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Orosur Mining Inc. – Full Year 2018 Results

MEDELLIN, Colombia--(BUSINESS WIRE)--

Orosur Mining Inc. (“Orosur” or “the Company”) (OMI.TO) (OMI.L) announces the results for the fiscal year ended May 31, 2018 (“FY18”). All dollar figures are stated in US$ unless otherwise noted.

FY18 Highlights

Operational

  • FY18 production of 27,586 oz of gold, in line with the updated guidance (27,000 - 30,000 oz), (FY17: 35,371 oz). The grade mined and processed at San Gregorio was lower than anticipated, leading to higher costs and reduced gold production.
  • 875,440 tonnes of ore were processed at a grade of 1.01 g/t with recovery averaging 94.97% (FY17: 978,529 tonnes at a grade of 1.21 g/t with recovery averaging 93.41%).
  • The average gold price realized for the year was $1,280/oz (FY17: $1,258/oz), an increase of 2%.
  • Cash operating costs for the year were $970/oz (FY17: $829/oz), an increase of 17%, due primarily to lower production and lower ore grades. These results are in line with the updated guidance of US$900 – US$1,000oz for the year.
  • All-in-sustaining costs (“AISC”) were $1,453/oz (FY17: $1,228/oz). The increase was due to the higher unit operating costs from the lower ore grades processed during the period and additional brownfield exploration.

Financial

  • Restructuring costs of $2.8mm (FY:nil) were recognized as a provision for layoffs representing a significant reduction in staff which left the Company with 70 employees at the end of July, as part of the initiatives to preserve cash.
  • The Company invested $9.8mm in capital and $5.2mm in exploration (FY17: $10.6mm and $2.6mm, respectively). The Company significantly increased its investment in exploration as a result of the drilling campaign in Colombia.
  • Operating loss of $1.1mm including higher depreciation of $8.9mm. Loss after tax and after impairment and discontinued operations was $36.9mm (FY17: profit of $2.7mm) including the recognition of the provision for layoffs ($2.8mm), write off of exploration projects ($6.0mm), loss for discontinued operation ($6.5mm), impairment ($11.0mm) and obsolescence provision of spare parts and consumables inventories ($4.7mm).
  • Cash flow generated by operations before working capital investment was $3.4mm (FY17: $9.7mm).
    Cash balance at the end of FY18 $1.4mm (FY17: $3.4mm) with net working capital deficiency (current assets less current liabilities including cash) of $10.6mm (FY17: Positive net working capital of $3.1mm). Excluding Loryser assets and liabilities, the Company had total cash and cash equivalents of US$0.1mm at the end of FY18. Total debt of $1.9mm (FY17 $0.4mm). The increase is due mainly to Loryser, the Company’s primary operating subsidiary drawing the $1.5mm line of credit. At present, the Company has a cash balance of $0.45mm and total debt of $1.9mm.

Exploration

  • In Colombia, the Company reported high grade results of its 2018 step-out drilling campaign at APTA including 5.00g/t Au over 23m, 4.89 g/t over 13.9m, 4.86 g/t Au over 25.0m, 9.42g/t Au over 7m, 9,62g/t over 6m and 5.28 g/t over 12m.
  • Drilling extended the mineralized zone at APTA down dip, up dip and along strike. Mineralized zones remain open along strike and at depth at APTA.
  • To date, Orosur has reported 18 holes (MAP_54 to MAP_71) totaling 6,314 metres at APTA and as at June 7, 2018 announced the completion of a further 3,045m of diamond drilling at its Charrascala target successfully encountering gold in the system, including intersects of 3.43 g/t Au and 30.60 g/t Ag over 1.5m and 2.62 g/t Au and 14.30 g/t Ag over 0.90m.

Corporate

  • On June 14, 2018 the Company applied for the Loryser Reorganization Proceedings and creditor protection, in the interest of Loryser, the Company and their stakeholders.
  • Loryser continued production at SG UG until the end of July after which, during August, it is placing the mine in care and maintenance. Loryser will remain able to enter into transactions with its suite of Uruguayan assets. Orosur is currently conducting conversations with the Government and third parties to analyze different options to continue its operations in Uruguay.
  • In Chile, the Company is discontinuing its operational unit. On July 2018, the Company sold its remaining 25% interest in Talca for consideration of $120k. With this sale, the Company is left with no interest or obligation in Talca. In respect of the Anillo project, Asset Chile forfeited the 16% interest it had earned and Fortune Valley returned the project to Codelco.
  • The Company continues to advance discussions to finance the next stage of exploration at the Anzá project in Colombia. In connection with these discussions, and as announced on July 10, 2018, a sophisticated international mining company has advanced $250k to subscribe for 3,603,077 common shares of Orosur at a price of CAD$0.091 per share. The subscription price represents a 102% premium to the closing price of the Company's common shares on the Toronto Stock Exchange on July 9, 2018.

