Welcome To The Orvana Minerals HUB On AGORACOM
Operations: Copper-gold-silver-mine in Bolivia, Gold/copper mine/Mill in Spain and its developing copper project in Michigan
Message: Orvana Fiscal Q3 Performance
Orvana earns $11.31-million (U.S.) in fiscal Q3 2013
2013-08-09 12:06 ET - News Release
Mr. Michael Winship reports
ORVANA ACHIEVES STRONG MINE PERFORMANCE IN FISCAL THIRD QUARTER
Orvana Minerals Corp. has released its financial and operating results for the third quarter ended June 30, 2013. The Company reported record gold production from its El Valle-Boinas and Carles mines in Spain ("EVBC").
The Company reported net income for Q3 2013 of $11.3 million and adjusted net loss of $0.7 million excluding certain non-recurring items.
The unaudited consolidated interim financial statements for Q3 2013 ("Q3 Financials") and management's discussion & analysis related thereto ("Q3 2013 MD&A") are available on SEDAR and at www.orvana.com.
Dollar amounts (other than per ounce/pound and per share amounts) are in thousands of U.S. dollars unless stated otherwise, and fine troy ounces of gold and silver are referred to as "ounces" or "oz".
Q3 2013 Operating and Financial Highlights
-- Record gold production from EVBC of 18,439 ounces.
-- Strong total metals production of 22,319 ounces of gold, 4.6 million
pounds of copper and 303,704 ounces of silver compared to 18,344 ounces
of gold, 5.1 million pounds of copper and 248,908 ounces of silver in
the third quarter of fiscal 2012. (1)
-- On June 16, 2013, there was a significant hoist incident at the Boinas
Mine at EVBC. A fully loaded skip failed to stop going into the surface
dump, crashed into the top of the headframe and dropped down the shaft
when the wire rope attachment failed. Preliminary findings show no
damage to the hoist or shaft but significant damage to the steel sets at
the shaft bottom and to the loading pocket. Repairs are expected to take
approximately six months at a cost of up to $3,500. Underground
production from the Boinas Mine has continued since the shaft accident
using truck haulage through the existing underground ramp access with
efforts to increase tonnage from higher grade skarns and oxide areas.
Production at the Carles Mine is unaffected and options to expand its
production are underway. Due to the hoist incident at the Boinas Mine,
production is forecasted to drop to about 90% of former levels at EVBC
until the repairs are completed. The Company, however, remains on track
to meet its original total metals production guidance for fiscal 2013.
-- Following the end of the third quarter, as part of the Company's ongoing
operational optimization initiatives, the Company suspended the
operations of its sulphuric acid plant at the UMZ Mine used to process
oxides. LPF processing costs were significantly higher than flotation-
only processing costs and throughput of the LPF circuit was
approximately half that of the flotation-only circuit. The Company
recorded an impairment charge of the LPF plant and related consumables
of $6,423. The Company will continue to process transition and sulphide
ores now by the flotation-only circuits. This suspension of the LPF
plant will result in increased production of about 5% per quarter.
-- Sales of 20,480 ounces of gold, 4.1 million pounds of copper and 303,733
ounces of silver compared to 16,842 ounces of gold, 5.5 million pounds
of copper and 284,440 ounces of silver in the third quarter of fiscal
2012. (1)
-- Consolidated revenue of $35,414 compared to $43,691 in the third quarter
of fiscal 2012, a decrease of 19%.
-- Net income of $11,315 compared to $12,118 in the third quarter of fiscal
2012.
-- Adjusted net loss of $654 compared to adjusted net income of $3,611 in
the third quarter of fiscal 2012. The adjusted net loss excludes certain
non-recurring items including (i) the unrealized gains from the
revaluation of the Company's financial instruments and the tax effect
thereof, (ii) the non-cash impairment charge of $6,423 in connection
with the suspension of the operations of the sulphuric acid plant at the
UMZ Mine, (iii) the non-cash de-recognition of a portion of the Boinas
Mine hoist of $3,500 as a result of the hoist incident, (iv) the cash
union payment provision of $1,384 at the UMZ Mine, and (v) the non-cash
provision for potentially uncollectible VAT at the UMZ Mine of $1,387.
