Orosur Mining: Fiscal Q2 2015 Financial Results...

Orosur Mining: Fiscal Q2 2015 Financial Results and Operational Update

Orosur Mining Inc.

Orosur Mining Inc. (“Orosur” or the “Company”) (TSX:OMI) (AIM:OMI), a South American-focused gold producer, developer and explorer is pleased to announce the results for the second quarter of its fiscal 2015 ended November 30, 2014 (“Q2 2015” or the “Quarter”).

Highlights

Financial

  • Gold production of 12,854 oz (14,829 oz in Q2 2014)
  • Cash operating costs of US$984/oz (US$761/oz in Q2 2014)
  • Both production and cash operating costs are in line with original guidance, and the Company remains on track to deliver its full year production guidance of 50,000 – 55,000 oz at a cash operating cost of US$850 - $950/oz
  • All-In-Sustaining costs of US$1,258/oz (Q2 2014: US$866/oz) as the Company maintained its planned exploration and investment programmes
  • Average gold price received in the Quarter was US$1,212/oz (Q1 13/14: US$1306/oz)
  • Cash flow from operations of US$0.8M (Q2 2014: US$7.3M )
  • Net loss after tax for the quarter was of US$ 1.2M (Q2 2014: Net profit after tax US$3.5M)
  • The cash balance at November 30, 2014 was US$6.8 million compared to US$10.8 million at May 31, 2014
  • Ongoing reduction in net debt with US$1.7M of debt repaid in the Quarter. The Company’s debt balance at November 30, 2014 was US$3.2 million compared to US$4.9 million at May 31, 2014.

Exploration

  • Continued funding of exploration programs in the San Gregorio district of Uruguay, including approximately 5,640 m of drilling while on-going pre-development work focused on the main known extension of the San Gregorio deposit
  • As part of the San Gregorio pre-development program, two drill holes tested an area east of the Ombú pit and west of the San Gregorio deposit
  • Encouraging results at Ombú including:
    • OZDD14-018: 15.7 m at 2.97 g/t Au
    • OZDD14-019: 5.1 m at 4.70 g/t Au
  • Underground drilling at Arenal Deeps yielded high-grade gold intercepts and has generated new targets that indicate potentially significant extensions of the deposit
  • Significant results at Arenal Deeps including:
    • DDHUG14N20_01: 6 m at 9.79 g/t Au
    • DDHUG14N20_03: 11.2 m at 5.30 g/t Au and 16.3 m at 4.50 g/t Au

Corporate

  • During the Quarter, Orosur extended the terms of its farm-in with Corporación Nacional del Cobre de Chile (“Codelco”) until January 2020 at zero cost, with an option to extend for an additional two years.
  • Orosur also entered into a non-binding letter of intent to option up to 40% of its interest in the Anillo project in Chile to Asset Chile Exploración Minera Fondo de Inversión Privado for non-dilutive funding of up to US$3.5 million.

Ignacio Salazar, CEO of Orosur, said:

“Orosur has once again delivered quarterly results in line with its guidance. The Company anticipated a quarter with higher unit costs pursuant to the mine plan and this, coupled with the weakness in the current gold price environment, has impacted the Company during the Quarter. However, the operational improvements implemented over the most recent months have positioned the Company to continue generating positive cash flow from operations, whilst advancing exploration and development efforts, most notably in Uruguay around the San Gregorio mine.

“In Anillo, the Company signed two separate agreements during the Quarter, with CODELCO and Asset Chile respectively, to significantly extend and advance the project As previously stated, the Company expects lower cash operating costs during the second half of the year as Orosur continues to focus on cost reduction initiatives, cash optimization and operational excellence.”

Results Conference Call

Orosur will be hosting a conference call for analysts to discuss the results, details for the call are below:

Time & Date:       14 January 2015
2:00pm Greenwich Mean Time, 9:00am Eastern Standard Time.
 
