Orosur Mining Inc. Q2 Results – 14,829 oz Gol...

Orosur Mining Inc. Q2 Results – 14,829 oz Gold Produced, $7.3M Operating Cash Flow, $3.5M Net Income, $761/oz Cash Costs, Added 44,000 oz Reserves, Sold Talca

Orosur Mining

Orosur Mining Inc (‘OMI’ or ‘the Company’) (TSX:OMI) (AIM:OMI), the South American-focused gold producer and explorer is pleased to announce the results for the fiscal quarter ended November 30, 2013.

Highlights

  • Gold production increased 6% from Q2 2013 to 14,829 oz
  • Operating cash costs of US$761/oz, representing a 37% reduction from Q2 2013
  • Enhanced 2014 fiscal outlook: increased production guidance to 55,000 - 60,000 oz, from previous guidance of 50,000 - 55,000 oz; and reduced operating cash cost guidance to US$800 - US$875/oz from to US$850 - US$925/oz. The updated cash cost target is equivalent to a 20-27% reduction from the US$1,093/oz operating cash costs reported for FY 2013
  • Average of gold price of US$1,306/oz (US$1,694 Q2 last year)
  • Despite almost US$400/oz reduction in gold price, cash flow from operations of US$7.3M this quarter are more than double than the cash from Q2 2013 (US$3.5M)
  • Net Income after tax of US$3.5M (compared with US$1.2M Q2 2013)
  • The Company’s net cash position has increased by US$5.4M in the first half of this fiscal year
  • Successfully added 40,000 oz of gold reserves in Arenal Deeps during the quarter and received a feasibility study supporting the employment of pillar-less mining using Cemented Rock Fill
  • At Vaca Muerta, pre-operational activities finalized and the exploitation permit granted on December 6, 2013 with mining commenced as scheduled according to plan in December
  • Also in Vaca Muerta, a total of 1,796m were drilled during the quarter increasing the mineral reserve by 4,189 oz (from 11,642 oz to 15,831 oz)
  • Completion in December 2013 of the sale of its Talca assets. Orosur to receive payments on the basis of an 18% NSR (Net Smelter Return) of the sales of gold, subject to the payment to the Tellos to acquire the remaining 75% of Talca, up to US$8M, plus a 2% NSR after that amount is reached

Ignacio Salazar, CEO of the Company said:

“Over the past 6 – 8 months our team has worked hard to make the changes required to improve in all areas of our business and I am delighted to once again report positive quarterly results. In a challenging gold price environment, we are pleased to have achieved such a strong operational and financial results this quarter. We made progress in production, costs, cash flow from operations, profits, open pit and underground reserve replacements, and in addition deriving value from non-core assets by way of completing a deal to dispose of Talca, one of our Chilean assets. The Company continues to strive to achieve further improvements.”

 
Operational & Financial Summary1     Quarter     Year to Date (H1)
    Q2 '13/14     Q2 ‘12/13     Diff     YTD 13/14     YTD 12/13     Diff
Operating Results      
Gold produced     Ounces     14,829     13,970     859     31,680     29,421     2,259
Operating Cash cost3     US$/oz     761     1,215     (454)     758     1,151     (393)
Average price received     US$/oz     1,306     1,694     (388)     1,314     1,642     (328)
Financial Results      
Revenue     US$ ‘000     20,375     24,168     (3,793)     43,320     50,502     (7,182)
Net income after tax     US$ ‘000     3,537     1,210     2,327     2,501     3,501     (1,000)
Cash flow from operations2     US$ ‘000     7,280     3,485     3,795     13,954     8,523     5,431
                       
                                           
Cash & Debt at the end of the period - Summary           Nov. 30, 2013     Aug 31, 2013     Diff     Nov. 30, 2013     May 31, 2013     Diff
Cash balance     US$ ‘000     8,817     6,463     2,354     8,817     5,633     3,184
Total Debt     US$ ‘000     6,808     8,487     (1,679)     6,808     8,995     (2,187)
Cash net of debt     US$ ´000     2,009     (2,024)     4,033     2,009     (3,362)     5,371
 
