FY 2014 Results: US$24M Cash Flow from Operations, US$9M Increase in Net Cash
Orosur Mining Inc. (‘OMI’ or ‘the Company’) (TSX:OMI) (AIM:OMI), the South American-focused gold producer, developer and explorer is pleased to announce the results for the fiscal year ended May 31, 2014.
Highlights
- Gold production of 60,271 oz ahead of upgraded guidance (55,000 – 60,000 oz).
- Cash operating costs reduced by 28% to US$792/oz (2013: US$1,093/oz) beating upgraded guidance.
- All-In-Sustaining costs reduced by 34% to US$1,049/oz (2013: US$1,601/oz).
- Average gold price received of US$1,298/oz (US$1,605 in 2013).
- Net Profit after tax of US$5.1 M (2013: loss of US$14.8M).
- Cash Flow from operations increased by 13% to US$23.9M (2013: US$21.2M).
- Net cash increased by US$9.2M with a cash balance of US$10.8M and total debt of US$4.9M as at May 31, 2014 (Net cash of US$5.9M).
- San Gregorio Mine life extended after addition of 75,000 oz to reserves at key projects.
- The San Gregorio-Arenal trend in Uruguay has been delineated over an approximate 200m wide corridor and along an extension of approximately 10 km with six initial targets defined to date.
- Exploration models have been advanced in Chile at minimal cost with the results at Quebrada Pantanillo consistently supporting the existence of a high sulphidation epithermal system and a structural interpretation study at Anillo which has defined six domains and several new targets.
- Acquisition of Waymar Resources Ltd. closed on July 9, 2014, adding the high grade Anzá gold exploration project in Colombia to Orosur’s exploration portfolio.
Ignacio Salazar, CEO of Orosur, said:
“Orosur is pleased to have achieved strong 2014 operating and financial results, delivering ahead of guidance given for production and cash costs. We have been able to generate operating cash flow of some US$24 million, 13% more than we generated in 2013 despite a significantly lower gold price environment.
“Whilst implementing numerous programmes to improve operations during a year of significant change for Orosur, we successfully executed the exploration and development work necessary to extend San Gregorio´s mine-life and grow our reserve base. Guided by disciplined capital investment evaluations, progress has been made at delineating the Arenal-San Gregorio mineralised corridor in Uruguay and in defining additional targets at our Chilean explorations assets.
“After financing all our growth programs internally, Orosur still improved its net cash position by US$9 million during the year. Beyond our current assets, the recent acquisition of Waymar Resources has added an attractive high grade exploration asset with significant upside in Colombia in the Anzá project. We are delighted to deliver progress across these areas and our intention remains to work efficiently and diligently for the benefit of our shareholders. We look forward to the year to come.”
Results Conference Call
Orosur will be hosting a conference call for analysts and investors to discuss the FY 2014 results, please find details for the call below:
| Time & Date: | 18th August 2014 | |
| 4.00pm British Summer Time | ||
| 11:00am Eastern Standard Time | ||
| 8:00am Pacific Standard Time | ||
| Dial-In: | Canada: + 1 (514) 841 2196 | |
| United States: +1 (718) 873 9077 | ||
|
| London: +44 (0) 20313 94830 | |
| Passcode: | 68606095# | |
| Operational & Financial Summary1 | Fiscal Year (FY) ended May 31 | |||||||
| 2014 | 2013 | Change | ||||||
| Operating Results | ||||||||
| Gold produced | Ounces | 60,271 | 64,994 | (4,723) | ||||
| Operating Cash cost3 | US$/oz | 792 | 1,093 | (301) | ||||
| Average price received | US$/oz | 1,298 | 1,605 | (307) | ||||
| Financial Results | ||||||||
| Revenue | US$ ‘000 | 80,370 | 105,884 | (25,514) | ||||
| Net income (loss) after tax | US$ ‘000 | 5,123 | (14,825) | (19,948) | ||||
| Cash flow from operations2 | US$ ‘000 | 23,885 | 21,209 | 2,676 | ||||
| Cash & Debt at the end of the period – Summary | 2014 | 2013 | Diff | |||||
| Cash balance | US$ ‘000 | 10,818 | 5,633 | 5,185 | ||||
| Total Debt | US$ ‘000 | 4,939 | 8,995 | (4,056) | ||||
| Cash net of debt | US$ ´000 | 5,879 | (3,362) | (9,241) | ||||
| 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. |
FY2014 & Q4 Production and Cash Costs
The constant emphasis on cost control adopted since May 2013 has delivered strong results in the fourth quarter and the financial year as a whole. Operational improvements introduced in ore control, mine planning, modelling and operations were important factors in delivering FY 2014 results which beat the upgraded guidance figures provided to the capital markets.