(2)
-- Cash flows provided by operating activities of $10,845 compared to
$12,366 in the third quarter of fiscal 2012 and cash flows provided by
operating activities before changes in non-cash working capital of
$4,604 compared to $10,929 in the third quarter of fiscal 2012. (2)
-- Capital expenditures of $4,283 and $17,265 for the three and nine months
ended June 30, 2013 consisting mostly of primary development at EVBC.
-- Debt net of cash, cash equivalents and restricted cash for debt
repayment of $44,400 at June 30, 2013.
-- Payment of principal and interest on its long-term debt of $11,099 in
the nine months ended June 30, 2013.
-- During the quarter, the announcement of a potential reduction in
quantitative easing in the United States. This, along with other
macroeconomic indicators in the United States, suggested the United
States economy was improving. In response, gold prices declined sharply
during June closing below $1,200 at the end of the quarter. Other
commodity prices were similarly affected. Operational and corporate
reviews have been initiated to seek means to reduce operating and
capital costs to improve liquidity and cash flows given the recent
declines and continued volatility in the metals markets.
(1) For a description of EVBC and the UMZ Mine, please see "Overall
Performance - EVBC" and "Overall Performance - UMZ Mine".
(2) Adjusted net income (loss) and cash flows from operating activities
before changes in non-cash working capital are non-IFRS performance
measures with no standard definition under IFRS. The Company believes
that, in addition to conventional measures prepared in accordance with
IFRS, the Company and certain investors use this information to evaluate
the Company's performance including the Company's ability to generate
cash flows from its mining operations. Accordingly, it is intended to
provide additional information and should not be considered in isolation
or as substitutes for measures of performance prepared in accordance
with IFRS. For further information and a detailed reconciliation, please
see the "Other Information - Non-IFRS Measures" section of the Q3 MD&A.
"The third quarter of 2013 highlights our focus on continuing to stabilize and optimize operations. We had record production numbers at EVBC and we continue to implement changes to further improve our performance," said Michael Winship, Interim President and CEO. "We have intensified our focus on cost reduction in the current challenging environment resulting in the suspension of the LPF plant at the UMZ Mine and continuing with flotation-only processing at lower costs and higher throughput."
OVERALL PERFORMANCE
In Q3 2013, the Company increased consolidated production due to record mining and processing performance at the EVBC Mine. The benefit of improved throughput was offset by lower metals prices. The table below summarizes the Company's operating and financial performance for the following periods:
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Q2 2013 Q3 2013 Q3 2012 YTD 2013 YTD 2012
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Operating Performance (1)
Gold
Production (oz) 18,144 22,319 18,344 58,223 40,773
Sales (oz) 19,248 20,480 16,842 52,624 36,448
Average realized price /
oz (2) $ 1,616 $ 1,450 $ 1,614 $ 1,574 $ 1,655
Copper
Production ('000 lbs) 3,852 4,558 5,080 12,793 11,307
Sales ('000 lbs) 3,848 4,064 5,454 11,885 9,470
Average realized price /
lb (2) $ 3.50 $ 3.25 $ 3.37 $ 3.38 $ 3.56
Silver
Production (oz) 191,374 303,704 248,908 728,530 439,199
Sales (oz) 213,879 303,733 284,440 759,384 380,358
Average realized price /
oz (2) $ 28.10 $ 22.58 $ 27.07 $ 26.64 $ 28.18
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Financial Performance
Revenue (3) $ 44,301 $ 35,414 $ 43,691 $113,743 $ 90,309
Mining costs (4) $ 26,163 $ 26,153 $ 27,857 $ 70,939 $ 58,836
Depreciation and
amortization $ 6,441 $ 7,226 $ 4,803 $ 17,686 $ 11,059
Impairment charge - $ 6,423 - $ 6,423 -
Gross margin $ 11,697 $ (4,388) $ 11,031 $ 18,695 $ 20,414
Financial instruments
(gain) loss $ (6,545) $(33,700) $(10,621) $(51,993) $ 8,602
Net income (loss) $ 6,483 $ 11,315 $ 12,118 $ 31,449 $ (346)
Net income (loss) per
share (basic and diluted) $ 0.05 $ 0.08 $ 0.09 $ 0.23 $ 0.00
Adjusted net income (loss)
(5) $ 922 $ (654) $ 3,611 $ 4,608 $ 3,149
Adjusted net income (loss)
per share (basic and
diluted) (5) $ 0.01 $ 0.00 $ 0.03 $ 0.03 $ 0.02
Operating cash flows $ 14,014 $ 10,845 $ 12,336 $ 24,910 $ 12,088
Operating cash flows
before non-cash working
capital changes (5) $ 10,627 $ 4,604 $ 10,929 $ 23,420 $ 18,823
Ending cash and cash
equivalents $ 14,346 $ 11,484 $ 11,094 $ 11,484 $ 11,094
Restricted cash (including
long-term) $ 13,858 $ 16,304 $ 14,626 $ 16,304 $ 14,626
Capital expenditures
(including primary mine
development) (6) $ 8,753 $ 4,283 $ 4,941 $ 17,265 $ 17,304
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(1) Metals production and sales are from EVBC and the UMZ Mine. EVBC and
the UMZ Mine reached commercial production in August 2011 and January
2012, respectively.
