Orosur Mining Inc. - Fiscal Q3 2016 Results &am...

Orosur Mining Inc. - Fiscal Q3 2016 Results & Operating Update

Orosur Mining Inc.

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 third quarter of its fiscal 2016 ended February 29, 2016 (“Q3 FY16” or the “Quarter”).

As previously announced, from July 2015 the Company implemented a strategic plan to reduce costs in line with the gold price environment. In line with expectations, the Company achieved a reduction in AISC below US$1,000/oz in the Quarter as the benefits of the progamme began to be realized. This represents a significant improvement from the previous year and previous quarters in FY16.

Highlights

Financial

  • All-in-sustaining-costs (“AISC”) of US$978/oz, representing a significant improvement over Q3 FY15 (US$1,132/oz), Q1 FY16 (US$1,166/oz) and Q2 FY16 (US$1,095/oz).
  • The Company reiterates its stated guidance of AISC below US$1,000/oz for the remainder of the year and between US$1,000-1,100/oz for the full year.
  • Production of 7,274 oz compared with 13,760 oz in Q3 FY15.
  • YTD production of 27,917 oz, ahead of the Company’s 30,000 – 35,000 oz guidance for the full year.
  • Operating cash costs of US$803/oz, compared to Q3 FY15 (US$876/oz).
  • Average gold price received of US$1,143/oz compared with US$1,220/oz in Q3 FY15.
  • Profit after tax was US$3.1M compared to a loss of US$1.9M in Q3 FY15.
  • Total cash balance of US$2.0M (compared with US$2.6M at November 30, 2015) and debt of US$0.4 million (compared to US$0.8 million at November 30, 2015). The Company has US$3.0M of undrawn lines of credit committed by Banco Santander available at February 29, 2016 and as of the date hereof.

Corporate

  • Alejandra López, current Controller of Orosur, has been promoted to Interim CFO.
  • In a show of support, the Ministers of Industry and Labour of Uruguay visited the San Gregorio complex in Minas de Corrales in early March.

Operational

  • All required permits for San Gregorio Deeps (“SGD”) have been granted.
  • The Company is proceeding with the plan to commence mining SGD during FY17 with development work scheduled to start in Q4 FY16.
  • The Company does not anticipate requiring any external funding for SGD, and intends to finance development with cash from operations.

Ignacio Salazar, CEO of Orosur, said:

“This quarter saw our strategic plan to reduce costs come to fruition, positioning the Company as a more resilient producer in this current gold price environment. As planned, we are very pleased to announce that, AISC was significantly reduced to below our target of US$1,000/oz. This quarter the Company also returned to profit and fully repaid the Santander loan, leaving the Company practically debt-free.

Additionally, the Company received all required permits to commence the development of San Gregorio Deeps without the need for external funding. We are also advancing our portfolio of exploration assets, prioritising our projects with near term returns in Uruguay, those of higher quality in Colombia and those which are already financed such as Anillo in Chile.

We are also delighted to announce the promotion of Alejandra Lopez, a long time Orosur employee, as our interim CFO. Alejandra possesses a strong skillset and knowledge of our operations, and her work in recent months has been extremely valuable.”

Operational & Financial Summary1   Q3 FY16   Q3 FY15   Diff   Q2 FY16   Diff
Operating Results            
Gold produced   Ounces   7,274   13,760   (6,486)   8,172   (898)
Operating cash cost3   US$/oz   803   876   (73)   858   (55)
AISC   US$/oz   978   1,132   (154)   1,095   (117)
Average price received   US$/oz   1,143   1,220   (77)   1,100   43
Financial Results            
Revenue   US$ ‘000   8,936   16,445   (7,509)   10,190   (1,254)
Gross profit/(loss)   US$ ‘000   749   (643)   1,392   40   709
Net profit/(loss) after tax   US$ ‘000   3,071   (1,884)   4,955   (870)   3,941
Cash flow from operations2   US$ ‘000   4,804   3,045   1,759   924   3,880
           
                         
Cash & Debt at the end of the period – Summary      

February 29,

2016

 

May 31,

2015

  Diff  

November 30,

2015

  Diff
Cash balance   US$ ‘000   1,961   4,787   (2,826)   2,633   (672)
Total debt   US$ ‘000   415   1,481   (1,066)   770   (355)
Cash net of debt   US$ ´000   1,546   3,306   (1,760)   1,863   (317)
 

1 Results are based on IFRS and expressed in US dollars
2 Before working capital movements
3 Operating cash cost is total cost discounting royalties and capital tax on production assets.

