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Press Release: Orosur Mining Inc. - Q3 2017 Results & Operations Update; YTD: $4.1M Profit, $8.7M Cash From Operations & First Quarter of New San Gregorio West UG Mine Production

3 Apr 2017 6:00 am

Orosur Mining Inc. - Q3 2017 Results & Operations Update; YTD: $4.1M Profit, $8.7M Cash From Operations & First Quarter of New San Gregorio West UG Mine Production
SANTIAGO, Chile--(BUSINESS WIRE)--April 03, 2017-- 

Orosur Mining Inc. ("Orosur" or "the Company") (TSX/AIM: OMI), the South American-focused gold producer, developer and explorer is pleased to announce its unaudited results for the third quarter ended February 28, 2017 ("Q3 17" or the "Quarter") and an update of its exploration and development activities. All dollar amounts referred to in this announcement are stated in US dollars.

OPERATIONAL HIGHLIGHTS
   -- Successful completion of first full quarter of production of Orosur's new 
      mine, San Gregorio West Underground ("SGW UG"). 
 
   -- Availability of services at SGW UG, such as water, power, access and 
      ventilation as well as operational factors such as fortification and 
      development works have been implemented successfully. 
 
   -- Q3 2017 production was 7,820 oz of gold, in line with the 7,274 ounces 
      produced during Q3 2016, and also in line with full year guidance of 
      35,000 to 40,000 oz. The Company views this positively considering 
      production is typically lower during the ramp up of new mines. 

FINANCIAL HIGHLIGHTS
   -- Quarterly cash operating costs were $858/oz (6% reduction from Q2), in 
      line with expectations and guidance for FY 17, which remains $800 to 
      $900/oz. As of a result of the additional development capex associate 
      with the SGW UG mine, including ramp, access and ventilation shaft work, 
      All-In-Sustaining Costs ("AISC") were $1,289/oz compared to $978 oz in Q3 
      16. 
 
   -- Year to date ("YTD") aggregate capex of $9.0M due to the Company's higher 
      than anticipated investments following the exploration successes at SG UG 
      East and Central and the Company's strategy to develop a larger UG mine 
      at and around SGW. 
 
   -- The Company remains committed to developing SG UG without any external 
      funding as planned and the total cash balance at Quarter end was $2.4M 
      (compared to FY 16: $4.3M),with total debt remaining at $0.2M compared to 
      $0.4M at May 31, 2016. 
 
   -- Cash generated from operations YTD amounts to $8.7M (YTD 16: $5.9M). 
 
   -- YTD net profit after tax is $4.1M (YTD 16: profit of $0.5M). 
 
          -- Average gold price of $1,198/oz compared with $1,143/oz during Q3 
             2016 

OUTLOOK
   -- Exploration drilling in and around the San Gregorio UG area has yielded 
      positive results, successfully intersecting gold mineralization in every 
      hole, which is expected to significantly enhance mine economics and 
      increase reserves and resources in the short and medium term. Further 
      drilling is underway and ongoing. 
 
   -- In Colombia, the Company finalized a geological model of its high grade 
      Anzá gold project to determine the exploratory potential with the 
      assistance of Mine Development Associates ("MDA") of Reno, Nevada. The 
      results of this work were announced on January 19th, 2017. 
 
   -- The Anzá project includes a gypsum mine, which has environmental and 
      mining permits granted by the Colombian authorities. As previously 
      announced, Orosur has recently taken over operatorship of the mine. The 
      gypsum permits can be readily expanded for additional tonnage, providing 
      the ability for Orosur to fast-track permitting for future gold mining 
      operations. 

Ignacio Salazar, CEO of Orosur, said:

"Operations remain healthy and profitable, with $8.7M of cash generated in the first three quarters of our fiscal 2017. We are especially pleased with progress so far given this is the first quarter with SGW UG as the Company's primary source of ore feed to the plant in Uruguay, achieving a unit operating cost of $858/oz in the Quarter despite the normal constraints associated to the initial months of operation of a new mine.

As previously announced, SGW UG has been financed entirely from operational cash flow and the Company aims to maintain this financial discipline in its future expansion into SG UG East and Central, with the objective of developing a larger UG mine in, around and below the current SGW UG.

In Colombia, we have made significant progress in the geological interpretation and modelling of our high grade Anzá gold project and we plan to commence a 15,000m - 30,000m drilling campaign. We are excited to be moving this project forward since taking over operatorship of the gypsum mine, which has now resumed operations after finalizing remediation work and improved operational standards during the quarter. With exploitation permits in place, the existing gypsum can be readily expanded, enabling Orosur to fast-track future gold mining operations."
 
