Not bad in gold environment. SMF

Orvana Minerals earns $32.62-million (U.S.) in fiscal 2013

2013-12-06 08:21 ET - News Release

Ms. Daniella Dimitrov reports

ORVANA REPORTS RECORD MINE PERFORMANCE AND FISCAL 2013 RESULTS WITH ADJUSTED NET INCOME OF $12.4 MILLION OR $0.09 PER SHARE

Orvana Minerals Corp. has provided its financial and operating results for the fourth quarter (Q4 2013) and the fiscal year ended Sept. 30, 2013. The company reported record gold production from its El Valle-Boinas and Carles mines in Spain (EVBC) in fiscal 2013.

The company reported adjusted net income in fiscal 2013 of $12.4-million or nine cents per share excluding certain non-recurring items and net income of $32.6-million or 24 cents per share. The company recorded adjusted net income in Q4 2013 of $7.8-million or six cents per share and net income of $1.1-million or one cent per share.

The audited consolidated financial statements for fiscal 2013 and management's discussion and analysis related thereto (2013 MD&A) are available on SEDAR and at the company's website.

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.

2013 annual operating and financial highlights

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• The company produced 22,250 ounces of gold, 4.5 million pounds of copper and 289,335 ounces of silver, and sales of 21,462 ounces of gold, 4.4 million pounds of copper and 314,011 ounces of silver. (1)
• Revenue was $43,975 in the fourth quarter of fiscal 2013 compared with $36,997 in the third quarter of fiscal 2013 and $52,110 in the fourth quarter of fiscal 2012, an increase of 19 per cent and decrease of 16 per cent, respectively.
• Net income of $1,174 in the fourth quarter of fiscal 2013 compared with net income of $11,315 in the third quarter of fiscal 2013 and a net loss of $2,007 in the fourth quarter of fiscal 2012.
• Adjusted net income was $7,814 in the fourth quarter of fiscal 2013 compared with adjusted net loss of $654 in the third quarter of fiscal 2013 and adjusted net income of $12,325 in the fourth quarter of fiscal 2012. (2)
• Cash flows provided by operating activities were $7,659 in the fourth quarter of fiscal 2013 compared with $10,845 in the third quarter of fiscal 2013 and $29,617 in the fourth quarter of fiscal 2012 and cash flows provided by operating activities before changes in non-cash working capital of $15,265 in the fourth quarter of fiscal 2013 compared to $4,604 in the third quarter of fiscal 2013 and $14,453 in the fourth quarter of fiscal 2012. (2)
• All-in costs (byproduct) of $1,035 per ounce of gold at EVBC and all-in costs (co-product) of $823 per ounce of gold, $14.49 per ounce of silver and $2.17 per pound of copper at the UMZ mine. (3)

(1) For a description of EVBC and the UMZ mine, please see "Overall performance -- EVBC mines" and "Overall performance -- UMZ mine" sections of the 2013 MD&A.

(2) Adjusted net income (loss), cash flows from operating activities before changes in non-cash working capital and all-in sustaining costs are non-IFRS (international financial reporting standards) 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 2013 MD&A.

(3) The company, in conjunction with initiatives undertaken within the gold mining industry, is adopting all-in sustaining costs and all-in costs non-IFRS performance measures as set out in the guidance note released by the World Gold Council in June, 2013. The company believes these performance measures more fully define the total costs associated with its metal production, however, these performance measures have no standardized meaning. Accordingly, they are intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. The company reports these measures on a metals volumes sold basis. The comparative periods have been restated accordingly. For further information and a detailed reconciliation of these performance measures, please see the "Other information -- non-IFRS measures" section of the 2013 MD&A.

"Fiscal 2013 highlights our focus on continuing to optimize operations with increased throughput and record production numbers at EVBC," said Michael Winship, president and chief executive officer. "We are seeing the results of our costs reduction initiatives with the suspension of the LPF process at the UMZ mine and we continue to focus on overall costs reduction at all of the operations."

Overall performance

In fiscal 2013, the company had record consolidated production due to strong mining and processing performance at EVBC. The benefit of improved throughput was offset by lower metals prices. The table summarizes the company's operating and financial performance for the following periods.

