Orvana Minerals Report Stonecap Securities

ORVANA MINERALS INC.

Christos Doulis, [email protected], 416.342.9992

Associate: Michael [email protected], 416.342.9989

June 30, 2011

OUTPERFORMTarget Price: $5.25

Siglo De Oro Redux — Initiating Coverage

Equity Research | MINING – PRECIOUS METALS

ORV-TSX: $2.33

Table of Contents

Siglo De Oro Redux ............................................................................................................ 4

Overview ............................................................................................................................. 4

El Valle-Boinas/Carles ........................................................................................................ 4

History........................................................................................................................... 5

Don Mario UMZ................................................................................................................... 7

Copperwood........................................................................................................................ 9

Growing Production Profile ............................................................................................... 10

Commodity Price Forecasts.............................................................................................. 12

Valuation ........................................................................................................................... 12

A blend of NAV and CFPS multiples .......................................................................... 12

Sensitivity Analysis............................................................................................................ 13

Strong sensitivity to copper and gold, weak sensitivity to silver................................. 13

Investment Risks............................................................................................................... 15

Target Price Catalysts....................................................................................................... 16

Comparable Companies ................................................................................................... 16

Financial Position And Capital Structure........................................................................... 17

Cash and working capital ........................................................................................... 17

Share structure ........................................................................................................... 17

Conclusion ........................................................................................................................ 17

Appendix A: Financial Summary....................................................................................... 18

Appendix B: Management and Director Biographies........................................................ 19

Disclosure List................................................................................................................... 21

Orvana Minerals Inc.

June 30, 2011 3

This report was prepared by an analyst employed by a Canadian affiliate, Stonecap Securities Inc., who is not registered as a research analyst under FINRA rules. See the last page of this report for important disclosure information.

Orvana Minerals Inc. (ORV-TSX, $2.33) Outperform; Target: $5.25 — Initiating Coverage

ORV-TSX $2.33RatingRisk Speculative12-Month Target Price $5.25Projected Return 125%Market Data

52-Week Trading Range (C$) $1.11 - $3.97Shares Outstanding, Basic (mm) 119.2Shares Outstanding, FD (mm) 120.2Market Capitalization (C$ mm) $278Net Debt (C$ mm) $27Enterprise Value (C$ mm) $304Financial DataCash $38.5Debt $65.0

ForecastsCalendar YE December 31st 2011E 2012E 2013EPer Share ($)EPS (fd) $0.27 $0.80 $0.75CFPS (fd) $0.31 $0.91 $0.88NAVPS $4.20

Production EstimatesGold Price (US$/oz) $1,450 $1,450 $1,400

Production (ozs Au) 44,000 110,000 117,000

Production (ozs Ag) 316,000 797,000 822,000

Production (mm lbs Cu) 9.7 23.9 24.4 Cash Costs (US$/oz Au) (net of credits) -$41 -$145 -$57Cash Costs (US$/oz Au) (by-product) $594 $437 $459

Resources (gold ounces)P&P + M&I Resources (mm oz) 1.5Total Est. Resources (mm oz) 3.0EV/ Resource ounce gold $103

Current Valuation (12 month forward looking)P/E 4.0xP/CFPS 3.5xP/NAV 0.6x

Target Valuation Blend of 1.2x NAV and 8x 2011 CFPS

Company ProfileMining: Junior Gold

Outperform

Source: Capital IQ, Company Reports, Stonecap Securities Inc.

Siglo De Oro Redux We are initiating coverage on Orvana Minerals Inc. (“Orvana” or the “company”) with an Outperform rating and a 12-month target price of $5.25 per share. Our recommendation is based on the following three points:

1. Forecast calendar 2011 production of ~44,000 ozs Au, ~316,000 ozs Ag and ~10 million lbs Cu from its Don Mario UMZ and EVBC mines, generating significant near-term cash flow.

2. Achieving potential annual production of 100,000+ oz Au in calendar 2012 as El Valle-Boinas/Carlés (“EVBC”) moves to full production with the completion of a production shaft at the operation.

3. Continued growth through development of the Copperwood Cu project in Michigan with anticipated annual production of ~42 million lbs Cu beginning in calendar 2014.

Valuation We have valued Orvana using a blend of P/NAV and P/CFPS multiples. Orvana’s value is derived primarily from its growth profile (captured by NAV), but we acknowledge that its immediate cash flow (captured by 2011/2012 CFPS) will also impact the share price. As such we have blended our NAV ($5.20) and CFPS ($5.36) based targets on a 66/34 basis to derive a target price of $5.25.

Conclusion Since its acquisition of the EVBC asset in mid 2009, Orvana has embarked on a process of transforming itself from a small Bolivian-focused gold mining company into a global metals producer.

With EVBC and Don Mario Upper Mineralized Zone (“UMZ”) having recently achieved production status, the company offers investors significant near-term exposure to both precious and base metal production at an attractive valuation. We are initiating coverage with a $5.25 target price and an Outperform rating.


