Orosur Mining Regulatory News (OMI)

10 Oct 2008 07:00

Uruguay Mineral Exploration Inc. (UME), a South American gold production andexploration company, today reported results for the first fiscal 2009 quarterended August 31, 2008. David Fowler, Chief Executive Officer commented: "During the quarter we produced16,439 ounces of gold at an average cash cost of $US 792 per ounce. Productionwas slightly below our 17,000 ounce expectation as a result of a delay inpermitting the new Polvorin pit. While costs were high for the quarter due toadditional mining costs and lower production they were in accordance with planand we continue to forecast annual production of 80,000 ounces for fiscal 2009at a projected cash cost target of $US 575 per ounce." Commenting on exploration, Mr. Fowler noted: "Our key corporate objective is tobuild our production profile at San Gregorio. Solid exploration progress hasbeen made during the quarter against this objective including: 1. Definition of higher grade open pit vein resources to increase production atSan Gregorio over the next three years. Progress includes success at Castrillonand Polvorin, from which we are now producing, and the development of newtargets including Peru, Esperanza and Areicua which will be drill tested incoming months. 2. Defining underground resources down dip of existing deposits to contribute tothe mine plan within 3 years. Drilling at Arenal Deeps in the down plunge zonehave outlined a mineralized area, open in several directions, of about 15,000square meters by 2 to 20 meters thick ranging in grade from 2 to 5 g/t.Additional drilling is scheduled for the second quarter and an independentresource estimate is planned to be completed by the end of the third quarterwith engineering and feasibility studies anticipated to follow. First passdrilling at the Nueva Australia prospect, interpreted to be the westernstructural offset of the main San Gregorio structure, also generated encouragingresults during the quarter. One of the three widely spaced holes completedto-date intercepted 4.65 m at 8.57 g/t Au and demonstrates the potential of thetrend to host additional significant gold resource. Follow-up drilling isexpected to be completed by December 2008. 3. Establishing new bulk open pit resources that can contribute to mineproduction within 2 years. At the Los Castillos sector ("The Gap"), surfacemapping and sampling have defined a structural trend that is over 800 meters instrike length and is interpreted to be the offset of the eastern extension ofthe Arenal structure. Consistent rock chip results confirm the potential of theLos Castillos sector with samples of up to 48 g/t Au collected. Drilling isplanned for late 2008 or early 2009 depending on permitting. Additional targetsare also expected to be developed further along this structural trend in thesecond quarter" "Away from the mine, our strategy focuses on defining stand-alone deposits orsmaller high grade deposits which can be transported to the mine. Progressduring the quarter includes: 1. At Presidente Terra, results of a first drill pass program of 51 holes over6.6 kilometres demonstrate that gold mineralization is continuous. Follow upexploration during the rest of 2008 will use these results to targethigher-grade areas and bulk targets to try to define a resource. 2. The discovery of significant mineralization at Paso de Lugo in the ArroyoGrande Belt which is in the central west area of Uruguay. This is a vein/shearsystem of at least a kilometre in length and 100 meters wide at surface definedby significant rock chip anomalies ranging from 0.5 g/t to 8.0 g/ Au.. We willcontinue to further refine targets for drill testing early in 2009, thoughdrilling could start as soon as permits are acquired. 3. Grant of permits and completion of land access agreements for the Madre conHijos tenement in the Crucera/Casupa district where our ground work has producedsome very encouraging results. Target drilling is planned to commence in thesecond quarter. 4 Definition of a new vein system at the Texas project that has returnedsignificant high grade rock chip results of up to 64 g/t Au "Three holes have been drilled at the Lascano project with a fourth hole inprogress. Holes LASDDH008 and LASDDH009 the third and forth holes of the currentprogram, have encountered significant hydrothermal alteration and pyritemineralization and continue to demonstrate the potential for the Lascano projectto deliver a significant discovery. Assays are pending. Our objective remains todiscover a major iron oxide-copper/gold or porphyry copper deposit." "We closed the quarter with a cash position of $US 12.4 million. This was afterpaying down $US2.1 million in debt, buying back shares for $US 0.4 million andinvesting $1.7 million in plant and equipment and $ 3.1 million in