Orosur Mining Orosur Mining Inc. - Q3 2018 Results

 
TIDMOMI 
 
 

Orosur Mining Inc. ("Orosur" or "the Company") (TSX/AIM: OMI), a South American-focused gold producer, developer and explorer announces its unaudited results for its third quarter ended February 28, 2018 ("Q3 18" or the "Quarter"). All dollar figures are stated in US$'000 unless otherwise noted.

HIGHLIGHTS

 
 
    -- In Colombia, high grade drilling continued at APTA during the Quarter 

with results from the current diamond drilling campaign including 4.89

g/t Au over 13.9m, 4.86 g/t Au over 25.0m, 9.42 g/t Au over 7.0m, 9.62

g/t Au over 6.0m and 5.28 g/t Au over 12.0m.

 
    -- This campaign has already extended the known mineralization at APTA 

down dip, up dip and along strike with early indications at the

present drilling at Charrascala appearing promising.

 
    -- In Uruguay, following definition of a weaker mineralized structure at 

San Gregorio (SG) UG at depth and to the East in Q2 18, the mine plan

and sequencing was redesigned with SRK to optimise economics,

including the cancellation of development of deeper stopes from the

previous mine plan and incorporation of marginal stopes from current

levels at SGW into Q3 18.

 
    -- As a result, Q3 18 production grades declined and production in the 

Quarter was 6,859 oz of gold, which is below original expectations,

and compares to 7,820 oz in Q3 17.

 
    -- In the current quarter, the Company expects an improvement in grades 

and lower capital expenditure. However, as a result of the lower

grades processed in Q2 18 and Q3 18, and with an increased focus on

profitability and not purely ounces produced, the Company's production

guidance has been reduced to 27,000 - 30,000 oz Au from 30,000 oz, as

well as an increase in the operating cash cost guidance to US$900 -

US$1,000/oz from US$800 - US$900/oz.

 
    -- Development work in Q3 18 focused on the shift of mining activities 

from SGW to SG Central and included the completion of a 230m tunnel to

provide access to the first planned stope at SGC towards the end of

the Quarter. The Company also finalised the pre-stripping of the

Sobresaliente open pit which is planned to be mined in Q4 18 as well

as finalised the fourth phase of the tailings dam which is planned to

provide tailings storage for the next 36 months.

 
    -- During the Quarter, and in large part due to the performance of the SG 

UG, the Company commenced the implementation of a strategic initiative

to reduce costs and corporate structure aimed at improving

profitability and preserving cash. The Company continuously considers

strategic options and is currently in discussions regarding several

alternatives to bolster capital resources available for its suite of

projects.

COLOMBIA EXPLORATION HIGHLIGHTS

On February 20th and April 4th, the Company reported high grade drilling and assay results from its current step-out drilling campaign at APTA in Colombia from 18 holes drilled to date (MAP_054 to MAP_071) totaling 6,314 metres, including 4.89 g/t Au over 13.9m, 4.86 g/t Au over 25.0m, 9.42 g/t Au over 7.0m, 9.62 g/t Au over 6.0m and 5.28 g/t Au over 12.0m. Recent drilling in this campaign has extended the known mineralization at APTA down dip, up dip and along strike. Mineralization remains open along strike and at depth at APTA. Of the 18 holes drilled to date in this exploration campaign, 6 holes (33%) have intercepted mineralised intervals grading in excess of 10 g/t Au.

Orosur is presently finalising the last phase of this exploration campaign focusing on maiden scout drilling at Charrascala, the highest priority untested target, located 1.5 km to the west of the APTA discovery. Preliminary indications at Charrascala appear positive, with drilling of the first hole having encountered sulphide polymetallic mineralization (pyrite, chalcopyrite and sphalerite) associated with a set of structures with intense silicification. Assay results of the five planned drill holes at Charrascala are expected to be received during May 2018 and announced shortly thereafter.

OPERATIONS IN URUGUAY AND FY18 OUTLOOK

The broader San Gregorio underground mine (SG UG) is a continuation of the San Gregorio open pit deposit at depth. The historic open pit produced approximately 536,000 oz of gold at an average grade of 2.12 g/t Au. Since November 2016, the SG UG West (SGW) 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 SG UG Central (SGC) commences. SGC is planned to be the main source of underground ore feed to the plant during the remainder of H2 18 and H1 19. The current mine plan then assumes continuation of ore production shifting from SGC to SG UG East, followed by the Veta A underground project.

