Orosur Mining Inc. - H1 & Q2 2018 Results
Orosur Mining Inc. - H1 & Q2 2018 Results
MONTEVIDEO, Uruguay, January 15, 2018. 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
first half of its fiscal 2018 (“H1 18”) and second quarter ended November, 2017 (“Q2 18” or the “Quarter”). All
dollar figures are stated in US$’000 unless otherwise noted.
EXPLORATION AND DEVELOPMENT HIGHLIGHTS
• Drilling in the APTA portion of the Anzá gold project in Colombia commenced in October 2017, with first
drill results announced on November 14, 2017, including 5.32m at 17.76 g/t in hole MAP -54. Depth
potential is being confirmed with gold mineralization intersected down to 200m. Mineralized zones remain
open.
• In Uruguay, a final infill drilling campaign and block model were finalised for San Gregorio Central (“SGC”),
with mine development planned to start in Q3 18.
• The Company is accelerating the preparation and permitting of Veta A Underground, a new underground
project with higher grades next to the San Gregorio CIL Plant.
• The deadline for Asset Chile to move into Phase 2 in Anillo expired on December 31, 2017 unexercised.
As a result, Asse t Chile will forfeit the 16% interest it had earned and Orosur is currently evaluating
strategic alternatives to move ahead with the project with external and non-dilutive funding.
OPERATIONAL HIGHLIGHTS
• Extended downtime of two long hole drill rigs used in stope production at the SGW UG mine caused the
deferral of 2,000 ounces of production planned for Q2 18. Development activities continued as planed at
the SGW UG mine and the Company resumed full underground production by the end of November.
• Q2 18 production was 7,052 oz of gold, compared to 6,852 oz in Q2 17. As a result of the Company’s
focus on profitability and not purely ounces produced, the Company is targeting the lower end of its
production guidance at San Gregorio for FY18, being 30,000 ounces of gold.
• Average cash operating cost was $867/oz, compared to $914/oz Q2 17. The Company expects to achieve
its annual guidance for cash operating cost of US$800 - US$900 per ounce.
• The Uruguayan government continues to demonstrate its support for the Company wit h an exemption
granted on royalty payments (equal to 3% of sales) for the period April 2017 to March 2018. This is forecast
to total approximately US$1.0 million.
• All-In-Sustaining Costs (“AISC”) were $1,455/oz compared to $1,345/oz in Q2 17, an increase of 8%. The
increase was predominantly due to higher development, brownfield exploration and the construction of the
fourth phase of the tailings dam.
FINANCIAL HIGHLIGHTS
• Operating profit of the San Gregorio operation was $3,423 compared to an operating profit of $2,261 in
Q2 17. The improvement mainly due to lower operating costs.
• Loss after tax was $251 compared to a profit of $942 in Q2 17. This was mainly due to higher depreciation
and the recognition of a provision for staff retrenchments following the Q2 production deferral at SGW UG.
• Cash flow from operations before changes in working capital was $2,160 compared to $2,234 in Q2 17.
• The Company invested $3,359 in capital expenditures and $1,704 in exploration compared to $3,835 and
$609 respectively in Q2 17. The Company significantly increased its investment in exploration and
development in Uruguay with the aim of expanding reserves.
• The Company’s cash balance at November 30, 2017 was $2,064 compared to $3,357 at May 31, 2017.
The deferral of approximately 2,000 ounces of planned production for the Quarter from the SGW UG mine
caused the Company to draw on the full Santander line of credit in the amount of $1,500 during the
Quarter.
• The committed line of credit with Banco Santander available as at November 30, 2017 was renewed for
another year (until November 30, 2018).
Operational & Financial Summary1
Q2 18 Q2 17 Diff YTD 18 YTD 17 Diff
Operating Results
Gold produced Ounces 7,052 6,852 200 15,677 16,802 (1,125)
Operating cash cost3 US$/oz 867 914 (47) 886 783 103
AISC US$/oz 1,455 1,345 110 1,422 1,135 287
Average price received US$/oz 1,299 1,252 47 1,277 1,290 (13)
Financial Results (unaudited)
Net profit/(loss) after tax US$ ‘000 (251) 942 (1,193) (542) 3,701 (4,243)
Cash flow from operations2 US$ ‘000 2,160 2,234 (74) 3,614 7,029 (3,415)
Cash & Debt Summary (unaudited) Nov. 30,
2017
Aug 31,
2017
Diff Nov. 30,
2017
May 31,
2017
Diff
Cash balance US$ ‘000 2,064 4,533 (2,469) 2,064 3,357 (1,293)
Total debt US$ ‘000 1,773 330 1,443 1,773 403 1,370
Cash net of debt US$ ‘000 291 4,203 (3,912) 291 2,954 (2,663)
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.
H2 OUTLOOK
SG UG is a continuation at depth of the San Gregorio open pit deposit, which produced approximately 536,000
oz at an average grade of 2.12 g/t Au. Since November 2016, SGW UG 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 SGC is scheduled to commence. SGC is planned to be the main source of underground ore
feed to the plant during H2 18.
Isometric view of the San Gregorio main Pit and SG underground deposits. Not to scale.
During Q2 18, 792 metres of diamond core were drilled around the San Gregorio West underground mine
aimed at improving accuracy and planning of the mining in this sector. A 250 metre development access ramp
is necessary to fully access SGC from the SGW UG mine and is under construction. The block model for SGC
was finalized in Q2 18, and shows that the mineralized structure is less economically viable at current gold
prices at depth and to the East based on reductions in both ore grade and thickness. Due to this, and amongst
other measures, the Company has been working with SRK Peru in order to optimize the mineplan for SGC,
with a special emphasis on profitability following the deferral of product ion from SGW in Q2 18. The new
design concentrates mining on the upper levels of the mine to minimize additional and uneconomic
development. Additionally, an existing crown pillar between the open pit and the UG mine is being evaluated
for potential inclusion in the mine plan.