Q3 FY16 Financial Summary

Gross profit in the Quarter was US$0.7 million compared to a loss of US$0.6 million for Q3 FY15. Lower revenue was offset by the improvements in operating costs due to the implementation of the strategic cost reduction plan during Q2 and Q3 of FY16.

Net profit after tax was US$3.1 million compared to a loss of US$1.9 million in Q3 FY15. This was primarily as a result of the improvements in the operating costs of the business as well as a US$2.5 million settlement agreement reached with the Government of Uruguay on February 29, 2016 pertaining to tax disputes. These funds are expected to be received by the Company during April 2016.

Cash flow from operations before changes in working capital was US$4.8 million compared to US$3.0 million for Q3 FY15.

The Company invested US$0.9 million in capital expenditures and US$0.6 million in exploration expenditures compared to US$2.4 million and US$1.5 million respectively in Q3 FY15.

The cash balance at the end of the Quarter was US$2.0 million compared to US$2.6 million at November 30, 2015. The Company’s debt balance was US$0.4 million compared to US$0.8 million at November 30, 2015. The Company has US$3.0 million of committed but undrawn lines of credit available at February 29, 2016 and as of the date hereof.

Development and Exploration

Uruguay Development Projects: San Gregorio Deeps (“SGD”) and Veta Rey

Permits for SGD were granted by the Uruguayan mining authority (DINAMIGE) during February 2016 and from the environmental body (DINAMA) in July 2015. The de-watering of the main pit of San Gregorio, during the previous quarter, allowed the Company to mine approximately 1,500 ounces of gold from the pit during January and February, including some higher grade material from a north wall structure and some lower grade material located at the bottom of the pit.

During the Quarter, an initial infill reverse circulation (“RC”) drilling campaign of 500m was undertaken from the main ramp of the San Gregorio open pit mine with the intention of further defining reserves and optimising mine design. The weighted average grade of the intercepts was 2.35 g/t Au over widths of approximately 4 to 14 metres. The Company plans to complete a further infill drilling campaign of 5,000m from underground drilling stations as development progresses, in order to reduce costs, compared to drilling from the surface.

As previously announced, in June 2015, the board of directors of Orosur approved the construction, development and the sourcing of additional project funding for San Gregorio Deeps.

Following the implementation of the strategic plan to reduce costs in line with the gold price environment post July 2015, a significant restructuring has been achieved and the economics of SGD have been updated, also assuming a reduced initial investment as the Company plans to use the equipment from Arenal Deeps instead of purchasing new underground mining equipment. The Company intends to dovetail the beginning of production in SGD with the conclusion of operations at Arenal in order to facilitate these anticipated savings and plans for this to take place during FY17. Development work in SGD is scheduled to commence shortly during Q4 FY16.

An additional expected benefit of the revised plan is that SGD will require no further external financing and is to be developed using cash from operations.

At Quarter end, the Company commenced pre-stripping the relatively small Veta Rey open pit. The mine plan for Veta Rey targets approximately 8,000 oz of gold to be mined over the next 6 months. Approximately 70% of waste rock will be allocated to the new tailings dam, decreasing costs of loading and hauling.

Uruguay Brownfields Exploration

The Company is currently focusing its brownfield exploration effort in Veta Rey and in Don Tito target,(located in the Sobresaliente district). As discussed, the Veta Rey project is currently at the pre-stripping stage.

Gold mineralization in Don Tito Is hosted in a hydro thermally altered granite and associated with quartz veining. Exploration work done to date consists of 6 trenches (483m), 12 diamond core and RC drill holes (738m) and 65 pantera drill holes (648m).

Concurrently, the Company is advancing known target zones in Don Tito using NSAMT (Natural Source Audio-frequency Magnetotelluric Imaging) geophysics methods. The NSAMT program has been ongoing during March and April with results expected during Q4 FY16.

At Arenal Deeps, the Company is testing a down-plunge extension/ repetition of the Arenal mineralized structure. A 1,100m drilling campaign commenced in December 2015 and is expected to conclude during Q4 FY16.

Chile

During the Quarter, a meeting of the Technical Committee of Anillo SPA was held (together with Asset Chile) to deliver the final results from the drilling campaign, multielement geochemistry, recommendations for follow-up and the exploration plan for the next phase.