                 Q3 2013   Q4 2013   Q4 2012      FY2013   FY2012    FY2011
Operating
performance (1)
Gold
Production
(oz)               22,319    22,250    15,155      80,541   55,929    19,313
Sales (oz)         20,480    21,462    18,604      74,087   55,052    16,179
Average
realized
price/oz
(1)                $1,450    $1,329    $1,666      $1,504   $1,659    $1,402
Copper
Production
(000s lb)           4,558     4,509     4,058      17,304   15,366     1,056
Sales (000s
lb)                 4,064     4,427     5,259      16,312   14,730       504
Average
realized
price/lb
(1)                 $3.25     $3.20     $3.50       $3.33    $3.54     $1.93
Silver
Production
(oz)              303,704   289,335   277,081   1,017,811  716,280    11,691
Sales (oz)        303,733   314,011   289,356   1,073,394  669,810    13,270
Average
realized
price/oz
(1)                $22.58    $21.05    $31.06      $25.01   $29.43    $34.58

Financial
performance
Revenue (1)       $36,997   $43,975   $52,110    $162,199 $145,574   $25,085
Mining costs (1)  $27,736   $25,643   $26,240    $101,063  $88,231   $18,290
Impairment
charge             $6,423     $(150)        -      $6,273        -         -
Gross margin      $(4,388)  $12,303   $21,912     $30,998  $42,326    $2,716
Derivative
instruments
gain (loss)       $33,700   $(9,853) $(17,493)    $42,140  $26,095   $13,611
Net income
(loss)            $11,315    $1,174   $(2,007)    $32,623  $(2,353) $(21,306)
Net income
(loss) per
share
(basic/diluted)     $0.08     $0.01    $(0.01)      $0.24   $(0.02)   $(0.18)
Adjusted net
income (loss)
(2)                 $(654)   $7,814   $12,325     $12,420  $15,474  $(12,671)
Adjusted net
income (loss)
per share
(basic/
diluted) (2)        $0.00     $0.06     $0.09       $0.09    $0.11    $(0.11)
Operating cash
flows             $10,845    $7,659   $29,617     $32,569  $41,705  $(12,623)
Operating cash
flows before
non-cash
working capital
changes (1)        $4,604   $15,265   $14,453     $38,685  $33,276   $(2,263)
Ending cash and
cash
equivalents       $11,484   $13,039   $13,200     $13,039  $13,200   $12,244
Restricted cash
(including
long-term)        $16,304   $17,839   $18,399     $17,839  $18,399    $2,275
Capital
expenditures
(1)                $4,283    $3,892   $20,414     $21,157  $37,718   $59,819


(1)  Refer to the 2013 MD&A for further information on operating performance, 
     metals production, metals sales, sales volumes, revenue, mining costs, 
     adjusted net income and capital expenditures.
(2)  Adjusted net income represents net income of $32,623 less (i) the tax-
     adjusted unrealized gains of $30,307 on the company's outstanding
     derivative instruments, plus (ii) the tax adjusted derecognition of
     assets relating to the EVBC hoist incident of $1,571, (iii) the tax-
     adjusted EMIPA union payments of $873, (iv) the EMIPA VAT provision of
     $1,387, and (v) the impairment charge of the LPF plant and related
     consumables of $6,273 (the EMIPA writedown). Refer to the 2013 MD&A
     for further information.

EVBC mines

With strong mining and processing performance and higher average grades of gold, copper and silver, the EVBC mines achieved record production numbers during fiscal 2013 of 65,992 ounces of gold, 6.7 million pounds of copper and 197,768 ounces of silver compared with 42,864 ounces of gold, 4.0 million pounds of copper and 117,113 ounces of silver in fiscal 2012, an increase of 54 per cent, 69 per cent and 69 per cent, respectively.

The increase in production compared with fiscal 2012 is primarily due to an increase of 35 per cent in tonnage mined and 32 per cent in tonnage milled and an increase in gold, copper and silver head grades of 17 per cent, 27 per cent and 23 per cent, respectively. Improved planning has provided better support to operations in development and dewatering in advance of mining. Backfilling has improved in both skarn and oxides providing for improved cycle times for mining the secondary stopes and increasing production. The Boinas mine continued to make progress in primary mine development advancements in both oxide and skarn areas in order to have sufficient stopes available for mining. Oxide mining with contractors has shown improved production and efficiencies following a change in the oxides contractor in the second quarter. Carles mine production has improved from 2012 levels as ramp access has made stoping on multiple levels possible.

