Orosur Mining Inc. – Q3 2019 Update and Results

Orosur Mining Inc. (Orosur or the Company) (TSX/AIM: OMI), a South American-focused gold developer and explorer announces the results for the third quarter ended February 28, 2019 (Q3 19 or the Quarter).

HIGHLIGHTS

  • In February 2019, Orosur received US$500,000, being the first of four half yearly cash payments from Newmont Mining Corporation (Newmont) as part of the previously announced Exploration Agreement with Venture Option for the Anz¡ project in Colombia.
  • In March 2019, Minera Anz¡ (Orosurs Colombian subsidiary), received US$240,000 from Newmont Colombia S.A.S., a subsidiary of Newmont, to fund the property maintenance costs in Colombia during the first 6 months of the exploration period (October 2018 to March 2019). This occurred after the end of the Quarter and is therefore not reflected in the Q3 19 balance sheet.
  • In Uruguay, as previously announced, Loryser SA (Loryser), the Companys largest Uruguayan subsidiary, has received to date support from approximately 72% of its creditors by value (comprising 67 different creditors) for its proposed reorganisation agreement (the Agreement). Under the Agreement, Loryser will manage a process, to be completed within two years, whereby the net proceeds from the sale of assets in Uruguay will be used to reclaim and close operations responsibly, and any remaining funds together with the issue of 10 million Orosur common shares will be used to fully satisfy all amounts owing to Lorysers creditors.
  • During Q3 2019, Loryser started part of the work included in the Agreement. This work has included advancing the remediation of the tailings dam and dewatering, taking advantage of the summer months, approximately 700,000 cubic metres, equivalent to 26 hectares of the total 40 hectares covered by the dam. In parallel, Loryser is starting to cover the dry area of the tailings dam with gravel.
  • In March 2019, Loryser executed a brokerage agreement with Savona Equipment Ltd to support the sale of specialized mining equipment of the San Gregorio mine, including its CIL plant, in the international markets.
  • As previously announced, on March 28, 2019, the Arbitral Tribunal in Chile rendered its decision, ruling that Fortune Valley Resources Chile S.A. (FVRC) (an indirect, wholly-owned subsidiary of Orosur) is required to pay Anglo American Inversiones SA approximately US$1.6 million plus interest at Chile´s current interest rate calculated from December 2015 until its effective payment. The Tribunals decision is exclusively against FVRC. Orosur was not named in the decision from the Tribunal. FVRC is evaluating its options with its Chilean lawyers.
  • At February 28, 2019, the Company had a cash balance of US$1.0 million of which US$246k is held by Loryser and not accessible to the Company (November 30, 2018 – $1.0 million; May 31, 2018 – $1.4 million).
  • On April 12, 2019, Mr. Robert Schafer was formally appointed Chairman of the Board of Directors.

Ignacio Salazar, CEO of Orosur, said:

At the end of 2018, the Company managed to close two key strategic agreements which provide a platform to transform Orosur: in Colombia with Newmont and with Loryser creditors in Uruguay. The Company has been working diligently to deliver on both agreements during last quarter and remains committed to its plan to restructure its businesses, and recapitalize and transform the Company.

Outlook and Strategy

During the year ended May 31, 2018, the Board adopted an aggressive strategic plan to restructure its businesses, and recapitalize and transform the Company by advancing its operations in Colombia (now with Newmont as a partner), as well as finding a fair solution in Uruguay for all stakeholders and reducing its activities in Chile. The strategy remains unchanged.

In Colombia, Newmont is performing a strategic review of the Anz¡ project to define an exploration program in the area in cooperation with Orosur.

In Uruguay, Loryser has commenced implementing the Agreement with creditors in anticipation of ratification by the Court. The reorganisation process and the Agreement are subject to consideration by the Court and the Intervenor. The process will continue with the Court confirming that the majorities required for the Agreement were effectively obtained, to be followed by public notice of the Agreement to all interested parties. Provided there is no valid opposition, the ratification process is expected to be completed by the end of the first half of 2019. Once approved by the Court, the Agreement will be legally binding on all Lorysers creditors and Lorysers creditor protection status will cease together with the Intervenors control over Loryser.

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 exploration plans in Colombia and the funding from Newmont of those plans, Newmont´s decision to continue with the option agreement, the ability to continue operations in Uruguay, and the approval by the Court of the Agreement in Uruguay, expectations that the Agreement will become legally binding on all creditors of Loryser and successful emergence from creditor protection proceedings and Intervenor control, and the outcome of the arbitration process in Chile against FV and any effects of that arbitration´s decision to the Company. 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 those as described in Section Risks Factors of the Managements Discussion and Analysis for the three months ended February 28, 2019 and for the year ended May 31, 2018. The Companys continuance as a going concern is dependent upon its ability to obtain adequate financing. These material uncertainties may cast significant doubt upon the Companys 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.

About Orosur Mining Inc.

Orosur Mining Inc. (TSX: OMI; AIM: OMI) is a precious metals developer and explorer focused on identifying and advancing gold projects in South America. The Company operates in Colombia and Uruguay.

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.