(2) Sales volumes represented in the table above and in the tables below
with respect to EVBC and the UMZ Mine include volume adjustments
relating to final liquidations from prior period sales. Average
realized metal prices are calculated by dividing gross revenue
recorded for the period from sales of the particular metal, before
deduction of treatment and refinement charges, by ounces of gold or
silver or pounds of copper sold during the period. Sales volumes used
to calculate average realized metal prices and unitary cash costs do
not include volume adjustments relating to final liquidations from
prior period sales.
(3) Revenue represents (i) gross revenue derived from the sales of metals
in the applicable period less transportation, treatment, refining,
penalties and selling costs associated with such sales, (ii) plus or
minus realized final liquidation amounts relating to metals sold in
prior periods, (iii) plus or minus mark-to-market adjustments based on
unrealized price fluctuations at period end relating to metals sold in
the current or prior reporting periods prior to completion of final
liquidations relating to such sales.
(4) Mining costs represents all costs associated with the production of
the metals sold in the period including mining, milling,
administration, royalties and, in respect of the UMZ Mine, mining
royalty taxes payable to the Bolivian government.
(5) Adjusted net income (loss), adjusted net income (loss) per share and
operating cash flows before non-cash working capital changes are non-
IFRS performance measures with no standard definition under IFRS. For
further information and a detailed reconciliation, please see the
"Other Information - Non-IFRS Measures" section of the Q3 MD&A.
(6) These amounts are presented in the consolidated cash flows in the Q3
Financials on a cash basis. Each reported period excludes unpaid
capital expenditures for the EVBC Mine incurred in the period which
will be paid in subsequent periods and includes capital expenditures
incurred in prior periods and paid for in the applicable reporting
period.
EVBC Operations, Spain
With strong mining and processing performance and higher than average grade, EVBC achieved record production numbers for the third quarter of fiscal 2013 of 18,439 ounces of gold, 1.9 million pounds of copper and 58,856 ounces of silver. Recoveries increased on gold, copper and silver in the third quarter of fiscal 2013 primarily as a result of higher head grades and stability in blend and operations of the mill.
The Company continued to realize a strong benefit from the hoisting and shaft system at the Boinas Mine. There was increased haulage and processing flexibility with the ramp and shaft combination with the hoist achieving 74% of the volume of skarns extracted in May.
However, on June 16, 2013 an incident occurred resulting in material damage to the hoist/shaft system. EVBC personnel have responded well to the adversity and it appears the loss of hoisting capability will not be as significant as initially anticipated, based on July production performance. An alternative production schedule in response to the hoist incident has been completed and is being executed. In July 2013, under the revised production schedule, the EVBC Mine produced 5,651 ounces of gold, 0.6 million pounds of copper and 19,463 ounces of silver.
International shaft and hoist expert contractors and consultants have completed a recovery plan. The Company expects that it will take about six months to repair the shaft at an estimated cost of approximately $3,500. As a result of this incident, the Company de-recognized a portion of the asset for the estimated cost to repair the damaged components of $3,500. The repair costs will be capitalized to property, plant and equipment when incurred and future insurance proceeds will be recorded in "other income" once received.