June 30, 2011 4

Siglo De Oro Redux The Spanish Golden Age (Spanish: Siglo de Oro, “Golden Century”) was a period of flourishing literature and the arts in Spain, coinciding with the political rise and decline of the Spanish Habsburg dynasty. During this time, the wealth of Spain increased dramatically as Spanish treasure ships plied their way across the Atlantic bringing the gold and silver of Spain’s colonies in the Americas back to Madrid.

Orvana is a “redux” (meaning "brought back, restored", from the Latin reducere – to bring back), of the Siglo De Oro in that Orvana has transformed itself into a global mining company with its primary asset (EVBC) in Spain and its other assets being located in Bolivia (Don Mario UMZ) and the United States (Copperwood). With the anticipated treasure of EVBC and Don Mario UMZ soon to be flowing into Orvana’s coffers, we believe the company is poised on the cusp of entering its own Golden Age.

Overview Orvana Minerals Inc. is a Canadian-based, emerging metals producer with assets in Bolivia, Spain and the United States. The company’s flagship asset is the El Valle-Boinas/Carlés Au-Cu-Ag mine, located in Asturias Province, Spain. Orvana put EVBC back into production in June 2011. Orvana’s two other assets are the Don Mario UMZ Cu-Au-Ag mine in Bolivia which began production in April 2011, and the advanced Copperwood Cu project in the United States which is slated to begin production in 2014.

El Valle-Boinas/Carles EVBC is Orvana’s flagship asset and is located in the Province of Asturias in north-western Spain within the Rio Narcea Gold Belt. Orvana acquired EVBC for about $40 million cash in September 2009 through the takeover of Kinbauri Gold. EVBC has a plant and a mill with a 2,000 tonne per day capacity as well as extensive infrastructure including 4.3 km of underground workings and auxiliary facilities.

In July 2010, the company tabled a technical report entitled “Technical Report on the Boinás and Carlés Gold Mines, Asturias, Spain”, which stated reserves (see Figure 2) and outlined a conceptual seven-year mine plan for the project. The seven-year mine plan generates annual production of approximately 105,000 ounces of gold, 8.6 million pounds of copper and 160,000 ounces of silver.

Orvana acquired a 2,000 tpd mill, a

resource of 2.6 million ozs Au and extensive

infrastructure for about $40 million cash


June 30, 2011 5

Figure 1: Orvana – EVBC location map

Source: Company reports

History The Rio Narcea Gold Belt (which hosts the EVBC mine) was a major mining area under the Romans until the second century AD, and was later explored by various companies during the late 20th century and ultimately mined by Rio Narcea Gold Mines Ltd. between 1997 and 2006.

Modern gold exploration in this area commenced during the 1970s. Boliden Minerals A.B., Exploraciones Mineras del Cantabrico S.A., Anglo American Company, Hullas del Coto Cortes, S.A., Concord Minera Asturiana, Rio Narcea Gold Mines Ltd., and Barrick Gold drilled over 70,000m at Carlés, El Valle, Godán, and La Ortosa and conducted underground exploration at Carlés between 1981 and 1996.

Commencing in 1997, Rio Narcea mined the Carlés and El Valle gold deposits by open-pit method, switched to underground mining in 2004 and closed the mine in 2006, producing about 950,000 ounces of gold and around 40 million pounds of copper.

Rio Narcea Gold was acquired by Lundin Mining Corporation in 2007 for its nickel assets, and the EVBC assets were sold to Kinbauri Gold Corp. in 2007. Kinbauri undertook both surface and underground drilling at Carlés and El Valle, increasing total resources at EVBC to 2.5 million ozs Au. Orvana acquired Kinbauri in September 2009 for about $40 million in cash and has since spent around $55 million at EVBC.

On June 3, 2011, Orvana announced the commissioning of EVBC. The mine is expected to run at around 70% of capacity during 2011 and early 2012 while Orvana


June 30, 2011 6

develops a 440m deep production shaft slated for completion in early 2012. On June 24, 2011, Orvana announced that EVBC has produced 450 tonnes of concentrate since commissioning of the mill and revenue from concentrate and dore sales is anticipated in July 2011. Our seven-year forecast production and cost profile for EVBC is presented in Figure 3.

Figure 2: Orvana – EVBC-NI 43-101 compliant resources

Ore Au Grade Cont. Au Cu Cont. CuCategory Mt gpt ozs % mm lbsProven 1.3 4.1 172,000 0.90 25.8Probable 3.4 5.7 612,000 0.68 51.0Total P&P 4.7 5.2 784,000 0.74 76.7Measured 2.1 4.1 280,000 0.80 37.0Indicated 5.2 5.5 922,000 0.60 68.8Total Measured & Indicated 7.3 5.1 1,202,000 0.65 105.8Inferred 9.5 4.9 1,478,000 0.40 83.8

Note: P&P are a subset of M&I


Figure 3: Orvana – EVBC seven-year production and cost profile

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Source: Stonecap Securities Inc.

Using our metals price forecasts, we estimate EVBC’s life of mine (“LOM”) revenue mix to be 83% gold, 14% copper and 3% silver.