Dial-In Details:

London

+44 (0) 20 3139 4830

Canada

+1 (514) 841 2196

United States

+1 (718) 873 9077

 

Passcode:

32538891#

       
Operational & Financial Summary1   Q1 ended August 31  
  Q2 14/15   Q2 13/14   Diff  
Operating Results
Gold produced       Ounces   12,854   14,829   (1975)
Operating cash cost3       US$/oz   984   761   (223)
Average price received       US$/oz   1,212   1,306   (94)
Financial Results
Revenue       US$ ‘000   17,404   20,375   (2,971)
Net loss after tax       US$ ‘000   (1,244)   3,537   (4,781)
Cash flow from operations2       US$ ‘000   818   7,280   (6,462)
           
                       
Cash & Debt at the end of the period – Summary          

November

30th 2014

 

May 31, 2014

 

November

30th, 2013

 
Cash balance       US$ ‘000   6,815   10,818   8,817  
Total debt       US$ ‘000   3,192   4,939   6,808  
Cash net of debt       US$ ´000   3,623   5,879   2,009  
       

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.

 

Q2 Production and Cash Costs

Production and cash operating costs for Q2 2015 are in line with both the Company’s mine plan and previously stated guidance. As previously stated, Orosur planned for higher unit costs in the first half of fiscal 2015 resulting from the current mining sequence, which was observed during the Quarter.

During Q2 2015, and in accordance with the mine plan, gold production from Arenal Deeps accounted for approximately 45% of total production in the Quarter. The Company expects this figure to average between 70-75% in the second half of fiscal 2015. Due in large part to the implementation of pillarless mining in the Arenal stopes, the Company maintains a specific mining sequence to safely and optimally operate the mine, which has, as planned, resulted in varying grade and volume figures over the fiscal year to date. As previously announced, the Company expects to return to mining higher grade, larger transverse stopes in the second half of its fiscal year, which is expected to reduce cash operating costs as well as mining open pits with lower strip ratios.

Orosur continues to focus on cost reduction initiatives, cash optimization and operational excellence.

FY 2015 Outlook & Guidance

The Company maintains its forecast production guidance for FY 2015 between 50,000 to 55,000 ounces of gold at operating cash costs of between US$850 to US$950 per ounce.

As in the past, variations in production and unit costs will occur quarter on quarter as the mine plan draws ore from several Arenal stopes with different grades, positions and sizes, changing the level of access required as well as the addition of ore from several open pits at varying grades and stages of stripping.

Q2 2015 Financial Summary

Cash flow from operations before working capital was US$0.8 million for the quarter compared to US$7.3 million for Q2 2014, primarily due to a lower gold price and coupled with lower production than in Q2 2014. Net loss after tax for the quarter was US$1.2 million compared to a profit of US$3.5 million in Q2 2014.

The Company invested US$2.3 million in capital expenditures and US$1.1 million in exploration expenditures in the quarter compared to US$1.7 million and US$1.5 million respectively in Q2 2014.

The cash balance at November 30, 2014 was US$6.8 million compared to US$10.8 million at May 31, 2014. The Company’s debt balance at November 30, 2014 was US$3.2 million compared to US$4.9 million at May 31, 2014. The Company expects to continue following the contracted schedule of lease repayments with HSBC and Banco Santander and anticipates being close to debt free by the end of FY 2015. The Company has US$3.0M of committed but undrawn lines of credit available at November 30, 2014 and at present is not planning to utilize them within the current development plans and gold price environment.

Q2 DEVELOPMENT AND EXPLORATION

URUGUAY

During the Quarter, the Company continued its exploration programs in the San Gregorio district of Uruguay, including approximately 5,640 m of drilling while continued pre-development work focused on the main known extension of the San Gregorio deposit.

URUGUAY DEVELOPMENT PROJECTS

In Q2 2015, a program of more than 3,000 m of drilling commenced to further evaluate a significant geological resource adjacent to the San Gregorio open pit that has undergone prefeasibility level engineering work. The work program, scheduled to be completed during Q3 2015, is aimed at gathering geotechnical data, and validating or improving the current geological model with the goal of enabling an informed development decision in the current fiscal year. Most of the drilling carried out in the Quarter as part of this program was geotechnical in nature and several drill holes are still in the process of being sampled and assayed.