The following table includes consolidated operating and financial performance data for the EVBC Mine for the periods set out below:
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Q2 2013 Q3 2013 Q3 2012 YTD 2013 YTD 2012
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Operating Performance
Ore mined (tonnes) (wmt) 191,460 193,202 161,115 547,713 429,568
Ore milled (tonnes) (dmt) 176,445 181,599 150,711 503,934 401,255
Gold
Grade (g/t) 3.04 3.41 3.09 3.20 2.72
Recovery (%) 90.9 92.5 93.4 92.3 92.2
Production (oz) 15,713 18,439 13,983 48,101 32,399
Sales (oz) 16,824 16,808 11,358 42,391 29,380
Copper
Grade (%) 0.48 0.63 0.51 0.54 0.42
Recovery (%) 80.4 87.3 86.5 83.4 84.3
Production ('000 lbs) 1,488 1,942 1,468 4.778 3,151
Sales ('000 lbs) 1,636 1,643 934 4,095 2,710
Silver
Grade (g/t) 10.0 12.1 10.4 11.2 9.4
Recovery (%) 73.8 82.9 78.4 79.1 76.2
Production (oz) 41,848 58,856 39,621 143,581 92,395
Sales (oz) 43,183 51,934 36,465 128,396 77,101
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Total cash costs (by-
product) ($/oz of gold
sold) (1) $ 784 $ 846 $ 806 $ 821 $ 916
Total production costs (by-
product) ($/oz of gold
sold) (1) $ 1,076 $ 1,178 $ 968 $ 1,127 $ 1,181
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Financial Performance
Revenue $ 31,180 $ 25,242 $ 20,845 $ 73,700 $ 56,521
Mining costs $ 17,051 $ 17,363 $ 13,644 $ 44,145 $ 34,460
Depreciation and
amortization (2) $ 4,915 $ 5,557 $ 2,730 $ 12,982 $ 7,783
Financial instruments
(gain) loss $ (6,545) $(33,700) $(10,621) $(51,993) $ 8,602
Income (loss) before tax $ 15,377 $ 30,894 $ 15,100 $ 62,264 $ 3,455
Adjusted income (loss)
before tax (1) $ 7,402 $ 1,391 $ 2,948 $ 11,515 $ 8,447
Capital expenditures
(including primary
development) (3) $ 3,243 $ 2,900 $ 7,507 $ 9,500 $ 21,075
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(1) Total cash costs (by-product) and total production costs (by-product)
per ounce of gold sold and adjusted income (loss) before tax are non-
IFRS performance measures with no standard definition under IFRS. For
further information and a detailed reconciliation, please see the
"Other Information - Non-IFRS Measures" section of the Q3 MD&A.
Adjusted income before tax includes realized expenses in connection
with financial instruments settled during the period and excludes the
mark-to-market fair value adjustments of the Company's outstanding
financial instruments at the end of the period.
(2) Depreciation and amortization amounts set out in the table above
include depreciation of amounts paid by the Company to acquire EVBC on
the acquisition of Kinbauri and such total depreciation and
amortization costs are included in the calculation of total production
costs (by-product) per ounce of gold sold.
(3) These amounts are presented on a cash basis. Each reported period
excludes unpaid capital expenditures incurred in the period which will
be paid in subsequent periods and includes capital expenditures
incurred in prior periods and paid for in the applicable reported
period.
UMZ Mine, Bolivia
The performance of the UMZ Mine in Q3 2013 increased compared to the second quarter of fiscal 2013 mainly as a result of an overall increase in grades and recoveries for gold and silver. Higher throughput was also a factor for copper and silver. Improved recoveries were achieved as a result of increased access to sulphides from different areas of the UMZ Mine to allow for a better blending of ores being processed as well as a change in reagents.
The Company placed its sulphuric acid plant on care and maintenance and recorded an impairment charge of the plant and related consumables of $6,423 as it determined it no longer economical to process oxides through the leach-precipitation-flotation ("LPF") process at this time as a result of, among other things, declining metals prices and rising prices of necessary consumables for the LPF process. LPF processing costs were significantly higher than flotation-only processing costs and throughput of the LPF circuit is approximately half that of the flotation-only circuit. This suspension of the LPF plant will result in increased production of about 5% per quarter.
