Orvana Minerals is a multi-mine gold-copper producer listed on the TSX with assets in Spain and Bolivia. Gavidia claims Orvana is a "100,000oz gold producer." In addition, Orvana Minerals has recently filed a PEA for the Taguas Mining Property golf-silver project, Argentina. There will be concerns regarding Orvana Minerals' ability to operate effectively given the disparate locations of its assets, but Gavidia insists regular flights are nothing more than a mild inconvenience. Orvana Minerals started the year with a share price of 0.16CAD, rising to an encouraging peak of 0.40CAD in August, courtesy of a rising gold price and the announcement of Oravana's Argentinian asset, before plummeting back down to a worryingly stagnant 0.14CAD as of today. The company has a market cap of CA$19.13m and around $10m in the bank. Gavidia alleges that market perception regarding liquidity is a large problem: Orvana Minerals has a 52% controlling shareholder. Investors may feel this perception is a reality, but Gavidia insists there is still 48% to play with, but the market simply chooses not to. Another issue is getting the new Orvana story out to prospective investors; since the successful introduction of an operational strategy that focused on lowering unitary costs and extending life-of-mine of operations, while maximizing cash flow, Orvana has seen a reduction from a $1400 AISC to an $1100 AISC. Gavidia hopes to reach closer to $1000 next year. Orvana Minerals is currently discussing if the TSX is a limiting factor for them, and will make a decision in the near future regarding where the place to be is. Gavidia cites the company's production performance in addition to its experienced management team as reasons to climb aboard the Orvana gold-copper train. Orvana has good assets and could be a prospect in the future. However, with gold having as good a year as it has, investors might be worried that a gold company is struggling so much. What did you make of Juan Gavidia? Is Orvana Minerals a gold-copper company of the future? Comment below, and we might just ask your questions in the near future.
Click here to watch the full interview.
Matthew Gordon: You're over here for the 121 conference. What are you hoping to achieve?
Juan Gavidia: To connect with investors. And also with the mining community, because Orvana is ending up now big turnaround process of almost two years now. So, it’s always good to connect with people to give them the good news of our results.
Matthew Gordon: And have you got many investors in Europe,around the UK?
Juan Gavidia: We have some.
Matthew Gordon: You have some but are hoping to connectwith some new ones.
Juan Gavidia: All the time.
Matthew Gordon: Why don’t we start off with a one-minutesummary for people who are new to the story and haven’t heard it before.
Juan Gavidia: Well, Orvana is now a 100,000oz gold producer, a junior out of Toronto. However, our operations are one in Northern Spain. Astraeus, 60,000oz per year. And the other one in Bolivia, in the Santa Cruz region next to Brazil, which is a 40,000oz producer. So those two assets are the ones comprising Orvana.
Matthew Gordon: So how did you end up with them?Obviously very different jurisdictions. So how did you end up with both ofthose?
Juan Gavidia: Because Orvanaat the beginning it started off the asset in Bolivia. So, we had a very successful underground operation from 2002 to 2009 with that funding, we acquired the property in Spain, which was an opportunity other time.
Matthew Gordon: What are your hopes? Are you going tojust focus on those two assets for now? And how do you split your time,management time?
Juan Gavidia: I mean, the joke is I’m in seat 3J, airplanes version. That's pretty much the situation. However, it’s going to increase the issue because we also have a project in Argentina in the San Juan province, which is the most mining friendly province in Argentina. There will be an open pit. We are skilled in that to be developed over the next four years.
Matthew Gordon: So you talked about a turnaround processfor three years. It's a long, long, long turnaround process, right? So, whatare you hoping to achieve? What does that mean, a turnaround process?
Juan Gavidia: Actually, the physical work was done almost a year and a half ago, which was to change their mining strategy. Before it was mining lower grade hard rock with some softer ground, high-grade rock. Now we are moving into a 50/50 type of depot blending. So, mining is more difficult because it’s softer ground, at a higher grade. So, the mastering of the mining in the softer ground was actually the turn around. That's pretty much done since late 2018 and we're just showing up with the goods, with the results.
Matthew Gordon: I'm always uncertain what's going on inthe minds of the management team. So, you had a scenario which wasn't workingfor you economically. And you've had to come in and to reassess the assetsyou've got and work out how you can turn this business around. But how are yougoing to do that? The 50/50 planning, is that the solution?
Juan Gavidia: It’s actually been done. In 2019 our fiscal year, which ended in September, was showing pretty much the first full year of the results of the new mining method. Mining method is basically you have an underground body which has two sections; hard rock and soft. Soft, higher ground is higher grade. So, they wait to do this. You need to change the fleet to some extent. You need to change the skills of the crews to some extent. And you need to start doing other types of processes. It's more like industrial engineering that work. At the end of it, the new processes, the new fleet, the retrained crew produced a higher tonnage of their sulphur ground ore and when we reached the 50/50 that’s when we said we’re OK. the where we reach the 50 50. Now, the end result is the average grade, so before we were almost around 2 grams per ton, we are now above 3. So, the grade is king.