June 30, 2011 7

Don Mario UMZ The Don Mario mine is Orvana’s initial mining asset, having been put into production in 2003. Don Mario is located in the east of Bolivia close to the border with Brazil (see Figure 4).Orvana initially exploited the Lower Mineralized Zone (“LMZ”) as an underground mine over a period of six years producing a total of 420,000 ozs Au (at cash losts of less than US$200/oz) prior to depletion in July 2009.

Mill capacity was then increased from 750 tpd to 2,000 tpd and Orvana mined the lower grade Las Tojas deposit, via open pit, from 2009 to 2011, producing 47,620 ozs Au at a cash cost of ~US$855/oz Au. Processing of ore from the LMZ and Las Tojas deposits was by carbon-in-leach (CIL) and ultimately produced a dore product.

Orvana began development of the Upper Mineralized Zone once it had finished exploitation of the Las Tojas deposit and achieved production at UMZ in April 2011.

Mining of the UMZ deposit is via open pit, but requires more complex metallurgical processing due to four different ore types present. After significant testing, Orvana determined that use of a leach-precipitation-flotation (“LPF”) circuit to treat the porous, oxide and transitional material prior to flotation would allow for recovery of the copper from these ores and provided optimal economics for the project with sulphide ore being sent straight to the floatation circuit. The tailings from the LPF process would then be sent to the CIL circuit to produce dore.

Figure 4: Orvana – Don Mario location


Figure 5 outlines existing NI 43-101 compliant resources at Don Mario UMZ while Figure 6 provides our forecast of Don Mario’s seven-year production and cost profile.


June 30, 2011 8

Figure 5: Orvana – Don Mario NI 43-101 compliant reserves and resources

Zone Category Tonnes Cu (%) Au (g/t) Ag (g/t)

Porous Proven 198,180 2.03% 1.47 52.05Probable 315,535 2.04% 1.39 39.33

Oxide Proven 742,580 1.71% 1.62 57.26Probable 980,363 1.79% 1.68 46.58

Transition Proven 837,474 1.37% 1.52 53.67Probable 928,079 1.27% 1.39 48.43

Sulfide Proven 716,651 1.20% 1.19 32.40Probable 984,480 1.16% 1.08 34.43

Total Total Proven and Probable 5,703,342 1.47% 1.41 45.22

Porous Measured 206,034 1.98% 1.43 50.77Indicated 326,664 1.99% 1.35 38.62Inferred 44,323 2.54% 1.44 29.34

Oxide Measured 769,028 1.67% 1.57 55.92Indicated 1,051,185 1.69% 1.58 44.18Inferred 190,401 1.53% 1.27 38.76

Transition Measured 922,323 1.28% 1.42 50.48Indicated 1,072,146 1.15% 1.25 43.90Inferred 83,832 0.91% 0.81 40.55

Sulfide Measured 851,632 1.04% 1.03 27.94Indicated 1,210,430 0.98% 0.92 29.03Inferred 7,062 0.61% 0.66 23.31

Total Total Measured & Indicated 6,409,442 1.34% 1.29 41.36Total Total Inferred 325,618 1.49% 1.16 37.60

Note P&P is a subset of M&I


Figure 6: Orvana – Don Mario UMZ seven-year production and cost profile

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June 30, 2011 9

While Don Mario LMZ and Las Tojas were (oxide) gold mines, Don Mario UMZ is a multi-ore type copper mine with significant precious metal credits. Using our price forecasts, we estimate Don Mario UMZ’s LOM revenue mix to be 56% copper, 24% gold and 20% silver.

Copperwood Orvana’s Copperwood project consists of mineral leases totaling 936 hectares (2,340 acres) located in the Upper Peninsula of the State of Michigan leased by Orvana’s wholly owned subsidiary, Orvana Resources US Corp., in September and October of 2008 and September 2010.

The project is located (see Figure 7) some 30 km southwest of the inactive White Pine Mine where over 3.7 billion pounds of copper and over 4.5 million ounces of silver were produced between 1953 and 1996.

Mineralization at Copperwood is hosted in shales and siltstones of the basal Nonesuch Formation and is stratigraphically equivalent to the copper-bearing zone at the White Pine Mine. The copper mineralization occurs as very fine-grained chalcocite.

Orvana has drilled about 18,000m to deliver a NI 43-101 compliant resource as outlined in Figure 8.

Figure 7: Orvana – Copperwood location map



June 30, 2011 10

Figure 8: Orvana – Copperwood NI 43-101 compliant resources

Proven 22.6 1.37% 682 4.20

Probable 4.6 1.11% 113 2.80Total P&P 27.2 1.37% 821 3.46Indicated – Satellites 25.0 1.40% 771

Inferred – Satellites 36.1 1.30% 1,034Total resource Inventory 61.1 1.34% 1,804Note reserves are a subset of total resource inventory

Category Million Tonnes % Cu lbs Cu (millions) gpt Ag


Our model for Copperwood assumes mining of a total of 25.92 million tons grading 1.34% Cu and 3.5 gpt Ag. We envision Copperwood as a 5,000 short ton per day underground operation producing around 42 million lbs of copper per year and 100,000 ozs Ag per year at a LOM cost of US$1.29/lb copper (net of silver credits) and requiring $198.5 million of initial capex.

