Orosur's (TO:OMI) H118 results indicate San Gregorio (SG) continues to perform well, albeit with a small deferral of 2koz of gold production to narrow FY18 guidance from 30-34koz to c 30koz. Orosur’s focus remains on the most profitable mining possible rather than extracting its reserves ad hoc. SG’s geological data are being thoroughly examined such that additional production opportunities are identified. The process has already yielded SG UG West (a current mainstay of production), with SG Central located adjacent and being developed to provide production during H218. Veta A is another old pit reopening as an underground mine project. We consider that Orosur should be able to return to profitability by end FY18, with upside clearly linked to the very positive initial drill results coming from its increasingly important Colombian asset base.
SG UG Central drilling highlights remnant potential
The original San Gregorio open pit produced over 0.5Moz. Sitting beneath this old pit are gold resources that may well contribute to future production. This includes a gold-bearing crown pillar situated between the old SG pit floor and the uppermost reaches of the SG UG West workings. A separate SG UG Central gold resource, is being optimised and will replace production from SG UG West when it ceases during H218. In our view these underground resources, as well as development of Veta A (situated 1.2km from the SG plant) are the near-term sources of gold for Orosur to mine and maintain SG’s profitable operation.
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