Orosur Mining Orosur Mining Inc. - H1 & Q2 2018 Results

 
TIDMOMI 
 
 

Orosur Mining Inc. ("Orosur" or "the Company") (TSX/AIM: OMI), a South American-focused gold producer, developer and explorer is pleased to announce the results for the first half of its fiscal 2018 ("H1 18") and second quarter ended November, 2017 ("Q2 18" or the "Quarter"). All dollar figures are stated in US$'000 unless otherwise noted.

EXPLORATION AND DEVELOPMENT HIGHLIGHTS

 
 
    -- Drilling in the APTA portion of the Anzá gold project in Colombia 

commenced in October 2017, with first drill results announced on

November 14, 2017, including 5.32m at 17.76 g/t in hole MAP-54. Depth

potential is being confirmed with gold mineralization intersected down

to 200m. Mineralized zones remain open.

 
    -- In Uruguay, a final infill drilling campaign and block model were 

finalised for San Gregorio Central ("SGC"), with mine development

planned to start in Q3 18.

 
    -- The Company is accelerating the preparation and permitting of Veta A 

Underground, a new underground project with higher grades next to the

San Gregorio CIL Plant.

 
    -- The deadline for Asset Chile to move into Phase 2 in Anillo expired on 

December 31, 2017 unexercised. As a result, Asset Chile will forfeit

the 16% interest it had earned and Orosur is currently evaluating

strategic alternatives to move ahead with the project with external

and non-dilutive funding.

OPERATIONAL HIGHLIGHTS

 
 
    -- Extended downtime of two long hole drill rigs used in stope production 

at the SGW UG mine caused the deferral of 2,000 ounces of production

planned for Q2 18. Development activities continued as planed at the

SGW UG mine and the Company resumed full underground production by the

end of November.

 
    -- Q2 18 production was 7,052 oz of gold, compared to 6,852 oz in Q2 17. 

As a result of the Company's focus on profitability and not purely

ounces produced, the Company is targeting the lower end of its

production guidance at San Gregorio for FY18, being 30,000 ounces of

gold.

 
    -- Average cash operating cost was $867/oz, compared to $914/oz Q2 17. 

The Company expects to achieve its annual guidance for cash operating

cost of US$800 - US$900 per ounce.

 
    -- The Uruguayan government continues to demonstrate its support for the 

Company with an exemption granted on royalty payments (equal to 3% of

sales) for the period April 2017 to March 2018. This is forecast to

total approximately US$1.0 million.

 
    -- All-In-Sustaining Costs ("AISC") were $1,455/oz compared to $1,345/oz 

in Q2 17, an increase of 8%. The increase was predominantly due to

higher development, brownfield exploration and the construction of the

fourth phase of the tailings dam.

FINANCIAL HIGHLIGHTS

 
 
    -- Operating profit of the San Gregorio operation was $3,423 compared to 

an operating profit of $2,261 in Q2 17. The improvement mainly due to

lower operating costs.

 
    -- Loss after tax was $251 compared to a profit of $942 in Q2 17. This 

was mainly due to higher depreciation and the recognition of a

provision for staff retrenchments following the Q2 production deferral

at SGW UG.

 
    -- Cash flow from operations before changes in working capital was $2,160 

compared to $2,234 in Q2 17.

 
    -- The Company invested $3,359 in capital expenditures and $1,704 in 

exploration compared to $3,835 and $609 respectively in Q2 17. The

Company significantly increased its investment in exploration and

development in Uruguay with the aim of expanding reserves.

 
    -- The Company's cash balance at November 30, 2017 was $2,064 compared to 

$3,357 at May 31, 2017. The deferral of approximately 2,000 ounces of

planned production for the Quarter from the SGW UG mine caused the

Company to draw on the full Santander line of credit in the amount of

$1,500 during the Quarter.

 
    -- The committed line of credit with Banco Santander available as at 

November 30, 2017 was renewed for another year (until November 30,

2018).