On June 24, 2011, Orvana released the highlights of a prefeasibility study for the Copperwood project roughly in line with our model for the project. In addition to a traditional drill-and-blast mine, the prefeasibility study also evaluated the development of Copperwood using a continuous miner that indicated superior economics to the drill-and-blast approach. However, evaluation of this approach is still at an early stage and will require more work before it can be determined if use of a continuous miner at Copperwood is an appropriate and optimal mining method.

Growing Production Profile With EVBC and Don Mario UMZ both having recently achieved production, Orvana is on the cusp of entering the ranks of mid-tier metals producers.

EVBC is expected to continue ramping up over the next year, particularly once the shaft at EVBC has been completed in early 2012, and successful development of the Copperwood project will provide additional production growth for Orvana in the future.

Both Don Mario UMZ and EVBC have only recently entered production (in April and June, respectively) and these operations have yet to demonstrate to the market consistent production or cost metrics. As such, we feel that investors currently have an opportunity to buy Orvana shares at a significant discount to their ultimate value which we believe will be reflected in the market once both mines have demonstrated several quarters of sustained, profitable operations.

Our seven-year production profile for Orvana is presented below in Figure 9. Figure 10 presents a summary of our mine models for EVBC, Don Mario UMZ and Copperwood.


June 30, 2011 11

Figure 9: Orvana – seven-year estimated production profile

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Figure 10: Orvana – summary of Don Mario UMZ, EVBC and Copperwood mine models

EVBC Don Mario UMZ Copperwood

Mine Life (years) 7.5 10.5 15.0Average annual gold production (ozs) 95,000 13,000 NAAverage gold head grade (gpt) 4.68 1.37 NAAverage annual silver production (ozs) 144,000 441,000 97,000Average silver head grade (gpt) 9.35 43.48 3.89Average annual copper production (lbs) 6,865,000 13,121,000 40,340,000Average copper head grade (%) 0.52% 1.37% 1.34%

LOM average cash cost (US$/oz Au) - byproduct basis $396 -$1,581 NATotal gold produced (ozs) 665,000 136,000 NA

LOM average cash cost (US$/lb Cu) - byproduct basis -$8.62 $0.02 $1.29Total Cu produced (lbs) 48,054,000 137,774,000 605,102,000

LOM average mining cost per tonne (US$) $59.13 $4.78 $13.00LOM average processing cost per tonne (US$) $21.00 $33.38 $12.25LOM average G&A cost per tonne (US$) $5.00 $4.15 $1.25



June 30, 2011 12

Commodity Price Forecasts Our gold, silver and copper price forecasts are presented below in Figure 11.

Figure 11: Stonecap gold, silver and copper price outlook

2011 2012 2013 2014 2015 2016 LT

SSI Au Forecast (US$/oz) $1,450 $1,450 $1,400 $1,300 $1,250 $1,100 $1,100

SSI Ag Forecast (US$/oz) $38.00 $38.00 $38.00 $28.00 $26.00 $26.00 $26.00

SSI Cu Forecast (US$/lb) $3.88 $3.50 $3.25 $3.00 $2.75 $2.50 $2.50


Valuation

A blend of NAV and CFPS multiples We have valued Orvana using a blend of P/NAV and 12-month forward looking CFPS multiples. We believe that Orvana’s value is driven primarily by its growing production profile (captured by NAV), but we also acknowledge that near-term cash flow (captured by 2011/2012 calendar CFPS) will have an influence on short-term pricing. As such, we have blended our NAV-based target and CFPS based target on a 66/34 basis to derive our price target. Note that we use a calendar based reporting period (year-ending December 31) while Orvana’s year end is September 30.

Our NAVPS estimate for Orvana is $4.20, which applies a discount rate of 5% for EVBC, 7% for Don Mario UMZ and 8% for Copperwood. We have used a 5% discount rate for EVBC as it is producing and in Spain, a jurisdiction we consider to have low political risk. Our 7% discount rate for Don Mario UMZ reflects our belief that although Don Mario UMZ has begun production, Bolivia has greater political risk relative to Spanish/U.S. assets. Our 8% discount rate for Copperwood reflects its prefeasibility stage.

We have applied a 1.2x multiple to Orvana’s operating NAVPS of $4.81 and included corporate adjustments of negative $0.61 per share (representing current working capital less debt and the NPV of corporate G&A) to generate a NAV-based target of $5.20 per share. Our NAV breakdown for Orvana is presented below in Figure 12.

Our 2011 (calendar) CFPS estimate for Orvana is $0.31 while our 2012 (calendar) CFPS estimate is $0.91. Our CFPS estimate for the next 12 months (i.e., for H2 calendar 2011 and H1 calendar 2012) is $0.67 and we have applied an 8x multiple to this to generate a CFPS-based target of $5.36 per share. As Orvana’s LOM revenue mix is dominated by copper (~63% of LOM revenue using our metals price forecasts), we have used an 8x multiple (which is in line with other junior base metals focused producers) rather than an ~12x multiple that we often use for precious metals focused junior miners. Our five-year (calendar, not Orvana fiscal) EPS and CFPS estimates for Orvana are presented in Figure 13.

