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Executives

Michael D. Winship – President and Chief Executive Officer

Daniella Dimitrov – Chief Financial Officer

Analysts

Christos Doulis – Stonecap Securities, Inc.

Orvana Minerals Corporation (OTCPK:ORVMF) F4Q 2013 Earnings Conference Call December 10, 2013 10:00 AM ET

Operator

Good morning ladies and gentlemen. Welcome to the Fourth Quarter and Fiscal 2013 Results Conference Call. I would now like to turn the meeting over to Mr. Michael Winship, President and Chief Executive Officer. Please go ahead, Mr. Winship.

Michael D. Winship

Thank you. Good morning. During this conference call, we’ll be discussing our financial results for the fourth quarter and year ended September 30, 2013 for Orvana Minerals and providing an update on our operations. These financial results were released on December 6 and are available on our website and SEDAR. Our presentation is available on the front page of our website at www.orvana.com under the quick links inside Q4, 2013 presentation.

We will ask that you please note our forward-looking statements on Slide 2 and take a moment to read it in its entirety.

Today, I'd like to welcome on this call with me Daniella Dimitrov, our Chief Financial Officer, who will be providing a summary of our financial results. Today we are calling in from Santa Cruz, Bolivia and can certainly provide current comments on our opportunities at our Don Mario operations.

Once we’ve completed our presentation, we will welcome questions and the operator will explain how you may participate. Please note that this call is being recorded and will be made available on our website for replay.

I’d like to start by highlighting some of our achievements as well as providing an update on our three key operations; EVBC in Spain, our Don Mario operation here in Bolivia and Copperwood in Michigan.

So I’d ask you please do turn to Slide 3 and 4. 2013 was the year of execution for Orvana. We had a record production year. We not only met our fiscal year 2013 guidance, but we surpassed it. Our overall gold production exceeded our fiscal year guidance by 7% and was up by more than 44% over our fiscal year 2012 production.

With both strong mining and processing performance, we’ve had record production numbers in the second half of 2013 in our flagship operation, EVBC in Spain. We are currently optimizing our UMZ Mine in Bolivia and have completed our first full year of commercial production from the open-pit.

Our Copperwood Project in Michigan USA, we’ve met milestones with our permitting and has a project shovel ready for construction. Revenue was up over 11% from 2012 and we continue to pay down our debt, resulting in a much stronger balance sheet.

In the important area of safety, we’ve made a significant improvement in our performance at all sites and had an overall reduction of 58% in our lost-time accidents compared to 2012.

Orvana welcomed John Bracale as EMIPA President in Bolivia at the start of November. John is a seasoned mining executive with extensive experience through sales in Central America.

I am personally honored with the Orvana board as it appointed me as President and Chief Executive Officer and I look forward to continuing the momentum and success that we’ve seen through the latter half of 2013 through 2014.

If you now move with me to Slide 5 and 6 of our presentation, we will discuss in more detail our EVBC operations. Production for the fourth quarter of fiscal 2013 was close to 18,000 ounces of gold, 1.9 million pounds of copper and over 54,000 ounces of silver. Production for 2013 was just under 66,000 ounces of gold, 6.7 million pounds of copper and approximately 200,000 ounces of silver and those are increases of 54%, 69%, and 69% compared to 2012, production guidance at EVBC for fiscal 2014 is 65,000 ounces to 75,000 ounces of gold, a range of 6 million ounce to 6.5 million ounce of copper and 175,000 ounces to 200,000 ounces of silver.

So turn to the Slide 7, the increase in production when compared to fiscal 2012, is due to an increase in tonnage mined and milled of over 30% as well as better than average head grades.

So improved mining and better planning, processing performance as well as increased oxide mining at the Boinás Mine also contributed the excellent results. The alternative hauling production schedule, which was put in place in respond to the hoist incident has exceeded expectations. We’ve been increased throughput capacity and the mining crucifix, just having a temporary interruption in our Bolivian operation.

Okay, I made for the delay. As we were saying, at EVBC we increased the trucking capacity and the mining crews have responded very well for the challenge. Mill throughput hit an all time high of 2,250 tonnes per day in August, demonstrating the capacity of the plant to operate at least 10% above its nominal capacity for a prolong period of time. This was done with no capital investment.