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

 

Enhanced outlook for fiscal 2014

Based on the results achieved year-to-date and the consolidation of the changes introduced positively affecting the remainder of the year, the Company has:

  • Increased production guidance to 55,000 - 60,000 oz, an increase of ~10% over the previously stated guidance of 50,000 - 55,000 oz
  • Reduced operating cash costs guidance to US$800 - US$875/oz compared to US$850 - US$925/oz as previously stated. The updated costs target is equivalent to a reduction of ~20-27% from the US$1,093/oz operating cash costs reported for FY 2013
 
      Guidance for Fiscal Year 2014
    Updated     Original
Gold produced     Ounces     55,000 – 60,000     50,000 – 55,000
Cash Operating cost     US$/oz     800 - 875     850 - 925
 

Q2 Production and Cash Costs

Production for the Q2 ending 30 November 2013 was 14,829 oz of gold. These ounces were produced at an average cash operating cost of US$761/oz. When compared against the same quarter last year, production is 6% higher and costs 37% lower (13,970 oz at cash operating cost of US$1,215/oz).

As with the previous quarter, the increased production and reduced cash costs was achieved primarily by maintaining the operational improvements and cost reduction programmes initiated and implemented over recent months. The Company’s focus on refining our geological modelling suite and optimizing ore control processes at the Arenal Deeps underground mine and in the open pits, as well as a focus on overall cost reductions, continued during the quarter with the outcome of generating further financial and operational improvements.

The Company is optimizing its fleet use as well as improving maintenance and availability and continues to focus on the ongoing productivity of operations. Production of the higher grade ore from the transverse stopes of Arenal Deeps, continued to produce better than expected grades and volumes in the quarter while the Company accelerated ore extraction from its open pit mine (Sobresaliente) by implementing a better suited design.

Gold recovery for the quarter remained high at 95.1%, which follows the historical record recoveries achieved in Q1 of this fiscal year (95.7%). To date, recoveries of over 95% this year compare favourably to recoveries of 93.4% in Q2 and 91.8% in Q1 last year.

Q2 Financial Summary

The average gold price in the quarter was US$1,306/oz, compared to US$1,694 in Q2 2013 (a reduction of US$388/oz). This reduction was offset by a higher reduction, quarter-on-quarter, of US$454/oz in operating cash costs ($761/oz vs $1,215/oz) and approximately 900 oz of higher production. As a result, the Company generated Q2 profit after tax of US$3.5M, compared to last year Q2 profit of US$1.2M, with the primary differences being lower costs of sales and lower corporate costs. Cash flow from operations before working capital investment for the quarter was US$7.3M compared to US$3.5M last year.

The Company invested US$1.7M in capital projects and US$1.5M in exploration for the quarter compared to US$6.1M and US$2.5M respectively in Q2 2013. The decrease is capital expenditure is as a result of less development of the now producing Arenal underground mine. The company’s cash balance at November 30, 2013 was $8.8M compared with $5.6M at May 31, 2013.

Q2 Exploration and Development

Arenal Deeps Geological Model – A significant effort by our Mine Geology team culminated during the quarter in the development of an updated geological model for Arenal Deeps. This work has allowed more precise resource and operational management.

In H2 2014, the model is expected to allow the Company to progress further the planning and design of underground exploration aimed at defining additional reserves above the 220m mine level and to explore for potential additional mineralization at depth and along strike. An aggressive underground exploration program and drill campaign has been designed which commenced during September 2013 and compromises approximately 4,450m of diamond drilling. The target is to generate new resources around and below the current underground mine in the short and medium term. As a very initial result, during the quarter, the Company has identified a potential resource of approximately 7,000 oz above the 220m level and on the side of the current known resource. The Company expects the results of this drilling program by end of the fiscal year 2014, however expects partial results will be processed and delivered before then.

