Orosur Mining Inc. Orosur Mining Inc. - Q3 2018 Results

Orosur Mining

16/04/2018 07:00

Orosur Mining Inc. - Q3 2018 Results

      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.

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

      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 dollars
2 Before non-cash working capital movements
3 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 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.

      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: +1
      (778) 373-0100.

      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, 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 and other assets 
1,611
 1,519 
 Inventories 
12,722
 13,157 
Total current assets
15,725
 18,033 
 Accounts receivable and other assets 
224
 550 
 Property plant and equipment and development costs 
18,201
 16,160 
 Exploration and evaluation costs 
22,088
 17,677 
 Deferred income tax assets 
3,115
 3,115 
 Restricted cash 
231
 229 
Total non-current assets
43,859
 37,731 
Total assets
59,584
 55,764 
Liabilities and Shareholders’ Equity
 Trade payables and other accrued liabilities 
16,730
 14,518 
 Current portion of long-term debt 
1,606
 202 
 Warrants 
577
 - 
 Environmental rehabilitation provision 
243
 243 
Total current liabilities
19,156
 14,963 
 Long-term debt 
120
 201 
 Environmental rehabilitation provision 
5,348
 5,405 
Total non-current liabilities
5,468
 5,606 
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 reserve 
(956)
 (890) 
Total shareholders’ equity
34,960
 35,195 
Total liabilities and shareholders’ equity
59,584
 55,764 


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
February 28,
Nine months ended
February 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) for the period
(1,906)
 472 
(2,584)
 4,116 
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 expenses written off 
32
 17 
 Obsolescence provision 
35
 101 
 Fair value of derivatives 
(20)
 181 
 Accretion of asset retirement obligation 
57
 57 
 Stock based compensation 
50
 49 
 Gain on sale of property, plant and equipment 
(65)
 (187) 
 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 accrued liabilities 
2,212
 395 
Net cash generated from operating activities
6,302
 8,619 
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 in) financing activities
4,287
 (191) 
Cash flow from investing activities
 Purchase of property, plant and equipment and development costs 
(7,897)
 (8,829) 
 Environmental tasks 
(114)
 (152) 
 Proceeds from the sale of fixed assets 
10
 240 
 Exploration and evaluation expenditure assets 
(4,553)
 (1,607) 
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 recognized 
50
 90 
 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 at end of period
34,960
 36,577 


      Orosur Mining Inc.
Ignacio Salazar, +1 778-373-0100
Chief
      Executive Officer
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.