Stonecap Securities says Orvana Q1 results “another step in the right direction”

Stonecap Securities maintained its “sector perform” rating and $1.50 price target on Orvana Minerals (TSE:ORV) on Monday, following the company’s first-quarter results report, noting that “the situation is improving”.

Shares of the company moved up 1.03 per cent as at about 11:30 a.m. EDT, trading at 98 cents.

Last week, Orvana 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. 

Mining analyst Christos Doulis said Orvana’s results were “largely in line” with guidance and noted that it has generated positive free cash flow for the second consecutive quarter, before changes in working capital. 

“Given the small amount of free cash flow generated and the substantial debt still on Orvana’s balance sheet we expect working capital to remain constrained, but the situation is improving,” Doulis said in the firm’s Morning Advantage report.

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.

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. 

Doulis said that the company took “another step in the right direction” when it reported production of 14,000 ounces of gold, 1.3 million pounds of copper and 43,000 silver ounces at EVBC.

The analyst added that at EVBC, cash costs including royalties were $847 per ounce of gold, net of credits, slightly above management’s guidance of $800 per gold ounce.

At UMZ, Orvana reported production of 3,800 gold ounces, three million pounds of copper and 191,000 silver ounces, in line with management’s implied guidance. Cash costs on a co-product basis were $2.03 per pound of copper, $1,039 per ounces of gold and $20 per ounce of silver, just missing management’s guidance.

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.

Orvana is expecting a decision on its Wetlands permit for its Copperwood project this month.