 
Operational 
& 
Financial 
Summary1 
                            Q2 18         Q2 17        Diff     YTD 18        YTD 17       Diff 
Operating 
Results 
Gold              Ounces    7,052         6,852        200      15,677        16,802       (1,125) 
produced 
Operating         US$/oz    867           914          (47)     886           783          103 
cash 
cost3 
AISC              US$/oz    1,455         1,345        110      1,422         1,135        287 
Average           US$/oz    1,299         1,252        47       1,277         1,290        (13) 
price 
received 
Financial 
Results 
(unaudited) 
Net               US$ '000  (251)         942          (1,193)  (542)         3,701        (4,243) 
profit/(loss) 
after 
tax 
Cash              US$ '000  2,160         2,234        (74)     3,614         7,029        (3,415) 
flow 
from 
operations2 
Cash &                      Nov. 30,2017  Aug 31,2017  Diff     Nov. 30,2017  May 31,2017  Diff 
Debt 
Summary 
(unaudited) 
Cash              US$ '000  2,064         4,533        (2,469)  2,064         3,357        (1,293) 
balance 
Total             US$ '000  1,773         330          1,443    1,773         403          1,370 
debt 
Cash net          US$ '000  291           4,203        (3,912)  291           2,954        (2,663) 
of debt 
 
 
1   Results are based on IFRS and expressed in US dollars 
2   Before non-cash working capital movements 
3   Operating cash cost is total cost discounting royalties 
    and  capital tax on production assets. 
 
 

H2 OUTLOOK

SG UG is a continuation at depth of the San Gregorio open pit deposit, which produced approximately 536,000 oz at an average grade of 2.12 g/t Au. Since November 2016, SGW UG has been the primary source of ore feed to the plant. Mining in the SGW sector is forecast to be complete in H2 18 when development and initial production of SGC is scheduled to commence. SGC is planned to be the main source of underground ore feed to the plant during H2 18.

To view the full release, showing all maps and figures, please click here.

During Q2 18, 792 metres of diamond core were drilled around the San Gregorio West underground mine aimed at improving accuracy and planning of the mining in this sector. A 250 metre development access ramp is necessary to fully access SGC from the SGW UG mine and is under construction. The block model for SGC was finalized in Q2 18, and shows that the mineralized structure is less economically viable at current gold prices at depth and to the East based on reductions in both ore grade and thickness. Due to this, and amongst other measures, the Company has been working with SRK Peru in order to optimize the mineplan for SGC, with a special emphasis on profitability following the deferral of production from SGW in Q2 18. The new design concentrates mining on the upper levels of the mine to minimize additional and uneconomic development. Additionally, an existing crown pillar between the open pit and the UG mine is being evaluated for potential inclusion in the mine plan.

The Company is accelerating the preparation and permitting of Veta A, a new underground project that is 1.2 kilometres from the plant, for development. Initial work indicates Veta A is currently the highest grade source of underground ore available on the San Gregorio mine complex. Veta A was previously mined as an open pit, producing 29,000 oz with an average grade of 3.1 g/t between September 2006 and March 2008. Current reserves are 9,440 oz (122,328 tonnes @ 2.40 g/t Au). The Company is targeting a significant increase in reserves following a positive drilling campaign that proved the continuity and extension of the ore body over 140 metres from the current defined reserves. A preliminary study by SRK Consulting at Veta A supports its geotechnical feasibility.

In addition to the redesign of underground production in San Gregorio, the company has implemented a number of initiatives to preserve cash. These include an 11% staff reduction at the end of November, the recently granted royalty exemption by the Uruguayan Government for a one year period and the deferral of planned greenfield exploration in Uruguay.

Orosur remains focused on profitability over production and as a result is targeting the lower end of its production guidance at San Gregorio for FY18 at 30,000 ounces of gold, while maintaining its operating cash cost guidance of between US$800 - US$900/oz. The Company continuously considers and analyses strategic options to develop its Uruguay, Colombian and Chilean assets to create shareholder value.

The Company expects to conclude its first phase of drilling at the APTA zone, which is part of the Anzá project in Colombia next month. Additional drill results are expected by the end of February. As announced in November 2017, preliminary results from the current drilling campaign have demonstrated APTA's potential at depth, with gold mineralization intersected to 200m, and along strike. The broader Anzá potential (beyond APTA) has yet to be tested at any of the four high priority identified targets with coincident geochemical and geophysical anomalies.

