RE: Value
A number of things holding this stock back
1. Following the issue of the PFS Technical Report, the Company engaged Kappes, Cassiday & Associates (“KCA”) of Reno, Nevada to complete a NI 43-101-compliant full feasibility study on the UMZ. This study was expected to be completed by the end of the current calendar year. However, during their research, KCA identified that the oxide ore noted in the table above also contains zinc in quantities sufficient to affect the process flow sheet of the project. The study must now address the presence of zinc to ascertain the quantities of zinc that will be produced and the impact on capital expenditures and operating expenses of process flow sheet modifications. The impact on project economics will be announced as soon as definitive results become available. The finding of the presence of zinc will delay completion of the full feasibility study. It is now expected that the study will be completed in the first half of fiscal 2008. Delay in results equals delay in deployment of cash.
2. Effective Tax rates go from 25-50%
3. New mining labour agreement in Bolivia means labour expenses have gone up by 24%.
4. Ore grades may decline in 2008
5. As a result of legislation passed by the Bolivian Congress, the Company is required to negotiate, by early fiscal 2008, a new natural gas supply contract with a governmentowned entity. The financial impact of such new contract is not yet known, but it is possible that increases in gas prices under such contract or other terms of the contract could have an adverse effect on the results of operations or financial condition of Orvana.
6. Beyond 2010 and in the absence of new operations or reserves being added, the Company’s revenue stream will depend on the UMZ base metal project of the Don Mario Mine. The Company anticipates that, if undertaken, the UMZ project maybe brought on stream following the processing of remaining gold ore. Given the extent of changes to
taxation and to other laws affecting the mining industry and the political uncertainties in the country, the Company may experience difficulty in obtaining satisfactory financing terms or adequate project financing for the UMZ. The 2006 pre-feasibility study estimated capital expenditure requirements of approximately $65,000 plus working capital requirements. These estimated financing requirements are preliminary and are subject to the completion of detailed estimates as part of the full feasibility study that is in progress currently.
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