During the fourth quarter of fiscal 2013, the company initiated the implementation of a number of costs savings initiatives at EVBC including the rationalization of certain contractors, reduction of company personnel and certain changes to the oxides stope widths and profile to allow for improved efficiencies in the mining of the oxides which is expected to improve mining costs.

The company continues to make progress on the hoist recovery from the incident at the Boinas mine in June, 2013. The basic recovery of the hoist system is estimated to cost approximately $2,244. The company has been assisting its insurers with their evaluations relating to the recovery of the basic hoist repair costs. The company is taking this opportunity to enhance the capabilities of the hoist with enhanced design and safety improvements. This includes a hoisting system designed to international standards with appropriate redundant safety features, a skip arrestor system and skip caging system in the headframe. Modification to the underground and haulage system that will enhance ore movement and provide the potential to hoist oxides is also being completed. The estimated costs of the upgrades are approximately $2,000 and will be paid for by EVBC. Completion of the hoist repairs and upgrades at the Boinas mine is expected in early 2014.

During the fourth quarter, EVBC completed an internal update of its resources, reserves and its life-of-mine plan and is currently undertaking an independent external expert review thereof.

The attached table includes consolidated operating and financial performance data for the EVBC mines for the periods set out.

                                 Q3 2013  Q4 2013  Q4 2012   FY2013   FY2012
Operating performance (1)
Ore mined (tonnes) (wmt)          193,202  204,859  129,015  752,572  558,583
Ore milled (tonnes) (dmt)         181,599  181,763  118,436  685,697  519,690
Gold
Grade (g/t)                          3.41     3.26     2.95     3.24     2.77
Recovery (%)                         92.5     93.4     93.2     92.5     92.5
Production (oz)                    18,439   17,823   10,465   65,992   42,864
Sales (oz)                         16,808   17,411   13,457   59,802   42,837
Copper
Grade (%)                            0.63     0.54     0.37     0.52     0.41
Recovery (%)                         87.3     86.2     82.0     84.4     84.1
Production (000s lb)                1,942    1,880      800    6,658    3,951
Sales (000s lb)                     1,643    1,990    1,241    6,085    3,951
Silver
Grade (g/t)                         12.10    11.30     8.41    11.24     9.17
Recovery (%)                         82.9     81.8     76.3     79.8     76.4
Production (oz)                    58,856   54,241   24,718  197,768  117,113
Sales (oz)                         51,934   62,447   29,098  190,843  106,199

                             Q3 2013  Q4 2013   Q4 2012     FY2013    FY2012
Financial performance
Revenue                      $25,449  $27,904   $25,843   $102,309   $82,750
Mining costs                 $17,620  $18,017   $13,280    $62,867   $48,126
Derivative instruments
gain (loss)                  $33,700  $(9,853)  $17,493    $42,140  $(26,095)
Income (loss) before tax     $30,894   $6,994   $(9,961)   $55,270   $(6,506)
Capital expenditures (1)      $2,900   $3,748    $9,457    $13,248   $31,136
Cash operating costs
($/oz) gold (1)                 $846     $759      $720       $803      $854
All-in sustaining costs
(byproduct) ($/oz) gold
(1)                           $1,049   $1,035    $1,749     $1,086    $1,658
All-in costs (byproduct)
($/oz) gold (1)               $1,049   $1,035    $1,749     $1,086    $1,658

(1) Refer to the 2013 MD&A for further information on operating performance, 
    capital expenditures, all-in sustaining costs and all-in costs. Costs are 
    reported per ounce of gold sold in the period.

UMZ mine, Bolivia

During fiscal 2013, the UMZ mine produced 14,549 ounces of gold, 10.6 million pounds of copper and 820,043 ounces of silver compared with 13,065 ounces of gold, 11.4 million pounds of copper and 599,167 ounces of silver in fiscal 2012.