  • These intersects include anomalous association in zinc, lead and copper and multi-element geochemistry potentially indicating the presence of a high sulphidation system at the north-east sector and low sulphidation at the central-north and south sectors.
  • Gold was encountered in the south and west sectors, opening up further exploration targets
  • The south and north gold-silver intersects are located in a north-south structural corridor, which appears to be the natural orientation for the mineralized veins in the district.
  • One of the intersects in the central-north sector is in line with the less mineralized sections of the Victoria vein at Yamana Gold’s El Peñon’s Augusta Victoria operation located 6 km north of the drilling area.
  • Consistent anomalous silver values at the central north sector point to the possibiliity of an envelope of a potentially mineralized northwest structure
  • Multi-element geochemistry shows anomalous associations including silver-cadmium-antimony-zinc-lead, which appears similar to one encountered at Au-Ag veins in El Peñón.
  • All the gold and silver encountered during drilling were intersects in silica/quartz-rich resistivity CSAMT structures, further demonstrating the usefulness of this exploration tool to help source locations of potentially mineralized areas.

As previously announced, the process of returning the Pantanillo properties to Anglo American continues.

Colombia

The Company continues to maintain a flexible and dynamic approach with regard to the high grade Anzá project, where Orosur is currently evaluating a number of options to advance the project via a smaller higher grade underground mine. This approach would be aimed at taking advantage of Orosur’s development and operational expertise, while considering the potential of working with or in combination with partners.

Qualified Person's Statement

The technical information related to the mining assets of Orosur Mining in this presentation has been reviewed by Michael Schwabe, an exploration consultant who is considered to be a Qualified Person under NI 43-101 reporting guidelines. Mr. Schwabe is a graduate in science, majoring in geology from the University of Tasmania and is a Fellow of the Australian Institute of Mining and Metallurgy, a Senior Fellow of the Society of Economic Geologists and a Professional Member of the Society for Mining, Metallurgy and Exploration. Mr. Schwabe has 47 years of professional experience in the field of mineral exploration, mine development and management.

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.

About Orosur Mining Inc.

Orosur Mining Inc. is a fully integrated gold producer, developer and exploration company 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 Company is quoted in Canada (TSX:OMI) and London (AIM:OMI).

For more information please visit www.orosur.ca.

Orosur Mining Inc.

Condensed Interim Consolidated Statements of Financial Position

Thousands of United States Dollars, except where indicated

   
 

 

As at February 29,

2016 ($)

  As at May 31,

2015 ($)

 
Assets
 
Cash 1,961 4,787
Accounts receivable and other assets 4,102 1,775
Inventories 11,285   14,363
Total current assets 17,348 20,925
 
Accounts receivable and other assets 414 414
Property, plant and equipment and development costs 14,206 16,662
Exploration and evaluation costs 17,577 17,126
Deferred income tax assets 551 551
Restricted cash 219   239
Total non-current assets 32,967 34,992
     
Total assets 50,315   55,917
 
         
 
Liabilities and Shareholders’ Equity
 
Trade payables and other accrued liabilities 9,690 13,832
Current portion of long-term debt 254 1,129
Environmental rehabilitation provision 112   112
Total current liabilities 10,056 15,073
 
Long-term debt 161 352
Environmental rehabilitation provision 6,465   6,606
Total non-current liabilities 6,626 6,958
     
Total liabilities 16,682   22,031
 
Capital stock 60,739 60,544
Warrants 62 62
Contributed surplus 5,852 5,824
Deficit (31,812) (32,287)
Currency translation reserve (1,208)   (257)
Total shareholders’ equity 33,633   33,886
 
Total liabilities and shareholders’ equity 50,315   55,917
 

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

Nine months ended

February 29   February 28 February 29   February 28
    2016 ($)   2015 ($)   2016 ($)   2015 ($)
 
Sales 8,936 16,445 33,591 50,375
Cost of sales (8,187)   (17,088)   (33,352)   (52,487)
Gross profit/(loss) 749 (643) 239 (2,112)
 
Corporate and administrative expenses (474) (311) (1,664) (2,186)
Restructuring costs (217) - (1,911) -
Exploration expenses and exploration written off (3) (514) (14) (547)
Impairment of assets - (63) - (63)
Other income 2,722 150 3,467 538
Net finance cost (68) (73) (205) (222)
Net foreign exchange gain/(loss) 378   (154)   560   (129)
2,338 (965) 233 (2,609)
 