Our target for Orvana is derived from a blend

of CFPS and NAVPS multiples reflecting

both near term-cash flow and Orvana’s

growth profile


June 30, 2011 13

Blending our NAV and CFPS based targets on a 66/34 basis generates our $5.25 price target for Orvana shares.

Figure 12: NAV breakdown for Orvana

Projects Location Status Valuation Valuation NAV($ mm) ($/share)

Don Mario Boliv ia production DCF @ 7% $180.7 $1.50EVBC Spain production DCF @ 5% $290.3 $2.41Copperwood USA development DCF @ 8% $106.7 $0.89

Subtotal – Operations $577.7 $4.81

Working Capital incl. Cash and eq. $38.5 $0.32Debt ($65.0) ($0.54)NPV of Corp G&A ($46.8) ($0.39)

Subtotal – Corporate ($73.3) ($0.61)

Net Asset Value (C$) $504.4 $4.20


Figure 13: Five-year (calendar) EPS and CFPS forecasts for Orvana

2011 2012 2013 2014 2015

EPS $0.27 $0.80 $0.75 $0.88 $0.78CFPS $0.31 $0.91 $0.88 $1.13 $1.06


Sensitivity Analysis

Strong sensitivity to copper and gold, weak sensitivity to silver Using our metals price forecasts, we estimate Orvana’s LOM revenue mix to be approximately 63% copper, 31% gold and 6% silver. As such, Orvana exhibits very strong sensitivity to copper, significant sensitivity to gold and weak sensitivity to silver. Figures 14, 15 and 16 outline the impact to our target price as well as NAVPS and 2011 and 2012 CFPS estimates for Orvana based on changes to our LOM metals price forecasts for copper, gold and silver. Note that while total NAV is most sensitive to Cu prices, 2011 and 2012 CFPS are most sensitive to Au prices, reflecting that Copperwood is scheduled for 2014 production.


June 30, 2011 14

Figure 14: Orvana NAV and target price sensitivity to changes in the copper price

$5.25 $4.20 $0.31 $0.91-15% $4.34 $3.25 $0.29 $0.85-10% $4.62 $3.57 $0.29 $0.87-5% $4.94 $3.88 $0.30 $0.890% $5.25 $4.20 $0.31 $0.915% $5.50 $4.51 $0.32 $0.9310% $5.81 $4.83 $0.33 $0.9515% $6.13 $5.14 $0.34 $0.97

2012 CFPSLOM Cu Price change Target NAV 2011 CFPS


Figure 15: Orvana NAV and target price sensitivity to changes in the gold price

$5.25 $4.20 $0.31 $0.91-15% $4.49 $3.56 $0.27 $0.79-10% $4.69 $3.77 $0.28 $0.83

-5% $4.98 $3.98 $0.30 $0.870% $5.25 $4.20 $0.31 $0.915% $5.48 $4.40 $0.33 $0.9510% $5.75 $4.62 $0.34 $0.9915% $5.98 $4.83 $0.36 $1.03

LOM Au Price change 2012 CFPS2011 CFPSTarget NAV


Figure 16: Orvana NAV and target price sensitivity to changes in the silver price

$5.25 $4.20 $0.31 $0.91-15% $5.07 $4.08 $0.30 $0.89

-10% $5.17 $4.12 $0.31 $0.89

-5% $5.18 $4.16 $0.31 $0.90

0% $5.25 $4.20 $0.31 $0.91

5% $5.28 $4.23 $0.32 $0.92

10% $5.29 $4.27 $0.32 $0.92

15% $5.37 $4.31 $0.32 $0.93

2011 CFPSLOM Ag Price change Target NAV 2012 CFPS


Orvana offers excellent leverage to copper,

good leverage to gold and weak leverage to

silver prices.


June 30, 2011 15

Investment Risks With any company involved in developing or operating mining projects, there are multiple inherent risks of varying degrees than can impact its ultimate success. We have outlined the most relevant risk factors and we qualify them from lower to higher risk relative to other companies. Figure 17 outlines our assessment of the risk levels for Orvana.

• Production Risk: is the risk of a project being able to meet our production estimates for an operating asset. Projects with current production that consistently meets company forecasts or our estimates would have a lower risk profile, while those that are not yet producers or are just ramping up would have a higher relative risk profile.

• Established Resource or Reserves Risk: is the risk of a company being able to establish an economically viable resource or reserve or one that is in line with our estimates. A pre NI 43-101 compliant resource estimate project would have a higher relative risk profile, whereas a project with an established resource or reserves would have lower risk.

• Feasibility Study Risk: is the risk of a project being able to establish a viable project plan through an NI 43-101 compliant feasibility study or scoping study or a project plan that is in line with our estimates. Higher risk projects would be those that are not yet at the feasibility stage and whose results could differ materially from our estimates, while those at the feasibility stage would have a lower relative risk profile.

• Capital & Project Financing Risk: is the risk of a company being able to raise sufficient capital to continue to develop or construct a project. This risk can be a factor of prevailing capital market conditions or the amount of capital required to develop a project. A company with a fully financed project or not in need of external capital to continue or expand operations would have a lower risk profile, while one that has not yet raised the capital to develop its project would have higher risk.