Production in fiscal 2013 compared with fiscal 2012 of (i) gold increased by 11 per cent primarily as a result of a 17-per-cent increase in recoveries, (ii) copper decreased by 7 per cent as a result of 21 per cent lower head grades and 11-per-ccent decrease in recoveries, and (iii) silver increased by 37 per cent as a result of a 59-per-cent increase in recoveries.

In the fourth quarter, the company commenced the implementation of the addition of gold gravity concentrators. This implementation, scheduled to be completed in the second quarter of fiscal 2014, is expected to increase gold recoveries to between 60 per cent to 65 per cent and, therefore, result in increased gold production from the UMZ mine in the second half of fiscal 2014.

The company suspended the LPF process and recorded an impairment charge of the LPF plant and related consumables of $6,273 in fiscal 2013. During the fourth quarter, the company continued to process transition and sulphide ores by the flotation-only circuits. Throughput increased by 5 per cent and total all-in costs decreased by 15 per cent, 4 per cent and 14 per cent, for gold, copper and silver, respectively, in the fourth quarter compared to the third quarter of fiscal 2013.

The company continues to evaluate reagents which may allow it to process oxide ores through its sulphide flotation process by completing certain testing in the fourth quarter of fiscal 2013 and the first quarter of fiscal 2014. As a result of the additional testing being undertaken by the company relating to the processing of oxide ores, the EMIPA writedown does not include oxide ores in stockpile at Sept. 30, 2013, with a carrying value of $1,678.

During the fourth quarter of fiscal 2013, EMIPA entered into regular annual union wage negotiations as mandated under Bolivian law. Intermittent work stoppages occurred in July. The company successfully completed the wage negotiations in August.

The attached table includes operating and financial performance data for the UMZ mine for the periods set out.

                            Q3 2013   Q4 2013   Q4 2012     FY2013     FY2012

Operating performance
(1)
Ore mined (tonnes)          258,116   245,976   322,422  1,013,646  1,016,489
Ore milled (tonnes)         195,798   206,431   191,725    788,149    594,054
Gold
Grade (g/t)                    1.39      1.44      1.55       1.26       1.75
Recovery (%)                   44.3      46.5      49.2       45.6       39.1
Production (oz)               3,880     4,427     4,691     14,549     13,065
Sales (oz)                    3,672     4,051     5,147     14,285     12,215
Copper
Grade (%)                      1.40      1.43      1.65       1.39       1.76
Recovery (%)                   43.4      40.3      46.7       44.2       49.4
Production (000s lb)          2,616     2,630     3,259     10,646     11,415

                                Q3 2013   Q4 2013   Q4 2012   FY2013   FY2012

Sales (000s lb)                   2,421     2,437     4,018   10,228   10,779
Silver
Grade (g/t)                       61.30     54.57     75.23    52.67    81.17
Recovery (%)                       63.5      64.9      54.4     61.5     38.6
Production (oz)                 244,848   235,094   252,364  820,043  599,167
Sales (oz)                      251,799   251,564   260,054  882,551  563,611

Financial performance
Revenue                         $11,497   $16,072   $26,267  $59,890  $62,824
Mining costs                    $10,115    $7,627   $12,960  $38,196  $40,105
EMIPA Q3 adjustments (2)         $9,194     $(150)        -   $9,044        -
Income (loss) before tax       $(10,350)   $8,276   $12,116   $4,358  $17,060
Capital expenditures               $317      $581    $1,164   $2,691   $1,969

Cash operating costs (co-
product) ($/oz) gold (1)           $939      $740      $969     $951   $1,147
Cash operating costs (co-
product) ($/lb) copper (1)        $2.18     $1.97     $1.92    $2.16    $2.40
Cash operating costs (co-
product) ($/oz) silver (1)       $16.34    $13.17    $18.69   $17.64   $22.88

All-in sustaining costs (co-
product) ($/oz) gold (1)         $1,010      $823    $1,587   $1,051   $1,258
All-in sustaining costs (co-
product) ($/lb) copper (1)        $2.35     $2.17     $3.61    $2.38    $2.63
All-in sustaining costs (co-
product) ($/oz) silver (1)       $17.47    $14.49    $33.00   $19.30   $24.86