exploration.Towards the end of the quarter we hedged approximately 70 percent of ourproduction for the reminder of the financial year to underwrite the cashflowrequired for exploration in 2009. We expect to close the current financial yearwith a cash position in the range of $US10 million to $US12 million, afterinvesting $11 million in exploration during 2009, closed Mr. Fowler." \* T Three-months ended August 31, ---------------------Summary of Results(1) Q1 2009 Q1 2008----------------------------------------------------------------------Operating ResultsGold produced Ounces 16,439 18,987Average cash cost US$/oz 792 425Average price received US$/oz 895 661 Financial ResultsRevenue $US '000s 17,721 13,253Net income for the period $US '000s (2,854) 1,407Cash flow from operations(3) $US '000s 1,729 4,110Basic earnings per share $US (0.06) 0.03Cash at the end of the period $US '000s 12,351 11,631Total debt at the end of the period $US '000s 166 2,300----------------------------------------------------------------------\* T (1) Results are based on Canadian GAAP and expressed in U.S. dollars. (2) Includes $US 1.582 million in non hedge derivatives losses (3) Before non-cash working capital movements. REVIEW FOR THE FIRST QUARTER ENDED AUGUST 31 2008 Production and Costs Gold production for the first quarter of fiscal 2009 was 16,439 ounces, slightlybelow expectations of 17,000 ounces for the period. Ore was sourced primarilyfrom the Arenal open pit with lower grades than anticipated, but was compensatedfor by better grades than expected from Veta Sur and San Gregorio East. Veta Surwas exhausted early in the quarter and Polvorin commenced later than anticipateddue to delays in permitting. Plant feed for the quarter was 335,832 tonnes at anaverage gold grade of 1.67 g/t with recovery of 91.4%. Stockpiled, low grade ore stocks continued to build during the quarter with abalance of 670,000 tonnes at 0.92 g/t produced. Cash costs for the quarter were $US 792 per ounce. Cash costs for the quarterwere below those budgeted for the quarter and the Company remains on track toachieve full year cash costs of $US 575 forecast for the year. The twosignificant factors that explain the increase in the current quarter are highermining volumes in quarter one compared to the remainder of the financial yearand the higher grades expected to be processed for the remainder of thefinancial year. A reconciliation of the cash cost per ounce for the firstquarter and the forecast at the beginning of the financial year is shown below. \* T $US per ounce Produced----------------------------------------------------------------------Average cash costs forecast for the 2008/09 financial year 575----------------------------------------------------------------------Difference due to lower production for the three months (assuming 80,000 full year) 172----------------------------------------------------------------------Budget higher mining costs quarter 1 due to volumes mined 45----------------------------------------------------------------------Actual Cash costs for the three-month period ended August 31, 2008 792----------------------------------------------------------------------\* T The production forecast for the 2009 financial year remains unchanged at 80,000ounces with a cash cost of $US 575 per ounce. Subsequent to the end of thequarter oil prices have fallen below budget levels of $US 122 per barrel and theUruguayan peso has devaluated to 21.5 from budget levels of 19.5. Financial Performance UME reported a net loss after tax of $US 2.9 million for the quarter, comparedwith a net profit after tax of $US 1.2 million in the corresponding quarter lastyear. The average gold sales price for the quarter was $US 895 per ounce againsta cash cost of $US 792 per ounce. Cash flow generated by operations was $US 1.7million before working capital items. Capital expenditure for the quarter was $US 3.9 million invested in property,plant and equipment and $US 3.1 million in exploration. Investment in plant andequipment included $US 2.1 million for the final deferred payment of the netprofit interest convertible note, a new PC1250 excavator, final constructionwork at the tailings dam and pre stripping activities at the San Gregorio Eastpit. Investment in exploration included $US 1.8 million in explorationactivities near the mine and in the Isla Cristalina belt and, $US 1.0 million inother gold projects in the Florida and Dom Feliciano Belts and $US 0.3 millionon Lascano. Cash on hand at the end of the quarter totaled $US 12.4 million, down from $US18.6 million at the beginning of the year. During the quarter UME paid down $US2.1 million of convertible notes eliminating debt and bought back shares for atotal of $US 0.4 million. At the end of August UME had hedged approximately 70 percent of its