Recovery of Transverse Stoping Pillars in Arenal Deeps - As announced on November 13, 2013 the Company successfully added 40,000 oz of gold reserves during the quarter and received a feasibility study supporting the employment of pillar-less mining using Cemented Rock Fill (CRF) at the Arenal Deeps Mine. Based on the updated mine plan, Orosur intends to start mining the first stope using the new pillar-less mining method in March 2014. The recovery of the pillars in Arenal Deeps has a net present value (NPV) of US$ 7.2 million, applying a 5% discount rate. An increase in the gold price from the base case of US$ 1,200/oz to US$ 1,300/oz will generate an NPV of US$10 million for this project. The mining of the additional Mineral Reserves at 1,400 tpd is expected to increase the mine life of Arenal by approximately eight (8) months.

The introduction of CRF requires approximately US$ 486,000 of additional capital costs to cover a new underground mixing station which comprises a single shaft- type slump mixer, dust collector, and concrete flooring.

An increase in operating costs of the CRF system compared to the original rock-fill system is estimated to be US$4/t of ore. These extra operating costs include the costs of preparation and processing of CRF at the underground mixing station.

Near Mine and Vaca Muerta Development – At Vaca Muerta, pre-operational activities were finalized and the exploitation permit was granted on December 6, 2013 with mining starting as scheduled according to plan in December. A total of 1,796m were drilled at Vaca Muerta during the quarter. The results of this infill drilling campaign increased the mineral reserve by 4,189 oz (from 11,642 oz to 15,831 oz). This represents a cost of approximately US$40/oz of reserve defined. The mineral reserves were optimized at a price of 1,100 US$/oz.

Uruguay Brownfield and Remnants – Near mine exploration during Q2 focused on the periphery of the San Gregorio cluster as well as on the Sobresaliente area. Approximately seven zones were reviewed and five of these drilled. The result of this work was the addition of 3 mineralized bodies to the short term pipeline.

Uruguay Satellite Projects - Currently our advanced satellite projects in Uruguay are Laureles and Veta A Deeps. The Company plans to advance Laureles to development within the next six months. The project has currently a potential geological resource of 15,000 oz @ 0.6 g/t cut off.

Veta A Deeps is the underground extension of the ore mined in the past at Veta A open pit. The mineralization is associated with a shear zone and continues down dip, continuity is also observed to the south. 29,260oz have been mined historically. Positive historic intercepts at depth lead to the undertaking of a 330m diamond drilling campaign during this quarter. Positive preliminary gold intersections were encountered and further work continues.

Uruguay Greenfield Exploration - Greenfield exploration is currently centered on eleven projects at different stages of development from early to intermediate. Geological mapping, surface sampling, geophysics, shallow RAB drilling were the main activities carried out during the first half of fiscal 2014. These projects have been ranked considering resource potential and permit status as the main criteria. The company is working actively with the Uruguayan Department of Mines (Dinamige) to accelerate the granting of the prospecting and exploration permits within the high priority areas.

The Company has ordered a light diamond drilling rig, expected to be received at the end of fiscal Q3, with the objective to accelerate the testing of potential targets, lower drilling costs and enable more efficient exploration.

Chile - Anillo and Pantanillo Projects – In Chile the activities during Q2 were restricted to El Anillo and Quebrada Pantanillo geological mapping. The goal is to advance in the acquisition of valuable data and information that contributes to advancing the current exploration models.

Orosur finalized the hydrological study in the Ciénaga Redonda area within the two year term granted by the exploration permit and prior to the October 2013 expiry date. The results of the exploration work did not reach the technical minimum specifications required for the Pantanillo Project. As a consequence the Company has decided to discontinue the process to request a water exploitation permit in that area. At present, the Company is working to identify new areas of interest for water exploration.

Chile – Talca Project - As announced on December 19th, 2013, Orosur completed the sale of its Talca assets and all its rights and obligations for US$8M to Altovalsol. This amount will be paid to Orosur on the basis of an 18% NSR of the sales of gold. During the period in which the Buyer is paying the Tellos, the original Talca owners, all payments required to acquire the remaining 75% of Talca under the current option agreement with Orosur, the Buyer will pay to Orosur the difference between the 18% NSR and these payments, with the total of all payments to Orosur being the Purchase Amount. After the full Purchase Amount has been paid to Orosur from the Buyer, Orosur will retain a 2% NSR of any future sales. In the event, the Buyer does not pay the full Purchase Amount; the Buyer will return Talca to Orosur.