All-in costs (co-product)
($/oz) gold (1)                  $1,010      $823    $1,587   $1,051   $1,258
All-in costs (co-product)
($/lb) copper (1)                 $2.35     $2.17     $3.61    $2.38    $2.63
All-in costs (co-product)
($/oz) silver (1)                $17.47    $14.49    $33.00   $19.30   $24.86

(1)  Refer to the 2013 MD&A for further information on operating performance, 
     cash operating costs, all-in sustaining costs and all-in costs. Costs are 
     reported per ounce of gold or silver or per pound of copper sold in the 
     period.
(2)  The EMIPA Q3 adjustments include (i) a non-cash provision of $1,387 for 
     amounts of VAT claimed and received and amounts of VAT not yet claimed or 
     received recorded as VAT receivables as a result of recently completed 
     audits conducted by the Bolivian National Tax Services with respect to VAT 
     claims, (ii) the EMIPA writedown of $6,423 consisting primarily of $4,715 
     and $1,558 representing the carrying value of the LPF plant and LPF 
     consumables and materials in inventory at June 30, 2013, respectively, 
     and (iii) a provision for and subsequent payment of $1,384 to EMIPA union 
     employees in respect of two periods between 2002 and 2012.

Copperwood project

Orvana continues to advance its copper project located in the upper peninsula of Michigan, United States. The company has achieved the necessary permits. Certain optimization work continues with a focus on additional metallurgical testing and mine design and Orvana is in the process of finalizing an independent concentrate marketing study.

Total capital expenditures in respect of the Copperwood project for the fourth quarter of fiscal 2013 were $546 compared with $2,597 for the fourth quarter of fiscal 2012. Total capital expenditures for fiscal 2013 were $3,193 compared with a total of $5,842 for fiscal 2012. These capital expenditures included metallurgical testing, mine optimization studies, logistics and marketing studies, 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 and financing alternatives to enhance the value of the Copperwood project to Orvana's shareholders. Holding costs of the Copperwood project will be minimized in fiscal 2014 while the company pursues various alternatives to advance the project.

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 and pursue growth alternatives. 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. Orvana will continue to derisk the Copperwood project and look for means to realize value. In fiscal 2014, Orvana has allocated certain amounts toward internal growth exploration initiatives at both the EVBC mines and the UMZ mine, and the regions thereof.

The attached table sets out Orvana's fiscal 2013 guidance and production as well as its fiscal 2014 guidance.

                                  FY2013         FY2013                FY2014
                                guidance     production              guidance
EVBC mines
Gold (oz)                         63,000         65,992       65,000 - 75,000
Copper (million lb)                  6.0            6.7             6.0 - 6.5
Silver (oz)                      200,000        197,768     175,000 - 200,000
UMZ mine
Gold (oz)                         12,000         14,549       15,000 - 18,000
Copper (million lb)                 12.0           10.6           12.0 - 14.0
Silver (oz)                      650,000        820,043     700,000 - 750,000
Total
Gold (oz)                         75,000         80,541       80,000 - 93,000
Copper (million lb)                 18.0           17.3           18.0 - 20.0
Silver (oz)                      850,000      1,017,811     875,000 - 950,000

During fiscal 2013, the company's focus at EVBC has been on improving head grade, increasing gold production and reducing total all-in costs per ounce of gold. The company will continue to focus on these initiatives in fiscal 2014. Over the next three months while the shaft recovery project is under way, the company will continue to execute on the alternative production schedule with the ramp haulage production at the Boinas mine which has exceeded expectations and continued efforts to push production will occur.

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 in the fourth quarter of fiscal 2013 has already contributed materially to these goals, particularly in unit cost reduction. These efforts will continue in fiscal 2014.

The permitting process in respect of the Copperwood project continued into fiscal 2013 and is complete. Orvana is continuing to optimize the Copperwood project and investigate a variety of possible options to enhance the value of the Copperwood project to Orvana's shareholders.

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 Dec. 10, 2013, at 10 a.m. (Eastern Time) to discuss its financial and operational results for the fourth quarter and 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 6817 072 followed by the number sign.