Orvana Minerals Corp (TSE:ORV) had its outperform rating maintained at Stonecap Securities on Monday following the release of the company's fiscal third quarter results last week, with analyst Christos Doulis saying the miner was still able to generate a small amount of free cash flow during the period despite the weak metal price environment.
Doulis, who also left his $1.00 price target on the company unchanged, noted that Orvana's balance sheet challenges, such as its debt repayment, remain, and will be "exacerbated" should metal prices remain weak. Still, he wrote: "For those bullish on the precious metal space we believe Orvana offers significant upside."
In the third quarter, cash flow provided by the company's operating activities was $10.8 million, or $4.6 million before changes in working capital. Capex was $4.3 million, resulting in free cash flow of $6.5 million, or $0.3 million before changes in working capital.
At the Toronto-headquartered precious and base metal miner's principal Spanish property at the El Valle-Boinás/Carlés mine, cash costs including royalties were $846 an ounce, net of credits, slightly above management's guidance of $800 an ounce and $784 an ounce in the second quarter.
Still, the company recorded record gold production from the site, notwithstanding curtailed production following an incident necessitating repairs at one mine.
Strong overall production numbers were posted for the quarter, including 22,319 ounces of gold, compared to 18,344 ounces a year ago; 4.6 million pounds of copper for the quarter, down on the year ago figure of 5.1 million pounds; and 303,704 ounces of silver for the quarter compared to 248,908 ounces in the same quarter of fiscal 2012.
At the UMZ mine, production was significantly above the fiscal second quarter, while cash costs on a co-product basis were $2.15 per pound of copper, $925 an ounce of gold and $16.12 per ounce of silver, down from the fiscal second quarter's level, but still above guidance.
Management reiterated its fiscal 2013 output guidance of 75,000 ounces of gold, 18 million pounds of copper and 850,000 ounces of silver.
Production at the company's Boinás Mine at EVBC is forecast to drop to roughly 90 per cent of its previous levels until the completion of repairs at the site following an incident in mid-June at the mine, in which a fully loaded skip failed to stop going into the surface dump, crashed into the top of the headframe and dropped down the shaft when the wire rope attachment failed.
Repairs are expected to be completed in roughly six months at a cost of up to $3.5 million. Doulis noted that previously management had indicated hoist repairs would take between four to six months, at a cost in the range of $2.5 to $3.5 million.
Underground production from the Boinás Mine has continued since the shaft accident with the company using truck haulage through the existing underground ramp access.
Also in the quarterly filings, Orvana extended its loan facility with Fabulosa Mines Limited until September 2014, with principal payments starting on April 1 of next year. The company will also issue 500,000 five-year warrants to Fabulosa.
Doulis also altered his view of when initial production from Orvana's Copperwood copper project in Michigan would start, from 2015 to 2016.
Shares in Orvana were trading up more than 3 per cent on Monday in Toronto, to 48 cents.
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