The Company is accelerating the preparation and permitting of Veta A, a new underground project that is 1.2
kilometres from the plant, for development. Initial work indicates Veta A is currently the highest grade source
of underground ore available on the San Gregorio m ine 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. Current
reserves are 9,440 oz (122,328 tonnes @ 2.40 g/t Au). The Company is targeting a significant increase in
reserves following a positive drilling campaign that proved the continuity and extension of the ore body over
140 metres from the current defined reserves. A preliminary study by SRK Consulting at Veta A supports its
geotechnical feasibility.
In addition to the redesign of underground production in San Gregorio , the company has implemented a
number of initiatives to preserve cash. These include an 11% staff reduction at the end of November , the
recently granted royalty exemption by the Uruguayan Government for a one year period and the deferral of
planned greenfield exploration in Uruguay.
Orosur remains focused on profitability over production and as a result is targeting the lower end of its
production guidance at San Gregorio for FY18 at 30,000 ounces of gold , while maintaining its operating cash
cost guidance of between US$800 – US$900/oz. The Company continuously considers and analyses strategic
options to develop its Uruguay, Colombian and Chilean assets to create shareholder value.
The Company expects to conclude its first phase of drilling at the APTA zone, which is part of the Anzá project
in Colombia next month . Additional drill result s are expected by the end of February. As announced in
November 2017, preliminary results from the current drilling campaign have demonstrated APTA’s potential
at depth, with gold mineralization intersected to 200m, and along strike. The broader Anzá potential (beyond
APTA) has yet to be tested at any of the four high priority identified targets with coincident geochemical and
geophysical anomalies.
Map showing APTA and Charrascala targets with the status of the drilling campaign.
Geological map of Anzá property showing its multiple targets
with coincident surface geochemical and geophysical anomalies
Ignacio Salazar, CEO of Orosur, said:
“The Company is concentrating on advancing exploration in Colombia while maintaining profitability in
Uruguay. We have built the SGW UG mine, entirely financed from cash from operations, while advancing
exploration and development around it. SGC is well under way and on track to commence production during
Q3 18 and we are swiftly advancing a new higher grade underground mine at Veta A. While we are taking
some tough measures to implement this plan, we are getting some initial results already and are proud to
count on the support of the Uruguayan government which granted us a second, and unprecedented, annual
royalty exemption.
As announced in November, preliminary results in Colombia from the current drilling campaign validate the
APTA gold potential. Depth potential has been confirmed at APTA with gold mineralization intersected down
to 200m. Mineralized zones remain open. We plan to update the market in the next several weeks. In addition
to APTA, and in respect of the broader Anzá potential , four high priority targets with coincident geochemical
and geophysical anomalies, remain untested.”
Potential for a New UG Mine: Veta A Underground
Historically, Veta A was a relatively small high grade open pit, located next to the now reclaimed San Gregorio
tailings dam, which was in operation from September 2006 until March 2008. The Veta A open pit produced
approximately 29,000 oz at average gold grades of 3.10 g/t.
Veta A Deposit Located at San Gregorio mine complex
As open pit mining progressed, the mineralized body appeared to run underneath the tailings dam. When
operations approached this physical barrier, mining was halted and the pit was backfilled with waste and then
reclaimed.
A preliminary geotechnical stud y of the Veta A deposit was performed by SRK Consulting during the first
Quarter with positive results. During Q2 2018, drilling continued at Veta A, with 968 metres drilled (adding up
to a total 1,665 metres drilled to date for this campaign). The results are encouraging. Drilling interceptions
to date are shown below:
HOLE From (m) To (m) Metres Au g/t
VADD17-006 161.9 168.6 6.7 5.0
VADD17-007 165.2 167.1 2.0 3.3
VADD17-008 125.0 131.1 6.1 2.6
VADD17-009 170.5 175.3 4.9 1.8
VADD17-010 107.7 109.7 2.0 0.4
VADD17-011 107.6 110.2 2.6 5.8
VADD17-012 124.4 130.8 6.4 1.7
VADD17-013 97.5 99.0 1.5 1.5
VADD17-014 96.30 97.70 1.4 0.7
VADD17-015 155.4 157.0 1.6 1.6
VADD17-016 133.6 136.7 3.1 3.4
All 11 holes drilled to date at Veta A intersected mineralization, confirming the extension of the mineralized
body for at least 140 metres downhole. The best mineralization intercepts show the continuity of the
Veta A
San Gregorio OP & UG
Reclaimed tailings dam
CIL Plant
mineralized trend to the south -west down -deep. This indicates the strong potential for an increase in the
volume of the mineralized structure, which may materially increase current reserves , albeit requiring further
work.
The block model was updated in -house during Q2 18 and a mine plan design is in progress to advance with
the feasibility study.
Isometric view showing increased geological potential in green, currently tested potential in orange with the DD holes
drilled on H1 and the current design. Not to scale.
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. Reserves and
Resources stated in this announcement have the meaning ascribed to such terms under N.I. 43-101, and have
been prepared on such basis and published in the Company’s annual information form dated August 29, 2017.
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.
For further information, please contact:
Orosur Mining Inc
Ignacio Salazar, Chief Executive Officer
Tel: +1 (778) 373-0100
Cantor Fitzgerald Europe – Nomad & Joint Broker
David Porter/Keith Dowsing
Tel: +44 (0) 20 7894 7000
Numis Securities Limited – Joint Broker
John Prior / James Black / Paul Gillam
Tel: +44 (0) 20 7260 1000
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 some of which are desbcribed in Section 8 of the Q2 2018 Managem ent
Discussion and Analysis, 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 proces ses 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.