END

Qualified Person's Statement

The information presented in this press release has been reviewed by Walter Muehlebach, GM Exploration of OMI and by Francisco Castillo, GM San Gregorio and they are both considered to be in compliance with N.I. 43-101 reporting guidelines. Mr Muehlebach is a graduate in Geology of the Universidad Católica del Norte (Chile) and a member of the Chilean Comisión Calificadora de Competencias en Recursos y Reservas Mineras, and has 23 years of experience in the field of mineral exploration. Mr Castillo is a graduate in Mining Engineering of the Universidad de Santiago de Chile and a member of the Chilean Comisión Calificadora de Competencias en Recursos y Reservas Mineras, and has 12 years of professional experience.

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.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

About Orosur Mining Inc.

Orosur Mining Inc. is a fully integrated gold producer and exploration company focused on identifying and developing 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 and Chile.

The Company is quoted in Canada (TSX:OMI) and London (AIM:OMI).

For more information please visit www.orosur.ca

– Financial Statements Follow –

 

Orosur Mining Inc.

Condensed Interim Consolidated Statement of Financial Position

Thousands of United States Dollars, except where indicated

 
      Note Ref.     As at November 30,

2013 ($)

    As at May 31,

2013 ($)

           
Assets
 
Cash and cash equivalents 8,817 5,633
Accounts receivables and other assets 3 3,588 3,776
Inventories 4 14,042     15,715
Total current assets 26,447 25,123
 
Property plant and equipment and development costs 5 40,181 47,322
Exploration and evaluation costs 6 34,477 31,686
Deferred income tax assets 11 3,143 5,305
Restricted cash 272     332
Total non-current assets 78,073 84,644
   
Total Assets 104,520     109,767
 
                   
 
Liabilities and Shareholders’ Equity
 
Trade payables and other accrued liabilities 3 13,247 16,665
Financial debt 16 2,586 4,172
Derivative financial instruments 13 0 0
Environmental rehabilitation provisions 7 1,305     0
Total current liabilities 17,138 20,838
 
Financial debt 4,222 4,823
Environmental rehabilitation provisions 7 2,605     6,148
Total non-current liabilities 6,827 10,970
       
Total liabilities 23,965     31,808
 
Capital stock 8 55,184 55,184
Warrants 0 276
Contributed surplus 5,630 5,534
Retained earnings 19,741     16,965
Total shareholders’ equity 80,555     77,959
 
Total liabilities and shareholders’ equity 104,520     109,767
 
 

Approved on behalf of the Board of Directors

                       
Ignacio Salazar Chief Executive Officer Marcelo Martinez

Acting in the capacity of Chief Financial Officer

 
 

Orosur Mining Inc.

Condensed Interim Consolidated Statements of Income and Comprehensive income

Thousands of United States Dollars, except for earnings per share amounts

 
   

Note Ref.

   

Three months ended

November 30,

   

Six months ended

November 30,

            2013 ($)     2012 ($)     2013 ($)     2012 ($)
       
Sales 20,375 24,168 43,320 50,502
Cost of sales 18 (16,194)     (22,067)     (36,093)     (43,803)
Gross profit 4,181 2,101 7,227 6,699
 
Corporate and administrative expense (901) (1,304) (1,732) (2,600)
Exploration expenses and exploration write off (374) (87) (890) (416)
Other income 86 358 126 391
Finance cost 17 0 (166) (120) (247)
Finance income 17 1 4 2 7
Derivative (loss) gain 13 0 472 0 41
Net foreign exchange (loss) gain (285)     (343)     13     (338)
(1,473) (1,066) (2,601) (3,162)
Profit before income tax 2,708 1,035 4,626 3,537
                   
Recovery (provision) for income taxes 11 829     175     (2,125)     (36)
Total income and comprehensive income for the period 3,537     1,210    

2,501

   

3,501

 
 
 
 
Earnings per common share
Basic 15 0.05 0.02 0.03 0.05
Diluted 15 0.05 0.02 0.03 0.05
 
 
 

Orosur Mining Inc.

