Tuesday, 9 April 2013

Orvana Minerals kept at outperform by Stonecap Securities as CEO departs; analyst says operations "hit their stride"

Stonecap Securities analyst Christos Doulis has maintained his outperform rating and $2.10 price target on Orvana Minerals(TSE:ORV), after the company yesterday announced the departure of Bill Williams from his role as president, CEO and director. 
Director Michael Winship, whose previous experience includes COO of Quadra FNX Mining and president of HudBay Minerals, has been appointed as his replacement, in the interim, while the company searches for a permanent fix. 
Winship joined Orvana's board in early March, along with Ed Guimaraes, with Doulis noting that both executives bring "considerable operating experience" to the company, saying the miner's recent focus on strengthening its team is geared toward the development of its Copperwood project in Michigan. 
The Toronto-based company, which has lately seen a sharp improvement at its mining operations, recently announced that it was granted the key Wetlands permit for its Copperwood project it is developing - moving one step closer to advancing the copper property toward a production decision. 
Over the last year, the gold and copper producer has been applying for permits that will allow for mining this copper deposit. 
The company also holds its flagship El Valle-Boinas/Carles (EVBC) gold-copper mine in northern Spain and the Don Mario Mine in Bolivia, which processes its copper-gold-silver Upper Mineralized Zone (UMZ) deposit. In February, Orvana announced 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. 
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.     
"While Orvana’s working capital still concerns us, we believe that operations at EVBC and Don Mario have hit their stride and that cash flow from operations should be sufficient, albeit tight, to meet Orvana’s debt repayment obligations," the analyst takes note in the report on Tuesday, adding that should the company's liquidity risk be substantially reduced, he would likely increase his net asset value multiple to comparable levels to other production companies in Stonecap's coverage universe. 
"We still believe that Orvana could benefit from additional (equity) capital, which could act as a cushion should any operational hiccups interrupt operating cash flow," Doulis concludes. 
Shares of Orvana closed at 99 cents in Toronto on Monday, giving it a market cap of $135.2 million. Its stock has risen more than 13 percent so far this year. 

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