forecastedproduction for the remainder of the financial year at a forward price of $US796.25 per ounce. Exploration and Development UME's exploration activity during the quarter continued to be focused on threemain objectives. The first, finding high grade resources near the San Gregoriooperation in the Isla Cristalina Belt to be blended with lower grade resources;second, finding one or more stand-alone ore bodies in the Isla Cristalina, DonFeliciano or Florida belts to enable either the development of a second goldoperation or transportation to the San Gregorio plant; and the third, making asignificant discovery at Lascano. Good progress continued to be made on allfronts. Summary of Exploration Results Isla Cristalina Belt: San Gregorio Near Mine Exploration Program The Company's near mine exploration strategy focuses on: -- Deep drilling of existing resources such as Arenal with the objective of finding a bulk resource, which, within three years, can be producing 40,000 to 50,000 ounces per annum. -- Testing targets along strike to the east and west of the San Gregorio mine looking for bulk resource targets at depth, such as Nueva Australia, and at surface as illustrated by the Los Castillos sector. -- Defining higher grade vein targets, such as Polvorin which incrementally add to production. During the quarter, the drilling campaign continued to deliver significantintercepts from Arenal Deeps and Nueva Australia, and in the former, expandingthe area of higher grade mineralization encountered in previous drill campaigns.As of August 31, 2008, five holes had been drilled at Arenal and three holes atNueva Australia. At Arenal, drilling continued to test the deep portion of the Arenal depositwith significant intercepts being reported from four of the five holescompleted. The best results reported to date are from drill hole ALDD090 withtwo intercepts of 19.25 m @ 4.68 g/t Au and 21.75 m @ 2.34 g/t Au. Drillingto-date has defined an open area of approximately 15,000 square meters by 2 to20 meters thick ranging in grade from 2 to 5 g/t. An independent resourceestimate is planned in this area once drilling is completed by the end of thethird quarter. It is expected that the resource will be converted into anunderground reserve. The Nueva Australia trend, 1.2 kilometres north of Santa Teresa, is interpretedto be the structural offset of the main San Gregorio structure. Anomaloussurface mineralization defines the Nueva Australia structure for over threekilometres and three core holes were completed this quarter to test thestructure at depth. One of the three holes, NADD003, was mineralized and itreported 4.65 m at 8.57 g/t Au at a vertical depth of 400 meters. This interceptwas some 400 meters from the nearest hole and it demonstrated the potential ofthe greater San Gregorio System to host additional gold resources. An firststage program of three offset drill holes is planned for the next quarter totest the extent of the mineralization along the strike and on dip. The small Polvorin deposit has been put into production to add higher grade feedto the mill and it is expected to provide supplementary feed during the 2009financial year. At Santa Teresa, resource drilling continues down dip and along strike to helpsupport a resource model up-date by the end of the third fiscal quarter. Thisdrill campaign commenced in late August 2008 and assays are pending on the firstholes completed. Surface exploration work continues in the 30 square kilometre area east ofArenal to define targets and is focused on the Los Castillos sector wheremapping and sampling have defined a structural trend that is over 800 meters instrike length and interpreted to be the offset extension of the Arenalstructure. Rock chips assaying up to 48 g/t have been collected from this trend.Drilling is planned for late 2008 or early 2009 and the timing is dependent onpermits. Mapping and sampling continued in other sectors along the 10 kilometre trend ofanomalous mineralization east of San Gregorio, including the historic mine sitesof Peru, Esperanza and Areicua. Rock chip results received in the last quarterrange from 0.5 g/t to 44 g/t. and it is expected that several drill targets willbe generated and tested late in 2008 once drill permits are received. Isla Cristalina Belt: Zapucay District Exploration Program Exploration drilling during the quarter focused on a number of prospects,including the structural corridor between Zapucay and Argentinita and areasaround the Zapucay deposit, and will continue next quarter in the Zabala, andTito Lopez prospects. Drilling has commenced in an area between the Zapucay and Argentinita depositswhich had not been drilled previously due to access restrictions. No significantintercepts have been reported as yet. Drilling around the Zapucay deposit hasre-commenced