Cash operating costs for the year were US$792/oz compared to US$1,093/oz in FY 2013. This represents a decrease of 28% and is also lower than the upgraded cash cost guidance of US$800-875/oz.
A strong performance at Arenal in the second half (H2) and especially in Q4, with higher production than expected, helped the Company to beat the upgraded targets that were given at the half year.
All-In-Sustaining costs have been US$1,049/oz in FY2014 compared to US$1,601/oz in FY2013.
| Full Year | Upgraded | Original Full | ||||||
| Gold produced | Ounces | 60,271 | 55,000-60,000 | 50,000–55,000 | ||||
| Cash Operating cost | US$/oz | 792 | 800-875 | 850-925 | ||||
| Q4 Actual | H2 Outlook | H2 Actual | ||||||
| Gold produced | Ounces | 15,319 | 23,320-28,320 | 28,590 | ||||
| Cash Operating cost | US$/oz | 844 | 850-1,000 | 820 | ||||
FY 2015 Outlook & Guidance
The Company's forecast production guidance for FY 2015 is between 50,000 to 55,000 ounces of gold at operating cash costs of between US$850 to US$950 per ounce. FY 2015 Production from Arenal Deeps is expected to contribute approximately 70-75% of total gold production, with open pit mining contributing the balance of the production profile.
The Company’s 2015 guidance is in line with the original guidance adopted in FY 2014, which were upgraded and beat, however the Company considers it prudent to maintain similar targets, as external factors are expected to contribute to cost appreciation and lower production grades are anticipated in the mining plan for the year. The United States Dollar:Uruguayan Peso exchange rate has remained relatively stable over the last several years despite the varying inflation rates between these two currencies. While this exchange rate is not sustainable in the long run and the Company is expected to get the benefit of the depreciation of the Peso at some stage, this has not been included in the current plan. Having said this, the Company expects to maintain the level of savings achieved since 2013 and plans to continue its operational improvement program focused on sustainable cost cutting measures and driving ongoing operational efficiencies.
As in the past, variations in production and unit costs will occur quarter on quarter as the mine plan draws ore from several Arenal stopes with different grades, positions and sizes, changing the level of access required as well as the addition of ore from several open pits at varying grades and stages of stripping. The Company plans to achieve its production and cost targets over the course of the year and is expecting higher unit cash costs in the first half of the year compared to the second half based on the current planned mining sequence.
FY 2014 Financial Summary
FY 2014 cash flow generated from operations before working capital was US$23.9M (FY 2013: US$21.2M). This increase was realized despite an average gold price in FY 2014 of US$1,298/oz compared to US$1,605/oz in FY2013.
FY 2014 Corporate expenses were US$3.5M compared to $5.3M in FY 2013, representing a 35% reduction as a result of the overall drive to sustainably reduce costs. This reduction was achieved by reducing or cancelling non essential activities or services, doing internally services performed in the past by consultants, renegotiating fees and working more efficiently.
FY 2014 profit after tax was US$5.1M, compared with a loss of US$14.8M in FY 2013.
The Company invested US$7.3M in capital and US$6.6M in exploration in FY 2014 compared to US$22.0M and US$9.2M respectively in FY 2013. The decrease in capital expenditure is as a result of the Arenal underground mine moving from development into production, as well as more efficient exploration expenditures.
Orosur’s cash position as at May 31 2014 was US$10.8M (FY 2013: US$5.6M) with total debt of US$4.9M (FY 2013: US$9M). The Company is following the contracted schedule of lease repayments with HSBC and Banco Santander and expects to almost entirely repay these facilities and be practically debt free by end of FY 2015. Net working capital (current assets less current liabilities including cash) was US$10.5M in FY 2014 (FY 2013:US$4.3M). The Company has US$3.0M of commited but undrawn lines of credit available at May 31, 2014 and at present is not planning to utilize them within the current development plans and gold price environment.
Q4 Development and Exploration
During the year, the Company has been systematically identifying new gold resources, and converting them to reserves. As a result, the Company has created a portfolio of projects to develop around San Gregorio which have extended its life of mine. The Company’s objective remains to sustainably carry out sufficient exploration to maintain a four-to-six year rolling reserve, as it has done for many years now.
As previously announced, the Company successfully added 40,000 oz of gold reserves from pillar-less mining using Cemented Rock Fill at the Arenal Deeps Mine in Q2, and 9,000 oz of gold reserves at Vaca Muerta following the results of an infill drilling campaign during Q2 and after re-optimizing the mineral reserves calculations using a US$1,200/oz gold price during Q3.
