Orosur Mining Inc (TO:OMI): Q117 results have provided a solid start to FY17 and bode well for the company achieving its end year guidance of 40koz Au produced at cash costs of between US$800/oz and US$900/oz. Q117 cash costs were 13% below the lower bound of this guidance. Alongside its ongoing strong operational performance, exploration results for San Gregorio highlight the resource potential close to existing infrastructure, which should prove favourable for a much needed upgrade to San Gregorio’s reserve base. This note covers Q117 results (which were in line with our forecasts) and focuses on exploration results and how we consider they de-risk our valuation and extend the valuation time frame, from FY20 to FY22.
Mine costs decline, AISC stable below US$1,000/oz
During Q117 San Gregorio produced 9,950/oz Au at cash operating costs of US$693/oz, a 38% reduction on a like-for-like basis and continuing the longer-term trend of improvements to mine site costs (FY15: US$912/oz; FY16: US$877/oz). All-in sustaining costs (AISC) for Q117 were US$989/oz, a 15% reduction on a like-for-like basis, and the third straight quarter of AISC below US$1,000/oz. These ongoing cost reduction trends are highly supportive of the company maintaining profitability at current gold prices and funding (from mine cash flow) additional exploration activities both at and around San Gregorio, as well as starting to realise value from its Anza asset in Colombia. We consider that Anza (which we have never included a value for) provides a clear opportunity on tapping this politically stabilising and highly prospective country.
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