and the program is designed to define and hopefully expand theremnant resource around the old mine site leading to an independently revisedresource estimate by March 2009. Exploration permits have been received for Tito Lopez and Zabala and drillingcommenced in September 2008. Results from this program will be reported in thenext quarterly report. Isla Cristalina Belt: Regional Exploration Program At Castrillon, on the western Isla Cristalina Belt, definition drilling wascompleted last quarter and an independent resource estimate is expected to bereported by the end of the third quarter of the fiscal year. Castrillon is ahigher grade, veta-like gold system extending over a strike length ofapproximately 300 meters and engineering has commenced to develop this projectto feed the San Gregorio plant. At the Eastern half of the Isla Cristalina Belt, the focus has transitioned fromprospecting to completing the generation of specific targets, including VacaMuerta, Vichadero, Curtume, Cerro Chato and Cerrillada. These prospects will bedrill tested after all higher priority targets are drilled nearer the mine site. Southern Uruguay Exploration Program Presidente Terra sits on a regional north-west shear structure within the DonFeliciano Belt. Anomalous gold mineralisation which extends over 10 kilometresis found along a sheared contact between granite and metasediments and also inquartz veining within the granites. Drilling commenced in April of 2008 and hastested two of the three exploration tenements, the southern and the northerntenements, which cover an area of 12 square kilometres. Some 45 reversecirculation drill holes and six core drill holes have been completed for a totalof 7,457 meters. Drilling concentrated on gold bearing vein/shear sets ingranitic host rock and to date has tested a combined 6.6 kilometres of strikelength of the vein system. Results to-date are encouraging with over 45% of thedrill holes reporting two meter or greater intercepts of more than 1.0 g/t Au.Results have been received for all reverse circulation drill holes and arepending on three core holes. Exploration permits for the central tenement havebeen received, and targets in this area are expected to be drilled over the nextsix months Targets on the newly acquired Madre con Hijos tenement at the Crucera/Casupadistrict are expected to be drilled in the second quarter of the fiscal year. In the Arroyo Grande Belt, significant gold mineralization has been discoveredthis year and has outlined an east-west trending vein/shear system in the Pasode Lugo tenement that is at least 1 kilometre in length and approximately 100meters wide at surface. This trend is defined by significant rock chip anomaliesof which 80% range from 0.5 g/t to 8.0 g/t. From airborne geophysical surveys inconjunction with historic sampling, an interpretation has been made that thisstructural/mineralized system could have a strike length of greater than 3kilometres. Management believes this is turning into one of the betterexploration targets outside of the Isla Cristalina Belt. Target definition workcontinues and drilling will commence as soon as permits are granted, hopefullyin December, this year. The Texas project has also returned significant high grade rock chip resultsassociated with a vein system. Interesting new drill targets are expected to begenerated in this long held project with testing getting underway as soon aspermits are obtained. At Nueva Helvecia, a five-hole drill program has been completed and only weakmineralization was encountered. No further work is planned for this target. Exploration Permits and Drilling Twenty four permits were granted during the quarter including Tito Lopez,Zaballa, Vaca Muerta, Curtume, Zapucay Sur, Madre con Hijos, Mirta, PresidenteTerra Central, Crucera and four additional drill sites in Lascano. Drillingpermits on prospecting licenses were also received for Vichadero and Curtume. Anumber of prospects, however, including the area around the Los Castillosproject and Paso de Lugo, still await either exploration permits or land owneraccess to be granted. Lascano Project Exploration Program A second round of drilling of 13 holes for 8,000 meters of diamond drillingcommenced in April 2008. Three holes have been completed in the central anomalyand have been sent for analytical analysis. Drilling at a fourth hole is inprogress and is expected to be completed by the end of October. All drill holesare placed as large step out drill holes of 300 to greater than 800 metersaround LASDDH002. Hole LASDDH008 and the present hole LASDDH009 have encounteredsignificant hydrothermal alteration and pyrite mineralization affecting severallithologies. Alteration minerals include quartz, sericite, pyrite and secondarybiotite and minor fluorite. Assay results for these holes are