Ignacio Salazar, CEO of Orosur, commented:

“FY18 has been a challenging year for Orosur. The weaker mineralization encountered at our SGW UG mine in Uruguay placed the Company in a precarious situation, leading to weak operating and financial performance for the year and also a number of financial impairments. The Company reacted quickly and decisively; drastically reducing costs and restructuring its various business units. In mid-June, the Company applied to place its key operating subsidiary in Uruguay, Loryser, into voluntary creditor protection. This process is underway and the Company is making every effort to arrive at a fair and balanced plan in the interest of all our stakeholders. In Chile, we have returned the Anillo project to Codelco and sold the remaining 25% interest in Talca.

“In Colombia, the drilling campaign in Anzá resulted in a number of high grade gold intercepts, providing support for our geological model as well as materially extending the known extent of mineralisation. The drilling started in October 2017 and was completed in early June 2018 and the Company has been planning the next stages of exploration as well as hosting advanced negotiations with a sophisticated senior mining company interested in progressing the Anzá project with the Company. This is an exciting development for Orosur and we look forward to updating the market shortly.”

     
Operational & Financial Summary1   Fiscal Year (FY)
ended May 31
  2018   2017   Change
Operating Results
Gold produced   Ounces   27,586   35,371   7,785
Operating Cash cost3   US$/oz   970   829   141
Total Cash cost   US$/oz   989   882   107
AISC   US$/oz   1,453   1,228   225
Average price received   US$/oz   1,280   1,258   22
Financial Results
Revenue   US$ ‘000   37,100   44,226   (7,126)
Net income (loss) before tax   US$ ‘000   (27,180)   2,337   (29,517)
Cash flow from operations2   US$ ‘000   3,361   9,664   (6,303)
     
                 
Cash & Debt at the end of the period   2018   2017   Diff
Cash balance   US$ ‘000   1,390   3,357   (1,967)
Total Debt   US$ ‘000   1,941   403   1,538
Cash net of debt   US$ ´000   (551)   2,954   (3,505)

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.

FY19 Outlook

As a consequence of the weaker mineralization encountered at our SGW UG mine in Uruguay and the consequently difficult financial situation of the Company, the Board adopted an aggressive strategic plan which has been implemented during FY18, with the main objective to restructure its businesses, recapitalize and transform the Company by reducing corporate structure and costs in Uruguay, advancing Colombia and reducing its activities in Chile. In this process, Orosur has been actively considering options and potential partnerships to create shareholder value and is currently in advanced discussions on several alternatives to bolster capital resources to develop its assets.

During FY19, the Company expects to produce between 2,500 - 3,500 ounces of gold, with operating costs of US$1,000 - US$1,100 per ounce from the San Gregorio mine in Uruguay in Q119, after which point all production is expected to be ceased and is not expected to resume in FY19, with operations placed on care and maintenance. All future production shall depend on material developments in the funding and environmental permitting of the Veta A Underground project in Uruguay and the ongoing discussions with the government of Uruguay and other third parties.

Orosur is focusing on financing the next stages of exploration of the high grade Anzá project in Colombia and is in the process of advancing a strategic alliance with a sophisticated international mining Company.

The Company anticipates that reaching a fair and balanced solution in Uruguay in the interest of all our stakeholders while partnering and advancing the next stages of exploration at the Anzá project will be the primary focus of the Company during FY19.

END

Qualified Person

The technical information related to the current assets of Orosur in this announcement has been reviewed and approved by independent Mining engineer Miguel Fuentealba, a qualified person as defined by National Instrument 43-101.

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 in Colombia and Uruguay.

Forward Looking Statements

All statements, other than statements of historical fact, contained in this news release constitute "forward-looking statements" within the meaning of applicable securities laws, including but not limited to the "safe harbour" provisions of 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. Forward-looking statements include, without limitation the expected completion of a US$250,000 subscription for common shares, the negotiation and execution of definitive agreements with respect to the Anzá project, the ability to advance the Anzá property, the approval of the TSX and other approvals, the ability to continue operations in Uruguay, and the ability to find a fair and balanced reorganisation plan in the interests of all stakeholders. There can be no assurance that such statements will prove to be accurate. Actual results and future events could differ materially from those anticipated in such forward looking statements. Such statements are subject to significant risks and uncertainties including the outcome of current discussions and negotiations with respect to the Company’s assets in Uruguay and Colombia, the results of future exploration in Colombia, the ability to successfully permit and develop the Veta A underground project and other risks and uncertainties which are described in Section 8 of the Q4 2018 Management Discussion and Analysis. The Company’s continuance as a going concern is dependent upon its ability to obtain adequate financing and to reach profitable levels of operations. These material uncertainties may cast significant doubt upon the Company’s ability to realize its assets and discharge its liabilities in the normal course of business and accordingly the appropriateness of the use of accounting principles applicable to a going concern. Although the Company has been successful in the past in obtaining financing there is no assurance that it will be able to obtain adequate financing in future or that such financing will be on terms advantageous to the Company. 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.

