Orvana rises on Copperwood PEA (September 27, 2010)

VANCOUVER — Orvana Minerals (ORV-T) has released a preliminary economic assessment (PEA) for its Copperwood copper project in Michigan, marking three early-stage mine plans in as many months.

In July the company released reserve and financial data on its El Valle-Boinas/Carles gold project in Spain, and in August, Orvana outlined details for its Upper Mineralized Zone copper-gold-silver project in Bolivia.

For the Copperwood project, the study outlined an underground operation using room-and-pillar mining to produce copper and silver. The study looked at conventional drill-and-blast, roadheader and continuous miner methods and settled on continuous mining to reduce costs despite possibly higher dilution.

In March, Orvana released a resource estimate for Copperwood that incorporated both the dark-grey siltstone and black-laminated shale Domino unit, and the red-massive, grey-laminated siltstone Upper Layer. Combined, the resource contains 19.5 million measured and indicated tonnes grading 1.86% copper for 798 million contained lbs. The resource contains a further 3.3 million inferred tonnes grading 1.49% copper, all using a 1% copper cutoff grade. Copper occurs in the form of very fine-grained chalcocite.

The conceptual mine plan, meanwhile, incorporated 16 million tonnes grading 1.51% copper. At a throughput of 1.6 million tonnes per year, or roughly 4,500 tonnes a day, the plan establishes a 10-year mine life. With copper recovery estimated at 85% using froth flotation, the mine is expected to produce 20,000 tonnes of copper and 103,000 oz. silver per year. The mine is expected to cost US$143.3 million in pre-production capital, including a US$25 million contingency, while working and sustaining capital is pegged at US$87.1 million.

The study put a net present value (NPV) of US$128.1 million on the project using long-term prices of US$2.25 per lb. copper and US$14 per oz. silver, and a 5% discount rate. With the same prices, the internal rate of return (IRR) works out to 20.2% with a 4.4-year payback period. Using a copper price of US$3.25 per lb., closer to the current spot price of around US$3.44 per lb., the IRR works out to 41% with a payback period of 3 years, and the NPV jumps to US$390 million. The company plans to apply for a mining permit next year, and has been encouraged by the recent permitting of Rio Tinto’s (RTP-N, RIO-L) Eagle nickel-copper mine in the state.

Orvana has long-term leases covering 7 sq. km that make up the Copperwood project, while it has option agreements on three other targets adjacent to the project.

The project carries a sliding 2% to 4% net smelter return royalty based on the price of copper.

Helping to cover development costs, Orvana continues to produce gold from its Don Mario mine in Bolivia, with 6,545 oz. produced in the third quarter. Gold production dropped by 49% compared to the same period last year after the higher-grade Lower Mineralized Zone was mined out and the company started mining the lower-grade Las Tojas deposit. The company continues to prepare the Upper Mineralized Zone at the project for production.

Orvana’s share price climbed 34¢ or 17.7% in two days of trading following the latest PEA news to close at $2.26, a 52-week high. The company hit a 52-week low of 82¢ in November and has 116 million shares outstanding.