Orosur Mining Inc. Orosur Mining Inc. – Full Year 2018 Results

Orosur Mining

30/08/2018 07:00

Orosur Mining Inc. – Full Year 2018 Results

      Orosur Mining Inc. (“Orosur” or “the Company”) (TSX: OMI) (AIM: OMI)
      announces the results for the fiscal year ended May 31, 2018 (“FY18”).
      All dollar figures are stated in US$ unless otherwise noted.

      FY18 Highlights

      Operational

        FY18 production of 27,586 oz of gold, in line with the updated
        guidance (27,000 - 30,000 oz), (FY17: 35,371 oz). The grade mined and
        processed at San Gregorio was lower than anticipated, leading to
        higher costs and reduced gold production.

        875,440 tonnes of ore were processed at a grade of 1.01 g/t with
        recovery averaging 94.97% (FY17: 978,529 tonnes at a grade of 1.21 g/t
        with recovery averaging 93.41%).

        The average gold price realized for the year was $1,280/oz (FY17:
        $1,258/oz), an increase of 2%.

        Cash operating costs for the year were $970/oz (FY17: $829/oz), an
        increase of 17%, due primarily to lower production and lower ore
        grades. These results are in line with the updated guidance of US$900
        – US$1,000oz for the year.

        All-in-sustaining costs (“AISC”) were $1,453/oz (FY17: $1,228/oz). The
        increase was due to the higher unit operating costs from the lower ore
        grades processed during the period and additional brownfield
        exploration.

      Financial

        Restructuring costs of $2.8mm (FY17: nil) were recognized as a
        provision for layoffs representing a significant reduction in staff
        which left the Company with 70 employees at the end of July, as part
        of the initiatives to preserve cash.

        The Company invested $9.8mm in capital and $5.2mm in exploration
        (FY17: $10.6mm and $2.6mm, respectively). The Company significantly
        increased its investment in exploration as a result of the drilling
        campaign in Colombia.

        Operating loss of $1.1mm including higher depreciation of $8.9mm. Loss
        after tax and after impairment and discontinued operations was $36.9mm
        (FY17: profit of $2.7mm) including the recognition of the provision
        for layoffs ($2.8mm), write off of exploration projects ($6.0mm), loss
        for discontinued operation ($6.5mm), impairment ($11.0mm) and
        obsolescence provision of spare parts and consumables inventories
        ($4.7mm).

        Cash flow generated by operations before working capital investment
        was $3.4mm (FY17: $9.7mm).
Cash balance at the end of FY18 $1.4mm
        (FY17: $3.4mm) with net working capital deficiency (current assets
        less current liabilities including cash) of $10.6mm (FY17: Positive
        net working capital of $3.1mm). Excluding Loryser assets and
        liabilities, the Company had total cash and cash equivalents of
        US$0.1mm at the end of FY18. Total debt of $1.9mm (FY17 $0.4mm). The
        increase is due mainly to Loryser, the Company’s primary operating
        subsidiary drawing the $1.5mm line of credit. At present, the Company
        has a cash balance of $0.45mm and total debt of $1.9mm.

      Exploration

        In Colombia, the Company reported high grade results of its 2018
        step-out drilling campaign at APTA including 5.00g/t Au over 23m, 4.89
        g/t over 13.9m, 4.86 g/t Au over 25.0m, 9.42g/t Au over 7m, 9,62g/t
        over 6m and 5.28 g/t over 12m.

        Drilling extended the mineralized zone at APTA down dip, up dip and
        along strike. Mineralized zones remain open along strike and at depth
        at APTA.

        To date, Orosur has reported 18 holes (MAP_54 to MAP_71) totaling
        6,314 metres at APTA and as at June 7, 2018 announced the completion
        of a further 3,045m of diamond drilling at its Charrascala target
        successfully encountering gold in the system, including intersects of
        3.43 g/t Au and 30.60 g/t Ag over 1.5m and 2.62 g/t Au and 14.30 g/t
        Ag over 0.90m.

      Corporate

        On June 14, 2018 the Company applied for the Loryser Reorganization
        Proceedings and creditor protection, in the interest of Loryser, the
        Company and their stakeholders.