In addition, on the basis of historical drilling since 2006 and following a 4,886m exploration drilling campaign in Q4, the Company has successfully added an additional 11,000 oz of gold reserves in the Laureles open pit and 27,000 oz of resources (note that all resources are stated inclusive of reserves). The cost of the drilling campaign is equivalent to US$22/oz of reserves. The Laureles project is situated approximately 18 km north-east of the San Gregorio plant. Orosur continues its brownfield exploration program during FY14–15 around Vaca Muerta, Laureles as well as some secondary targets around the San Gregorio facility and on the Zapucay cluster.
The recent 2,504 m brownfield exploration drilling campaign in Arenal Deeps, below and along strike of the Arenal Deeps underground mine was conducted from underground platforms and targeting three different zones with potential mineralization, in close proximity to the current underground operations. As a result, Orosur has added 18,000 oz of resources and 15,000 oz of reserves. Additional exploration, targeting mineralization further along strike as well as at depth is planned to continue in FY 2015 at Arenal, with 2,300m of drilling focused on four additional blocks aimed to add similar geological resources to those added in the FY 2014 campaign.
In total, the Company added 75,000 oz of reserves to its main projects during FY 2014, thereby extending the minelife at San Gregorio to approximately 4 years.
Uruguay Development Projects
In additional to the brownfield exploration and development work in the above-mentioned open pits and at Arenal, the Company is carrying out modelling and engineering work on the San Gregorio deposit, aimed at delineating a significant geological resource adjacent to the existing open pit as well as evaluation an underground project at Veta A. The current potential of the underground project at Veta A Deeps was calculated using a cut-off of 1.71 g/t Au with a total of 138 kt @ 2.55 g/t Au for total resources of approximately 11,000 oz. Management believes that there is ample room for adding reserves to these projects and is evaluating potential synergies and optimal sequencing of these two projects as they are located within 1 km of each other.
Uruguay Greenfield Exploration
The Company’s exploratory efforts during Q4 continued to focus primarily on the high grade granulite basement and specifically on the corridor of the Santa Teresa, San Gregorio and Arenal Shear Zone (“SGSZ”), with a low cost surface exploration program to identify new mineralization centers along the historically poorly defined and mostly hidden south east extension of the SGSZ. This zone was delineated in 2014 within an approximate 200m wide corridor and along an extension of approximately 10 km. Six initial targets have been defined on this highly prospective potential belt and a program of 2,000m of DDH drilling, planned as a first pass campaign, started during Q4 and continues at present.
Additionally, in the Sobresaliente District, four target zones were identified and are currently under review. Mineralization is hosted in irregular, pod like bodies that require a more robust geophysical analysis as well as further drilling to delineate.
The recently acquired L-500 diamond rig is operational and supporting all surface exploration drilling. The incorporation of this drill rig is not only providing flexibility but also reducing the Company’s drilling costs.
Chile
In Chile, activities were concentrated on surface exploration at Quebrada Pantanillo and at Anillo. The goal is to acquire valuable data and information that contributes to advancing the current exploration models at minimal cost.
Work at Quebrada Pantanillo consisted of surface delineation work including mapping, a groundmagnetic 3D inversion model, spectrometry, geochem reinterpretation and three CSAMT sections. Results from this data consistently support the existence of a high sulphidation epithermal system.
At Anillo, the Company completed a structural interpretation study by Nick Olivier which defined six domains and several new targets.
There were no significant additional activities in Chile during Q4.
Colombia
The acquisition of Waymar Resources Ltd. by way of a plan of arrangement closed after the FY 2014 year end on July 9, 2014, on schedule and within budget as already announced. The integration of the Anzá project and the team within Orosur progressed smoothly and has now completed. The Anzá gold exploration project is an attractive high grade asset with significant upside. There are several targets in Anzá at different stages of development. In FY 2015, Orosur is planning to review and advance the technical evaluation of the various options in Anzá to plan and define the upcoming round of drilling in Colombia, and re-constitute the local team during the second half of the year.
END
Qualified Person's Statement
The information presented in this press release has been reviewed by Walter Muehlebach, GM Exploration of OMI and by Francisco Castillo, GM San Gregorio and they are both considered to be in compliance with N.I. 43-101 reporting guidelines. Mr. Muehlebach is a graduate in Geology of the Universidad Católica del Norte (Chile) and a member of the Chilean Comisión Calificadora de Competencias en Recursos y Reservas Mineras, and has 23 years of experience in the field of mineral exploration. Mr. Castillo is a graduate in Mining Engineering of the Universidad de Santiago de Chile and a member of the Chilean Comisión Calificadora de Competencias en Recursos y Reservas Mineras, and has 12 years of professional experience.
