Orosur Mining Inc. Q1 Results - $6.3M Operating Cash Flow, Operating Cash Costs $754/oz

Orosur Mining Inc. Q1 Results - $6.3M Operating Cash Flow, Operating Cash Costs $754/oz

SANTIAGO, Chile--(BUSINESS WIRE)-- 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 August 31, 2013 ("Q1 fiscal 2014" or "Q1´14").

Highlights

  • Gold production increased 9% from Q1 last year to 16,851 oz
  • Operating cash costs of US$754/oz, representing a 31% reduction from Q1 last year.
  • Average of gold price of US$1,321 (US$1,598 Q1 last year)
  • Cash flow from operations of US$6.3M (US$5.0M Q1 last year) despite reduction in gold price
  • Profit before tax of US$1.9M (US$2.5M Q1 last year) as a result of higher depreciation
  • Open pit mining at San Gregorio will concentrate on Vaca Muerta in the second half fiscal 2014. Preparation is proceeding according to plan, including:
    • Geological model has been re-evaluated
    • Uruguayan environmental agency (Dinama) granted the environmental permit for Vaca Muerta in September 2013
    • 1,700 metresof infill drilling and exploration commenced in October, with the objective of extending mineralization and recategorizing resources
    • Work has commenced to improve ~20km of road, logistics and camp
  • The study of the Recovery of pillars at Arenal Deeps transverse stopes commenced in May 2013 and is under development by AMEC Consulting.
  • During this quarter, near mine exploration focused on the Sobresaliente area and around the San Gregorio operations as well as active satellite projects with the intention of increasing reserves and extending mine life.
  • Uruguayan greenfield exploration has included geological mapping, sampling, geophysics, and shallow drilling in areas with strong potential for economic gold mineralization.
  • Discovery of mineralized intercepts from recent Anillo drilling campaign.

Ignacio Salazar, CEO of the Company, said:

"Orosur is delighted to have achieved operational and organizational improvements which delivered the strong set of operating and financial results in the quarter amidst a difficult gold price environment.The Company continues to strive to achieve further improvements while, at the same time, is methodically developing projects to extend the mine life of our producing assets, San Gregorio and Arenal."

  
Operational & Financial Summary1Q1 - Ended August 31
  Q1 '13/14  Q1 '12/13  Difference  Diff %
Operating Results            
Gold produced  Ounces  16,851  15,451  1,400  9%
Operating Cash cost of gold produced3  US$/oz  754  1,094  (340)  -31%
Average price received  US$/oz  1,321  1,598  (277)  -17%
Financial Results               
Revenue  US$ '000s  22,945  26,334  (3,389)  -13%
Net Income before tax  US$ '000s  1,918  2,502  (584)  -23%
Net income after tax  US$ '000s  (1,036)  2,291  (3,327)  -145%
Cash flow from operations2  US$ '000s  6,314  5,038  1,276  25%
        

 

               
      

August 31,

2013

  

May 31,

2013

  Difference  Diff %
Cash at the end of the period  US$ '000s  6,463  5,633  830  15%
Total Debt at the end of the period  US$ '000s  8,487  8,995  (508)  -6%

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

2014 Outlook

The Company maintains its FY 2014 production forecast of 50,000 to 55,000 oz of gold at operating cash costs of approximately US$850 to US$925/oz of gold. This is equivalent to a reduction of approximately 20% from the US$1,093 per ounce operating cash costs reported for FY 2013. Should the first quarter trend continue, additional benefits may accrue from operational improvement programmes and may allow Orosur to outperform these forecasts.

Q1 Production and Cash Costs

Production for the Q1 ending 31 August 2013 was 16,851 oz of gold, significantly ahead of the Company's previous guidance of some 13,500 to 14,500 oz of gold. These ounces were produced at an average cash operating cost of US$ 754/oz, compared to previous guidance of US$950 to US$1,000/oz of gold for the quarter. When compared against the same quarter last year, production is 9% higher and costs 31 % lower (Q1 '13: 15,451 oz at cash operating cost of US$1,093/oz).

  
 Q1, Ended Aug 31
  2013 Actual  

2013 Guidance

  2012 Actual  Variance
Gold produced  Ounces  16,851  13,500 - 14,500  

15,451

  9%
Cash Operating Cost  US$/oz  754  950 - 1,000  1,094  -31%
        

The increased production and reduced cash costs have been achieved primarily thanks to 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 an overall cost reduction, continued during the quarter, generating further financial and operational improvements.

The Company is optimizing fleet use, improving maintenance and availability and continues to focus on the ongoing productivity of operations. Production of higher grade ore from the tranverse stopes of Arenal Deeps, which commenced at the end of April 2013, resulted in stronger than anticipated production for the quarter, and will be necessary in order for the Company to sustain results of this calibre. Additionally, a stronger than expected US dollar exchange rate (12% appreciation in the quarter) helped mitigate Uruguayan pesos denominated expenditure.

Gold recovery for the quarter was at record highs at 95.7% (compared with 91.7% Q1 '13), primarily as a result of the Company's shift in strategy to feed ore to the plant by source separately. Ore and waste development during the quarter totalled 771 metres length, which is slightly more than anticipated. Ore production from Arenal was 45,550 tonnes at an average grade of 3.66 g/t Au for development and 93,695 tonnes at an average grade of 2.99 g/t Au for stopes. During Q1, Arenal represents 85% of mined ounces and 82% of ounces fed to the mill and plant.