Now we are pushing to a new target of 2,400 tonnes per day and experimenting with additional mobile crushing capacity ahead of the primary crusher and optimizing the SABC circuit. Orvana has engaged the leading EPCM contractor to lead the hoist recovery plan in the Boinás Mine. We’re not only repairing the shaft deal, but we’re also taking the opportunity to improve the material handling in the mine to the loading pocket and upgrading the skipping and hoisting systems to allow for greater performance. Project is well advanced and expected to be complete in 2014.

Moving on to Slide 8, during the fourth quarter the Company initiated cost savings initiative with EVBC including staff reductions, contractor rationalization, re-bidding of supply disruptions contracts and improved efficiencies in mining of oxides and it’s to expected to continue to improve our mine COC situations.

Focusing on enlightening our operating margins even with the recent challenge in metal prices. The Company reported – or may the Company has adapted now the all-in sustaining cost during the fourth quarter of 2013 along the most gold industry peers. Cash operating cost of $803 per ounce of gold sold in fiscal 2013 were 6% lower compared to 2012. All-in sustaining cost of $1,086 per ounces of gold sold in fiscal 2013, the 35% lower than in 2012.

Cash operating cost of $759 per ounces of gold sold in fourth quarter or 10% lower than in the third quarter of 2013. And lastly all-in sustaining cost of $1,035 per ounces of gold sold in the fourth quarter or 1% lower than the third quarter in 2013. So clearly you can see a train rollover or a driving down both our cash and all-in sustaining costs.

Moving down to the Don Mario operations in Bolivia, in the UMZ Mine plugs 9 and 10. During the first quarter UMZ Mine produced over 4,400 ounces of gold, 2.6 million pounds of copper and more than 235,000 ounces of silver. During fiscal 2013, the UMZ Mine produced approximately 14,500 ounces of gold, 10.6 million pounds of copper and over 820,000 ounces of silver. And this compares to 2012 where we produced only 13,000 ounces of gold, 11.4 million pounds of copper and just to almost 600,000 ounces of silver.

The increased gold production was primarily due to increased recoveries and higher gold grades as we’re getting deeper in the pit. The drop in copper production was as a result of lower head grade and also challenging recoveries, which dropped by about 11%. Silver production increased as a result of higher grades and an increase in recovery. Production guidance at UMZ for fiscal 2014 is 15,000 to 18,000 ounces of gold, 12 million to 13.5 million pounds of copper and 700,000 to 750,000 ounces of silver.

Moving onto to Slide 11, we’ve had a focused on reducing cost at our Bolivian operation as well to cost benefits and increased production were realized in the fourth quarter with the suspension of operations of our sulfuric acid plant in the LPF process really achieved an increase, throughput of 5% through the mill and a decrease of all-in cost by 19%, 8% and 17% respectively for gold, copper and silver compared to the third quarter of fiscal 2013.

So we certainly optimize that operation with a closer net LPF circuit. We marked all the LPF facilities and our investigating sales opportunities for that at this time. On the sulphide circuit, we’re optimizing the flow sheet and tackling a number of opportunities to improve recoveries with the complex metallurgy. We’re currently evaluating and testing certain reagents which may allow us to process oxide ores to our floatation-only process.

We’ve run two full milling campaigns in September and November 2013 of this year and now we are evaluating the comparative results in this fast forward. In the fourth quarter, we commenced the implementation of a gravity gold circuit which is expected to increase gold recoveries by as much as 60% to 65%. We expected implementation to be completed in the second quarter of fiscal 2014.

Turning to Slide 12 and looking at our cost performance at the UMZ Mine, co-product cash operating cost were $951 per ounce of gold, $216 per pound of copper and $17.64 per ounce of silver, which is 17%, 10% and 23% lower respectively than what we achieved in fiscal 2012. All-in sustaining cost co-product reported in fiscal 2013 for $1,051 per ounce of gold, $238 per pound of copper and $19.30 per ounce of silver, compared to $1,258 per ounce of gold, $263 per pound of copper and $24.86 per ounce of silver for 2012.

