, amounted to $16.9
million at June 30, 2011 compared to $11.9 million at September 30,
2010.
'Revenue and operating profit for the third quarter ended June 30, 2011 were significantly lower as a result of the depletion of the Las Tojas deposit at the end of the second quarter and continued work towards commissioning of the Don Mario UMZ in Bolivia and the EVBC mine in Spain. At EVBC, we commenced commissioning of the mill in May. Payments for the first 1,000 tonnes of copper concentrate as well as the first gold dore pour were received in the first week of August 2011. At our Don Mario UMZ mine commissioning started in April 2011. During June 2011, approximately 27,000 tonnes of ore was processed with total concentrate production to date exceeding 1,000 tonnes, with first revenues expected in August. The commissioning stage has been slower than planned due to initial issues with the sulphuric acid plant but these issues have been resolved and the plant is now running to 100% of its design capacity. Recoveries are improving and currently are up to 60% for copper and we continue to make progress toward the target of 80%. At Copperwood, we announced the results on June 24, 2011 of the pre-feasibility study (available on SEDAR.com) and we are continuing to advance the mine permit application.' said Roland Horst, Orvana's Chief Executive Officer.
On July 27, 2011, the Company entered into an underwriting agreement to sell 8,500,000 common shares of Orvana at a price of C$2.00 per common share for aggregate gross proceeds of C$17 million (the 'Offering'). This transaction closed on August 11, 2011.
Concurrent with the closing of the Offering, the Company repaid in full the outstanding amount of the $15.2 million bridge loan, including accrued interest, by issuing 7,319,969 common shares to the Company's majority shareholder at the same price and on the same terms as those issued under the Offering. The majority shareholder also acquired 1,180,031 common shares, on a private placement basis at a price of C$2.00 per common share. As a result, the majority shareholder has acquired 8,500,000 common shares in total when combined with the shares issued to it on repayment of the bridge loan.
As Orvana replenishes its cash reserves and financing capacity, 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 - Las Tojas 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 was depleted at the end of the second quarter of fiscal 2011 and gold production ceased during the third quarter.
The following table presents the cash operating costs and production costs for the nine months ended June 30, 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).
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Nine months ended June 30,
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2011 2010
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Costs Cost/oz. Costs Cost/oz.
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Direct mine operating costs $8,544 $863.57 $14,032 $619.87
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Third-party smelting, refining and
transportation costs 80 8.12 116 5.13
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Cash operating costs 8,624 871.69 14,148 625.00
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Royalties and mining rights 577 58.29 860 38.00
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Mining royalty tax 1,025 103.59 1,790 79.06
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Total cash costs 10,226 1,033.57 16,798 742.06
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Depreciation, amortization and
accretion 1,516 153.28 2,458 108.57
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Total production costs $11,742 $1,186.85 $19,256 $850.63
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Gold production 9,894 ozs. 22,637 ozs.
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Cash operating costs were $871.69 per ounce on 9,894 ounces produced for the nine months ended June 30, 2011(representing only six months of actual production that ended March 31, 2011) compared to $625.00 per ounce on 22,637 ounces produced for the nine months ended June 30, 2010. The increase in costs was largely due to lower production volumes and processing of lower grade ore from the Las Tojas deposit.
Financial Highlights
Orvana's financial highlights for the three and nine months ended June 30, 2011 compared to three and nine months ended June 30, 2010 are summarized below:
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Three months ended Nine months ended
June 30 June 30
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2011 2010 2011 2010
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Revenue $1,752 $7,758 $14,509 $25,612
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Operating (loss) profit (128) 1,350 1,911 6,794
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Net loss before derivatives mark-to-
market adjustment, net-of-tax(1) (7,472) (1,106) (10,199) (1,564)
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Derivatives mark-to-market adjustment,
net-of-tax(1) 459 - (21,525) -
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Net loss (7,013) (1,106) (31,724) (1,564)
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Net loss per share - basic and diluted ($0.06) ($0.01) ($0.27) ($0.01)
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Net loss per share before derivatives
mark-to-market adjustment, net-of-
tax- basic and diluted(1) ($0.06) ($0.01) ($0.09) ($0.01)
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Cash provided by (used in) operating
activities ($4,496) 932 ($12,714) (3,971)
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Cash and cash equivalents 16,896 26,922
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Total assets 233,054 139,514
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Long-term debt, net of financing fees 47,728 3,235
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Obligations under capital leases 3,210 1,722
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Shareholders' equity $85,017 $110,003
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(1)These amounts are non-GAAP measures and are derived from the following amounts in the income statement: Derivatives gain for the three months ended June 30, 2011 of $656 less future tax expense of $197 and derivatives loss of $30,750 less future income tax recoveries of $9,225 for the nine months ended June 30, 2011.
The unaudited consolidated financial statements and Management's Discussion & Analysis for the period ended June 30, 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 utilize future cash flow and mining capability to build long-term value for its shareholders initially through organic growth and in the future through strategic acquisitions of advanced-stage gold and/or copper properties.
In the short term, Orvana is focused on fully commissioning its EVBC gold-copper-silver mine in northern Spain and its Don Mario mine copper-gold-silver operation in eastern Bolivia, and advancing its Copperwood copper project in Michigan.
In Spain, the Company commenced production start-up and commissioning at the EVBC Mine in May 2011. The first shipment of gold dore was made on July 27, 2011 and gold/copper concentrate was shipped to the port during July 2011 for further transport to the smelter, with the cash received for these shipments during the first week of August 2011. The EVBC life-of-mine ('LOM') average annual gold production is 105,000 ounces of gold and 8.6 million pounds of copper.
In Bolivia, at the Don Mario Mine, commissioning and start up of the LPF mill and acid plant continued during the third quarter of fiscal 2011, with 1,000 tonnes of concentrate produced by the end of July 2011. The Las Tojas deposit extended gold production to the end of the second quarter of fiscal 2011, with the final shipment of gold dore from this deposit occurring at the beginning of April 2011. The UMZ LOM annual metal production to beyond 2019 is estimated at 14.5 million pounds of copper, 14,400 ounces of gold and 460,000 ounces of silver. The transport of the first 1,000 tonnes of copper concentrate to the port in Chile has commenced, with payment expected in August 2011.
In Michigan, USA, at Copperwood, a pre-feasibility study based on increased resources was completed in August 2011 and the submission of a mine plan permit to the state of Michigan is expected to take place in the fourth quarter of fiscal 2011.
With the commissioning at the Don Mario UMZ and the EVBC Mine, Orvana expects annual gold production to increase from about 28,000 ounces produced in fiscal 2010 to approximately 75,000 ounces by mid fiscal 2012. Additionally, annual copper production is expected to increase substantially to over 9,000 tonnes and annual silver production to over 550,000 ounces. Orvana's long term forecasts of 100,000 ounces of annual gold production and 10,000 tonnes of annual copper production remain unchanged.
The Company will hold a conference call on Tuesday August 16, 2011 at 10:00 a.m. (Eastern Time) to discuss the fiscal 2011 third 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 is transforming itself from a single mine gold producer into a multi-mine gold and copper producer. Orvana's primary asset is the EVBC gold-copper project in northern Spain, which is now being commissioned towards targeted production levels. Orvana owns and operates the Don Mario Mine in Bolivia which is being commissioned to process its copper-gold-silver 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-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 June 30, 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 June 30, 2011.
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