Condensed Interim Consolidated Statements of Cash Flows

Thousands of United States Dollars, except where indicated

 

 

   

Three months ended November 30,

   

Six months ended November 30,

    2013 ($)     2012 ($)     2013 ($)     2012 ($)

Net inflow (outflow) of cash related to the following activities

 

Cash flow from Operating activities

       
Net income for the period 3,537 1,210 2,501 3,501
Adjustments to reconcile net income to net cash provided from operating activities:
Depreciation 4,451 4,133 8,746 7,063
Exploration and evaluation expenses written off 19 0 39 0
Fair value of derivatives 0 (472) 0 (41)
Accretion of asset retirement obligation 19 19 38 38
Deferred income tax assets (792) (938) 2,162 (1,583)
Stock based compensation 48 22 96 59
Gain on sale of property, plant and equipment (2) (481) 9 (514)
Others 0     (8)     3     0
Subtotal 7,280 3,485 13,594 8,523
Changes in operating assets and liabilities
Accounts receivables and other assets (24) (236) 240 (989)
Inventories 1,372 (1,557) 1,894 (1,261)
Trade payables and other accrued liabilities (1,419)     (335)     (3,423)     (2,578)
Net cash generated from operating activities 7,199     1,357     12,305     3,695
 
Cash flow from financing activities
Proceeds from the issue of share options 0 54 0 70
Proceeds from the issue of shares in a private placement 0 0 0 0
Loans received 0 2,834 0 3,573
Loans payment (1,680)     (10)     (1,985)     (21)
Net cash from financing activities (1,680)     2,878     (1,985)     3,622
 
Cash flow from investing activities
Purchase of property, plant and equipment and development costs (618) (7,062)

(1,856)

(11,648)

Environmental tasks (1,056) 22 (2,276) (104)
Loans collected (granted) 0 900 0 900
Proceeds from the sale of fixed assets 0 909 0 942
Exploration and evaluation expenditure assets (1,491)     (2,451)     (3,004)     (5,123)
Net cash used in investing activities (3,165)     (7,682)     (7,136)     (15,033)
 

Increase (Decrease) in cash and cash equivalents

2,354

(3,447)

3,184

(7,716)

 
Cash and cash equivalents at the beginning of period 6,463     7,192     5,633     11,461
 
Cash and cash equivalents at the end of period 8,817     3,745     8,817     3,745
 
 
 

Orosur Mining Inc.

Condensed Interim Consolidated Statements of Changes in Shareholders’ Equity

Thousands of United States Dollars, except where indicated

 
    Three months ended

November 30,

    Six months ended

November 30,

     

2013 ($)

   

2012 ($)

   

2013 ($)

   

2012 ($)

Capital stock

       
Balance at beginning of period 55,184 55,099 55,184 55,074
Exercise of stock options 0 54 0 70
Transfer from contributed surplus 0     0     0     9
Balance at end of period 55,184     55,153     55,184     55,153
 
Broker Warrants
Balance at beginning of period 0 276 276 276
Commission on private placement 0     0     (276)     0
Balance at end of period 0     276     0     276
 

Contributed surplus

Balance at beginning of period 5,582 5,452 5,534 5,424
Transfer to capital stock 0 0 0 (9)
Employee stock based compensation recognized 47     22     95     59
Balance at end of period 5,629     5,474     5,629     5,474
 

Retained earnings

Balance at beginning of period 16,205 34,081 16,965 31,790
Warrant expiration 0 0 276 0
Net income for the period 3,537     1,210     2,501     3,537
Balance at end of period 19, 742     35, 291     19,742     35,291
 
Shareholders’ equity at end of period 80,555     96,194     80,555     96,194
 

Orosur Mining Inc
Ignacio Salazar, + 562 2924 6800
Chief Executive Officer
isalazar@orosur.ca
or
Cantor Fitzgerald Europe
Stewart Dickson / Tom Sheldon / Julian Erleigh (Corporate Finance)
Jeremy Stephenson (Corporate Broking)
+44 (0) 20 7894 7000

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