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Orosur Mining makes light work of underground switch

Overall operations were healthy with US$7mln of cash generated in the first half.

Underground mining
Orosur is a South America focused gold producer....

Orosur Mining Inc (LON:OMI CVE:OMI) operates San Gregorio, Uruguay's only producing gold mine.

Under the firm's re-jigged plan,  the last quarter to November saw it open the San Gregorio Deeps underground project while simultaneously closing the Arenal sections.

The process went as smoothly as it could said Ignacio Salazar, Orosur’s chief executive.

First production from the underground stopes was recorded on 24 November, which was on time and within budget he said, while Arenal was shut without major incident.

The underground mine will require no further external financing and is to be developed using money from the firm's own operations, which seemingly won’t be a problem as cash holdings rose strongly over its last three months.

Shaping up nicely

A higher received gold price also allowed Orosur to post net profits for the second quarter to November of US$942,000 versus an US$870,000 loss a year earlier.

For the half year, net profits came in at US$3.7mln from a US$2.6mln deficit the last time.

Production in the second quarter totalled 6,852 ounces (8,172) as the company cut back ahead of the move deeper at San Gregorio.

Costs were also higher due to the switch underground at US$914 an oz (US$858) due to shifting staff and equipment over.

But that was planned said Salazar and overall operations were healthy with US$7mln of cash also generated in the first half.

Watch: Orosur Mining chief pleased with 'incredibly busy' first half

“The successful transition to San Gregorio UG as the Company’s primary source of ore feed to the plant in Uruguay, was a significant achievement for Orosur,” he added.

Guidance for the full year remains in a range of 35,000 to 40,000 oz of gold at operating cash costs of between $800 - $900/oz.

Rolling in the deeps

House broker Cantor said Orosur made significant progress towards defining new deposits and reserves close to its existing operations over the half year.

Good progress is being made at open pit targets (Mina Peru and extensions to Veta Rey).

Exploration permits have also been granted for Los Naranjos and Nueva Australia, two open pit targets near the processing plant as well as three more new targets near the Sobre Saliente pit.

"We believe this should result in both short and long term increases to the company’s reserve base."

Away from Uruguay, the company is finalising the geological model for the Anza project in Colombia.

While the gold price has been lower since the end of November, the weakness of the pound against the US dollar should mean this has little impact on target price.

“OMI is delivering on its operational and exploration programmes and we reiterate our buy recommendation and TP of 32p ahead of finalising new estimates.”

Shares rose 10% to 16.9p.

Quick facts: Orosur Mining Inc

Price: 30.5 GBX

AIM:OMI
Market: AIM
Market Cap: £48.88 m
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