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Friday, 22 February 2013
Orvana Minerals shares rally as investors tune in to improving operations
Shares of Orvana Minerals (TSE:ORV) gained 14% Friday, with the company receiving bullish analyst coverage of late after improving operations at its two main mines.
Its stock rose by 14 cents this afternoon to $1.13, up almost 19% since late January.
Stonecap Securities analyst Christos Doulis recently boosted his rating on Orvana to outperform and increased its target sharply to $2.10 from $1.50 previously on what Stonecap believes to be an executed turnaround at both the company's flagship EVBC and Don Mario mines.
Orvana's primary asset is the El Valle-Boinas/Carles (EVBC) gold-copper mine in northern Spain. It also owns and operates the Don Mario Mine in Bolivia, processing its copper-gold-silver Upper Mineralized Zone (UMZ) deposit, and is advancing its Copperwood copper project in Michigan, U.S.
Earlier this month, the company said it swung to a profit in its fiscal first quarter as revenue more than doubled on a sharp rise in production at its mines from a year earlier.
"As Orvana derives both immediate revenue from base metals and has a sizeable copper development project (Copperwood), the increase in our base metals price forecasts has increased our share price target considerably," Doulis explains in a note in which the capital markets firm raised its price targets for copper.
"While working capital constraints continue to concern us, things seem to be improving on this front and we expect the company to begin paying down its (expensive) line of credit with Fabulosa."
The analyst adds that he expects the company's balance sheet to improve over the next several quarters, seeing "substantial upside value" in Orvana's asset base.
In the latest quarter, the company produced 17,759 ounces of gold, 4.4 million pounds of copper and 233,452 ounces of silver, compared to output of 9,937 ounces of gold 3.2 million pounds of copper and 82,654 ounces of silver in the first quarter last year.
Cash flow provided by operations before changes in working capital was $8.2 million in the quarter and capital expenditures were $4.2 million, resulting in positive free cash flow of $4 million, noted Doulis.
Total revenue rose 121% to $34.03 million from $15.37 million a year ago.
Looking ahead, the company said its short term focus is operational optimization at the EVBC and UMZ mines to generate increasing operating cash flows in order to pay down debt, and set a foundation for growth.
Orvana is also expecting a decision on its Wetlands permit for its Copperwood project this month. Over the last year, it has been applying for permits that will allow for mining this copper deposit.