To view the full release, showing all maps and figures, please click here.

Ignacio Salazar, CEO of Orosur, said:

"The Company is concentrating on advancing exploration in Colombia while maintaining profitability in Uruguay. We have built the SGW UG mine, entirely financed from cash from operations, while advancing exploration and development around it.SGC is well under way and on track to commence production during Q3 18 and we are swiftly advancing a new higher grade underground mine at Veta A.While we are taking some tough measures to implement this plan, we are getting some initial results already and are proud to count on the support of the Uruguayan government which granted us a second, and unprecedented, annual royalty exemption.

As announced in November, preliminary results in Colombia from the current drilling campaign validate the APTA gold potential.Depth potential has been confirmed at APTA with gold mineralization intersected down to 200m.Mineralized zones remain open.We plan to update the market in the next several weeks. In addition to APTA, and in respect of the broader Anzá potential, four high priority targets with coincident geochemical and geophysical anomalies, remain untested."

Potential for a New UG Mine: Veta A Underground

Historically, Veta A was a relatively small high grade open pit, located next to the now reclaimed San Gregorio tailings dam, which was in operation from September 2006 until March 2008. The Veta A open pit produced approximately 29,000 oz at average gold grades of 3.10 g/t.

To view the full release, showing all maps and figures, please click here.

As open pit mining progressed, the mineralized body appeared to run underneath the tailings dam. When operations approached this physical barrier, mining was halted and the pit was backfilled with waste and then reclaimed.

A preliminary geotechnical study of the Veta A deposit was performed by SRK Consulting during the first Quarter with positive results. During Q2 2018, drilling continued at Veta A, with 968 metres drilled (adding up to a total 1,665 metres drilled to date for this campaign). The results are encouraging. Drilling interceptions to date are shown below:

 
HOLE           From (m)  To (m)  Metres  Au g/t 
VADD17-006     161.9     168.6   6.7     5.0 
VADD17-007     165.2     167.1   2.0     3.3 
VADD17-008     125.0     131.1   6.1     2.6 
VADD17-009     170.5     175.3   4.9     1.8 
VADD17-010     107.7     109.7   2.0     0.4 
VADD17-011     107.6     110.2   2.6     5.8 
VADD17-012     124.4     130.8   6.4     1.7 
VADD17-013     97.5      99.0    1.5     1.5 
VADD17-014     96.30     97.70   1.4     0.7 
VADD17-015     155.4     157.0   1.6     1.6 
VADD17-016     133.6     136.7   3.1     3.4 
 
 

All 11 holes drilled to date at Veta A intersected mineralization, confirming the extension of the mineralized body for at least 140 metres downhole. The best mineralization intercepts show the continuity of the mineralized trend to the south-west down-deep. This indicates the strong potential for an increase in the volume of the mineralized structure, which may materially increase current reserves, albeit requiring further work.

The block model was updated in-house during Q2 18 and a mine plan design is in progress to advance with the feasibility study.

To view the full release, showing all maps and figures, please click here.

Qualified Person's Statement

The technical information related to the current assets of Orosur Mining in this presentation has been reviewed by Miguel Fuentealba, a Mining Engineer who is considered to be a Qualified Person under NI 43-101 reporting guidelines. Mr. Fuentealba is a graduate in Mining Engineering from the University of Santiago de Chile and is an AusIMM Member and Qualified Person of Chilean Mining Commission. Mr. Fuentealba has 20 years of professional experience in the field of mining engineering, mine development and management. Reserves and Resources stated in this announcement have the meaning ascribed to such terms under N.I. 43-101, and have been prepared on such basis and published in the Company's annual information form dated August 29, 2017.

About Orosur Mining Inc.

Orosur Mining Inc. (TSX: OMI; AIM: OMI) is a fully integrated gold producer, developer and explorer focused on identifying and advancing gold projects in South America. The Company operates the only producing gold mine in Uruguay (San Gregorio), and has assembled an exploration portfolio of high quality assets in Uruguay, Chile and Colombia.