As part of this program, two drill holes tested an area east of the Ombú pit and west of the San Gregorio deposit. The results are encouraging both for the potential to use the Ombú pit as a portal location for an underground development of the San Gregorio extension and/or for a potential expansion of the Ombú pit.

Significant results from these two drill holes are summarized below:

                                             

Hole Number

    Northing   Easting   Elevation   Azimuth   Dip  

Total

Depth

  From   To   Interval   Au
    (m)   (m)   (m)   (°)   (°)   (m)   (m)   (m)   (m)   (g/t)  
OZDD14-018     6506537.78   527652.72   169.564   55   -60   104.60   55.1   70.8   15.7   2.97  
OZDD14-019   6506510.9   527658.832   169.499   55   -50   96.40   74.3   79.4   5.1   4.70  
                            87.3   91.5   4.2   1.55  
 

URUGUAY BROWNFIELDS EXPLORATION

Underground exploration drilling at Arenal Deeps consisted of 1,134 m in nine drill holes and was successful in identifying extensions of the Arenal orebody at Levels 20 and 107 towards the west of the previously predicted margins. Significant intercepts of this drill program include:

                                             
Hole Number
     Northing   Easting   Elevation   Azimuth   Dip  

Total

Depth

  From   To   Interval   Au
    (m)   (m)   (m)   (°)   (°)   (m)   (m)   (m)   (m)   (g/t)  
DDHUG14N20_01   6505354.99   530636.11   -20.35   221.05   0   116.65   52.7   60.2   7.5   3.74  
                      65.2   65.2   71.2   6.0   9.79  
                      75.2   75.2   83.1   7.9   1.58  
DDHUG14N20_02   6505354.99   530636.11   -20.35   235.04   0   147.05   83.2   89.6   6.4   1.41  
                      92.9   92.9   109.2   16.3   1.73  
DDHUG14N20_03   6505354.99   530636.11   -20.35   221.05   -8   182.85   29.7   37.2   7.6   1.35  
                      71.1   71.1   83.1   12.0   2.48  
                      100.9   100.9   110.3   9.4   1.30  
                        164.3   164.3   175.5   11.2   5.39  
DDHUG14N107_01   6505257.99   530576.14   -108.30   195.79   1   125.95   75.0   91.2   16.3   4.50  
                      100.3   100.3   120.0   19.8   2.80  
DDHUG14N107_04   6505258.18   530576.06   -108.31   207.31   1   129.45   52.7   55.7   3.0   1.63  
                      105.4   105.4   114.9   9.5   2.50  
DDHUG14N107_05   6505258.38   530575.98   -108.32   207.31   10   117.15   37.1   41.6   4.5   1.78  
                      59.5   59.5   64.2   4.7   1.05  
                      74.4   74.4   80.0   5.7   3.07  
                      90.4   90.4   94.6   4.2   2.59  
                        106.2   106.2   115.3   9.1   1.04  
 

The intercepts described above are likely to represent potential additions to resources and reserves in areas where current models predict non-economic grades of less than 0.8 g/t Au. As the mineralization in Level 107 is the projected down-dip extension of that intercepted in Level 20, these results have also produced an attractive target for follow-up drilling between Levels 20 and 107.

Other brownfields programs focused on finding extensions of the orebodies that were subject to open pit operations in the Quarter, including Vaca Muerta, Veta Rey, Veta Guillo, and Cross Hill.

URUGUAY GREENFIELDS EXPLORATION

The greenfields program continued acquiring data and testing targets to the east of the Arenal deposit, along the structural corridor defined in the previous fiscal year. In Q2 2015, most of this work was aimed at delineating targets and executing first-pass drilling on some of these. Seven diamond drill holes for a total of approximately 780 m were completed, intersecting positive geological indicators and anomalous gold values at two different targets where further work is ongoing.

CHILE

As previously announced by the Company, two separate agreements were signed during Q2 2015, with CODELCO and with Asset Chile Exploración Minera Fondo de Inversión Privado (“Asset Chile”), for significant extension and advancement of the Anillo project.