Profit (loss) before income tax 3,087 (1,608) 472 (4,721)
 
Income tax (provision) recovery (16)   (276)   3   313
Total profit (loss) for the period 3,071   (1,884)   475   (4,408)
 
Other comprehensive loss
Foreign exchange differences on translating foreign operations (144) (351) (951) (871)
             
Total comprehensive profit (loss) for the period 2,927   (2,235)   (476)   (5,279)
 
 
Profit (loss) per common share
Basic 16 0.03 (0.02) 0.00 (0.05)
Diluted 16 0.03 (0.02) 0.00 (0.05)
 

Orosur Mining Inc.

Condensed Interim Consolidated Statements of Cash Flows

Thousands of United States Dollars, except where indicated

   

 

Three months

ended February

Nine months

ended February

29   28 29   28
  2016 ($)   2015 ($)   2016 ($)   2015 ($)

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

 

Cash flow from operating activities

Net profit (loss) for the period 3,071 (1,884) 475 (4,408)
Adjustments to reconcile net income to net cash provided from operating activities:
Depreciation 1,378 3,748 5,006 11,430
Impairment of assets - 63 - 63
Exploration and evaluation expenses 3 514 14 544
Accretion of asset retirement obligation 19 19 57 57
Deferred income tax assets - 276 - (317)
Stock based compensation 16 (74) 28 -
Gain on sale of property, plant and equipment - 96 (15) (60)
Other 317   287   337   97
Subtotal 4,804 3,045 5,902 7,406
Changes in operating assets and liabilities
Accounts receivable and other assets (2,832) 226 (2,325) 792
Inventories 1,135 719 3,137 3
Trade payables and other accrued liabilities (1,902)   (910)   (4,142)   (260)
Net cash generated from operating activities 1,205   3,080   2,572   7,941
 
Cash flow from financing activities
Loan payments (356) (237) (1,066) (2,745)
Proceeds on sale of common shares of Anillo SPA -   -   710   -
Net cash used in financing activities (356)   (237)   (356)   (2,745)
 
Cash flow from investing activities
Purchase of property, plant and equipment and development costs (880) (2,253) (2,638) (6,759)
Environmental tasks (23) (143) (198) (562)
Proceeds from the sale of fixed assets - 21 33 788
Exploration and evaluation expenditure assets (618)   (1,476)   (2,239)   (3,674)
Net cash used in investing activities (1,521)   (3,851)   (5,042)   (10,207)
 

Decrease in cash

(672)

(1,008)

(2,826)

(5,011)

 
Cash at the beginning of period 2,633   6,815   4,787   10,818
 
Cash at the end of period 1,961   5,807   1,961   5,807
 

Orosur Mining Inc.

Condensed Interim Consolidated Statements of Changes in Shareholders’ Equity

Thousands of United States Dollars, except where indicated

 
Nine months ended
    February 29

2016 ($)

  February 28

2015 ($)

 

Capital stock

 
Balance at beginning of period 60,544 55,184
Issued for Waymar acquisition - 5,360
Termination consideration 195   -
Balance at end of period 60,739   60,544
 
Broker Warrants
Balance at beginning of period 62 -
Issued for Waymar acquisition -   62
Balance at end of period 62   62
 

Contributed surplus

Balance at beginning of period 5,824 5,708
Stock based compensation recognized 28 (60)
Stock options issued for Waymar acquisition -   94
Balance at end of period 5,852   5,742
 

(Deficit) Retained earnings

Balance at beginning of period (32,287) 22,088
Net profit (loss) for the period 475   (4,408)
Balance at end of period (31,812)   17,680
 
Currency translation reserve (1,208)   (871)
 
Shareholders’ equity at end of period 33,633   83,157
 

Orosur Mining Inc
Ignacio Salazar, Chief Executive Officer
info@orosur.ca
Tel: +1 (778) 373-0100
or
Cantor Fitzgerald Europe
Stewart Dickson / Jeremy Stephenson / Carrie Drummond / Philip Davies
Tel: +44 (0) 20 7894 7000
or
FTI Consulting
Ben Brewerton / Oliver Winters / Sara Powell /Emerson Clarke
Tel: +44 (0) 20 3727 1000

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