Hedge/Production/Costs/Macro Situation Orvana is in a good position regardless of the fall in gold prices over the last two days.
1) Orvana is well protected against a fall in gold prices well into the future. Its gold puts are now in the money by approximately $180/ounce at the moment.
Gold Puts (Jan '13 - Sept '15) 52,800 ounces at $1,550.00
2) Q2 '13 production will be higher and will have been sold at higher prices prior to this reversal in gold prices. The Q2 '13 quarterly report is pending.
3) Orvana had approximately $10,000,000.00 in inventory in Q1 that will have been sold.
4) Orvana has been increasing production and Fabulosa has shown determination with appointment of a new interim CEO William Winship who recently said that efforts are going reasonably well and that work on increasing production and reducing costs is progressing. This has credibility as we have seen progress in the past quarters, the strike was settled in a day, and staff changes have been made throughout last year and now to make improvments. The 2013 production forcast is conservative. The new EVBC shaft allows more ore to be pulled so that the mill can be brought up to full capacity, and EVBC ore grades have been increasing.
PRODUCTION
2012 2013 Projection Increase % Increase
Copper million lbs 15.37 18 2.63 17.11
Gold ounces 55,929 75,000 19,071 34.1
Silver ounces 716,280 850,000 143,720 20.1
5) Costs have been coming down over the last number of quarters and managment has indicated that work is ongoing to reduce costs further.
6) On a macro scale this pull back in gold will not last long because all the macro conditions for higher gold price are still in place. Already we are seeing Indians rush to jewlery dealers. Indian jewlers sell their gold jewlery at spot prices.