• Construction Risk: is the risk of a company being able to successfully construct a project and bring it into operation once financing has been completed. Generally this risk is higher until a company begins commissioning or declares commercial production of a project.

• Regional, Political, or Ownership Risk: are the risks related to a project's location and ownership and may include whether the region is a mining friendly jurisdiction with clear permitting and mining laws, if the current political landscape is stable or changing, and any risk that may be related to the ownership of a project through operating licenses, options, or vendor agreements. Companies whose projects are in less certain regions or have disputed ownership claims would have a higher risk, while those that own their projects outright and are operating them in well established mining areas would have a lower risk profile.

• JV Partner Risk: is the risk related to the JV partner a company may have on a project. This risk can be in the form of the JV partner being the majority interest holder and operator. In this case, the partner may be a well-established senior


June 30, 2011 16

producer, but may impact the timing and scope of development of a project to an extent that the minority partner may have little control. This risk can also be in the form of a minority partner that is unable to meet its funding or participation requirements and may impact the project’s development. Companies that have a 100% interest in their projects would have a lower risk profile, while those that are minority partners would have a higher risk profile.

Figure 17: Relative risk table

Orvana Minerals Low Low Medium Low Medium Medium Low

ProductionFeasibility

Study Construction JV Partner

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Reserve

Capital and Project

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Our medium ratings for feasibility study and construction relate to the Copperwood project while our medium rating for political risk reflect’s Don Mario UMZ’s location in Bolivia. Don Mario represents around 31% of our operating NAV estimate for Orvana while Copperwood represents around 18%.

Target Price Catalysts The following catalysts are expected to help propel Orvana shares to our target price level:

1. Achieving production milestones at EVBC. While EVBC has achieved production, it has yet to achieve commercial production. Furthermore, until the shaft is complete at EVBC, the mine will only be able to operate at around 70% of capacity and as such completion of the shaft in early 2012 should act as a catalyst for Orvana’s shares. Once EVBC has demonstrated steady state production for several months its value should be better reflected in Orvana’s share price.

2. Achieving production milestones at Don Mario UMZ. While Don Mario UMZ has achieved production, it has yet to achieve commercial production. Once the mine has achieved steady state production for several months its value should be better reflected in Orvana’s share price.

3. Successful advancement of the Copperwood project. Copperwood ultimately provides Orvana’s future growth and as the project is de-risked its value should be better reflected in Orvana’s share price.

4. Continued upside momentum in the prices for metals would induce investors to allocate more capital to the metals space.

Comparable Companies Figure 18 illustrates where Orvana trades relative to its peers in the emerging copper-gold producer space. We note that Orvana is currently trading at a discount to its peers on a P/CFPS and a P/NAV basis.


June 30, 2011 17

Figure 18: Orvana comparable companies

Intermediate copper-gold producer comparables

Ticker Close Shares O/S (M)

Enterprise Value ($M)

2011E Au Prod'n (000 oz)

EV/ Au Resource

EV/ 2011 Production 2011 P/CF1 2012 P/CF1 P/NAV1

Nevsun Resources Ltd. TSX:NSU $5.78 197 $1,135 919.0 $700 $1,235 4.7x 4.3x 0.8xDundee Precious Metals Inc. TSX:DPM $7.78 125 $932 122.5 $95 $7,608 9.2x 6.3x 0.6xNorthgate Minerals Corp. TSX:NGX $2.58 292 $603 200.0 $120 $3,014 8.1x 4.8x 0.6xImperial Metals Corp. TSX:III $19.30 37 $672 45.4 $44 $14,812 7.5x 8.4x 0.5xOceanaGold Corporation TSX:OGC $2.65 262 $711 270.0 $73 $2,632 4.6x 4.8x 0.7xMinera Andes Inc. TSX:MAI $2.41 278 $671 19.6 $32 $34,212 8.9x 7.1x 0.4xAura Minerals Inc. TSX:ORA $2.01 211 $414 210.0 $66 $1,971 5.8x 3.4x 0.5xRio Alto Mining Limited TSXV:RIO $2.08 152 $302 75.0 $96 $4,025 8.4x 4.1x 0.3xLa Mancha Resources, Inc. TSX:LMA $2.34 143 $277 135.0 $87 $2,051 5.4x 4.8x 0.6xAverage $146 $7,951 7.0x 5.3x 0.6xMedian $87 $3,014 7.5x 4.8x 0.6xOrvana Minerals Corp. TSX:ORV $2.33 117 $301 44.0 $101 $6,843 5.8x 2.2x 0.4x1 Consensus estimates

Valuation


Financial Position And Capital Structure

Cash and working capital As at March 31, 2011, Orvana had working capital of $15.4 million including $23.5 million of cash and equivalents. Subsequent to March 31, 2011, Orvana completed a US$15 million, six-month term bridge loan with Fabulosa Mines Ltd.