The agreement with CODELCO, as announced on November 5th, 2014, extends the term of the Company’s farm-in contract on the Anillo project from 2015 until 2020, with a further option to extend it until 2022.

The agreement with Asset Chile was announced on November 19th, 2014. A Letter of Intent was signed for non-dilutive financing of up to $3.5 million to advance the exploration at the Anillo project. The first of three phases of the work program related to this agreement will consist of a new round of drilling with a budget of approximately $950,000 scheduled to start in the second half of the current fiscal year. Negotiations of the definitive agreements with Asset Chile are progressing at present. Once a definitive agreement is signed, the Company plans to perform CSAMT lines and RC drilling to follow-up and delineate the mineral intercepts obtained at the last drilling campaign, including the west border of the property in the north-south corridor of the Ventura vein new discovery at El Peñon (which was recently announced by Yamana). The Anillo project is located to the northeast of Yamana Gold’s El Peñón operation, a well established and significant gold producer.

Further exploration work at Pantanillo is scheduled to begin in Q3 with very limited capital as the exploration team plans to complete the field categorizing of the porphyry and epithermal targets defined during the past summer season, in line with a priority effort for identifying additional Au oxidized mineral sources to improve the economics of Pantanillo Norte project.

COLOMBIA

At the Anzá project in Colombia, community relations and environmental monitoring and activities continued as per the normal schedule. Technical programs for the next round of exploration work in the Anzá deposit and prioritization of targets are being defined internally and with the aid of consultants. Anzá remains a high priority target for organic growth of the Company.

END

Qualified Person's Statement

The scientific and technical information related to the current assets of Orosur Mining in this press release has been reviewed and approved by Michael Schwabe, an Exploration Consultant who is 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 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.

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

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.

Financial Statements Follow. Please note the accompanying notes included in the unaudited interim consolidated financial statements available on www.sedar.com or the Company’s website are an integral part of these Statements.

 
 

Orosur Mining Inc.

Condensed Interim Consolidated Statements of Financial Position

Thousands of United States Dollars, except where indicated

             
        Note Ref.     As at November 30,

2014 ($)

    As at May 31,

2014 ($)

 
Assets
 
Cash and cash equivalents 6,815 10,818
Accounts receivables and other assets 4 2,791 3,338
Inventories 5 14,969     14,254
Total current assets 24,575 28,410
 
Accounts receivables and other assets 4 414 414
Property plant and equipment and development costs 6 33,576 37,323
Exploration and evaluation costs 7 44,469 35,813
Deferred income tax assets 13 6,063 5,470
Restricted cash 288     258
Total non-current assets 84,810 79,278
       
Total assets 109,385     107,688
 
 
 
Liabilities and Shareholders’ Equity
 
Trade payables and other accrued liabilities 4 14,620 13,343
Current portion of long-term debt 18 2,681 3,978
Environmental rehabilitation provisions 8 598     598
Total current liabilities 17,899 17,919
 
Long-term debt 18 511 961
Environmental rehabilitation provisions 8 5,448     5,828
Total non-current liabilities 5,959 6,789
       
Total liabilities 23,858     24,708
 
Capital stock 9 60,544 55,184
Warrants 11 62 -
Contributed surplus 5,876 5,708
Retained earnings 19,045     22,088
Total shareholders’ equity 85,527     82,980
 
Total liabilities and shareholders’ equity 109,385     107,688
                     
 
   

Approved on behalf of the Board of Directors

     
Ignacio Salazar Chief Executive Officer Daniel J. Moretti Chief Financial Officer
 
 

Orosur Mining Inc.

Condensed Interim Consolidated Statements of Profit (Loss) and Comprehensive Profit (Loss)

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

             

Note Ref.

