Orosur Mining Inc

Orosur Mining Inc (LON: OMI) is a FTSE AIM All-Share listed explorer and developer of precious metals, which is focused on advancing and identifying gold projects in South America. It operates in Uruguay and Colombia.

Investment Rationale – Expensive at GBX 42.90

• From a technical standpoint, 14-Day RSI (92.165) reflecting an overbought situation, and hence, a short-term correction can be expected.
• The Company is still operating in losses from continuing operations and its profitability multiples remained in the negative territory against the positive fundamentals of the industry.
• The Company is going through a transition period and trying to overcome through the massive losses from Uruguay operations.
• The Covid-19 pandemic can present challenges for exploration and operations.

Risk Assessments

• The Company’s performance as a going concern is dependent upon its ability to obtain sufficient funding and satisfactory implementation of the Creditor´s Agreement in Uruguay.
• The Covid-19 pandemic continued to create operational risk.
• Moreover, there are several financial risks associated with fluctuation in the foreign exchange & interest rates, and credit defaults.

Recent News

12 October 2020: OMI announced that Minera Anzá S.A. (100% owned Colombian subsidiary) had received the sum of nearly US$650,000 fund exploration at the Anzá project.

Full-Year Results - for the fiscal year ended 31 May 2020 (as on 15 October 2020)

   (Source: Company Website)

• As of FY20, the Company had a cash balance of US$782k (31 May 2019: US$526k). On 15 October 2020, it had a cash balance of US$642k.
• For Columbian operations, a payment of US$500K was received on 5 March 2020 from Newmont Colombia over the Anzá project. On 3 September 2020, further US$500K was received for the exploration agreement. Post 30 September 2020, Anzá Project is considered as a 50:50 joint-venture between Newmont Corporation and Agnico.
• On 6 August 2020, OMI disposed of its mining and exploration permits in the San Gregorio Project area to Kiwanda Group LLC for US$550k as aggregate cash consideration.
• In Q4 FY20, the Company appointed Louis Castro as Chairman of the Board. After the year-end, it also appointed Brad George as Chief Executive Officer, and Thomas Masney as a non-executive director.

One Year Share Price Chart

 (Source: Refinitiv, chart created by Kalkine Group)

Conclusion

During FY20, OMI adopted an aggressive strategic plan to restructure and recapitalise the business while progressing other opportunities. In Columbia, Newmont completed the payment commitment for Year 2 of the exploration agreement, and Newmont is a new partner in the Anza project. In Uruguay, the Company has advanced well with the sale of its assets and the proceeds would be used to pay liabilities in connection with the Creditors Agreement. However, the Covid-19 pandemic continued to create challenges for the Company, while the stock is trading nearly at a 52-week high, which is raising doubts over the upside potential. Stock 52 week High and Low were GBX 45.80 and GBX 1.45, respectively.

Based on the factors discussed above, we have given an “Expensive” recommendation on Orosur Mining at the current market price of GBX 42.90 (as on 16 October 2020, before the market close at 10.00 AM GMT+1).

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