Share structure As at June 3, 2011, Orvana had 119 million shares issued and outstanding. Using the fully diluted treasury method and the share price at the time of this report’s publication, Orvana has a total of 120.2 million shares outstanding. Orvana’s single largest shareholder is Fabulosa Mines Ltd., a private mining company owning approximately 52.4%. Other major shareholders of Orvana include Dimensional Funds, Sprott Asset Management and Fidelity Investments.

Conclusion Orvana offers investors exposure to both immediate (precious and base) metal production as well as a strong growth profile. As EVBC and Don Mario UMZ ramp up production during 2011 and 2012, we expect the market to more accurately reflect the value of these assets in Orvana’s share price.

We are initiating coverage with a $5.25 target price and an Outperform rating.


June 30, 2011 18

Appendix A: Financial Summary Orvana Minerals

Income Statement (Calendar Year End) - Orvana actual year end September 30th

All in C$ millions 2011E 2012E 2013E 2014E 2015E 2016E

Revenue (net of smelting costs) $110.5 $266.2 $266.0 $330.4 $319.4 $300.6

Operating Costs $46.4 $94.6 $100.6 $146.1 $151.1 $154.4G&A Costs $4.0 $4.0 $4.0 $4.0 $4.0 $4.0Other Costs $1.1 $1.2 $1.3 $0.8 $0.5 $0.0Depreciation/Amortization $5.0 $13.3 $15.5 $29.7 $32.7 $34.7

Operating Earnings $54.1 $153.1 $144.6 $149.8 $131.0 $107.5

Income Tax $21.4 $57.2 $54.0 $52.7 $46.0 $38.1

Net Income $32.6 $95.9 $90.6 $97.1 $84.9 $69.5

EPS (basic) – C$ $0.27 $0.80 $0.76 $0.81 $0.71 $0.58EPS (f.d.) – C$ $0.27 $0.80 $0.75 $0.81 $0.71 $0.58

CFPS (basic) – C$ $0.32 $0.92 $0.89 $1.06 $0.99 $0.87CFPS (f.d.) – C$ $0.31 $0.91 $0.88 $1.05 $0.98 $0.87

Consolidated Statement of Cash Flows 2011E 2012E 2013E 2014E 2015E 2016E

Net Income $32.6 $95.9 $90.6 $97.1 $84.9 $69.5

Non-cash items $5.0 $13.3 $15.5 $29.7 $32.7 $34.7CAPEX $11.0 $0.5 $0.8 $2.9 $0.5 $0.6

Operating cash flow $37.6 $109.2 $106.1 $126.8 $117.6 $104.2Free cash flow $26.6 $108.7 $105.3 $123.9 $117.2 $103.6

Summary Operating Data

Au Price (US$/oz) $1,450 $1,450 $1,400 $1,300 $1,250 $1,100Silver Price (US$/oz) $38.0 $38.0 $38.0 $28.0 $26.0 $26.0Copper Price (US$/lb) $3.88 $3.50 $3.25 $3.00 $2.75 $2.50

Don Mario UMZ MineAu Production (ozs) 11,067 20,468 16,327 14,262 13,924 14,574Ag Production (ozs) 252,719 624,217 635,983 537,469 537,274 504,839Cu Production (lbs) 7,305,929 17,306,521 17,703,920 14,315,650 13,112,372 13,689,231

EVBC MineAu Production (ozs) 33,162 90,028 100,446 95,254 95,979 109,030Ag Production (ozs) 63,355 172,829 186,072 177,873 167,590 133,484Cu Production (lbs) 2,417,783 6,608,122 6,675,762 6,788,405 6,902,320 6,063,340

CopperwoodCu Production (lbs) 0 0 0 37,352,000 42,021,000 42,021,000Ag Production (ozs) 0 0 0 90,044 101,300 101,300



June 30, 2011 19

Appendix B: Management and Director Biographies

Roland Horst, CEO and Director

Mr. Horst has been Chief Executive Officer and a Director of the company since March 2010. Mr. Horst has 35 years of mining industry experience as a Chief Executive Officer, investment banker, corporate banker and geologist, including 14 years as a CEO of both public and private companies involved in mining production, development and exploration in Canada, Brazil and Chile.

Carlos Mirabal, President and Chief Operating Officer

Mr. Mirabal has been President and Chief Operating Officer of the company since March 2010 and a Director since October 2006. Mr. Mirabal was President and Chief Executive Officer of the company from October 2006 to February 2010. Prior to joining Orvana, Mr. Mirabal was Vice President of Operations of Sinchi Wayra S.A. (formerly Compania Minera del Sur S.A. (“Comsur”)), a Bolivian mining company.

Malcolm King, VP and Chief Financial Officer

Mr. King has been Vice President and Chief Financial Officer of the company since February 2006, and was a Director of the company from May 2006 to December 2007. Mr King was Vice President and Controller of the company from June 2005 to February 2006. Prior to joining Orvana, Mr. King was Chief Financial Officer and a Director of IQ-Ludorum plc, and Vice President, Finance and Vice President & Corporate Comptroller of the Telemedia group.