pending. Thisdrilling demonstrates the extensive nature of alteration on the Lascano systemand enhances its potential to produce a major ore body. The objective of thedrill program is to discover a major iron oxide-copper/gold or porphyry copperdeposit. For more information on UME's exploration activities for the quarter, pleaserefer to the Exploration Report for the Quarter ended August 31, 2008. Qualified Person's Statement The technical information presented in this press release has been reviewed andverified by Mr. John Sadek, Vice President Operations and a Mining Engineer, andMr. George Schroer Vice President Exploration and a Certified ProfessionalGeologist. Mr. Sadek and Mr. Schroer are the Qualified Persons for the purposesof the AIM Guidance Note on Mining, Oil and Gas Companies dated March 2006. Mr.Sadek has a Bachelor of Engineering (Mining) from the University of Sydney andis a member of the AusIMM and SME. He has over 20 years of internationalexperience in mining. Mr. Schroer has a Masters of Science in Geology fromColorado State University and is a member of SEG and AIPG. He has over 20 yearsof international experience in exploration. Forward Looking Statements All statements, other than statements of historical fact, contained orincorporated by reference in this news release, including any information as tothe future financial or operating performance of UME, constitute"forward-looking statements" within the meaning of certain securities laws,including the "safe harbour" provisions of the Securities Act (Ontario) and theUnited States Private Securities Litigation Reform Act of 1995 and are based onexpectations estimates and projections as of the date of this news release.There can be no assurance that such statements will prove to be accurate, suchstatements are subject to significant risks and uncertainties, and actualresults and future events could differ materially from those anticipated in suchstatements. Forward-looking statements include, without limitation success ofexploration activities; permitting time lines; the failure of plant; equipmentor processes to operate as anticipated; accidents; labour disputes; requirementsfor additional capital title disputes or claims and limitations on insurancecoverage. UME disclaims any intention or obligation to update or revise anyforward looking statements whether as a result of new information, future eventsand such forward-looking statements, except to the extent required by applicablelaw. ENDS The TSX Venture Exchange has not reviewed and does not accept responsibility forthe adequacy or accuracy of this news release. About Uruguay Mineral Exploration Inc. Uruguay Mineral Exploration Inc. (UME) is a gold production and explorationcompany that identifies and develops mineral opportunities in South America. UMEis a fully integrated mining company, possessing the skills necessary to exploreand develop its discoveries. UME operates San Gregorio, the only producing goldmine in Uruguay, and is the leading mineral exploration company in Uruguay withan exploration portfolio of gold, diamonds and base metal prospects, includingcopper, nickel, lead, and zinc. Uruguay Mineral Exploration Inc. is quoted in Canada (TSXV) and London (AIM) andRBC Capital Markets is its Nominated Adviser and Broker. More information can befound at www.uruguayminerals.com Financial Statements Follow \* T Uruguay Mineral Exploration Inc. Consolidated Balance Sheets (Unaudited) (Thousands of United States Dollars, except where indicated) As at ------------- August May 31, 31, 2008 2008---------------------------------------------------------------------- $ $Assets Current assetsCash 12,351 18,601Accounts receivable 3,034 2,810Inventories (Note 2) 16,017 16,749Prepaid expenses 1,674 1,004 ------------- 33,076 39,164 Property plant and equipment and mineral properties (Note 3) 28,452 29,681Deferred exploration (Note 4) 12,029 8,948Future income tax assets 5,400 5,375Restricted cash 198 191 -------------Total assets 79,155 83,359 ---------------------------------------------------------------------- Liabilities and Shareholders' Equity Current liabilitiesAccounts payable and accrued liabilities 8,401 8,816Fair value of derivatives (Note 9) 1,528 0Current portion of long term debt (Note 5) 150 2,275 ------------- 10,079 11,091 Long term tax payable 2,414 2,414Long term debt (Note 5) 16 25Asset retirement obligation 2,904 2,869 -------------Total liabilities 15,413 16,399 ------------- Capital stock (Note 6) 34,642 35,043Warrants and convertible notes (Note 6) 12 12Contributed surplus 3,919 3,882Accumulated other comprehensive income (19) (19)Retained earnings 25,188 28,042 -------------Total shareholders' equity 63,742 66,960 ------------- Total liabilities and shareholders' equity 79,155 83,359----------------------------------------------------------------------\* T \* T Uruguay Mineral Exploration Inc. Consolidated Statements of Income, other comprehensive income and Retained Earnings (Unaudited)(Thousands of United States Dollars, except for earnings per share and weighted average number of shares outstanding) Three months ended August 31 August 31 ---------- ---------- 2008 2007---------------------------------------------------------------------- $ $ Net Sales 17,721 13,253 Operating expenses (14,803) (7,870) Amortization and depreciation (3,000) (2,865) ---------------------Operating expenses (17,803) (10,735) Sub-total (82) 2,518 Other income (expenses) Stock based compensation expense (37) (192) General and administrative expense (1,197) (1,011) Non-hedged derivative loss (1,528) 0 Interest expense, debt accretion and financing fees (75) (62) Foreign exchange 152) (42) Interest earned and other income 192 196 --------------------- (2,797) (1,111) Income (loss) before taxes (2,879) 1,407 Current income taxes provision 0 (434) Future income taxes recovery 25 251 --------------------- Net and comprehensive income (loss) for the period (2,854) 1,224 Retained earnings, beginning of period 28,042 22,986 Provision for dividends 0 (1,625) Retained earnings, end of period 25,188 22,585---------------------------------------------------------------------- Earnings (loss) per common shareBasic (Note 10) (0.06) 0.03Diluted (Note 10) (0.06) 0.03 Weighted average shares outstandingBasic 48,684,535 48,926,268Diluted 48,684,535 49,893,268\* T \* T Uruguay Mineral Exploration Inc. Consolidated Statements of Cash Flows (Unaudited) (Thousands of United States Dollars, except where indicated) Three months ended August August 31 31 2008 2007---------------------------------------------------------------------- $ $Operating activities Net income for the period (2,854) 1,224 Adjustments for: Amortization and depletion 3,000 2,865 Fair value of derivatives 1,528 0 Accretion of debt 47 43 Future Income taxes (25) (251) Stock based compensation 37 192 Other (4) 37 --------------- 1,729 4,110 Net change in non-cash working capital balances (Note 8) (577) 51 --------------- 1,152 4,161 --------------- Financing activities Proceeds from the issue of share capital 0 593 Share repurchase (Note 6) (401) 0 Payments of finance lease net of draw downs (47) (46) --------------- (448) 547 --------------- Investing activities Purchase of property, plant and equipment and development costs (3,873) (4,747) Exploration expenditure (3,081) (2,308) --------------- (6,954) (7,055) --------------- Decrease in cash (6,250) (2,347) Cash at the beginning of period 18,601 13,978 --------------- Cash at the end of period 12,351 11,631\* T \* T Uruguay Mineral Exploration Inc. Consolidated Statements of Changes in Shareholders' Equity (Unaudited) (Thousands of United States Dollars, except where indicated) As at As at August 31, 2008 May 31, 2008---------------------------------------------------------------------- Number Amount Number Amount (000's) (000's) Common sharesBalance at beginning of period 48,811 $35,043 48,531 $34,592Exercise of stock options 0 0 410 857Share repurchases (144) (401) (130) (406) -------------------------------Balance at end of period 48,667 $34,642 48,811 $35,043 ------------------------------- Warrants and Convertible notes(Note 6)Balance at beginning of period 270 $12 520 $12Expired warrants and convertible notes (250) 0 (250) 0 -------------------------------Balance at end of period 20 $12 270 $12 -------------------------------Contributed surplusBalance at beginning of period $3,882 $3,297Employee stock based compensation recognized 37 792Transfer to common shares (207) -------------------------------Balance at end of period $3,919 $3,882 ------------------------------- Accumulated other comprehensive incomeBalance at beginning of period $(19) $(19)Movement for the period 0 0 -------------------------------Balance at end of period $(19) $(19) ------------------------------- Retained earningsBalance at beginning of period $28,042 $22,986Net income for the period (2,854) 7,798Dividends 0 (2,742) -------------------------------Balance at end of period $25,188 $28,042 ------------------------------- -------------------------------Shareholders' equity at end of period $63,742 $66,960 -------------------------------\* T \* TUruguay Mineral Exploration IncTony Shearer, Chairman: +44 20 7602-1570tonyshearer@btinternet.comDavid Fowler, CEO: 598 2 6016354urumin@ume.com.uyorInvestor/Media RelationsBreakstone Group:Susan Borinelli, +1-646-330-5907sborinelli@breakstone-group.comorRBC Capital MarketsAndrew Smith: +44 (0) 20 7029 7882andrew.smith@rbccm.comSarah Wharry: +44 (0) 20 7653 4667sarah.wharry@rbccm.comMartin Eales: +44 (0) 20 7029 7881martin.eales@rbccm.com\* T Copyright Business Wire 2008