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Orosur Mining prioritising profit over production at San Gregorio

In addition to the redesign of underground production in San Gregorio, the company has implemented a number of initiatives to preserve cash

Drilling rig
Initial work indicates Veta A is currently the highest grade source of underground ore available on the San Gregorio mine complex

Orosur Mining Inc (CVE:OMI, LON:OMI) is targeting the lower end of its production guidance at San Gregorio as it focuses on profitability over production.

The company said it expects to produce 30,000 ounces of gold at San Gregorio in Uruguay in the current financial year, which runs to the end of May.

READ: Orosur Mining updates on second quarter production issues

Production in the second quarter of the financial year totalled 7,052 ounces, bringing the year-to-date total up to 15,677 ounces, down from 16,802 ounces in the same period of last year.

The company left its annual guidance for cash operating cost of US$800 - US$900 per ounce, after the operating cash cost in the second quarter narrowed to US$867 per ounce from US$914 per ounce the year before.

Operating profit at San Gregorio in the three months to the end of November was US$3.42mln, up from US$2.26mln in the corresponding period of 2016.

The company posted a loss before tax of US$251,000, however, compared to a profit of US$942,00 the year before, mainly due to higher depreciation and the recognition of a provision for staff retrenchments following the second production deferral at San Gregorio West underground (SGW UG).

The miner ended the reporting period with net cash of US$291,000, down from US$4.2mln at the beginning of the quarter. It is focused on preserving cash, and cut staffing levels by 11% at the end of November.

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 mine complex.

Veta A was previously mined as an open pit, producing 29,000 ounces (oz) with an average grade of 3.1 grams per tonne (g/t) between September 2006 and March 2008. Current reserves are 9,440 oz (122,328 tonnes @ 2.40 g/t gold).

Orosur 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 currently defined reserves. A preliminary study by SRK Consulting at Veta A supports its geotechnical feasibility.

READ: Orosur Mining hits high grade gold at Anzá in Colombia

It said it expects to conclude the first phase of drilling at the APTA zone, which is part of the Anzá project in Colombia next month. Additional drill results are expected by the end of February.

“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,” said Ignacio Salazar, the chief executive officer of Orosur.

“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,” he added.

“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.

“In addition to APTA, and in respect of the broader Anzá potential, four high priority targets with coincident geochemical and geophysical anomalies, remain untested,” Salazar concluded.

Quick facts: Orosur Mining Inc

Price: 29.5 GBX

Market: AIM
Market Cap: £47.28 m

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