During July 2013, the Company entered into regular annual union wage negotiations as mandated under Bolivian law. Intermittent work stoppages commenced in July by way of formal strike notice from the union for set short periods of time. The Company approached the Ministry of Labour to gain assistance on inappropriate actions being taken by the union. Negotiations have then proceeded normally with no work disruptions in late July and into August. The Company is focused on finalizing its annual wage negotiations.
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Q2 2013 Q3 2013 Q3 2012 YTD 2013 YTD 2012
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Operating Performance (1)
Ore mined (tonnes) 450,489 522,939 343,450 1,456,470 841,318
Ore milled (tonnes) 184,607 195,798 179,923 581,717 402,330
Gold
Grade (g/t) 1.01 1.39 1.92 1.20 1.84
Recovery (%) 40.7 44.3 39.2 45.2 35.1
Production (oz) 2,432 3,880 4,361 10,122 8,374
Sales (oz) (2) 2,424 3,672 5,484 10,233 7,068
Copper
Grade (%) 1.26 1.40 1.83 1.37 1.82
Recovery (%) 46.0 43.4 49.7 45.6 50.6
Production ('000 lbs) 2,363 2,616 3,612 8,016 8,156
Sales ('000 lbs) (2) 2,212 2,421 4,520 7,790 6,760
Silver
Grade (g/t) 42.1 61.3 87.6 52.0 84.0
Recovery (%) 59.8 63.5 41.3 60.2 31.9
Production (oz) 149,526 244,848 209,287 584,949 346,804
Sales (oz) (2) 170,697 251,799 247,975 630,988 303,257
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Total cash costs (co-
product) ($/lb) copper (3) $ 2.47 $ 2.15 $ 2.35 $ 2.21 $ 3.18
Total cash costs (co-
product) ($/oz) gold (3) $ 1,155 $ 925 $ 1,119 $ 1,023 $ 1,030
Total cash costs (co-
product) ($/oz) silver (3) $ 22.52 $ 16.12 $ 21.20 $ 19.27 $ 18.99
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Financial Performance
Revenue $ 13,121 $ 10,172 $ 22,846 $ 40,043 $ 33,788
Mining costs $ 9,112 $ 8,790 $ 14,193 $ 26,793 $ 24,376
Depreciation and
amortization $ 1,499 $ 1,669 $ 2,073 $ 4,704 $ 3,276
EMIPA Q3 adjustments (4) - $ 9,194 - $ 9,194 -
Income (loss) before tax $ 369 $(10,350) $ 6,315 $ (3,918) $ 4,944
Adjusted income (loss)
before tax $ 369 $ (1,156) $ 6,315 $ 5,276 $ 4,944
Capital expenditures $ 423 $ 317 $ 232 $ 2,110 $ 806
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(1) The UMZ Mine commenced commercial production on January 1, 2012.
Information relating to production for fiscal 2012 includes production
from the UMZ Mine during the start-up and commissioning period in the
first quarter of fiscal 2012. Sales for the first quarter of fiscal
2012 from the UMZ Mine were credited against capitalized commissioning
costs and sales from January 1, 2012 onwards were recorded as revenue.
(2) The sales volumes for the first quarter of fiscal 2013 have been
adjusted from the previously reported information to deduct volume
adjustments relating to final liquidations from prior period sales.
Sales volume used to calculate unitary cash costs do not include
volume adjustments relating to final liquidations from prior period
sales.
(3) Total cash costs (co-product) per pound of copper and per ounce of
gold and silver are non-IFRS performance measures with no standard
definition under IFRS. For further information and a detailed
reconciliation, please see the "Other Information - Non-IFRS Measures"
section of the Q3 MD&A.
(4) Other expenses include $7,807 of non-recurring payments including the
LPF plant impairment charge and $1,384 in payments made to union
employees.
Copperwood Project
Orvana continues to advance its copper project (the "Copperwood Project") located in the Upper Peninsula of Michigan, United States. The Company has achieved the necessary permits. Optimization work is being done further to the Copperwood Project feasibility study, with a focus on additional metallurgical testing and mine design.
