RI: Roland, would you first give investors an overview of Orvana Minerals and in particular your projects and what is happening on them now. You’ve got three projects that are all advanced stage or in production and there is a lot for investors to account for.
RH: The most important thing is that we’re a miner and we’ve been mining for eight years in Bolivia. About a year and a half ago we bought an asset in Spain—El Valle-Boinás—that had been producing for 10 years. We are now putting the El Valle-Boinás mine back into production using our own miners that have done contract mining before.
Additionally, we have a major development program in Michigan, called Copperwood, which is a major copper project. We are also developing a new project in Bolivia that is going into production very shortly and will have substantial gold and copper production going forward. That is the Don Mario mine’s Upper Mineralized Zone.
RI: You mentioned that you had the Bolivian project and it has been producing for quite some time and one part of the mine has been depleted and basically you’re bringing in the Upper Mineralized
Zone into that. Can you give us a bit of an overview of the mine life there and how much you expect to generate in terms of revenues and cash flow?
RH: It’s a copper, gold and silver deposit and has an 8 to 9 year mine life. The deposit is a hill right next to the mill and we have refurbished the mill. We spent around $20 million refurbishing the mill so we can process the copper. It will be a major copper, silver and gold producer. We’re looking at fairly substantial cash flow there and expect it will probably be in the neighborhood of $50 million a year. It is front end loaded so we’ll be generating more cash at the start than toward the end of the mine life. It’s a major asset and fairly low cost.
RI: You’ve mentioned that you expect to generate $500 million in revenues in the next five years. That’s a big jump from a smaller cash flow company to quite a large cash flow company. Where else is that cash flow going to come from?
RH: Overall from Spain and Bolivia we are producing about 120,000 ounces annually from 2012 on. At current gold prices you’re looking at $150 million from the gold side of the equation. From the copper side of the equation you’re looking at about 13,000 tonnes of copper and that is a substantial revenue from copper as well. We are looking for acquisitions and we intend to grow these projects internally and also develop Copperwood. Copperwood is a major project that we’ll look at in 2013 in 2014 and substantial revenue will come out of that project as well.
RI: At Copperwood you’ve got 2 parts: The main development area and then the satellite deposits. You’ve got about 1 billion pounds of copper and then you tack on another 1.8 billion which will be running through the same plant. Have I got that correct?
RH: Yes, we put out a preliminary economic assessment last year and based it on 20 million tonnes at about 1.8% copper and we recently announced that we’re going to expand that. We are looking now at about 30 million tonnes at probably 1.6 or 1.7%. That will be the basis for the prefeasibility and I think that’s when people will start paying attention to this project.
RI: You’re not really getting value for Copperwood because a lot of the people who are watching you are gold analysts. You just put out this new measured and indicated resource estimate for Copperwood with more than a 50% jump—and no one is paying attention?
RH: I should say that increase is for the prefeasibility so we haven’t actually increased the total pounds but we have increased by 50% the pounds that are going into the prefeasibility. That’s what is so important here. I think there was some confusion when the press release came out at not recognizing that this is part of the prefeasibility and it should add substantial value to that asset.
RI: Across the board, you are a low cost project company in all of your projects. What about your Copperwood project, what are you looking at in terms of your stripping ratio and other aspects such as infrastructure that will add value to a low-cost project?
RH: Copperwood will be an underground mine and we’ll be looking at going in with continuous miners. I think the preliminary economic assessment shows that the cost will be about $1.50 per lb and we think it will be very competitive with our project in Bolivia as well.
RI: You’re also operating in Michigan. How welcoming is Michigan and the United States in general?
RH: We’ve had tremendous support. I’ve been there with our vice president of business and development who is president of our US subsidiary and he is an American based in Phoenix and focuses on these projects, as well as other things. We’ve had a couple of public meetings there with over 100 people in attendance and everybody came out and everybody is looking for good jobs. We’re behaving environmentally responsibly and we’re getting very good community support.
RI: When can people there looking for jobs and investors expect to see a production decision on breaking ground and construction?
RH: We will be doing the prefeasibility this year and the next stage is feasibility. By 2013 or 2014 will be starting to look at financing this and we think we could be in production by 2014.
RI: What financing options are you looking at?
RH: We have a very good relationship with Credit Suisse. They lent us $50 million and there is a good rapport there. We think half to two thirds could be debt-financed and the other portion would be equity financing but we haven’t done an equity deal since 1998. We haven’t diluted shareholders and we’ve generated the cash flow to Bolivia, Spain and Michigan and we will continue to generate a fair bit of cash flow.
RI: What are the next steps ?
RH: I think one thing we will look at is the copper vs gold part of the equation. Investors do look for gold plays and they look for copper plays and that is something we’re looking at. Additionally we’re looking for acquisitions in the Americas and in Europe in stable jurisdictions.
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