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, 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 processes 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.
Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
About Orosur Mining Inc.
Orosur Mining Inc. is a fully integrated gold producer, developer and exploration company 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. The Company is quoted in Canada (TSX: OMI) and London (AIM: OMI).
For more information please visit www.orosur.ca
- Financial Statements Follow –
| Orosur Mining Inc. | ||||||||
| Consolidated Statements of Financial Position | ||||||||
| Thousands of United States Dollars, except where indicated | ||||||||
| As at May 31 | As at May 31 | |||||||
| Assets | Notes | |||||||
| Cash and cash equivalents | 10,818 | 5,633 | ||||||
| Accounts receivable and other assets | 5 | 3,338 | 3,776 | |||||
| Inventories | 6 | 14,254 | 15,715 | |||||
| Total current assets | 28,410 | 25,124 | ||||||
| Accounts receivable and other assets | 5 | 414 | ||||||
| Property plant and equipment and development costs | 7 | 37,323 | 47,321 | |||||
| Exploration and evaluation costs | 8 | 35,813 | 31,686 | |||||
| Deferred income tax assets | 14 | 5,470 | 5,305 | |||||
| Restricted cash | 258 | 332 | ||||||
| Total non-current assets | 79,278 | 84,644 | ||||||
| Total Assets | 107,688 | 109,768 | ||||||
| Liabilities and Shareholders’ Equity | ||||||||
| Trade payables and other accrued liabilities | 5 | 13,343 | 16,665 | |||||
| Financial debt | 20 | 3,978 | 4,172 | |||||
| Environmental rehabilitation provisions | 10 | 598 | ||||||
| Total current liabilities | 17,919 | 20,837 | ||||||
| Financial debt | 20 | 961 | 4,823 | |||||
| Environmental rehabilitation provisions | 10 | 5,828 | 6,148 | |||||
| Total non-current liabilities | 6,789 | 10,971 | ||||||
| Total liabilities | 24,708 | 31,808 | ||||||
| Capital stock | 11 | 55,184 | 55,184 | |||||
| Warrants | 12 | - | 276 | |||||
| Contributed surplus | 12 | 5,708 | 5,535 | |||||
| Retained earnings | 22,088 | 16,965 | ||||||
| Total shareholders’ equity | 82,980 | 77,960 | ||||||
| Total liabilities and shareholders’ equity | 107,688 | 109,768 | ||||||
| Orosur Mining Inc. | ||||||||||
| Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) | ||||||||||
| (Thousands of United States Dollars except for earnings per share amounts) | ||||||||||
| 2014 ($ | ) | 2013 ($ | ) | |||||||
| For the years ended May 31 | Note | |||||||||
| 80,370 | 105,884 | |||||||||
| Sales | ||||||||||
| Cost of sales | 22 | (72,905 | ) | (97,657 | ) | |||||
| Gross profit | 7,465 | 8,227 | ||||||||
| (3,498 | ) | (5,303 | ) | |||||||
| Corporate and administrative expense | ||||||||||
| Exploration expenses and exploration write off | 8 | (245 | ) | (4,282 | ) | |||||
| Impairment of assets | 9 | (557 | ) | (14,057 | ) | |||||
| Obsolescence provision | 9 | (22 | ) | - | ||||||
| Uncollectible Receivables | (45 | ) | - | |||||||
| Other income | 1,139 | 589 | ||||||||
| Finance cost | 21 | (670 | ) | (261 | ) | |||||
| Finance income | 21 | 4 | 8 | |||||||
| Derivative income | 16 | 0 | 41 | |||||||
| Net foreign exchange gain (loss) | 91 | (603 | ) | |||||||
| (3,803 | ) | (23,868 | ) | |||||||
| Profit (loss) before income tax | 3,662 | (15,641 | ) | |||||||
| Income tax recovery | 14 | 1,461 | 816 | |||||||
| Total income (loss) and comprehensive income (loss) for the year | 5,123 | (14,825 | ) | |||||||
| Earnings per common share | ||||||||||
| Basic | 19 | 0.07 | (0.19 | ) | ||||||
| Diluted | 19 | 0.07 | (0.19 | ) | ||||||
| Orosur Mining Inc. | ||||||||||
| Consolidated Statements of Cash Flows | ||||||||||
| Thousands of United States Dollars, except where indicated | ||||||||||