Matthew Gordon: When is this going to start having effectfinancially for you?
Juan Gavidia: 2019 was the first year where we were very much above the average over the previous years, cash flow positive share, which is allowing us not to require any financing over the last twelve months.
Matthew Gordon: But you're around USD$18M market cap. It'snot a big company. You've got USD$10M in the bank? You’re not seeing a lot ofreflection for the work that you think you put in this year in the market. When'sit coming?
Juan Gavidia: So, there is a number of factors. Factor number one, we have our main controlling shareholder, 52%. So that's a problem with a market perception about liquidity, etc..
Matthew Gordon: Is there much liquidity? Is there muchtrading?
Juan Gavidia: The liquidity, we have 48% to play with but the market doesn't play much with our stock. The reason for this is before they turned around, we didn't have a very stellar performance. So, we are talking to investors. We are coming to these kinds of gathering's to tell the story because the story in not very good terms was lasting since 2011/2012 all the way to 2016. So, is it too easy to get those results but more difficult to also turn around the perception of the company? So, we are battling the perception. We are also telling the story that the main shareholder is not such an influencing factor in the performance because we are…
Matthew Gordon: Who is this group?
Juan Gavidia: It’s a family office out of the U.S.
Matthew Gordon: A US family office. They’re not involvedin the day to day in terms of no decision making, but they've got to sit on theboard?
Juan Gavidia: The board is only 6 people, 5 are fully independent.
Matthew Gordon: I want to talk about this turnaroundbecause that’s the exciting bit that you want to tell the market. What effectis that having on the AISC because I know the AISC has been quite high?
Juan Gavidia: Well, the cost at the peak of the pre-turnaround situation we are approaching USD$1,400. Now we are approaching USD$1,100, closer to USD$1,000. We're shooting for the next year to be closer to a thousand. Once you have the fleet catching up on the features of the fleet, once you have the crew caught up with the new processes. And also, we have the infrastructure ahead of us like you have the de-watering, all the ventilation and all the infrastructure inside the underground mine also up to date. Then you are not remediating anything. You're moving forward. So that creates a more proactive approach, lowering the unit costs.
Matthew Gordon: AISC has been circa USD$1,400 buckscoming down towards USD$1,100 and you would hope at some point to reduce thatmore.
Juan Gavidia: Not hoping, we’re planning to reach that.
Matthew Gordon: You’ve got a lot of cash going in at themoment and you're putting in infrastructure so your costs will remain high fora while, but at some point you're going to have to stop managing…
Juan Gavidia: The underground mine that we are managing in Spain is going to be always be around USD$1,000. Even probably USD$980 or USD$950. But it's going to always be USD$1,000, it’s underground. And the grades are going to be about 3g/t. If you have a mine of 5g/t or 6g/t, your unit cost goes down.
Matthew Gordon: You've got Bolivia, Spain and Argentina.Small company, limited cash, unless you’re going to go out to the market andraise more money because the margins are still small, even at today's goldprices.
Juan Gavidia: We need to announce that our guidance still in a few weeks, however, we do plan on a strong cash flow position out of Spain for next year.
Matthew Gordon: How do you finance three different locationswith limited resources?
Juan Gavidia: Of course, Spain. Bolivia is moving, it’s transforming, it’s repurposing the operation. It used to be underground, moving too open pit. And now we are moving into reprocessing stockpiles and tailings, and that should last at least for another 7 or 8 years. So that’s a very long, non-mining full processing phase for the Bolivian assets. So, that's a cash flow self-sufficient. Financing for operations in Bolivia is actually very fluid for us. There is a local market. There is a local banking system. It's also even a local stock exchange in Bolivia. So, we are tapping into all those resources. So, it’s a very self-sufficient situation. You will see in our financial statements that Spain, Bolivia, funding for operations, which is structural, is not a catching up type of financing, it’s local. So, we don't have expensive funding coming from the usual suspects in terms of mining in Toronto, London, or New York. We're having out of Bolivia like banking system and Asturias Northern Spain banking system.
Matthew Gordon: Why are you here?
Juan Gavidia: Because we need to develop things, for instance Argentina. Argentina is our asset that is still in pre-feasibility. So, we need to move into feasibility. That would require extra funding. And eventually we will need to move into JV partnerships. So, basically to tell this story, to improve his stock price, to tell the story about the Towers project in Argentina, JV Partnerships. That's the main reasons we're here.
Matthew Gordon: Why are you on the TSX?