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In Q2 18, a revised block model for SGC was finalized showing that the mineralized structure to be less economically viable at depth and to the East of the sector with reductions in both ore grade and thickness. To date, SG UG has produced 465,943 tonnes at 1.49 g/t Au (approximately 22Koz Au), representing approximately a 30% reduction in grade from historical SG open pit operations, which delivered an average of 2.12 g/t Au.

Following definition of this weaker mineralized structure at SG UG, the Company redesigned the mine plan with SRK Argentina ("SRK") and changed its sequencing for Q3 18. Development into deeper stopes was removed from the mine plan and marginal stopes from current levels at SGW were incorporated into Q3 18 in order to optimise economics based on development costs already incurred. As a consequence of these initiatives, Q3 18 grades declined and production was approximately 2,000 oz below expectations. In an effort to partially compensate for this production shortfall, additional remnants from open pit reserves were mined during the Quarter.

Primarily as a consequence of these lower grades, Q3 18 production was 6,859 oz of gold, compared to 7,820 oz in Q3 17 with average cash operating costs for the Quarter of $1,065/oz, compared to $858/oz in Q3 17.

During the Quarter, development work focused on the shift of mining activities from SGW to SGC completing a 230m tunnel, which provided access to the first planned stope at SGC towards the end of the Quarter. In addition, the Company finalised the pre-stripping of the Sobresaliente open pit which is planned to be mined in Q4 18 as well as finalised the fourth phase of the tailings dam which will provide tailings storage for the next 36 months, or until March 2021, on the basis of the current mine plan. All-In-Sustaining Costs ("AISC") were $1,395/oz compared to $1,289/oz in Q2 17, an increase of 8%.

The Company expects in Q4 an improvement in grades and lower capital expenditure. However, with the lower grades processed in Q2 18 and Q3 18 and with an increased focus on profitability and not purely ounces produced, the FY 18 production guidance has been reduced to 27,000 - 30,000 oz Au from 30,000 oz and the Company's operating cash cost guidance increased to US$900 - US$1,000/oz from US$800 - US$900/oz.

During the Quarter, and in large part due to the performance of the SG UG, the Company commenced the implementation of a strategic initiative to reduce costs in Uruguay and corporate structure aimed at improving profitability and preserving cash. As part of this initiative, during Q3 18, greenfield exploration was suspended and non-essential corporate and support costs have been drastically reduced, with Directors and officers agreeing to reduce their fees and salaries by 20%. Further, the Company plans to discontinue mining from marginal open pits during Q4 18. As a part of this initiative, a reduction of 120 staff members has occurred from November 2017 to the end of March 2018.

The Company is currently accelerating its preparation of Veta A, a new underground project that is 1.2km from the plant. In March 2018, the Company submitted a permit application to DINAMA, the environmental agency in Uruguay. Initial work indicates Veta A is currently the highest-grade source of underground ore available in 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. Reserves at the end of May 2017 were 9,440 oz (122,328 tonnes at 2.40 g/t Au) and the Company is targeting a significant increase in reserves after proving the continuity and extension of the ore body over 140 metres from the current defined reserves while it remains still open at depth and along strike.

The Company continuously considers and analyses strategic options and potential partnerships to develop its Uruguayan, Colombian and Chilean assets to create shareholder value and is currently in discussions on several alternatives to bolster capital resources at its suite of projects.

Q3 18 FINANCIAL SUMMARY

 
 
    -- Operating profit was $1,168 compared to an operating profit of $1,848 

in Q3 17.

 
    -- Loss after tax was $1,976 compared to a profit of $363 in Q3 17. This 

was mainly due to higher depreciation and the recognition of a

provision for staff retrenchments.

 
    -- Cash flow from operations before changes in working capital was $(155) 

compared to $1,674 in Q2 17.

 
    -- The Company invested $1,753 in capital expenditures and $1,236 in 

exploration compared to $3,218 and $449 respectively in Q2 17. The

Company significantly increased its exploration as a result of the

current drilling campaign in Colombia.

