Orosur Mining Regulatory News (OMI)

13 Jan 2011 07:00

Orosur Mining Inc. ("OMI" or "the Company"), today announced results for the second fiscal 2011 quarter ended November 30, 2010.

Results for the Second Quarter Ended November 30, 2010

David Fowler, Chief Executive Officer commented: "We have completed another solid quarter with 12,576 ounces of gold produced. This was in accordance with expectations of between 12,000 and 13,000 ounces. Cash costs per ounce at US$790 were better than expected. Cashflow from operations at San Gregorio was US$ 5.1 million this quarter at an average gold price of US$ 1,332 per ounce.

Good progress was made on finalizing plans for the development of Arenal Deeps. A development contract for Arenal Deeps was awarded to Redpath, an experienced underground contractor, and we anticipate commencing development in February 2011 with a progressive ramp up in ore production from mid calendar 2011. We look forward to the successful implementation of the Arenal Deeps project as we believe that it will provide significant opportunity to develop other underground ore sources and further extend mine life.

We are also pleased with exploration progress during the quarter including the discovery of significant gold mineralization at our Vaca Muerta project approximately 85 km from San Gregorio. Follow-up drilling has confirmed and extended this mineralization and additional targets along strike and around Vaca Muerta are expected to be tested in the second half of the 2011 fiscal year. "

Production and costs

Production for the quarter of 12,576 ounces of gold resulted from processing 373,135 tonnes of ore through the plant at an average grade of 1.12 g/t au and at a 93.3% recovery.

Cash costs per ounce of gold for the quarter were US$ 790 compared to US$ 871 for the same quarter last year. The reduction in costs is a consequence of mining fewer tonnes and cost reduction initiatives, including better rates negotiated with mining contractors and rebuild of major components in-house.

With production for the first half in line with expectations, the Company confirms its forecast production for the 2011 financial year at 55,000 ounces of gold, which means a production of approximately 29,500 ounces of gold in the second half compared to 25,513 ounces of gold in the first half of the financial year. Higher grade ore is expected to be processed in the second half of the year to meet the 55,000 ounce target for the full year.

Despite lower Q2 cash costs of US$ 790, the Company maintains its target cash cost per ounce of approximately US$ 825 for the year as the Uruguayan Government is expected to implement an increase in royalties to be applied from January 2011.

Financial Performance

Total sales for the quarter were US$ 16.6 million compared to US$ 14.8 million for the corresponding period of the previous year. The average gold price for the quarter increased to US$ 1,332 per ounce from US$ 1,065 in the second quarter of the previous year. For the quarter, net income after tax was US$ 2.7 million compared to US$ 0.7 in the corresponding period of the prior year.

Cash flow from operations includes the results from the San Gregorio operation less the cost of general and administrative expenses, interest and income taxes. During the quarter, cash flow generated from operations before working capital movements was US$ 5.1 million compared to US$ 1.8 million in the corresponding quarter of the previous year.

Exploration expenditure for the quarter was US$ 1.9 million compared to US$ 1.7 million for the corresponding quarter of the prior year.

The cash position of the group at the end of the quarter was US$ 13.9 million. The cash balance increased by US$ 3.2 million during the quarter.

Exploration and Development

Arenal Deeps

On December 21, 2010, the company announced the approval of the Arenal Deeps project by its Board of Directors and the execution of a Letter of Intent with Redpath (Redpath Chilena Construcciones y Compañía Limitada, a member of the Redpath Group of companies) for the mine development contract. A definitive agreement is expected to be signed early in 2011 with targeted commencement of development in February 2011, following equipment delivery and final environmental permitting.

The contract will involve the development of approximately 2 km's of decline, 8 km's of lateral development and stope preparation and this work is expected to be completed in approximately 30 months. Ore mining will be performed by Orosur and this is expected to start in the second half of calendar 2011 concurrently with development.

The Company submitted a request for an environmental permit for the Arenal Deeps project on April 30, 2010 and is in the process of obtaining the environmental approvals for the project from DINAMA, the relevant authority in Uruguay, by early calendar 2011.

At current gold prices the project can be funded from cashflow from operations and modest debt levels. Orosur has received a number of preliminary debt funding offers for the project and expects to close financing arrangements for $US5 million to $US10 million of debt funding in Q1 of calendar 2011.

Uruguay Brownfields Exploration - Sobresaliente

The Sobresaliente gold deposit is located 5 km north of the San Gregorio Operation and comprises four discrete gold deposits.. These deposits have been formed in granite at the intersection of two regional structural trends and the deformation has produced intense cataclasis, brecciation and quartz veining along zones in excess of 100 m wide and approximately 1.0 km long.

A drilling program started in December 2010 on the Sobresaliente project. The purpose of this program is to infill known mineralization, test along-strike extensions of the known ore bodies, improve the category of the resource and locally check the geologic and structural model. Approximately 5,000 meters are planned in three progressive stages.

There currently are 16,000 ounces of measured and indicated resources and 1,800 ounces of inferred resource in three of the four defined deposits at Sobresaliente. These resources were defined using a gold price of US$ 650 per ounce and an assumed gold recovery of 70%. Additional metallurgical tests completed in the first half of the financial year suggest improved recoveries in the 80% range and a more comprehensive test work program is planned following the current drilling.. The Company is initially targeting the expansion of existing resources and will concurrently evaluate the possibility of developing Sobresaliente into a bulk tonnage-low grade operation.

