LONDON (Alliance News) - South America-focused gold miner Orosur Mining Inc on Thursday said it swung to a huge pretax loss in the year to the end of May, driven by impairments it booked on exploration properties and as gold production dropped and the price it achieved for that gold fell.
The developments prompted Orosur to slash its financial year 2016 production guidance and say that the current year will be focused on cost cutting.
Orosur said its pretax loss for the year to May 31 was USD49.4 million, compared to a USD3.7 million profit a year earlier, primarily thanks to the group booking USD27.9 million in impairment charges on exploration projects, particularly the Platanillo project in Colombia, the economics of which have been severely damaged by the fall in the gold price during the period.
Revenue for the group dropped to USD65.9 million from USD80.4 million, as gold production fell to 53,485 ounces from 60,271 ounces a year earlier and the average gold price it achieved slid to USD1,232 per ounce from USD1,298 per ounce.
Though the fall in production in the year was in line with its guidance for 50,000 to 55,000 ounces, the cost cutting the group it embarking upon in the current financial year meant it has slashed its production guidance for the 2016 financial year to only 30,000 to 35,000 ounces, down from 50,000 to 55,000 previously.
Orosur will also seek to cut its all-in sustaining costs this year to USD1,000 to 1,100 per ounce, down from its previous guidance of USD1,100 to 1,200 per ounce. For the 2015 financial year, its all-in sustaining costs rose to USD1,185 per ounce, up from USD1,049 per ounce a year earlier.
The group said the cost-cutting will be driven by optimised mine plans for its open pits and for the Arenal Deeps project in Uruguay, which will result in production falling from its open pits and from Arenal. It said it hopes the changes made will make the company more resilient to any future declines in the gold price.
"Whilst the company has been successful in implementing numerous programmes to improve operations and reduce costs during the past two years, results have been affected by the continuing decline of the gold price. Our focus for 2016 is cost reduction, profitable operations and cash preservation, and the steps required to implement this are actively being put in place at present," said Ignacio Salazar, Orosur's chief executive.
"Challenging markets aside, in a difficult gold price environment, Orosur delivered a solid 2015 performance and our intention remains to work decisively and efficiently for the benefit of our shareholders," Salazar added.
Shares in Orosur were down 10% to 6.27 pence on Thursday morning.
By Sam Unsted; samunsted@alliancenews.com; @SamUAtAlliance
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Orosur Mining (OMI)