 
    -- The Company's cash balance at February 28, 2018 was $1,392 compared to 

$3,357 at May 31, 2017. The Company has drawn on the Santander line of

credit in the amount of $1,500 during Q3 18.

 
Operational & Financial Summary1 
                                          Q3 18           Q3 17          Diff      YTD 18          YTD 17         Diff 
Operating Results 
Gold produced                  Ounces     6,859           7,820          (961)     22,536          24,623         (2,087) 
Operating cash cost3           US$/oz     1,065           858            207       943             807            136 
AISC                           US$/oz     1,395           1,289          106       1,416           1,184          232 
Average price received         US$/oz     1,288           1,198          90        1,280           1,263          17 
Financial Results (unaudited) 
Net profit/(loss) after tax    US$ '000   (1,976)         363            (2,339)   (2,518)         4,064          (6,582) 
Cash flow from operations2     US$ '000   (155)           1,674          (1,829)   3,459           8,703          (5,244) 
Cash & Debt Summary (unaudited)           Feb. 28, 2018   Nov 30, 2017   Diff      Feb. 28, 2018   May 31, 2017   Diff 
Cash balance                   US$ '000   1,392           2,064          (672)     1,392           3,357          (1,965) 
Total debt                     US$ '000   1,726           1,773          (47)      1,726           403            1,323 
Cash net of debt               US$ '000   (334)           291            (625)     (334)           2,954          (3,288) 
1 Results are based on IFRS and expressed in  US dollars2 Before non-cash working  capital movements3 Operating cash  cost is total cost discounting royalties and capital tax on  production assets. 
 
 

Ignacio Salazar, CEO of Orosur, said:

"In Uruguay, we are taking drastic measures to restore profitability. As of today, SG Central is now in production, and we are quickly advancing a new higher-grade underground mine at Veta A.The Company is currently contemplating several strategic alternatives to advance its projects and unlock the value of our assets for the benefit of our shareholders.

We are delighted with exploration progress in Colombia. Anzá is located in the most prospective district in Colombia.Our strategy for this drilling campaign is to demonstrate the potential scale of the project and the results to date from APTA together with the quality of the other untested targets in our 200km² property support this approach."

Qualified Person's StatementThe 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.

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 StatementsAll 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, 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 February 28,2018 ($)   As at May 31,2017 ($) 
Assets 
Cash                       1,392                        3,357 
Accounts receivable        1,611                        1,519 
and other assets 
Inventories                12,722                       13,157 
Total current assets       15,725                       18,033 
Accounts receivable        224                          550 
and other assets 
Property plant             18,201                       16,160 
and equipment 
and development costs 
Exploration and            22,088                       17,677 
evaluation 
costs 
Deferred income            3,115                        3,115 
tax assets 
Restricted cash            231                          229 
Total non-current          43,859                       37,731 
assets 
Total assets               59,584                       55,764 
Liabilities and 
Shareholders' 
Equity 
Trade payables             16,730                       14,518 
and other 
accrued liabilities 
Current portion of         1,606                        202 
long-term debt 
Warrants                   577                          - 
Environmental              243                          243 
rehabilitation 
provision 
Total current              19,156                       14,963 
liabilities 
Long-term debt             120                          201 
Environmental              5,348                        5,405 
rehabilitation 
provision 
Total non-current          5,468                        5,606 
liabilities 
Total liabilities          24,624                       20,569 
Capital stock              63,461                       61,162 
Contributed surplus        5,886                        5,836 
Deficit                    (33,431)                     (30,913) 
Currency translation       (956)                        (890) 
reserve 
Total shareholders'        34,960                       35,195 
equity 
Total liabilities and      59,584                       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 endedFebruary 28,      Nine months endedFebruary 28, 
                                                         2018 ($)   2017 ($)                 2018 ($)   2017 ($) 
Sales                                                    8,555      8,845                    29,534     32,268 
Cost of sales                                            (9,234)    (8,376)                  (28.714)   (27,186) 
Gross profit/(loss)                                      (679)      469                      820        5,082 
Corporate and administrative expenses                    (382)      (457)                    (1,776)    (1,688) 
                                                         (597)      (144)                    (1,407)    144 
                                                         (6)        (6)                      (32)       (17) 
                                                         (417)      -                        (417)      - 
                                                         9          (1)                      (35)       (101) 
                                                         92         471                      222        1,328 
Net finance cost                                         (63)       (53)                     (209)      (143) 
Derivative loss                                          -          -                        (10)       (412) 
Net foreign exchange gain/(loss)                         67         78                       328        (110) 
                                                         (1,297)    (112)                    (3,336)    (999) 
Profit/(loss) before income tax                          (1,976)    357                      (2,516)    4,083 
Recovery (provision) for income taxes                    -          6                        (2)        (19) 
Net profit/(loss) for the period                         (1,976)    363                      (2,518)    4,064 
Other comprehensive profit/(loss) 
Cumulative translation adjustment                        70         109                      (66)       52 
Total comprehensive profit/(loss)                        (1,906)    472                      (2,584)    4,116 
for the period 
Profit/(loss) per common share: 
Basic                                                    (0.02)     0.00                     (0.02)     0.04 
Diluted                                                  (0.02)     0.00                     (0.02)     0.04 
 