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 Ryan Cohen, VP Corporate Development of the Company (responsible for arranging release of this announcement on behalf of the Company) on: +1 (778) 373-0100.

Financial Statements Follow –

 

Orosur Mining Inc.

Consolidated Statements of Financial Position

(Thousands of United States Dollars, except where indicated)

   
    As at May 31 2018($)   As at May 31 2017($)
 
Assets
Cash 1,390 3,357
Accounts receivable and other assets 1,550 1,519
Inventories 6,100 13,157
Asset held for sale 120   -
Total current assets 9,160 18,033
 
Accounts receivable and other assets 73 550
Property plant and equipment and development costs 6,578 16,160
Exploration and evaluation costs 9,755 17,677
Deferred income tax assets - 3,115
Restricted cash 201   229
Total non-current assets 16,607 37,731
 
Total Assets 25,767   55,764
 
Liabilities and Shareholders’ Equity
Trade payables and other accrued liabilities 17,845 14,518
Current portion of long-term debt 1,730 202
Warrants 68 -
Environmental rehabilitation provision 139   243
Total current liabilities 19,782 14,963
 
Long-term debt 211 201
Environmental rehabilitation provision 5,283   5,405
Total non-current liabilities 5,494 5,606
     
Total liabilities 25,276   20,569
 
Capital stock 63,290 61,162
Contributed surplus 5,893 5,836
Deficit (67,780) (30,913)
Currency translation reserve (912)   (890)
Total shareholders’ equity 491   35,195
 
Total liabilities and shareholders’ equity 25,767   55,764
 

Orosur Mining Inc.

Consolidated Statements of Profit/(Loss) and Comprehensive Profit/(Loss)

(Thousands of United States Dollars except for earnings per share amounts)

     
For the years ended May 31   Note   2018 ($)   2017 ($)
 

Sales

37,100

44,226

Cost of sales (38,170)   (40,271)
Gross profit/(loss) (1,070) 3,955
 
Corporate and administrative expenses (2,231) (2,037)
Restructuring costs (2,840) 143
Exploration expenses (207) -
Exploration and evaluation costs written off (5,999) (131)
Impairment of assets (11,083) -
Inventory write-downs (1,161) -
Obsolescence provision (4,678) (113)
Other income 995 1,525
Finance cost net (177) (164)
Gain/(loss) on fair value of financial instruments, net 680 (458)
Foreign exchange gain/(loss) 591   (383)
(26,110) (1,618)
Profit/(loss) before income tax (27,180) 2,337
 
Recovery (expense) for income taxes (3,121) 557
     
Total profit/(loss) for continuing operations (30,301)   2,894
 
Other comprehensive profit/(loss)  
Cumulative translation adjustment (22)     93
 
Total comprehensive profit/(loss) from continuing operations (30,323)     2,988
 
Loss from discontinued operations (6,544) (310)
       
Total comprehensive loss from discontinued operations (6,544) 2,678
       
Total comprehensive (loss)/ profit for the year (36,867)     2,678
 
Basic and diluted net profit/(loss) per share
Continuing operations (0.26) 0.03
Discontinued operations (0.06) (0.00)
 

Orosur Mining Inc.

Consolidated Statements of Cash Flows

(Thousands of United States Dollars, except where indicated)

     
For the years ended May 31   Note   2018 ($)   2017 ($)
 
Net inflow (outflow) of cash related to the following activities
 
Cash flow from operating activities
Net profit/(loss) for the year (36,845) 2,585
Adjustments to reconcile net income to net cash provided from operating activities:
Depreciation 8,901 7,143
Impairment of assets 11,083 -
Inventory write-downs 1,161 -
Exploration and evaluation costs written off 5,999 131
Loss from discontinued operations 6,544 310
Obsolescence provision 4,678 113
Fair value of derivatives (399) 458
Accretion of asset retirement obligation (10) 18
Deferred income tax assets 3,115 (581)
Stock based compensation 57 93
Loss/(gain) on sale of property, plant and equipment (828) (241)
Other (95)   (55)
Subtotal 3,361 9,664
Changes in working capital
Accounts receivable and other assets 112 (211)
Inventories 1,217 (1,200)
Trade payables and other accrued liabilities 3,146   3,932
Net cash generated from operating activities 7,836   12,185
 
Cash flow from investing activities

Purchase of property, plant and equipment and development costs

(9,712) (10,621)
Payments for environmental rehabilitation (122) (213)
Proceeds from the sale of fixed assets 782 240
Exploration and evaluation expenditure assets (5,183)   (2,604)
Net cash used in investing activities (14,235)   (13,198)
 
Cash flow from financing activities
Proceeds from private placement, net of issuance costs 2,894 -
Loan proceeds 1,740 320
Loan payments (202)   (270)
Net cash generated from financing activities 4,432   50
 
Decrease in cash (1,967) (963)
 
Cash at the beginning of year 3,357   4,320

Cash at the end of year

1,390

 

3,357

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