Orosur Mining Inc. Condensed Interim Consolidated Statements of Financial Position (Expressed in thousands of United States Dollars) Unaudited

             

As at

   

As at

February 28,

May 31,

2019

2018

 

ASSETS

 

Current assets

Cash and cash equivalents

$

1,033

$ 1,390
Accounts receivable and other assets

928

1,550
Inventories

5,301

6,100
Asset held for sale

      120

Total current assets

7,262

9,160
 

Non-current assets

Accounts receivable and other assets

73

73
Property, plant and equipment

3,261

6,578
Exploration and evaluation assets

9,724

9,755
Restricted cash

49

      201

Total assets

             

$

20,369

    $ 25,767
 

EQUITY AND LIABILITIES

 

Current liabilities

Accounts payable and accrued liabilities

$

20,500

$ 17,845
Current portion of long-term debt

1,711

1,730
Warrants

409

68
Environmental rehabilitation provision

139

      139

Total current liabilities

22,759

19,782
 

Non-current liabilities

Long-term debt

211

211
Environmental rehabilitation provision

5,248

      5,283

Total liabilities

28,218

      25,276
 

Equity

Share capital

65,290

63,290
Contributed surplus

5,965

5,893
Currency translation reserve

(1,037)

(912)
Deficit

(78,067)

      (67,780)

Total equity

(7,849)

      491

 

Total equity and liabilities

             

$

20,369

    $ 25,767
 

The accompanying notes to the unaudited condensed interim consolidated financial statements are an integral part of these statements.

Orosur Mining Inc. Condensed Interim Consolidated Statements of Loss and Comprehensive Loss (Expressed in thousands of United States Dollars) Unaudited

 

Three Months

 

Three Months

 

Nine Months

 

Nine Months

Ended

Ended

Ended

Ended

February 28,

February 28,

February 28,

February 28,

2019

2018

2019

2018

 

Gross profit (loss)

Sales

$

$ 8,555

$

4,202

$ 29,534
Cost of sales

    (9,234)    

(7,119)

    (28,714)
 

Gross profit (loss)

(679)

(2,917)

820
 

Operating expenses

Corporate and administrative expenses

(528)

(382)

(1,569)

(1,776)
Restructuring costs

(81)

(597)

(4,048)

(1,407)
Exploration written off

(28)

(6)

(121)

(32)
Exploration expenses

(1,850)

(417)

(2,012)

(417)
Obsolescence provision

10

(5)

(35)
Other income

1,236

92

1,535

222
Net finance cost

(17)

(63)

(87)

(209)
Care and maintenance

(571)

(1,184)

Loss on fair value of financial instrument

(320)

(341)

(10)
Net foreign exchange gain/(loss)

133

    65    

462

    328

(2,026)

    (1,298)    

(7,370)

    (3,336)

Loss before income taxes

(2,026)

(1,977)

(10,287)

(2,516)
Income tax recovery

   

    (2)

Net loss for the period

$

(2,026)

  $ (1,977)  

$

(10,287)

  $ (2,518)
 
 

Other comprehensive income (loss)

Items that will be reclassified subsequently to income

Cumulative translation adjustment

$

624

  $ 70  

$

(125)

  $ (66)

Other comprehensive income (loss) for the period

624

    70    

(125)

    (66)

Total comprehensive loss for the period

 

$

(1,402)

  $ (1,907)  

$

(10,412)

  $ (2,584)
 

Basic and diluted net loss per share

$

(0.01)

  $ (0.02)  

$

(0.08)

  $ (0.02)
 

Weighted average number of common shares

outstanding

   

150,278

    117,587    

136,774

    113,867
 

The accompanying notes to the unaudited condensed interim consolidated financial statements are an integral part of these statements.

Orosur Mining Inc. Condensed Interim Consolidated Statements of Cash Flows (Expressed in thousands of United States Dollars) Unaudited

 

Nine Months

   

Nine Months

Ended

Ended

February 28,

February 28,

2019

2018

 

Operating activities

Net loss for the period

$

(10,287)

$ (2,518)
Adjustments for:
Depreciation

3,533

5,911
Share-based payments

72

50
Exploration and evaluation expenses written off

121

32
Obsolescence provision

5

35
Fair value of financial instrument

341

(20)
Accretion of asset retirement obligation

57

57
Gain on sale of property, plant and equipment

(902)

(65)
Other

383

(23)
Changes in non-cash working capital items:
Accounts receivable and other assets

622

234
Inventories

794

397
Accounts payable and accrued liabilities    

2,655

      2,212

Net cash provided by (used in) operating activities

   

(2,606)

      6,302

Investing activities

Purchase of property, plant and equipment

(340)

(7,897)
Environmental tasks

(92)

(114)
Proceeds from sale of fixed assets

938

10
Exploration and evaluation expenditures    

(510)

      (4,553)

Net cash used in investing activities

   

(4)

      (12,554)

Financing activities

Issue of common shares

2,000

2,894
Restricted cash

152

Loan payments

(19)

(176)
Investment in Anillo

120

69
Loans received  

      1,500

Net cash provided by financing activities

   

2,253

      4,287

Net change in cash and cash equivalents

(357)

(1,965)

Cash and cash equivalents, beginning of period

   

1,390

      3,357

Cash and cash equivalents, end of period

 

$

1,033

    $ 1,392
 

The accompanying notes to the unaudited condensed interim consolidated financial statements are an integral part of these statements.

Orosur Mining Inc., +1 (778) 373-0100
Ignacio Salazar, Chief
Executive Officer

Ryan Cohen, VP Corporate Development
[email protected]

SP
Angel Corporate Finance LLP,
+44 (0)20 3470 0470
Nominated
Adviser & Joint Broker

Jeff Keating / Stephen Wong

Numis
Securities Limited,
+44 (0) 20 7260 1000
Joint Broker
John
Prior / James Black / Paul Gillam