| For the years ended May 31 | Note | 2014 ($) | 2013 ($) | |||||||
| Net inflow (outflow) of cash related to the | ||||||||||
|
| ||||||||||
| Cash flow from Operating activities | ||||||||||
| Net income (loss) for the year | 5,123 | (14,825 | ) | |||||||
| Adjustments to reconcile net income to net cash | ||||||||||
| Depreciation | 7 | 18,738 | 19,712 | |||||||
| Impairment of assets | 7 | 557 | 14,057 | |||||||
| Exploration and evaluation expenses written off | 8 | 219 | 4,217 | |||||||
| Fair value of derivatives | 16 | - | (41 | ) | ||||||
| Accretion of asset retirement obligation | 10 | 231 | 76 | |||||||
| Deferred income tax assets | 14(b) | (165 | ) | (1,663 | ) | |||||
| Stock based compensation | 12 | 175 | 151 | |||||||
| Gain on sale of property, plant and equipment | 7 | (706 | ) | (509 | ) | |||||
| Others | (287 | ) | 34 | |||||||
| Subtotal | 23,885 | 21,209 | ||||||||
| Changes in operating assets and liabilities | ||||||||||
| Accounts receivable and other assets | 78 | 897 | ||||||||
| Inventories | 1,462 | 1,393 | ||||||||
| Trade payables and other accrued liabilities | (3,324 | ) | (2,267 | ) | ||||||
| Net cash generated from operating activities | 22,101 | 21,232 | ||||||||
| Cash flow from Financing activities | ||||||||||
| Proceeds from the exercise of share options | - | 70 | ||||||||
| Loans received | 20 | - | 4,713 | |||||||
| Loan payments | (3,854 | ) | (1,518 | ) | ||||||
| Net cash from financing activities | (3,854 | ) | 3,265 | |||||||
| Cash flow from Investing activities | ||||||||||
| Purchase of property, plant and equipment and development costs | (4,762 | ) | (21,088 | ) | ||||||
| 7 | ||||||||||
| Enviromental tasks | 8 | (2,572 | ) | (960 | ) | |||||
| Proceeds from the sale of fixed assets | 847 | 969 | ||||||||
| Exploration and evaluation expenditure assets | 8 | (6,575 | ) | (9,246 | ) | |||||
| Net cash used in investing activities | (13,062 | ) | (30,325 | ) | ||||||
| Increase / Decrease in cash and cash equivalents | 5,185 | (5,828 | ) | |||||||
| Cash and cash equivalents at the beginning of year | 5,633 | 11,461 | ||||||||
| Cash and cash equivalents at the end of year | 10,818 | 5,633 | ||||||||
| Orosur Mining Inc. | ||||||||||
| Consolidated Statements of Changes in Shareholders’ Equity | ||||||||||
| Thousands of United States Dollars, except where indicated | ||||||||||
| For the years ended May 31 | Note | 2014 ($) | 2013 ($) | |||||||
| Capital stock | ||||||||||
| Balance at beginning of year | 55,184 | 55,074 | ||||||||
| Exercise of stock options | - | 70 | ||||||||
| Transfer from contributed surplus for exercise of options | - | 40 | ||||||||
| Balance at end of year | 55,184 | 55,184 | ||||||||
| Broker warrants | ||||||||||
| Balance at beginning of year | 276 | 276 | ||||||||
| Warrant expiration | (276 | ) | - | |||||||
| Balance at end of year | - | 276 | ||||||||
| Contributed surplus | ||||||||||
| Balance at beginning of year | 5,534 | 5,424 | ||||||||
| Employee stock based compensation recognized | 12 | 174 | 151 | |||||||
| Transfer to Capital stock | - | (40 | ) | |||||||
| Balance at end of year | 5,708 | 5,535 | ||||||||
| Retained earnings | ||||||||||
| Balance at beginning of year | 16,965 | 31,790 | ||||||||
| Net income for the year | 5,123 | (14,825 | ) | |||||||
| Balance at end of year | 22,088 | 16,965 | ||||||||
| Shareholders’ equity at end of year | 82,980 | 77,960 | ||||||||
Contact
Orosur Mining Inc
Ignacio Salazar, + 562 2924 6800
Chief Executive Officer
info@orosur.ca
or
Cantor Fitzgerald Europe
Stewart Dickson / Jeremy Stephenson / Carrie Lun
Tel: +44 (0) 20 7894 7000
or
FTI Consulting
Ben Brewerton / Oliver Winters / Sara Powell
Tel: +44 (0) 20 3727 1000