Total capital expenditures in respect of the Copperwood Project during Q3 2013 and for the nine months ended March 31, 2013 were $362 and $2,647, respectively, compared to a total of $5,842 in fiscal 2012. These capital expenditures included metallurgical testing, mine planning, costs associated with permitting including the Wetland Permit, well field investigation and peer review and supporting costs. Orvana is continuing to investigate a variety of possible options to enhance the value of the Copperwood Project to Orvana's shareholders including mine financing, partnerships and third party acquisition.
Liquidity
In addition to its long-term debt at EVBC, the Company has a loan facility (the "Fabulosa Loan") with Fabulosa Mines Limited ("Fabulosa"), the Company's 52% shareholder, in the amount of $11,500. Orvana is making principal and interest payments under the EVBC Loan, interest and stand-by fees payments under the Fabulosa Loan and repaid $3,000 of principal under the Fabulosa Loan in the third quarter to date.
The Fabulosa Loan was amended subsequent to the end of the quarter. The availability and maturity periods were extended until September 30, 2014 from August 31, 2013 and December 31, 2013, respectively. Interest of 12%, is payable monthly along with stand-by fees. Principal amounts outstanding under the Fabulosa Loan are now required to be repaid in the minimum amount of $500 per month commencing on April 1, 2014, provided that the entire principal and interest will be repaid by the new maturity date. In connection with such extension and amendment, the Company agreed to issue warrants to purchase 500,000 common shares of the Company exercisable for five years at an exercise price equal to an average of current market trading prices, subject to the approval of the Toronto Stock Exchange.
Debt net of cash, cash equivalents and restricted cash for debt repayment stood at $44,400 at June 30, 2013. At the date hereof, the Company has the ability to draw approximately $8,770 under the Fabulosa Loan until September 30, 2014.
Outlook
Orvana's short-term focus is operational optimization at EVBC and the UMZ Mine to generate increasing operating cash flows in order to pay down debt. Operational and corporate reviews have been initiated to seek means to reduce operating and capital costs to improve liquidity and cash flows given the recent declines and continued volatility in the metals markets. As well, Orvana will continue to de-risk the Copperwood Project and look for means to possibly advance the development.
Fiscal 2013 guidance for production remains at 75,000 ounces of gold (58,223 ounces for the first three quarters), 18 million pounds of copper (12.8 million pounds for the first three quarters) and 850,000 ounces of silver (728,530 ounces for the first three quarters).
Total EVBC production for the nine months ended June 30, was 48,101 ounces of gold (fiscal 2013 guidance of 63,000), 4.8 million pounds of copper (fiscal 2013 guidance of 6 million) and 143,581 ounces of silver (fiscal 2013 guidance of 200,000). During fiscal 2013, the Company's focus at EVBC has been on improving head grade, increasing gold production and reducing total cash costs (net of by-product revenue) per ounce of gold. The Company will continue to focus on these initiatives over the next six months while the shaft recovery project is underway. There has been good initial success with the ramp haulage production at the Boinas Mine and continued efforts to push production will occur. EVBC personnel have responded well to the adversity and it appears the loss of hoisting capability will not be as significant as initially anticipated, based on July production performance at EVBC.
Total UMZ Mine production for the nine months ended June 30, 2013 was 10,122 ounces of gold (fiscal 2013 guidance of 12,000), 8.0 million pounds of copper (fiscal 2013 guidance of 12 million) and 584,949 ounces of silver (fiscal 2013 guidance of 650,000). During fiscal 2013, the Company's focus at the UMZ Mine has been on improving metal production and reducing operating costs. The suspension of the LPF process will contribute materially to these goals, particularly in unit cost reduction.
Orvana's long-term focus is to utilize future cash flow and mining capabilities to build long-term value for its shareholders. Growth opportunities, particularly near the Spanish operations, are being investigated.
The Company will hold a conference call on August 9, 2013 at 3:00 p.m. (Eastern Time) to discuss its financial and operational results for the third quarter of fiscal 2013. 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 pass code 8728 099 followed by the number sign.
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