 
Operational & Financial 
 Summary(1) 
 
                               Q3 17  Q3 16   Diff    YTD 17  YTD 16   Diff 
Operating Results 
---------------------------    ---------------------  ------  ------  ------- 
Gold produced         Ounces     7,820  7,274    546    24,623  27,917  (3,294) 
Operating cash 
 cost(3)              US$/oz      858    803     55      807     886     (79) 
AISC                  US$/oz     1,289   978     311    1,184   1,096     88 
Average price 
 received             US$/oz     1,198  1,143    55     1,263   1,131     132 
----------------    -----------  -----  -----  -------  ------  ------  ------- 
Financial Results 
(unaudited) 
---------------------------    ---------------------  ------  ------  ------- 
Net profit after 
 tax                 US$ '000     363   3,071  (2,708)  4,064    475     3,589 
Cash flow from 
 operations(2)       US$ '000    1,674  4,804  (3,130)  8,703   5,902    2,801 
----------------    -----------  -----  -----  -------  ------  ------  ------- 
 
                               Feb.    May 
Cash & Debt Summary             28,    31, 
(unaudited)                    2017   2016    Diff 
---------------------------    -----  -----  ------- 
Cash balance         US$ '000    2,400  4,320  (1,920) 
Total debt           US$ '000     161    352    (191) 
Cash net of debt     US$ '000    2,239  3,968  (1,729) 
 
 
 
(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. 
 
 

Q3 2017 Operations and SGW Development

Q3 2017 production was 7,820 oz of gold, in line with the 7,274 oz produced during Q3 2016.

In Q2 2017 the Company transitioned from Arenal UG to SGW UG, following which Q3 2017 saw commissioning of the SGW UG new mine concluded successfully. Availability of services such as water, power, access and ventilation as well as operational factors such as fortification and development works have been implemented with approximately 60% of gold production for the Quarter coming from the SGW UG mine in this, its first quarter in production. Typically ore production and operational efficiencies are lower at the start of any new mine, especially underground operations, due to the low operational flexibility given the lack of available production stopes. As the SGW UG mine development advances, efficiency is expected to improve and the Company expects to see improvements as early as Q4 2017.

Q3 2017 Financial Summary

Average cash operating costs were of $858/oz, compared to $803/oz in Q3 2016. As previously announced in the Company's Q2 2017 results, with the new SGW UG mine commencing production in the Quarter, unit costs have begun to gradually reduce (cash operating costs in Q2 2017 were: $914/oz) and the Company expects the same trend to continue in Q4 2017 given more available production stopes and higher grades from SGW UG.

During the Quarter, the Company invested $3.2M in capex and $0.4M in exploration compared to $0.9M and $0.6M, respectively, in Q3 2016. The bulk of the investment for the construction of the SGW UG mine was concentrated in Q2 and Q3 2017 including work related to the ramp, access and the ventilation shaft. In addition, the Company completed construction of phase 4A of the tailings dam during the Quarter. As a result of the additional capex in SGW UG and phase 4A of the tailings dam, AISC were $1,289/oz compared to $978/oz in Q3 2016. This marks a reduction compared with Q2 2017 ($1,345/oz); a trend the Company expects to continue in Q4 2017 and beyond.

The average gold price realized for the Quarter was $1,198/oz (Q3 2016: $1,143/oz).

Net profit after tax was $0.4M compared to a profit of $3.0M in Q3 2016. The difference in profit between the two quarters was mainly due to the benefit of $2.5M recognized during Q3 2016 as a result of the settlement with the Government of Uruguay for the elimination of the benefit relating to the export of industrialized goods, as previously announced.

YTD profit after tax was $4.0M compared to a profit of $0.5M in the same period of the previous fiscal year. The improvement is mainly due to a higher realised price of gold ($1,263/oz) compared to ($1,131/oz) and lower overall costs of sales, which have been partially offset by lower relative production for the period; overall, resulting in more profitable production (Contribution margin YTD 2017: $9.3M compared to $5.2M in YTD 2016).

Cash flow from operations before working capital variations was $1.7M compared to $4.8M in Q3 2016 (which also included the $2.5M settlement explained above). YTD 2017 cash flow from operations before working capital variations was $8.7M compared to $5.9M for the prior year due to better operating performance in YTD 2017 as explained above.

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