Orosur Mining

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dakota15
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Orosur Mining

I found this one an interesting read after metcoalfan posted it on the Juniors with Near Term Production thread (http://www.tfmetalsreport.com/forum/1678/juniors-near-term-production) However, since they are already producing a substantial amount of gold each year, I thought they should have their own thread. Plus, if somebody else wants to jump in on this I would be grateful – I can’t seem to figure out why it’s so cheap.

metcoalfan wrote:
I keep forgetting to dd this one, and keep forgetting it's name, so I'm putting it down cause I come back to this list when I have time. Market cap under 100 million, they did 55k oz this past year and roughly the same the year before, at cash costs between 725 and 800....725 this year and 800 last. I need to check mine life, exploration potential and jurisdiction...seems very cheap for an established producer.

They are the only operating gold mine in Uruguay, which appears to be fairly new to the mining game, and I couldn't find anything negative about the region. Their San Gregorio mine appears to have a shelf life of about five years but I think there is currently only 3 years of mine life remaining. They don't appear to be very clear on this but do state they "continue to explore and define resources and reserves around the San Gregorio mine site to maintain a target production rate of 60,000 ounces per annum over the next three years." They are, however, exploring heavily in the area around the mine and are beginning underground operations at Arenal Deeps to begin extracting a higher grade ore for the San Gregorio mine. So it is quite plausible they will be able to extend the mine's life and seem to be working towards that goal.

What appears to be really interesting is their properties in Chile, which is one of the friendliest mining districts in the world.

Their Pantanillo property is located directly between Kinross Gold's Maricunga Mine (Ex Refugio) and the Marte-Lobo project. I found this quite interesting regarding this property: "Historical geological work on the Pantanillo property by Anglo American (1986-1998) and Kinross Gold (2005-2008) has defined a potential mineral deposit estimated to be in the range of 82 to 125 million tonnes grading 0.83 to 0.73 g/t gold, using a 0.6 to 0.5 g/t gold cut-off, for the lower and higher tonnage estimates respectively, which is equivalent to 2.18 to 2.95 million ounces of contained gold. This preliminary assessment was made by Kinross Gold in 2007 and was estimated based on a total of 14,891 meters of reverse circulation drilling and diamond drilling." From this, OMI has a "maiden" NI 43-101 resource estimate of 1.05 Moz. They have an option to acquire a 100% interest in the property from Anglo American. Not sure of what the dynamics are of their agreement as I haven’t time right now, but this property seems to be stellar to say the least.

Another project they have in Chile is their Anillo project, which sits directly north of Yamana's El Peñon Mine, and to the west of the Escondida Mine, so there is gold in them thar hills! They are still drilling the property and have the option to purchase 65% of the property from the world’s largest copper producer, Codelco. This property is obviously down the road.

But what they appear to be really excited about is their announcement that they just purchased a 100% interest in what they call the Tacla Project from a Chilean family of artisan miners who have pulled about 300,000 ozs of gold out of two non-mechanized mines over the last 40 years. OMI plans on 7500 metres of drilling beginning right away. From their news release (http://www.orosur.ca/news/index.php?&content_id=354) “OMI intends to fast track production from the mine. Following an aggressive exploration program to commence in 2011, the Company aims to publish its maiden N.I. 43-101 compliant resources during calendar Q2 2012.” So they seem to really like this one.

Canadian Insider (http://www.canadianinsider.com/coReport/allTransactions.php?ticker=OMI) doesn’t bring any red flags, but in fact shows the acquisition of several thousand shares by various insiders under a “prospectus exemption” but I haven’t had a chance to look at Sedar. Reading through SH shows that investors like what they have but can’t understand why the stock has remained in a stagnant trading pattern and why it’s not an actively traded stock.

This is from a SH member (DetVicMackey): “Despite Orosur's SP going up as much as 5x from the lows of last year, I am still somewhat disappointed. On a relative basis, the company is being valued just as cheaply today considering that gold has gone from $1200 to $1800+. Margins have expanded from $400/oz to $1000/oz. OMI still trades near 1.5x free cash flow even though long term cash costs will drop thanks to the development of Arenal Deeps. What the market is mostly pricing out however is Pantanillo which should elevate OMI to at least $5.

Pantanillo is currently undergoing prefeasibility studies and has the potential to deliver heap leach production of 100,000oz per year or more. The mine already hosts over 1M+ measured & indicated ounces of oxide + transitional ore with recoveries of 77 and 65% respectively, but are expected to increase based on ongoing scoping studies. There is still another 1M+ ounces worth of sulphides still being delineated and mineralization is open at depth. AMEC calculated cash costs per ounce from Pantanillo to be $400/oz.

Check out slide 7 for some comparisons of peer mines in the Maricunga belt known to host a couple of elephant deposits: http://www.atacamapacific.com/investors/pdf/atacama-investor-presentation.pdf

Atacama Pacific's Cerro Maricunga just announced a maiden resource of 1.6M indicated oxide ounces at 0.54g/t with up to 89% recoveries. Pantanillo's grade is 0.69g/t and is more advanced in terms of development. ATM's market capitalization is $215M as of this writing while OMI sits at $93M. Pantanillo is arguably worth at least two-thirds the value of Cerro Maricunga. It's even more ridiculous to find OMI's market cap less than ATM's especially when considering Orosur also generates a lot of free cash flow on the side with the San Gregorio complex.”