        Loryser continued production at SG UG until the end of July after
        which, during August, it is placing the mine in care and maintenance.
        Loryser will remain able to enter into transactions with its suite of
        Uruguayan assets. Orosur is currently conducting conversations with
        the Government and third parties to analyze different options to
        continue its operations in Uruguay.

        In Chile, the Company is discontinuing its operational unit. On July
        2018, the Company sold its remaining 25% interest in Talca for
        consideration of $120k. With this sale, the Company is left with no
        interest or obligation in Talca. In respect of the Anillo project,
        Asset Chile forfeited the 16% interest it had earned and Fortune
        Valley returned the project to Codelco.

        The Company continues to advance discussions to finance the next stage
        of exploration at the Anzá project in Colombia. In connection with
        these discussions, and as announced on July 10, 2018, a sophisticated
        international mining company has advanced $250k to subscribe for
        3,603,077 common shares of Orosur at a price of CAD$0.091 per share.
        The subscription price represents a 102% premium to the closing price
        of the Company's common shares on the Toronto Stock Exchange on July
        9, 2018.

      Ignacio Salazar, CEO of Orosur, commented:

      “FY18 has been a challenging year for Orosur. The weaker
      mineralization encountered at our SGW UG mine in Uruguay placed the
      Company in a precarious situation, leading to weak operating and
      financial performance for the year and also a number of financial
      impairments. The Company reacted quickly and decisively; drastically
      reducing costs and restructuring its various business units. In
      mid-June, the Company applied to place its key operating subsidiary in
      Uruguay, Loryser, into voluntary creditor protection. This process is
      underway and the Company is making every effort to arrive at a fair and
      balanced plan in the interest of all our stakeholders. In Chile, we have
      returned the Anillo project to Codelco and sold the remaining 25%
      interest in Talca.

      “In Colombia, the drilling campaign in Anzá resulted in a number of
      high grade gold intercepts, providing support for our geological model
      as well as materially extending the known extent of mineralisation. The
      drilling started in October 2017 and was completed in early June 2018
      and the Company has been planning the next stages of exploration as well
      as hosting advanced negotiations with a sophisticated senior mining
      company interested in progressing the Anzá project with the Company.
      This is an exciting development for Orosur and we look forward to
      updating the market shortly.”

Operational & Financial Summary1
Fiscal Year (FY) 
ended May 31
2018
2017
Change
Operating Results
 Gold produced 
 Ounces 
 27,586 
 35,371 
 7,785 
 Operating Cash cost3
 US$/oz 
 970 
 829 
 141 
 Total Cash cost 
 US$/oz 
 989 
 882 
 107 
 AISC 
 US$/oz 
 1,453 
 1,228 
 225 
 Average price received 
 US$/oz 
 1,280 
 1,258 
 22 
Financial Results
 Revenue 
 US$ ‘000 
 37,100 
 44,226 
 (7,126) 
 Net income (loss) before tax 
 US$ ‘000 
 (27,180) 
 2,337 
 (29,517) 
 Cash flow from operations2
 US$ ‘000 
 3,361 
 9,664 
 (6,303) 
Cash & Debt at the end of the period
2018
2017
Diff
 Cash balance 
 US$ ‘000 
 1,390 
 3,357 
 (1,967) 
 Total Debt 
 US$ ‘000 
 1,941 
 403 
 1,538 
 Cash net of debt 
 US$ ´000 
 (551) 
 2,954 
 (3,505) 

      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.

      FY19 Outlook

      As a consequence of the weaker mineralization encountered at our SGW UG
      mine in Uruguay and the consequently difficult financial situation of
      the Company, the Board adopted an aggressive strategic plan which has
      been implemented during FY18, with the main objective to restructure its
      businesses, recapitalize and transform the Company by reducing corporate
      structure and costs in Uruguay, advancing Colombia and reducing its
      activities in Chile. In this process, Orosur has been actively
      considering options and potential partnerships to create shareholder
      value and is currently in advanced discussions on several alternatives
      to bolster capital resources to develop its assets.

      During FY19, the Company expects to produce between 2,500 - 3,500 ounces
      of gold, with operating costs of US$1,000 - US$1,100 per ounce from the
      San Gregorio mine in Uruguay in Q119, after which point all production
      is expected to be ceased and is not expected to resume in FY19, with
      operations placed on care and maintenance. All future production shall
      depend on material developments in the funding and environmental
      permitting of the Veta A Underground project in Uruguay and the ongoing
      discussions with the government of Uruguay and other third parties.

