For the Brave - Goodbye



Sold out of these a few months back, having held some for several years.

Main reason was that OMI remains a high risk/geared play on a high/rising gold price and the prospects for the POG to soar are far from compelling for the foreseeable future.
I doubt the POG will now go much above $1,300/oz at all this year; OMI only becomes truly attractive at ~$1,400+/oz.

The other main reason is the lack of much in the way of a pipeline of reserves.
While I don’t doubt more will be found in Uruguay, the decent grades will require a series of underground developments for which the CAPEX will pretty much exhaust the cashflow generated at ~$1,250/oz POG.
Alternatively, Orosur could go for further open cast pit development-production, with much lower CAPEX but the grades are almost invariably much lower and just the operational costs will be ~$1.100/oz or higher from the past several years experience.
So, either which way or blend there-of, the AISC looks to be ~$1,200/oz, if all goes to par, without any serious mishap, [San Gregorio underground-pit-series output basis] over next 2-3 years; could well be higher.
Conceivably an AISC of $1,100/oz or even a tad under may be achieved; I’m not at all confident it will.
The sub $1,000/oz AISC reported by ORosur over patches of the past 2 years looks a headfake to me; it’s only achieved between the serial pit development phases.
During the development phases, [every 12-18 months pretty much], the CAPEX ramp sends the AISC over $1,300/oz.
Orosur’s figures, not my supposition!

As for the other Assets:

  1. Well, Anza may be the future but not without a load of CAPEX and that will either mean a shed load of debt at risk premium rates or Capital raising and the spectre of share dilution or a mix of the 2.
    Best of luck with that.
    But maybe with a decent JORC the asset could be sold for $several-mn profit and could finance a phase of in-depth exploration and development in Uruguay, in the IC belt where the mill and current ops are focused.
    Makes sense from the management/employees/Uruguayan perspective; keep jobs, salaries + maybe share option profits and tax revenues flowing.

  2. As for Anillo, well it’s very unlikely to be a latent El Penon; far more hope than realistic expectation of a bumper find.
    Orosur let Pantanillo go for nothing, despite having proved there were extensive and accessible ores there to mine, albeit of low grade.
    They spent $millions on exploration there, probably over $10-mn over several years.
    OMI were telling investors for years that the asset was commercially viable for production at POG>$1,200/oz.
    No surprise they let Pantanillo go quietly; especially given the previous debacle of Talca which wrote off ~$13-mn from memory.

Well, that’s that as far as I’m concerned.
Best of luck if you’re still holding; think you’ll need that if the POG doesn’t at least average $1,300/oz the next 2-3 years.