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Orvana Minerals Corp
Symbol ORV
Shares Issued 136,623,171
Close 2022-05-10 C$ 0.315
Recent Sedar Documents

Orvana loses $5.84-million (U.S.) in Q2 fiscal 2022

2022-05-10 20:42 ET - News Release

Mr. Juan Gavidia reports

ORVANA REPORTS CONSOLIDATED FINANCIAL RESULTS FOR THE SECOND QUARTER OF FISCAL 2022 AND PROVIDES REVISED GUIDANCE

Orvana Minerals Corp. has released consolidated financial and operational results for the quarter ended March 31, 2022, and has revised guidance for fiscal year 2022 for the Orovalle operation to take into consideration the impacts caused by COVID-19-related absenteeism, delays in spare parts supply in Europe, the nationwide transportation strike in Spain, and rising annual inflation rates in Spain reaching near 40-year highs causing higher prices for energy, materials, supplies and services.

This news release should be read in conjunction with the company's management's discussion and analysis, unaudited financial statements, and notes to the unaudited financial statements for the corresponding period, which have been posted on the Orvana SEDAR profile and which are also available on the company's website. All figures are in U.S. dollars unless otherwise noted.

"Orvana has a well-defined and clear strategy based on developing its three assets for the long term. In that sense, we had an exceptional quarter, with very encouraging drilling results in Spain and Argentina, coupled with the successful completion of metallurgical testing and economic modelling in Bolivia. On the annual production side, we did have a challenging quarter in Spain as exceptional national, and continental, events unfolded simultaneously, causing intermittent disruptions of operations and rising production costs," said Orvana chief executive officer Juan Gavidia. "Our Spanish operation's amended guidance reflects the impact of the previous months but does not affect our outlook of Orovalle's performance in the medium to longer term. Spain continues to be the cornerstone of Orvana's organic growth strategy, meaning free operating cash for the rest of the year is committed to create value through expanded mineral resource modelling for Spain and Argentina, and detail project engineering for Bolivia. The company expects to be in a favourable position by the end of this fiscal year to continue the development of its defined strategy of continued production and development of organic growth," added Mr. Gavidia.

Consolidated financial results and operating highlights:

  • Revenue of $21.9-million for the three months ended March 31, 2022, and $48.5-million for the six months ended March 31, 2022;
  • EBITDA (earnings before interest, taxes, depreciation and amortization) of negative $2.7-million for second quarter fiscal 2022 and positive $2.4-million for first half fiscal 2022;
  • Capital expenditures (on a cash basis) of $4.7-million for Q2 fiscal 2022 and $9-million for H1 fiscal 2022;
  • $13.6-million of cash and cash equivalents as at March 31, 2022;
  • Orovalle:
    • Q2 fiscal 2022 production was impacted by a multiday operations stoppage caused by a nationwide transportation strike in March;
    • Starting December, 2021, Orovalle experienced the effects of the sixth wave of COVID-19 cases in Spain despite the company's continuing efforts to safeguard the health of the work force; the wave reached its peak in January, 2022, impacting work force attendance levels; during this stressful period, the company continued operating safely and responsibly although with productivity challenges;
    • Gold production of 8,341 ounces in Q2 fiscal 2022, compared with 11,731 ounces in the first quarter of fiscal 2022; production decrease was due to 17-per-cent-lower tonnes milled and 15-per-cent-lower head grade;
    • Copper production of 800,000 pounds in Q2 fiscal 2022, compared with 1.5 million lb in Q1 fiscal 2022; production decrease was due to 17-per-cent-lower tonnes milled, 31-per-cent-lower head grade and 4-per-cent-lower recovery;
    • 6,642 metres of infill and brownfield drilling;
    • 1,447 metres of greenfield exploration drilling;
    • 196.50 metres at 0.53 gram per tonne gold grade was intercepted in greenfield Lidia project;
  • EMIPA:
    • A new National Instrument 43-101 "Technical Report for the Don Mario Property, Eastern Bolivia," was filed on March 15, 2022; highlights being its upside with the oxides stockpile project (OSP) and the tailings reprocessing project (TRP);
    • Don Mario continues in care and maintenance (C&M), transitioning to the OSP;
    • OSP has completed metallurgical testing with very satisfactory results in terms of recoveries and consumption of key operating expenditure items; basic engineering for construction to define capital expenditure levels is under way, as well as project financing;
    • TRP conducted 1,022.5 metres of infill drilling (82 holes) in Q2 fiscal 2022;
    • During Q1 fiscal 2022, mapping, and geochemical and geophysical sampling were carried out in two previously unexplored areas in Las Tojas and Oscar sectors; during Q2 fiscal 2022, the resulting data have been processed and analyzed to continue with fiscal 2022 exploration program;
    • During the second quarter of fiscal 2020, as a result of the suspension of operations, EMIPA implemented a labour restructuring process, which was managed in full compliance with the terms defined by applicable laws in Bolivia; certain former employees of EMIPA affected by the restructuring process decided not to accept the dismissal terms provided for under applicable employment laws in Bolivia, and started a reinstatement claiming process at labour, administrative and criminal jurisdictions; late April, 2022, in relation to one of the files at the criminal jurisdiction, the court issued a sentence determining the imprisonment of the general manager of EMIPA for a period of four years; a legal complaint against the sentence was presented, and, on May 9, the sentence was invalidated; the restructuring process was carried out according to all the applicable local regulations; considering the strength of EMIPA's arguments and the evolution of the process as of today, the company expects a positive outcome of the process;
  • Orvana Argentina:
    • On Dec. 30, 2021, the company announced its updated Taguas project preliminary economic assessment report, which was filed on SEDAR on Feb. 11, 2022; Orvana retained Saxum Engineered Solutions (Argentina), in co-operation with Kappes, Cassiday & Associates (Reno, Nev., United States) and NCL (Chile), to prepare the report; the report was prepared in accordance to National Instrument 43-101 (Standards of Disclosure for Mineral Projects); the 2021 Taguas PEA replaced a previous one dated May 14, 2019, and filed on SEDAR on July 9, 2019;
    • The 2021 Taguas PEA refers only to the oxidized gold-silver mineralization occurring near surface in Cerros Taguas, leaving the bigger gold-silver-copper sulphidic volume for a second developmental phase;
    • The company started an infill drilling campaign in late December, 2021, to upgrade the mineral resource from the inferred category and to realize its oxide mineral tonnage upside potential; as of March 31, 2022, 26 diamond drill holes totalling 4,210 metres had been drilled; the drilling program continues to progress, and the company estimates to achieve a total of 6,500 metres by mid-May, 2022.

Revised guidance

Orovalle's production, revenue and costs suffered material impacts in the first half of fiscal 2022 due to:

  • COVID-19-related work force absenteeism that resulted in lower productivity and production;
  • Lower fleet mechanical availability due to delays in spare part supply around Europe, impacting both mine and plant efficiencies;
  • Operations shutdown in March, 2022, due to an unusually severe nationwide transportation strike in Spain that disrupted supply chains across all sectors and regions, especially the highly industrialized north, where El Valle sits;
  • Regular level of indirect fixed costs that, given lower production, originated materially higher unit costs;
  • Higher prices for energy, materials, supplies and services; Spain's annual inflation was 6.7 per cent in December, 2021, reaching a near-40-year high of 9.8 per cent in March, 2022; fuel and electricity pricing was at the core of this phenomenon.

The above-mentioned operational issues are temporary, and the company expects that they will not affect Orovalle's performance in the medium to longer term. Actions are being taken to return to full operational levels while continuing to manage outstanding risks related to COVID-19.

The conflict in Ukraine is causing significant economic and social effects, which are affecting all European countries. The Spanish government approved in March an economic package to mitigate the impacts of the armed conflict. The European Union announced late April that it would allow Spain and Portugal to apply a limit to the gas price used in power generation for a 12-month period, with the gas price cap set at 50 euros per megawatt-hour. Spain's Central Bank forecasted early April consumer prices to surge 7.5 per cent in 2022, but just 2 per cent in 2023. The company expects that this inflationary scenario is temporary and will not affect Orovalle's results in the medium to longer term in a material way. The company's strategy for the second half of fiscal 2022 is to manage its existing capital resources and liquidity in a prudent fashion while continuing to manage price hikes impacting its cost structure.

The company has assessed the impact of the above-mentioned circumstances, therefore adjusting its production and cost guidance for fiscal 2022 accordingly.

About Orvana Minerals Corp.

Orvana is a gold-copper-silver company. Orvana's assets consist of the producing Orovalle operation in northern Spain, the Don Mario property in Bolivia, currently in care and maintenance, and the Taguas property located in Argentina.

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