So these decreases in fiscal 2013 are primarily due to the lower costs where we only incurred three LPF campaigns compared to four fiscal 2012 and also we’ve gained by-product credits from lead sales.

For the fourth quarter cash operating costs, co-product, were $740 per ounce of gold, $1.97 per pound of copper and $13.17 per ounce of silver. These decreases again are generally due to higher cost in the third quarter fiscal 2013 from running the LPF, whereas in the last quarter we did not run that circuit.

Moving on to our Copperwood Project in Northern Michigan. We had a significant year of permitting from the Copperwood. All of the major permits have been achieved and the last milestone was receiving the Wetland Permit in the second quarter.

Optimization and engineering work is continuing in an effort to derive value from this project. The Copperwood Project is shovel-ready and we’re investigating value realization options including partnership, financing and divestiture opportunities.

Moving on to Slide 15, I would just like to discuss the growth opportunities for Orvana Minerals. We have excellent opportunities for organic growth around our operating mines in both Spain and Bolivia. In Spain, we have multiple zones that are open to depth and a number of sound like targets in range of our processing plant. We plan to drill 22,700 meters and spend about $2 million on exploration in 2014.

In Bolivia, we’ve had two very perspective gold belts that were Orvana has produced from in the past, and here we plan to drill 4,100 meters and spend just under $1 million. Daniella and I visited the exploration site this weekend and saw three historic pits including the Las Tojas pit. So there are kilometers of gold mineralization, steeply dipping zones that have profit surface and typically runs from 1.5 to 3.5 grams per tonne and there’s been virtually no systematic delineation of these resources.

So 2014, we’ll do trenching and diamond drilling to define potential open pit resources with an easy access to the Don Mario mill. We will however, be cautious about our exploration expenditures due to metal crisis and the investment climate. We will continue to focus on value through margins and we certainly see opportunities to expand our gold resources.

I’m now going to turn the call over to Daniella, who will provide a summary of the financial results.

Daniella Dimitrov

Thank you, Michael. Please turn to Slide 16. We exit 2013 with $13 million in unrestricted cash, largely unchanged from the end of 2012. However, our debt net of cash and restricted cash satisfied for debt payments is now under $40 million, highlighting our focus on continuing to strengthen our balance sheet by paying down debt.

Our short-term loans in Bolivia remain at $10 million. And our balance outstanding under our $11.5 million short-term facility was reduced to $2.7 million during the fourth quarter of 2013.

Turning to Slide18 and 19, revenue in 2013 increased to $162 million from $145 million in 2012. This is a result of the increased production that Michael talked about in 2013, particularly at our EVBC operations in Spain and a corresponding higher sales that comes from that production. This increase was offset by lower average realized prices, particularly as we moved through the third and fourth quarter of 2013 compared to the first and second quarters. We had a strong fourth quarter with revenue up $44 million and adjusted EBITDA of $19 million.

Turning to Page 19, we’ve provided an illustration of the calculation of adjusted net income. The adjustments that you see through the net income that you see in our financial statements are largely non-cash items including the market revaluation of our hedge book, which in 2013 was over $30 million as a result of decrease in metal market prices. Additional non-cash adjustments were our write-down of our LPF operations in Bolivia, as well as certain accounting impacts that we had to take to our financial statement as a result of the hoist incidents in Spain.

Turning to Slide 20, you see the impact of the higher production and higher revenue to our cash flow and the ability of the operation to generate cash. Our cash flow from operations was just over $32 million in 2013. That cash was used largely in capital expenditures by just over $21 million in 2013. That compares to almost $40 million in 2012. As we’ve indicated in our guidance we’ve experienced a material reduction in our capital expenditure, as a result primarily of the completion of the Voice Construction in Spain, which was a large portion of that CapEx in 2012 as a result as well as the decrease in the capitalization of development costs in Spain.

We reduced our long-term debts by $12 million. That debt is, as you know, associated with our Spanish operations as well as made some inroads on our short-term debt repayment.

I’ll turn it now over to Michael for his concluding remarks.

Michael D. Winship

Okay. Thank you, Daniella. So just briefly summarize that our focus at Orvana Minerals in this challenging market remains thoroughly under operations and executing wells. So we see a positive year ahead of us with our operations and with the opportunities that I’ve explained with regards to growth.

