Orosur Mining: 'Production at the lower end of expectations'

South American-focused gold producer Orosur Mining has unveiled its second quarter results revealing a reduction in net income for the period after tax following a lower grade of ore being mined at one of the pits.

Net income after tax for the three months ending November 30th 2012 was down to $1.2m from $2.6m in the corresponding three months in 2011. However, third quarter revenue rose to $24.2m from $21m in the same period in 2011.

Although gold production increased to 13,970 ounces in the three months ending November 30th, compared to 11,916 ounces in the corresponding period in 2011, the average price received was down slightly to $1,694 per ounce compared to $1,717 per ounce a year earlier.

The group stated that ore mined at the Crucera pit during the quarter had been of a lower grade than planned resulting in lower ounces produced and higher cash costs per ounce at that pit.

The impact of the higher cash costs and lower production from Crucera, offset in part by higher gold prices than the group planned for, reduced cash flow for the quarter by $2m. As a result, the cash balance at the end of the quarter was $3.7m.

"Production at lower end of expectations"David Fowler, Chief Executive Officer at Orosur Mining, commented: "Production was at the lower end of expectations for the quarter due to lower than anticipated grades from the Crucera pit. During December we slowed the rate of mining at Crucera in order to adapt the mining approach to reduce dilution, thus achieving less tonnes of ore produced at an improved grade.

"Accordingly and taking into account the significant progress made on developing the ramp at Arenal Deeps, we remain confident that we will meet out production target for the second half and achieve production for the full year of between 63,000 and 68,000 ounces."

He added: "As a result of the lower cash flow in the second quarter we expect that our cash balance, prior to the additional capita expenditure outlined below, at year end, will be approximately $13m based on production of 65,750 ounces and a gold price of $1,625 an ounce compared with the $15m that we announced in October."

Orosur's share price was down 9.09% to 35p at 08:44 on Friday morning.

MF