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulation ("MAR"). Upon the publication of this announcement via Regulatory Information Service, this inside information is now considered to be in the public domain. If you have any queries on this, then please contact Ignacio Salazar, Chief Executive Officer of the Company (responsible for arranging release of this announcement) on: [phone].

Forward Looking Statements

All statements, other than statements of historical fact, contained or incorporated by reference in this news release, including any information as to the future financial or operating performance of the Company, constitute "forward-looking statements" within the meaning of certain securities laws, including the "safe harbour" provisions of the Securities Act (Ontario) and the United States Private Securities Litigation Reform Act of 1995 and are based on expectations estimates and projections as of the date of this news release. There can be no assurance that such statements will prove to be accurate. Such statements are subject to significant risks and uncertainties some of which are described in Section 8 of the Q2 2018 Management Discussion and Analysis, and actual results and future events could differ materially from those anticipated in such statements. Forward-looking statements include, without limitation success of exploration activities; permitting time lines; the failure of plant; equipment or processes to operate as anticipated; accidents; labour disputes; requirements for additional capital title disputes or claims and limitations on insurance coverage. The Company disclaims any intention or obligation to update or revise any forward looking statements whether as a result of new information, future events and such forward-looking statements, except to the extent required by applicable law.

 
Orosur Mining Inc. 
Condensed Interim Consolidated 
Statements 
of Financial Position 
Thousands of United 
States Dollars, 
except where indicated 
                                      As at November 30,   As at May 31, 
                                      2017 ($)             2017 ($) 
Assets 
Cash                                  2,064                3,357 
Accounts receivable                   1,706                1,519 
and other assets 
Inventories                           12,457               13,157 
Total current assets                  16,227               18,033 
Accounts receivable                   304                  550 
and other assets 
Property plant and equipment          18,331               16,160 
and development costs 
Exploration and evaluation costs      20,756               17,677 
Deferred income tax assets            3,115                3,115 
Restricted cash                       227                  229 
Total non-current assets              42,733               37,731 
Total assets                          58,960               55,764 
Liabilities and Shareholders' 
Equity 
Trade payables and other              14,158               14,518 
accrued liabilities 
Current portion of long-term debt     1,626                202 
Warrants                              577                  - 
Environmental rehabilitation          243                  243 
provision 
Total current liabilities             16,604               14,963 
Long-term debt                        147                  201 
Environmental rehabilitation          5,349                5,405 
provision 
Total non-current liabilities         5,496                5,606 
Total liabilities                     22,100               20,569 
Capital stock                         63,461               61,162 
Contributed surplus                   5,880                5,836 
Deficit                               (31,455 )            (30,913 ) 
Currency translation reserve          (1,026  )            (890    ) 
Total shareholders' equity            36,860               35,195 
Total liabilities and                 58,960               55,764 
shareholders' equity 
 
 
Orosur Mining Inc. 
Condensed Interim 
Consolidated 
Statements of profit/ 
(loss) 
and  Comprehensive 
profit/ (loss) 
Thousands of United 
States 
Dollars, except 
for loss per share 
amounts 
                          Three months ended       Six months ended 
                          November 30,             November 30, 
                          2017 ($)   2016 ($)      2017 ($)   2016 ($) 
Sales                     9,028      10,765        20,979     23,423 
Cost of sales             (7,708 )   (9,567 )      (19,480 )  (18,810 ) 
Gross profit              1,320      1,198         1,499      4,613 
Corporate                 (749   )   (704   )      (1,394  )  (1,143  ) 
and administrative 
expenses 
Restructuring costs       (750   )   164           (810    )  288 
Exploration expenses      (17    )   (2     )      (26     )  (11     ) 
and 
exploration written 
off 
Obsolescence              (9     )   (12    )      (45     )  (100    ) 
provision 
Other income              1          507           130        857 
Net finance cost          (59    )   (45    )      (146    )  (90     ) 
Derivative                -          8             (10     )  (412    ) 
profit/(loss) 
Net foreign exchange      11         (87    )      262        (188    ) 
gain/(loss) 
                          (1,572 )   (231   )      (2,039  )  (887    ) 
Profit/(loss) before      (252   )   967           (540    )  3,726 
income tax 
Provision for             1          (25    )      (2      )  (25     ) 
income taxes 