      Orosur is focusing on financing the next stages of exploration of the
      high grade Anzá project in Colombia and is in the process of advancing a
      strategic alliance with a sophisticated international mining Company.

      The Company anticipates that reaching a fair and balanced solution in
      Uruguay in the interest of all our stakeholders while partnering and
      advancing the next stages of exploration at the Anzá project will be the
      primary focus of the Company during FY19.

      END

      Qualified Person

      The technical information related to the current assets of Orosur in
      this announcement has been reviewed and approved by independent Mining
      engineer Miguel Fuentealba, a qualified person as defined by National
      Instrument 43-101.

      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 in Colombia and
      Uruguay.

      Forward Looking Statements

      All statements, other than statements of historical fact, contained in
      this news release constitute "forward-looking statements" within the
      meaning of applicable securities laws, including but not limited to the
      "safe harbour" provisions of 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. Forward-looking statements include, without limitation the
      expected completion of a US$250,000 subscription for common shares, the
      negotiation and execution of definitive agreements with respect to the
      Anzá project, the ability to advance the Anzá property, the approval of
      the TSX and other approvals, the ability to continue operations in
      Uruguay, and the ability to find a fair and balanced reorganisation plan
      in the interests of all stakeholders. There can be no assurance that
      such statements will prove to be accurate. Actual results and future
      events could differ materially from those anticipated in such forward
      looking statements. Such statements are subject to significant risks and
      uncertainties including the outcome of current discussions and
      negotiations with respect to the Company’s assets in Uruguay and
      Colombia, the results of future exploration in Colombia, the ability to
      successfully permit and develop the Veta A underground project and other
      risks and uncertainties which are described in Section 8 of the Q4 2018
      Management Discussion and Analysis. The Company’s continuance as a going
      concern is dependent upon its ability to obtain adequate financing and
      to reach profitable levels of operations. These material uncertainties
      may cast significant doubt upon the Company’s ability to realize its
      assets and discharge its liabilities in the normal course of business
      and accordingly the appropriateness of the use of accounting principles
      applicable to a going concern. Although the Company has been successful
      in the past in obtaining financing there is no assurance that it will be
      able to obtain adequate financing in future or that such financing will
      be on terms advantageous to the Company. 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.

      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 Ryan Cohen, VP Corporate Development of the Company
      (responsible for arranging release of this announcement on behalf of the
      Company) on: +1 (778) 373-0100.

      – Financial Statements Follow –

Orosur Mining Inc.
Consolidated Statements of Financial Position
(Thousands of United States Dollars, except where indicated)
As at May 31 2018($)
 As at May 31 2017($) 
Assets
 Cash 
1,390
 3,357 
 Accounts receivable and other assets 
1,550
 1,519 
 Inventories 
6,100
 13,157 
 Asset held for sale 
120
 - 
Total current assets
9,160
 18,033 
 Accounts receivable and other assets 
73
 550 
 Property plant and equipment and development costs 
6,578
 16,160 
 Exploration and evaluation costs 
9,755
 17,677 
 Deferred income tax assets 
-
 3,115 
 Restricted cash 
201
 229 
Total non-current assets
16,607
 37,731 
Total Assets
25,767
 55,764 
Liabilities and Shareholders’ Equity
 Trade payables and other accrued liabilities 
17,845
 14,518 
 Current portion of long-term debt 
1,730
 202 
 Warrants 
68
 - 
 Environmental rehabilitation provision 
139
 243 
Total current liabilities
19,782
 14,963 
 Long-term debt 
211
 201 
 Environmental rehabilitation provision 
5,283
 5,405 
Total non-current liabilities
5,494
 5,606 
Total liabilities
25,276
 20,569 
 Capital stock 
63,290
 61,162 
 Contributed surplus 
5,893
 5,836 
 Deficit 
(67,780)
 (30,913) 
 Currency translation reserve 
(912)
 (890) 
Total shareholders’ equity
491
 35,195 
Total liabilities and shareholders’ equity
25,767
 55,764 