 
Orosur Mining Inc. 

Condensed Interim Consolidated 
Statements of Cash Flows 
Thousands of United States Dollars, 
except where indicated 
                                          Nine months ended February 28, 
                                          2018 ($)   2017 ($) 
Net inflow/(outflow) of cash related 
to the following activities 
 
Cash flow from operating activities 
Net profit/(loss) for the period          (2,518)    4,064 
Adjustments to reconcile 
net income to net 
cash provided from  operating 
activities: 
Depreciation                              5,911      4,208 
Exploration and evaluation                32         17 
expenses written off 
Obsolescence provision                    35         101 
Fair value of derivatives                 (20)       181 
Accretion of asset retirement             57         57 
obligation 
Stock based compensation                  50         49 
Gain on sale of property,                 (65)       (187) 
plant and equipment 
Other                                     (23)       213 
Subtotal                                  3,459      8,703 
Changes in working capital: 
Accounts receivable and other assets      234        (259) 
Inventories                               397        (220) 
Trade payables and other                  2,212      395 
accrued liabilities 
Net cash generated from                   6,302      8,619 
operating activities 
Cash flow from financing activities 
Loan payments                             (176)      (191) 
Investment in Anillo                      69         - 
Loans received                            1,500      - 
Proceeds from private placement           2,894      - 
Net cash generated from/(used             4,287      (191) 
in) financing activities 
Cash flow from investing activities 
Purchase of property,                     (7,897)    (8,829) 
plant and equipment 
and development costs 
Environmental tasks                       (114)      (152) 
Proceeds from the sale                    10         240 
of fixed assets 
Exploration and evaluation                (4,553)    (1,607) 
expenditure assets 
Net cash used in investing activities     (12,554)   (10,348) 
Increase/(decrease) in cash               (1,965)    (1,920) 
Cash at the beginning of period           3,357      4,320 
Cash at the end of period                 1,392      2,400 
 
 
Orosur Mining Inc. 
Condensed Interim Consolidated 
Statements 
of Changes in  Shareholders' Equity 
Thousands of United States Dollars, 
except where indicated 
                                         Nine months ended February 28, 
                                         2018 ($)   2017 ($) 
 
Capital stock 
Balance at beginning of period           61,162     60,751 
Exercise of stock options                -          326 
Grant of shares                          -          33 
Private placement                        2,299      - 
Balance at end of period                 63,461     61,110 
Contributed surplus 
Balance at beginning of period           5,836      5,925 
Stock based compensation                 50         90 
recognized 
Exercise of stock options                -          (183) 
Balance at end of period                 5,886      5,832 
Deficit 
Balance at beginning of period           (30,913)   (33,497) 
Net profit/(loss) for the period         (2,518)    4,064 
Balance at end of period                 (33,431)   (29,433) 
Currency translation reserve             (956)      (932) 
Shareholders' equity                     34,960     36,577 
at end of period 
 
 

Orosur Mining Inc.Ignacio Salazar, [phone]Chief Executive [e-mail] Fitzgerald Europe - Nomad & Joint BrokerDavid Porter / Keith Dowsing, [phone]orNumis Securities Limited - Joint BrokerJohn Prior / James Black / Paul Gillam, [phone]

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(END) Dow Jones Newswires

April 16, 2018 02:00 ET (06:00 GMT)