So with that, I think I will now open the line for any questions that anyone might have.

Question-and-Answer Session

Operator

Thank you. We will now take questions from the telephone lines. (Operator Instructions) The first question is from Christos Doulis. Please go ahead.

Christos Doulis – Stonecap Securities, Inc.

Hi, good morning guys. Congratulations on a great quarter and a nice way to end the year. Couple of quick questions for you, in terms of the timeline on that the hoisted jack in back up and running at EVBC. Say 2014 can you provide a little more clarity on that? What quarter you think it might be getting it up and running again?

Michael D. Winship

Yes that is our fiscal 2014 quarter for those on a calendar second quarter. It’s first quarter of 2014.

Christos Doulis – Stonecap Securities, Inc.

So first quarter of calendar 2014 I am sorry?

Michael D. Winship

Yes. We expect towards the end of January and February to be clear.

Christos Doulis – Stonecap Securities, Inc.

Okay and then clearly, I just want to confirm, my suspicion here that you – no additional capital needs judging by the financial position you are in now in terms of both executing and finishing on the shaft, and then assuming metal prices don’t drop further being able to meet your obligations to Credit Suisse.

Michael D. Winship

Correct. We are on track with the cost estimate that we have put in for this recovery project. As I mentioned within our 2014 plan we also satisfied a little capital for material handling improvements within the EVBC mine and those are on track as well. So generally as you’d be aware, that’s our main capital expenditures besides this one-time hoist investment is our sustaining capital underground development as well as some other tailing bond lifts.

Christos Doulis – Stonecap Securities, Inc.

Great and then let’s just talk about that in a bit. I heard you say that you are looking like you could take EVBC to 2,400 tons a day is that? Did I hear correctly?

Michael D. Winship

That is our new target.

Christos Doulis – Stonecap Securities, Inc.

When would you like to see you guys thinking you – is that kind of half two, calendar half two of 2014. Do you think or is that an earlier event?

Michael D. Winship

We didn’t bake into our plan. But we are starting to hit quite a few day for achieving that rate. Now it is just a get continuity, it depends quite a bit too on the blend of piece that we put towards the mill, certainly when we have a higher percentage of oxide, we are able to achieve that level or higher. So we found with by putting a mobile crusher added to the primary crushing circuit that has allowed us to flow through material through to the SAG mill and optimize the grinding capacity.

So certainly again with little to no capital and maybe little additional operating expense for that extra crushing help we are looking at since we have 20% increase from the nominal 2,000 tonne per day capacity of that mill.

Christos Doulis – Stonecap Securities, Inc.

Great. And on that – I mean is that in order to fill the Mill with rate, are you guys reliant on [indiscernible], I guess as the source of oil or can you – I don’t think whole 2400 tonnes of [indiscernible].

Michael D. Winship

Doulis, it’s balance between the two operations as they indicated we are really pleased without their cruise that both of our underground mines have responded. And we did add some extra trucking capacity to both operations and there have been able to ramp up production. I’d say we’re probably near the top of what we can do there, but certainly when we bring in the hoisting capacity in our second quarter that’s going to give us a lot more flexibility to increase our underground production and hence probably push the mill to see if they can get up to those higher levels.

Christos Doulis – Stonecap Securities, Inc.

I’ll listen that. Once again congratulation, guys. It’s been a challenge at EVBC since the acquisition, but it certainly seems like it’s all coming to fruition now. So congratulations on a great year. Hopefully 2014 will be more of the same, paying down debt and improving the overall financial position of the Company. Thanks so much.

Michael D. Winship

Yes, thanks very much, Christos.

Daniella Dimitrov

Thank you, Chirstos.

Operator

Thank you. (Operator Instructions) There are no further questions registered at this time. I would now like to turn the meeting over to Mr. Winship.

Michael D. Winship

Okay. Well, thank you everybody that called in and listened to our webcast and this will be posted on our website. And thank you for your interest today. Good-bye.

Operator

Thank you. The conference has now ended. Please disconnect your lines at this time and we thank you for your participation.

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