Orosur Mining Inc.
Consolidated Statements of Profit/(Loss) and Comprehensive Profit/(Loss)
(Thousands of United States Dollars except for earnings per share amounts)
For the years ended May 31
Note
2018 ($)
 2017 ($) 
Sales
37,100
44,226
 Cost of sales 
(38,170)
 (40,271) 
Gross profit/(loss)
(1,070)
 3,955 
 Corporate and administrative expenses 
(2,231)
 (2,037) 
 Restructuring costs 
(2,840)
 143 
 Exploration expenses 
(207)
 - 
 Exploration and evaluation costs written off 
(5,999)
 (131) 
 Impairment of assets 
(11,083)
 - 
 Inventory write-downs 
(1,161)
 - 
 Obsolescence provision 
(4,678)
 (113) 
 Other income 
995
 1,525 
 Finance cost net 
(177)
 (164) 
 Gain/(loss) on fair value of financial instruments, net 
680
 (458) 
 Foreign exchange gain/(loss) 
591
 (383) 
(26,110)
 (1,618) 
Profit/(loss) before income tax
(27,180)
 2,337 
 Recovery (expense) for income taxes 
(3,121)
 557 
Total profit/(loss) for continuing operations
(30,301)
 2,894 
Other comprehensive profit/(loss)
 Cumulative translation adjustment 
(22)
 93 
Total comprehensive profit/(loss) from continuing operations
(30,323)
 2,988 
 Loss from discontinued operations 
(6,544)
 (310) 
Total comprehensive loss from discontinued operations
(6,544)
 2,678 
Total comprehensive (loss)/ profit for the year
(36,867)
 2,678 
Basic and diluted net profit/(loss) per share
 Continuing operations 
(0.26)
 0.03 
 Discontinued operations 
(0.06)
 (0.00) 

Orosur MiningInc.
Consolidated Statements of Cash Flows
(Thousands of United States Dollars, except where indicated)
For the years ended May 31
Note
2018 ($)
 2017 ($) 
Net inflow (outflow) of cash related to the following activities
Cash flow from operating activities
 Net profit/(loss) for the year 
(36,845)
 2,585 
Adjustments to reconcile net income to net cash provided from operating activities:
 Depreciation 
8,901
 7,143 
 Impairment of assets 
11,083
 - 
 Inventory write-downs 
1,161
 - 
 Exploration and evaluation costs written off 
5,999
 131 
 Loss from discontinued operations 
6,544
 310 
 Obsolescence provision 
4,678
 113 
 Fair value of derivatives 
(399)
 458 
 Accretion of asset retirement obligation 
(10)
 18 
 Deferred income tax assets 
3,115
 (581) 
 Stock based compensation 
57
 93 
 Loss/(gain) on sale of property, plant and equipment 
(828)
 (241) 
 Other 
(95)
 (55) 
Subtotal
3,361
 9,664 
Changes in working capital
 Accounts receivable and other assets 
112
 (211) 
 Inventories 
1,217
 (1,200) 
 Trade payables and other accrued liabilities 
3,146
 3,932 
Net cash generated from operating activities
7,836
 12,185 
Cash flow from investing activities
Purchase of property, plant and equipment and development costs
(9,712)
 (10,621) 
 Payments for environmental rehabilitation 
(122)
 (213) 
 Proceeds from the sale of fixed assets 
782
 240 
 Exploration and evaluation expenditure assets 
(5,183)
 (2,604) 
Net cash used in investing activities
(14,235)
 (13,198) 
Cash flow from financing activities
 Proceeds from private placement, net of issuance costs 
2,894
 - 
 Loan proceeds 
1,740
 320 
 Loan payments 
(202)
 (270) 
Net cash generated from financing activities
4,432
 50 
 Decrease in cash 
(1,967)
 (963) 
 Cash at the beginning of year 
3,357
 4,320 
Cash at the end of year
1,390
3,357

      For further information, please contact:
Orosur Mining Inc
Ignacio
      Salazar, Chief Executive Officer
Ryan Cohen, VP Corporate
      Development
+1-778-373-0100
info@orosur.ca
or
Cantor
      Fitzgerald Europe – Nomad & Joint Broker
David Porter/Keith
      Dowsing, +44 (0) 20 7894 7000
or
Numis Securities Limited –
      Joint Broker
John Prior / James Black / Paul Gillam, +44 (0) 20
      7260 1000

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      Orosur Mining Inc.