Three months ended

November 30,

Six months ended

November 30,

   
              2014 ($)   2013 ($)     2014 ($)   2013 ($)
 
Sales 17,404 20,375 33,930 43,320
Cost of sales 20 (18,925)   (16,194)     (35,399)   (36,093)
Gross profit (1,521) 4,181 (1,469) 7,227
 
Corporate and administrative expense (993) (901) (1,875) (1,732)
Exploration and evaluation expenses written off (4) (374) (33) (890)
Other income 200 86 388 126
Finance cost 19 (57) - (152) (120)
Finance income 19 1 1 3 2
Net foreign exchange gain (loss) (29)   (285)     25   13
(882) (1,473) (1,644) (2,601)
 
(Loss) profit before income tax (2,403) 2,708 (3,113) 4,626
 
Recovery (Provision) for income taxes 13 1,159   829     589   (2,125)
Total (loss) profit for the period (1,244)   3,537     (2,524)   2,501
 
Other comprehensive loss
Foreign exchange differences on translating foreign operations (466) - (520) -
               
Total comprehensive (loss) profit for the period (1,710)   3,537     (3,044)   2,501
 
 
(Loss) profit per common share
Basic and fully diluted 17 (0.02) 0.05 (0.04) 0.03
                             
 
 

Orosur Mining Inc.

Condensed Interim Consolidated Statements of Cash Flows

Thousands of United States Dollars, except where indicated

         

 

Note Ref.

Six months ended

November 30,

 

            2014 ($)   2013 ($)

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

 

Cash flow from operating activities

 
Net (loss) profit for the period (2,524) 2,501
Adjustments to reconcile net income to net cash provided from operating activities:
Depreciation 7,682 8,746
Exploration and evaluation expenses 7 30 39
Accretion of asset retirement obligation 8 38 38
Deferred income tax assets 13 (593) 2,162
Stock based compensation 10 74 96
Gain on sale of property, plant and equipment (156) 9
Others (190)   3
Subtotal 4,361 13,594
Changes in operating assets and liabilities
Accounts receivables and other assets 566 240
Inventories (716) 1,894
Trade payables and other accrued liabilities 650   (3,423)
Net cash generated from operating activities 4,861   12,305
 
Cash flow from financing activities
Repayment of long-term debt 18 (2,508)   (1,985)
Net cash used in financing activities (2,508)   (1,985)
 
Cash flow from investing activities
Purchase of property, plant and equipment and development costs 6 (4,506) (1,856)
Environmental tasks 8 (419) (2,276)
Proceeds from the sale of fixed assets 767 -
Exploration and evaluation expenditure assets 7 (2,198)   (3,004)
Net cash used in investing activities (6,356)   (7,136)
 

(Decrease) Increase in cash and cash equivalents

(4,003)

3,184

 
Cash and cash equivalents at the beginning of period 10,818   5,633
 
Cash and cash equivalents at the end of period 6,815   8,817
                   
 
 

      Orosur Mining Inc.

      Condensed Interim Consolidated Statements of Changes in Shareholders’ Equity

      Thousands of United States Dollars, except where indicated

       
Six months ended

November 30,

     
         

2014 ($)

     

2013 ($)

 

Capital stock

Balance at beginning of period 55,184 55,184
Issued for Waymar acquisition   5,360       -
Balance at end of period   60,544       55,184
 
Broker Warrants
Balance at beginning of period - 276
Issued for Waymar acquisition 62 -
Expiration   -       (276)
Balance at end of period   62       -
 

Contributed surplus

Balance at beginning of period 5,708 5,534
Employee stock based compensation recognized 74 95
Issued for Waymar acquisition   94       -
Balance at end of period   5,876       5,629
 

Retained earnings

Balance at beginning of period 22,088 16,965
Warrant expiration - 276
Net loss for the period (2,524) 2,501
Currency translation reserve   (520)       -
Balance at end of period   19,045       19,742
 
 
Shareholders’ equity at end of period   85,527       80,555
 

Orosur Mining Inc
Ignacio Salazar, + 562 2924 6800
Chief Executive Officer
info@orosur.ca
or
Cantor Fitzgerald Europe
Stewart Dickson / Jeremy Stephenson
+44 (0) 20 7894 7000
or
FTI Consulting
Ben Brewerton / Oliver Winters / Sara Powell
+44 (0) 20 3727 1000

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