Orvana Minerals (ORV.TO) has announced a plan to repay its debt at an accelerated pace and should be debt-free by the end of this year. The funds to repay the debt will mainly be provided by the current working capital position, the proceeds from the sale of the Copperwood project, and the proceeds from unwinding all EUR/USD, gold and copper price hedges. This hedge had an estimated value of $13.1M as of at the end of March of this year, and the company hopes to realize a cash gain of $10-12M which will be used to repay a part of the outstanding debt position of $37.5M.
We think this is a good move by Orvana Minerals, as reducing the debt to a level close to zero will very likely reduce the annual interest payments by $2M and thus increase the free cash flow of the company. We hope the company can also continue its great operational performance at the EVBC mine which should continue to generate a substantial free cash flow. The sale of Copperwood is a good deal as we think the price is quite fair for a project with a relatively high cash cost, and we’re looking forward to see Orvana Minerals deploy its free cash flow to acquire a project with a higher operating margin.
Disclosure: The author holds no position in Orvana Minerals. Please see our disclaimer for current positions.