Orosur Mining dives after warning on profits and job losses

Orosur Mining shares plunged by almost a third on Monday after the South American focused gold producer and explorer warned that for the 2013/14 financial year both production levels and revenue will be lower as a result of a reduced gold price and the deferral of production at the San Gregorio Deeps.

It also said the cost-cutting would result in a 'significant reduction' to the company's workforce.

The deferral comes after the firm said it was reviewing its operations and as such it is not planning to start the pre-strip and development at San Gregorio Deeps.

Try 6 free issues of MoneyWeek today

Get unparalleled financial insight, analysis and expert opinion you can profit from.

Start your trial

Sign up for MoneyWeek’s free twice-daily newsletter.

Join more than 165,000 subscribers and keep yourself informed with latest financial news, insights and expert analysis to help you understand what really matters when it comes to your finances.

Join more than 165,000 subscribers and keep yourself informed with latest financial news, insights and expert analysis to help you understand what really matters when it comes to your finances.

Sign up

The firm said that pre-stripping would incur 'significant' costs for an initial period of around nine months before the pit starts to generate net positive cashflow over a six month period, and will wait to review the decision once there is more certainty about the gold price and the group's capital expenditure capacity.

Chairman Tony Shearer said: "Like many gold producers, Orosur is reacting to reduced long term gold price expectations. We are focussing on lowering costs to ensure we maintain an operating margin.

"The decision not to proceed with the San Gregorio Deeps pre-stripping will be reviewed as and when we have greater certainty. Implementing the results of the operational review will be challenging, and we will keep the market informed of progress."

As of April 26th, the group had a cash balance of $3.6m, debt of $9.4m, and $6.5m in undrawn and committed debt facilities.

The share price fell 32.26% to 21p by 16:30 on Monday.

NR