Q1 Financial Summary

The average gold price in the quarter was US$1,321/oz, compared to US$1,598 in Q1 '13 (a reduction of US$277). This reduction was offset by a higher reduction, quarter-on-quarter, of US$340 in operating cash costs ($754 vs $1,094) and 1,400 oz of higher production. As a result, the Company generated a Q1 profit before tax of US$1.9M, compared to a Q1 '13 profit of US$2.5M, with the primary differences including higher depreciation and lower corporate costs. Net loss after tax for the quarter was US$1.0M compared with a net profit US$2.3M in Q1 '13 due to additional tax credits this year. Cash flow from operations for the quarter was US$6.3M compared to US$5.0M for Q1 '13.

The Company invested US$2.5M in capital projects and US$1.5M in exploration for the quarter compared to US$4.7M and US$2.7M respectively in Q1 '13 as a result of lower expenditures in both the Arenal mine development and the Chilean exploration projects. The company's cash balance at August 31, 2013 was $6.5M compared with $5.6M at May 31, 2013. The debt balance was reduced in the quarter by $0.5M.

Q1 Exploration and Development

Recovery of Tranverse Stoping Pillars in Arenal Deeps - A study to recover the pillars in the Arenal Deeps transverse stopes commenced in May 2013 and is under development by AMEC Consulting. Preliminary results are anticipated during the Q2 '14. A positive outcome would increase the Arenal resource by approximately 10,000 - 15,000 oz Au. Any production from these pillars is additional to the Company´s current budget.

AMEC is expected to finalise the study during Q2, with any recovery from the pillars expected to commence in Q4.

Near Mine and Vaca Muerta Development - At Vaca Muerta, the geological model was re-evaluated and 1,700 metresof infill drilling and exploration have been included in the plan for Q2 '14, with the objective of extending the mineralization and re-categorizing resources. The Company aims to exploit Vaca Muerta in the second half of fiscal 2014.

In September 2013, the Uruguayan environmental agency (Dinama) granted the environmental permit for Vaca Muerta. The infill drilling campaign has just started in October 2013 to support metallurgical and geotechnical analysis, and to improve the categorization of resources and reserves. The first drilling of this campaign has thus far verified mineralization, and supported a potential increase in reserves and resources. In parallel with this, the Company is working on improving 20 km of roads, as well as additional logistics and camp facilities.

Uruguay Brownfield and Remnants: Near mine exploration focused during Q1 on the Sobresaliente area and around the San Gregorio operation, where a total of 4,090 metres of RC drilling was conducted in 64 holes at a cost below US$0.3M. As a result, an overall geological resource of approximately 5,500 oz was identified on a preliminary basis (at a cost of approximately ~US$50/oz).

        
AREA  SECTOR  HOLE Nr.  METRES  STATUS
SOBRESALIENTE ESTE  SOBRESALIENTE  4  236  DISCARDED
SOBRESALIENTE CENTRAL  SOBRESALIENTE  36  2541  CONTINUES
SOBRESALIENTE SUR  SOBRESALIENTE  2  139  CONTINUES
SOBRESALIENTE NORTE  SOBRESALIENTE  9  581  DISCARDED
SOBRESALIENTE  SOBRESALIENTE  4  233  CONTINUES
CHIRCA  SAN GREGORIO  2  100  DISCARDED
SANTA TERESA  SAN GREGORIO  4  172  DISCARDED
GUILLO  SAN GREGORIO  -  -  CONTINUES
VETA SUR  SAN GREGORIO  -  -  CONTINUES
MURCIELAGO  SAN GREGORIO  -  -  DISCARDED
VETA REY  SAN GREGORIO  3  88  CONTINUES
 

The project portfolio initially included eleven targets, of which five were discarded due to insufficient results and six continue under review. Preliminary geological resources are distributed at Sobresaliente central (67%), Sobresaliente Norte (15%) and Veta Rey (18%). Veta Rey represents an entirely new mineralized structure that was discovered during this period. Initial drilling includes short conventional drill holes and three RC (Reverse Circulation) holes. The mineralization starts from surface and shows good grade consistency along a relatively smooth dipping structure and continues at depth.

Uruguay Satellite Projects

Currently our advanced satellite projects in Uruguay include Laureles and Mina Peru. The Company plans to advance these projects to development in the next six months. During this quarter, the drilling was concentrated on this group of satellite projects completing 2,763.2 out of a total of 3,548.9 metres in 56 holes at a cost of ~ US$ 80 per meter.

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SATELLITE PROJECTS
PROJECT  HOLES  METRES  MAP&SAMP  GEOPHYSICS  PERMITS
LAURELES  5  521,2  X     OK
VETA A  3  361,2  X     OK
ZAPUCAY OESTE        X     APPLIED
ARGENTINITA SURESTE        X     OK
MINA PERU  32  2242        OK
VACA MUERTA INFILL  7  155        OK
SANTA BARABARA  9  269,5        OK

 

          
 
GREENFIELD AND DISTRICT SCALE PROJECTS
PROJECT  HOLES  METRESMAP&SAMP  GEOPHYSICS  PERMITS
SIETE PORTERAS            APPLIED
MANTO VERDE      X  MAG  APPLIED
DON TITO      X     APPLIED
PAMPAS 2            APPLIED
NUEVA AUSTRALIA      X     OK
RINCON DE LOS CASTILLOS      X  MAG  APPLIED
ARENAL ESTE      X     APPLIED
ARROYO LAURELES      X  MAG  OK
TEXAS      X     OK
ISLA PATRULLA      X     OK
RETAMOSA      X     APPLIED
ARROLLO SOLDADO