Bill Williams, VP Corporate Development and President Orvana USA

Dr. Williams has been Vice President, Corporate Development of the company since March 2008. He received his Ph.D. in Economic Geology from the University of Arizona after spending eight years in the oil & gas industry with Tenneco Oil Company. Since then he has held various positions in minerals exploration and project development throughout the Americas with Western Mining, Northern Orion, Phelps Dodge and Freeport-McMoRan. Prior to joining Orvana, he was Vice President, Americas for Freeport-McMoRan Exploration Corporation.

C. Kent Jesperson, Director

Mr. Jespersen has director experience on many boards of directors in the energy and technology sectors. He is currently Chairman of CCR Technologies Ltd. and serves on the boards of TransAlta Corporation, Axia NetMedia Corporation and Matrikon Inc. He is also past Chairman of North American Oil Sands Corporation, Geac Inc., C.D. Howe Institute and Institute of the Americas. He has been Chairman of the Board of the company since December 2007.

Peter Bradshaw, Director

Dr. Bradshaw has been Director, President and Chief Executive Officer of First Point Minerals Corp. since June 1996. Prior to starting First Point Minerals, Dr. Bradshaw was Vice President of Orvana Minerals from August 1986 to August 1995 and Exploration Manager for Australasia for Placer Dome from 1979 to 1986. He has been a Director of the company since May 2006.


June 30, 2011 20

Richard Garnett, Director

Dr. Garnett spent the years of 1962 to 1990 working worldwide with the Rio Tinto and, later, Anglo-American/ De Beers group of companies, as both a mining engineer and a geologist. Since then he has run his own Toronto- based mining consultancy company, Valrik Enterprises Inc., and has been chairman or director of several mining companies. He recently received the PDAC’s Thayer Lindsley award for the 1989 discovery of Donlin Creek and he played a leading role in the 1994 discovery of Voisey’s Bay. Dr. Garnett has been a Director of the company since February 2009.

James Gilbert, Director

Mr. Gilbert is President and CEO of Minera S.A., a private mining and metals investment company, and has 20 years of experience in mining and metals finance and investment. Prior to joining Minera, Mr. Gilbert was the Chief Investment Officer of Gerald Metals Inc., the global commodities trading firm based in Stamford, Connecticut. Prior to joining Gerald Metals, he was a Director of the mining and metals investment banking group at Rothschild Inc., in Washington D.C., and a Director of Corporate Finance at Coopers & Lybrand in New York. Mr. Gilbert has been a Director of the company and a member of the Compensation and Nominating Committee since August 2009.

Robert Logan, Director

Mr. Logan runs a private investment company and sits on both public and private company boards. Previously, Mr. Logan spent 20 years in investment banking based in New York, Toronto and London. His banking experience focused on funding and risk managing significant growth initiatives for many natural resource companies and projects. Mr. Logan is a member of the National Association of Corporate Directors and holds an ICD.D designation from the Institute of Corporate Directors. He has been a Director of the company since December 2007.

Robert, Mitchell, Director

Mr. Mitchell is a retired partner from Ernst & Young LLP, rejoined as a Director of the company in April 2007 and is Chairman of the Audit Committee. Mr. Mitchell was a Director of the company from December 2003 to June 2006. He is also a director and member of the audit committee of another public company.

Jorge Szasz, Director

Mr. Szasz is an independent consultant. Prior to this, Mr. Szasz was Vice President Finance, Administration and Commercialization of Sinchi Wayra S.A., a Bolivian mining company. Mr. Szasz also worked with PricewaterhouseCoopers for ten years in Audit. He was a director and Chief Financial Officer of the company from 2002 to 2005. Mr. Szasz rejoined as a director of the company in February 2010.

Biographies are sourced from company reports.


June 30, 2011 21

Company Name Disclosures Orvana Minerals Inc. 6 A member of the research team has visited the subject company's operations: On April 19, 2011, we toured the Don Mario UMZ operation. On June 13, 2011, we toured the EVBC operation.

Disclosure List 1. Within the last 12 months, Stonecap or its affiliates have provided investment banking and/or related services for the subject issuer. 2. Within the last 12 months, a director, officer, or analyst with Stonecap has provided services for remuneration, other than investment advisory or trading services, to the subject issuer. 3. Stonecap or its affiliates is a market maker, or is associated with the specialist that makes a market in the securities of the subject issuer. 4. Stonecap or its affiliates collectively beneficially own 1% or more of any class of the issuer’s equity securities. 5. An employee, officer, or director of Stonecap is a member of the Board of Directors, Officer of, or an advisor to, the subject issuer. 6. The subject company paid for a part, or all, of the research analyst's or associate’s travel expenses.

Investment Rating Guidelines Outperform: The stock's risk adjusted total return is expected to materially outperform sector peer returns over the next 12 months. Sector Perform: The stock's risk adjusted total return is expected to approximate sector peer returns over the next 12 months. Underperform: The stock's risk adjusted total return is expected to materially underperform sector peer returns over the next 12 months. Under Review: The stock rating is under review, pending evaluation of material new information.

Risk Qualifier Guidelines Average: Operational and financial risks are assessed as being in line with sector peer levels. Above Average: Operational and financial risks are assessed as being significantly above sector peer levels. Speculative: Operational and financial risks are assessed as being exceptionally high, low predictability of financial results.

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