Juan Gavidia: Well, there is a lot of opinions around about where to be. ASX, TSX or private. So, in our case, we are discussing that very strategic situation. Actually, these days we will actually have this strategy session with a board every year, and that's actually happening next week. We may have some news, but in general the VI is to be more liquid in whatever stock exchange we will be in ending or landing. Right now, TSX for sure, but we need to take some actions about our share price for sure. It’s structural.
Matthew Gordon: Something happened in June-July. What wasthat? Because we saw the price go up and then straight back down again to whereit was.
Juan Gavidia: Two factors. We announced the Argentinian assets and we start riding the wave of the gold price up take. So those two were almost like coincidental. We would move up to CAD$0.40. And then we were subject to this pressure and short selling type of strategies. There are some articles about the topic, a lot of people, a lot of companies. And that was what we were facing. We saw the reports about short selling all these mechanics that we face because really the controlling shareholder is not worried in the short term of that situation.
Matthew Gordon: You’re not worried until you’ve got toraise some capital?
Juan Gavidia: So, these days we are selling the merits of the assets as opposed to the market cap of the company.
Matthew Gordon: You think there’s two things. One, the announcementof Argentina and two, the gold price. Clearly your share price has come backdown again. That can't have been just the gold price, even though you’re aproducer, it was the excitement of what you were going to do with Argentina. Doyou think the market hasn't heard enough about what you're going to do there?
Juan Gavidia: Yes. Well, that's part of the reasons. Usually there is no one single answer for anything. But in this case, we need to continue announcing the next development phases of Tower’s. We are taking the attitude of perhaps a little bit too much time on the legal issues of opening the local subsidiary, moving the actual asset into the local subsidiary, looking to all the mining registrations in Argentina. But that's ending within the next 4-8 weeks and then we can next announce **** works, moving from PEA (preliminary economic assessment) into PFS (pre-feasibility).
Matthew Gordon: Are you finding Argentina difficult?
Juan Gavidia: That's paperwork, in terms of corporate registration in Argentina. So, there's legal issues, not mining permitting. Mining permitting in San Juan province is the most mining friendly in Argentina. That was very, very fast.
Matthew Gordon: Why should people be listening to youversus all the other gold producers out there at the moment trying to catch abreak?
Juan Gavidia: Because we have the results. So, we said something to investors, since two years ago, we are announcing quarter after quarter that we are improving. Right now we are completing our fiscal year, 2019, and we have the goods to show. So that's pretty much what we’re doing.
Matthew Gordon: Tell me about the team that you'reworking with. Who else are you working with to help you manage all of this, cutthe costs and get the AISC down and go tell the stories to market?
Juan Gavidia: Excellent question. Thank you very much. So, I am a former mining person from major gold mining company and also I am Peruvian, so I saw first-hand performance of experts in countries like Spain, etc. or Bolivia, but also I saw the value of local teams properly developed. So, the emphasis in these last three years has been to, in a very intense way, develop local teams. So, we brought the experts for heavy, heavy in depth advising, consulting on improving the skills of the local teams. So, the general managers of both places, the technical top managers at both places are locals. And we do have IVP operations, which is an expert who is also like me, moving around the sites.
Matthew Gordon: Who on the team has been there and doneit before? Who has created shareholder value? Has anyone done any exits? Anyonecreated larger companies, public companies before? What's the track record ofpeople knowing what they're meant to do next?
Juan Gavidia: In terms of track record on how to put public companies in good shape, we have our CFO, which is with us here and then myself. So, we will be working with these since probably 2012. I came a major but the junior is very interesting.
Matthew Gordon: It’s a different world.
Juan Gavidia: I actually enjoy a lot. So we are creating, I think a very good result for the marketplace. We do have all these headwinds coming from the past, but we need to keep pushing forward.
Matthew Gordon: You do need to keep pushing forward. Juan, thank you very much. Really enjoyed hearing that story. First time for us. Stay in touch with us. Let us know what goes on. I like the fact you're driving the costs down and now you're trying to tell the story in the marketplace. Let's see what happens.
Company page: https://www.orvana.com/
If you see something in this article that you agree with, or even disagree with, please let us know in the comments below.
Any advice contained in this website is general advice only and has been prepared without considering your objectives, financial situations or needs. You should not rely on any advice and / or information contained in this website or via any digital Crux Investor communications. Before making any investment decision we recommend that you consider whether it is appropriate for your situation and seek appropriate financial, taxation and legal advice.
Any advice contained in this website is general advice only and has been prepared without considering your objectives, financial situations or needs. You should not rely on any advice and / or information contained in this website or via any digital Crux communications. Before making any investment decision we recommend that you consider whether it is appropriate for your situation and seek appropriate financial, taxation and legal advice.