Orosur Mining appears to have a good team of geologists, $14 million cash on hand and have just 81 million shares out fully diluted. It almost appears too good to be true at $1.20/share. They are also invested in a joint venture diamond project in Uruguay, however, this doesn't interest me so I didn't read any more.

Anybody else want to look a little deeper at this one? What’s missing? Surely producing 50-60,000 ozs of gold with a bunch of blue-sky properties on hand should be worth a much larger market cap. Or is this just one heck of a bargain?

Edited by admin on 11/08/2014 - 06:20
srockport
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Orosur Mining

Orosur is the real deal.  These guys are excellent managers, taking a measured approach to company growth. I would suggest they are a bargain at this level. Based on their financials, guidance, the conference call, (gold between $1650-$1700), etc., I estimate 2012 earnings  in the $0.45 range. At a paltry 5 times earnings, this gives $2.25/share.  Each $100 move in gold should add another $0.30 to the share price based on the same 5 times earnings.  Use whatever PE you think if 5 times does not work for you.

At San Gregorio, the target is to essentially maintain a rolling five year inventory. In other words, always replace current years production with new reserves. This will always leave them with about five years worth of reserves.  Cash costs are estimated a little higher in 2012 because they have decided to mine lower grade material due to the high gold price. 

I believe the market is only valuing them based on current production and with gold at $1300.  Therefore, the higher gold price and all the exploration projects are receiving no value. I expect at some point this year, when/if gold miners gain some traction, we should see the stock really take off. My minimum target over the next 12 months is $2.00.  However, if the exploration projects turn out good results, you could easily see $3.00 or more.

Thanks for starting this thread.  I agree, they should be considered for anyone looking for a small value type producer.

metcoalfan
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Hell of a good breakdown Dakota15 & srockport

I've been procrastinating on this one, but it may be another one of those stellar deals - I definitely believe companies can get 'stuck' when people believe they are too cheap, as in too good to be true.   They sit and sit and sit, and then boom when least expected,  it starts moving and everyone suddenly wants it.  

metcoalfan
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Insider ownership

http://apps.cnbc.com/view.asp?country=US&uid=stocks/ownership&symbol=omi.v

(just found this cnbc page today; I like it.  You can change the ticker at the very end and hit refresh and it pulls up presto)

dakota15
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Nice find!

I like that 22% of the companies shares are held by 8 institutions including Sprott, 6 mutual funds and 7 other major holders of which CEO David Fowler is one.

dakota15
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Sedar

Here is a link to their latest MD&A dated May 31, 2011 on Sedar

http://www.sedar.com/GetFile.do?lang=EN&docClass=7&issuerNo=00004014&fileName=/csfsprod/data121/filings/01787764/00000001/v%3A%5COrosurMining-Uruguay%5CASM-2011%5COrosur-MDA-May31-2011.pdf

I can't find anything that really stands out other than the fact that they sold their fleet of drilling equipment - "Other gains include the profit made on the sale of assets. During 2011 the Company sold its exploration drill fleet located in Uruguay together with its auxiliary equipment and its associated inventory of spare parts and consumables generating profits of $ 1,856,000. During the previous year, the Company completed the sale of the Montevideo’s headquarter offices generating profits of $ 1,124,000.”

Not sure why they would do that unless it is cheaper to hire out than to maintain your own equipment? Somebody with better knowledge about drilling could probably answer that.

And the deal with Anglo American I can find – “For the Pantanillo property, the Company has to pay to Anglo American Norte SA, a subsidiary of Anglo American plc, $300,000 by September 2011 and $300,000 on the definitive sale of the property. It will need to complete an additional minimum exploration expenditure of $2,000,000 and 6,000 drilled meters by September 2012.”

Not sure if there is any net smelter agreement but there usually is in these type of deals. Thought I read 1.5% somewhere but now can’t find it.

DetVicMackey
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ALL IN

Daily volume keeps getting thinner so I finally decided to pull the trigger on my 10% cash reserve and increased my stake in OMI from 12% to 22%. I would liquidate my other holdings and buy more, but over 10 months worth of consolidation suggests the trend could stay flat with little downside risk. However, upcoming news flow could be the catalysts that catapult the stock to higher levels. Fundamentals are only getting better. The stock has lagged spot gold as well as other producers. Management keeps meeting or exceeding targets. Exploration is proving to replace and add resource ounces. Balance sheet is stronger than ever. The only knock against the company is that it is not well promoted. Behind the scenes, I'm sure OMI is a takeout target that isn't getting any notice by the market.

Potential news flow:

1) FYQ1 production update (anytime)

2) Final Arenal Deeps permitting and development ore (September)

3) Anillo drill results (end of September)

4) FYQ1 financials (early October)

5) Pantanillo metallurgy optimization update (calendar Q3)

6) Vaca Muerta resource update (calendar Q3/Q4)

7) Completion of tailings dam and ventilation (calendar Q4)

8) First ore from Arenal Deeps stoping (calendar Q4)

9) Pantanillo resource update (calendar Q4)

10) Pantanillo complete scoping and baseline study (calendar Q4) 

11) Maiden Talca resource definition (calendar Q2 2012)

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