Uruguay Greenfields Exploration - Vaca Muerta

Vaca Muerta is located 85 kilometers east of the Company's San Gregorio gold mine in northern Uruguay in the Isla Cristalina Belt. Vaca Muerta mineralization is similar in style to the San Gregorio deposits. Host rock granites are strongly foliated, fractured and sheared and contain zones of quartz/hematite/sericite/pyrite veining as well as disseminated pyrite mineralization.

The Company has completed 28 drill holes to date comprising 23 reverse circulation and 5 diamond totaling 2,736 meters (1,958m RC, 778m DD). Best results from this drilling included:

Weighted intercept grades were calculated using an external cut-off of 0.5g/t Au and up to 3m of internal dilution. Samples were processed using OMI's in house laboratory using fire assay with atomic absorption finish. For quality control purposes 5% of samples are re-analyzed at external laboratories.

The mineralized zone currently has a strike length of 425 meters and a vertical depth of 120 meters from surface and is open down dip and along strike to the NW. The mineralization appears to be associated with a gold/arsenic soil geochemical anomaly and a number of similar anomalies along strike and adjacent to existing mineralization have been identified for follow-up. The Company plans to restart drilling in February 2011 to define a 43-101 compliant resource by mid 2011 and to test additional targets.

Pantanillo Chile

Drilling and development work on the Pantanillo Norte deposit is being performed in a phased approach. The first phase, completed during the 2010 drill season, focused on defining the oxide and mixed ore zones of the deposit for which higher metallurgical recoveries are expected using conventional heap leach processing.

OMI is planning to start drilling again in Pantanillo during January 2011 with around 3,500 metres focused on testing for additional oxide mineralization around Pantanillo Norte and at Pantanillo Sur, to be followed by a further 3,500 - 5,000 metres to better define the deeper sulfide mineralization at Pantanillo Norte. Metallurgical test work is planned on the sulfide mineralization that is assumed to have lower recoveries and potentially may require alternative processing methods.

During 2011 OMI's initial field investigations will also commence on other targets including Quebrada Pantanillo, Oro 52, and the silver breccia at Pantanillo Sur. Historical trenching at Pantanillo Sur includes 40 meters at 311 g/t Ag and 16 meters at 693 g/t Ag. A number of historic shallow rotary drill holes were drilled in this target with best results being 11.0 meters at 1546g/t Ag from surface and 11.3 meters at 1072g/t Ag also from surface.

Anillo Chile

During this quarter OMI completed surface exploration in the northeastern portion of the Anillo project including surface mapping and sampling of trenches and ground magnetic and VLF geophysical surveys covering five high priority target areas in the NNE portion of the property surrounding Yamana's Pampa Victoria discovery. First pass geological mapping and rock chip and stream sediment sampling also continued throughout the entire Anillo property.

Two geophysical surveys including ground Magnetics and VLF were finished in October 2010.

In early November some five targets were outlined in the high priority areas surrounding Pampa Victoria and were first pass drill tested at the end of the quarter with a program of 2,497 metres (16 holes) of reverse circulation drilling. Assays are expected to be received in February 2011.

Three new prospective areas in the western, central and southeastern portions of the property were identified during the quarter and mapping, sampling and trenching will continue in the next half with the objective of defining additional drill targets.

Qualified Person's Statement

The information presented in this press release has been reviewed by William F. Lindqvist, Director of OMI and Mr. Randall Corbett, General Manager, San Gregorio, and is considered to be in compliance with NI 43-101 reporting guidelines. Dr. Lindqvist holds a Ph.D. in Applied Geology from Imperial College, London, has been a member of the AusIMM for 46 years, and has had 40 years of experience in international minerals exploration and property evaluation. Mr. Corbett has a Bachelor of Engineering (Mining) Degree from Technical University of Nova Scotia (T.U.N.S.), is a Professional Engineer (P. Eng.) registered in the Province of Ontario and has more than 25 years operational, engineering and development experience.

Forward Looking Statements

All statements, other than statements of historical fact, contained or incorporated by reference in this news release, including any information as to the future financial or operating performance of the Company, constitute "forward-looking statements" within the meaning of certain securities laws, including the "safe harbour" provisions of the Securities Act (Ontario) and 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. There can be no assurance that such statements will prove to be accurate, such statements are subject to significant risks and uncertainties, and actual results and future events could differ materially from those anticipated in such statements. Forward-looking statements include, without limitation success of exploration activities; permitting time lines; the failure of plant; equipment or processes to operate as anticipated; accidents; labour disputes; requirements for additional capital title disputes or claims and limitations on insurance coverage. 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.

ENDS

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

About Orosur Mining Inc.

Orosur Mining Inc. is a fully integrated gold producer and exploration company focused on identifying and developing gold projects in Latin America. The Company operates the only producing gold mine in Uruguay (San Gregorio), and has assembled an exploration portfolio of high quality assets in Uruguay and Chile. The Company is quoted in Canada (TSX-Venture Exchange: OMI) and London (AIM: OMI).

Copyright Business Wire 2011