Net profit/(loss)         (251   )   942           (542    )  3,701 
for the period 
Other comprehensive 
profit/(loss) 
Cumulative                142        (20    )      (136    )  (57     ) 
translation 
adjustment 
Total comprehensive       (109   )   922           (678    )  3,644 
profit/(loss) 
for the period 
Profit/(loss) per 
common share: 
Basic                     (0.00  )   0.01          (0.00   )  0.04 
Diluted                   (0.00  )   0.01          (0.00   )  0.04 
 
 
Orosur Mining Inc. 
Condensed Interim Consolidated 
Statements of Cash Flows 
Thousands of United 
States Dollars, 
except where indicated 
                                     Six months ended November 30, 
                                     2017 ($)   2016 ($) 
Net inflow/(outflow) 
of cash related 
to the following activities 
Cash flow from operating 
activities 
Net profit/(loss) for the period     (542   )   3,701 
Adjustments to reconcile 
net income to net 
cash provided from  operating 
activities: 
Depreciation                         4,064      2,829 
Exploration and evaluation           26         11 
expenses written off 
Obsolescence provision               45         100 
Fair value of derivatives            (20    )   186 
Accretion of asset retirement        38         38 
obligation 
Stock based compensation             44         88 
Gain on sale of property,            (61    )   (14    ) 
plant and equipment 
Other                                20         90 
Subtotal                             3,614      7,029 
Changes in working capital: 
Accounts receivable                  29         (249   ) 
and other assets 
Inventories                          656        211 
Trade payables and other             (360   )   1,094 
accrued liabilities 
Net cash generated from              3,939      8,085 
operating activities 
Cash flow from financing 
activities 
Loan payments                        (129   )   (127   ) 
Investment in Anillo                 69         - 
Loans received                       1,500      - 
Proceeds from private placement      2,894      - 
Net cash generated from/(used        4,334      (127   ) 
in) financing activities 
Cash flow from investing 
activities 
Purchase of property,                (6,164 )   (5,617 ) 
plant and equipment 
and development costs 
Environmental tasks                  (95    )   (145   ) 
Proceeds from the sale               10         18 
of fixed assets 
Exploration and evaluation           (3,317 )   (1,158 ) 
expenditure assets 
Net cash used in investing           (9,566 )   (6,902 ) 
activities 
Increase/(decrease) in cash          (1,293 )   1,056 
Cash at the beginning of period      3,357      4,320 
Cash at the end of period            2,064      5,376 
 
 
Orosur Mining Inc. 
Condensed Interim Consolidated Statements 
of Changes in  Shareholders' Equity 
Thousands of United States Dollars, 
except where indicated 
                                              Six months ended 
                                              November 30, 
                                              2017 ($)  2016 ($) 
 
Capital stock 
Balance at beginning of period                61,162    60,751 
Exercise of stock options                     -         174 
Grant of shares                               -         34 
Private placement                             2,299     - 
Balance at end of period                      63,461    60,959 
Contributed surplus 
Balance at beginning of period                5,836     5,925 
Stock based compensation                      44        83 
recognized 
Exercise of stock options                     -         (102) 
Balance at end of period                      5,880     5,906 
Deficit 
Balance at beginning of period                (30,913)  (33,497) 
Net profit/(loss) for the period              (542)     3,701 
Balance at end of period                      (31,455)  (29,796) 
Currency translation reserve                  (1,026)   (1,041) 
Shareholders' equity                          36,860    36,028 
at end of period 
 
 

Orosur Mining Inc Ignacio Salazar, [phone] Chief Executive Officer [e-mail] or Cantor Fitzgerald Europe - Nomad & Joint Broker David Porter/Keith Dowsing Tel: [phone] or Numis Securities Limited - Joint Broker John Prior / James Black / Paul Gillam Tel: [phone]

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January 15, 2018 02:00 ET (07:00 GMT)