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Orvana Minerals Shares Rise As Optimization Underway At Two Of Its Mines

Orvana Minerals (TSE:ORV) shares gained Thursday, as investors look to optimized operations at the company's EVBC and UMZ mines, and positive cash flow.

Shares in the company rose almost 9%, or 8 cents, to 98 cents this afternoon.

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, USA.

Last month, Orvana said its short term focus is to optimize operations at the EVBC and UMZ mines to generate increased operating cash flows in order to pay down debt, as well as potentially advance the development of its Copperwood project.

Indeed, for the quarter that ended September 30, the multi-mine gold and copper producer reported a net loss of $2.0 million, but adjusted net income was positive at $12.3 million, or 9 cents per share.

The company's long term goal is to use future cash flow to build long-term value through organic growth and possibly through strategic acquisitions focused mainly on advanced-stage gold and copper properties.

Cash flow provided by operations before changes in working capital was $14.5 million in the latest quarter and capital expenditures were $12.6 million, resulting in positive free cash flow of $1.9 million.

On the conference call earlier this month, Orvana reiterated its fiscal 2013 production guidance of 75,000 ounces of gold, 18 million pounds of copper and 850,000 ounces of silver.

The company also provided cash cost guidance of about $800 per ounce of gold, net of credits at EVBC and co-product cash costs of below $1,000 per gold ounce, $20 per ounce of silver and $2 per pound of copper at Don Mario.

Orvana has roughly $14 million in payments due this year to Credit Suisse, as well as its Fabulosa credit line - with a principal of $5.7 million as at December 4 - due at year-end.

During 2012, the company made timely payments to Credit Suisse and reduced the Fabulosa debt by $800,000, Orvana CEO Bill Williams told Proactive Investors.

The company is also looking at $7.6 million in short-term bank debt, most of which is 60 to 120-day loans with Bolivian banks for working capital, and about $40 million in other payables.

"We believe the shares could appreciate considerably should short-term liquidity issues be overcome; however, due to the short-term elevated liquidity risk, we are maintaining our sector perform rating and $1.50 target," Stonecap Securities analyst Christos Doulis concluded in his note.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.