RE:RE:RE:RE:RE:RE:RE:RE:Orvana Reports Improved Third Quarter Financial Results firecracker74,
Remember what I posted about Orvana. Reason #5 why the market doesn't understand this stock. It is a non linear stock, and you cannot make simple extrapolations and predict the future financials. That's one reason why the stock sold off today. People saw that BOGUS three cent loss, and they ran for the hills!
So let's dispense with a couple of errors in your thinking about the 4th fiscal quarter.
Yes, the Euro has gone up against the dollar. So let's assume that it goes from $1.11 to $1.20 average for Q4. That raises the cost of production $134 USD per ounce and adds $1.5 million to cost at El Valle.
However, copper has gone from $2.45 to $2.90 USD, and the move in copper drops the cost of gold production by $114 USD per ounce of gold. So copper rise and Euro rise almost totally offset each other.
Then, management reported in their news release that they had mined 42,243 metric tons of oxide ore at Boinas and 39115 metric tons of ore from Carles. So oxide is already 19 percent of production and Carles ore makes up 21 percent of throughput. If they were mining with grade control, then average ore grades should be at 2.9 g/t instead of 2.35 g/t, but this quarter they were mining through some "indicated ore zones" and introduced some ore dilution.
Take away that ore dilution, and gold production should have been 16,500 ounces, and mining costs would be $120 USD per ounce lower. The percentage of oxide ore should increase to 30 percent in Q4, and if that happens with copper at $2.90 USD and the Euro at $1.20, then the AISC for EVBC will be around $960 USD per ounce with 19,000 ounces of gold production from El Valle and Carles. Total gold production including Don Mario would be around 31,000 ounces. I figure conservatively that POG should be at least at $1360 USD in fiscal Q4, which would imply revenue of $48.5 million USD and EPS of 3.4 cents per share.
I can understand why you feel that this is a "very disappointing report." However, step back from the situation and ask yourself how hard is it to report a loss on a stock that just had a 27 percent increase in gold equivalent production, and netted $1.2 million in cash from Copperwood, and made a profit of $844,000 from their gold hedges?
Pretty darned difficult, but here's how it was done:
- Take that $1.2 million USD from Copperwood, and send it down to Don Mario to buy supplies, and bingo! Don Mario's mining costs go up, and the dollars that would have gone to the bottom line now result in an increase in inventory and reduced Don Mario profitability.
- At EVBC, hold back 1776 ounces of gold woth $2.2 million making the revenue, and 200,000 pounds of copper worth $0.5 millon dollars which reduces top line revenue.
- Then mine through low grade skarns and low grade oxide which reduces gold average head grade.
- Increase throughput and depreciation at El Valle.
And surprise, surprise! A breakeven report turns into a 3 cent per share loss. Most managements try to make their stock look good by using accounting tricks to hide costs, and maximize reported profits. This management does the opposite! Ask yourself why?