Buy The Dip



“Orosur?s Q4 and FY 2016 results will be announced on or around August 16th 2016”

Assuming flat production and average Gold price of ~$1,240/oz [Q4 is to 31st May]
anticipate net cash of at least $5-mn.


Dear Two Sporrans

What did you think of the results?
Why did it only increase its net cash by $.7m?
Conference call this pm will be on the web site


Good Morning Mr. Business

I’m OK with the results; not too peeved the net cash didn’t build ~$5-mn during Q4.

As to why the meagre $0.7-mn increase, I’ve only scan read what’s been issued; not gone through details that methodically.

Hard to pick out an explanation from annualised figures with no discrete Q4 given.

But, the clue is surely in the higher AISC figure for the year than what was achieved in H1 which was below $1,000/oz.
The overall AISC to end of May was $1,069 /oz; so the H2 must have risen to something well over $1,100/oz; maybe around $1,150/oz.

Well this might explain much of it, albeit obliquely:
“The Company completed an assessment of the carrying value of its cash generating units (?CGUs?) as at May 31, 2016, and as a result, has recorded a non-cash impairment charge of US$4.2M for property, plant and equipment and development costs (FY15: 14.7M). The impairment was driven by changes in reserve estimations as the company enters the final stages of the Arenal Deeps project. Arenal Deeps is expected to reach the end of its mine life by mid-FY17. No impairment was recorded for other property, plant and equipment and development costs. Additionally, the Company wrote off US$351k for exploration properties (compared to US$27.9M in the prior year)”

So, what we have is a one-off write-off charge of $4.2-mn for Arenal Deeps, as it has less than a year of production [but note: may get extended following further development] remaining, despite most of equipment going to the SG underground mine.

The charge can’t have directly impacted on the cash situation but indicates that maybe Orosur have burnt some cash on the SG development beyond what they anticipated when they last reported; i.e. the “synergies” refered to below have been a lot less than expected:
"The development and startup of the SGW UG mine benefited from synergies with the?closing of?the Arenal UG operation, which is planned to complete during H1 FY17. As a result, Capex is expected to be minimized and personnel and equipment have started to be shifted from Arenal to San Gregorio. By phasing the development of SGW UG with the closure of Arenal Deeps, the Company intends to fund the development with internal cash and cash flow. "

That’s my preliminary take.

Gotta go now.



wrt post below, responding to mrbusiness, scrub my comments about the AISC.

I think the rest is valid.

Regards the AISC, the $1076/oz FY figure is within the guidance $10000-1100 and is OK.
Actually more than OK for Q3+Q4 as the AISC:
“reduced below US$1,000/oz in Q3 and Q4,”

Anyway, the prognosis is quite promising given the production target has been raised to
£35-40k pa, even though Arenal [as far as currently developed] will exhaust in mid 2017.
Salazar has a history of conservative forecasting.
Production from open pits may be raised quite a lot more if the POG can stay at or above these levels for rest of 2016.
Seems that Salazar is reluctant to gamble on this; hence the modest increase in the target.



Thank you. So do you think Salazar is right that the company is still undervalued? What do you think the prospective PE is at the current POG?



I have found the answer to my own question, see below, following yesterday’s results:

"While our estimates will need some adjustments, based on a US$1,321/oz gold price we are currently forecasting a significant increase in OMI’s earnings next year, placing OMI on multiples of just 1.2x EV/EBITDA [enterprise value/underlying earnings] and 2.4x P/E [price/earnings] despite the share price having doubling in the past 12 months. Hence, we believe there must be more upside to the share price from this level and we reiterate our BUY recommendation and TP [target price] of 32p.? said Cantor?s Robin Byde.