Orosur Mining Inc. - H1 2017 Results: $3.7M Profit, $7.0M Cash From Operations and New San Gregorio UG Mine Put into Production

Orosur Mining Inc. H1 2017 Results: $3.7M Profit, $7.0M Cash From Operations and New San Gregorio UG Mine Put into Production

SANTIAGO, Chile, January 16, 2017. Orosur Mining Inc. ("Orosur" or "the Company") (TSX/AIM: OMI), the South American-focused gold producer, developer and explorer is pleased to announce the results for the first half of its fiscal 2017 ("H1 17") and second quarter ended November, 2016 ("Q2 17" or the "Quarter") and an update of its exploration and development activities in Uruguay.

OPERATIONAL HIGHLIGHTS

• The San Gregorio West Underground ("SGW UG") mine commenced full production from its maiden stope on November 24, 2016

  • Project completed on budget and on schedule following a safe and efficient transition of equipment and staff from Arenal

  • Construction included over 883m of horizontal development and approximately 663m of infill diamond drilling from 13 underground holes comprising the bulk of the zones to be mined within the existing FY17 SGW mine plan

• An additional 90,000 tonnes at 1.4 g/t Au not previously in the mine-plan were produced at Arenal UG mine prior to its planned closure at the end of Q2 17, deferring higher grade production from SGW UG

• Production for the Quarter of 6,852 oz was, as previously guided, affected by the transition from Arenal UG to the new SGW UG mine

  FINANCIAL HIGHLIGHTS

• Quarterly cash operating costs were $914/oz, in line with expectations(Q2 16: $858/oz)

  • Guidance for FY 17 remains $800 to $900/oz

• Additional development capex related to the contruction of the SGW UG mine in Uruguay resulted in All- In-Sustaining costs ("AISC") for the Quarter of $1,345/oz (Q2 16: $1,095/oz)

• Transition from Arenal UG to the new SGW UG mine led to an increase on Capital Expenditure ("capex") to $3.8M (Q2 16: $0.9M)

• Cash generated from operations increased in Q2 17 to $2.2M (Q2 16: $0.9M). Total cash balance at period end of $5.4M, increased from Q1 17: $5.0M, and FY 16: $4.3M

• Q2 17 Net profit after tax of $0.9M (Q2 16: loss of $0.9M)

  • Average gold price for the quarter was $1,252/oz (Q2 16: 1,100/oz)

    OUTLOOK

• Exploration drilling in and around the San Gregorio UG area has yielded positive results, successfully intersecting gold mineralization in every hole, which are expected to significantly enhance mine economics and increase reserves and resources in the short and medium term. Further drilling is underway

• During H2 FY17, the Company plans to accelerate exploration in open pit targets around the San Gregorio plant after receiving several permits and to drill seven RC/DD holes (1,600m) in the Arenal-SG corridor to test the occurrence of what could be a relatively large deposit

• In Colombia, the Company is finalizing a geological model of its high grade Anzá gold project project to determine the exploratory potential with the assistance of Mine Development Associates ("MDA") of Reno, Nevada. The results of this work are expected to be announced shortly

Ignacio Salazar, CEO of Orosur, said:

"Operations remain healthy and profitable, with $7M of cash generated in the first half of our fiscal 2017. The successful transition to San Gregorio UG as the Company's primary source of ore feed to the plant in Uruguay, was a significant achievement for Orosur. The SGW UG mine successfully started production from its first stope on November 24 on time and within budget.

"The transition, achieved in a safe, professional manner, represents a significant technical and operational achievement and I am pleased with the technical capacity and execution demonstrated by our team. It was financed entirely from operational cash flow helped by the efficient transfer of equipment and staff between the two undergound mines.

"In parallel, more active and aggressive exploration work in Uruguay appears to have a good likelikood of enhancing the San Gregorio underground project and advancing the open pit projects around the plant. In Colombia, we are making good progress in the geological interpretation and modelling of our high grade Anzá gold project and expect to be updating the market shortly."

Operational & Financial Summary1
Q2 17	Q2 16	Diff	YTD 17	YTD 16	Diff
Operating Results
Gold produced	Ounces	6,852	8,172	(1,320)	16,802	20,643	(3,841)
Operating cash cost3	US$/oz	914	858	56	783	916	(133)
AISC	US$/oz	1,345	1,095	250	1,135	1,138	(3)
Average price received	US$/oz	1,252	1,100	152	1,290	1,127	163
Financial Results (unaudited)
Net profit/(loss) after tax	US$ '000	942	(870)	1,812	3,701	(2,596)	6,297
Cash flow from operations2	US$ '000	2,234	924	1,310	7,029	1,097	5,932
Cash & Debt Summary (unaudited)		Nov. 30, 2016	Aug 31, 2016	Diff	Nov. 30, 2016	May 31, 2016	Diff
Cash balance	US$ '000	5,376	4,982	394	5,376	4,320	1,056
Total debt	US$ '000	225	289	(64)	225	352	(127)
Cash net of debt	US$ '000	5,151	4,693	458	5,151	3,968	1,183

1 Results are based on IFRS and expressed in US dollars

2 Before non-cash working capital movements

3 Operating cash cost is total cost discounting royalties and capital tax on production assets.

Q2 17 Operations and SGW Development

Q2 17 production was 6,852 oz of gold, compared to 8,172 oz in Q2 16. The reduction is due to the implementation of the strategic plan previously announced in July 2015, in response to the lower gold price environment. Additionally, in this Quarter, the Company transitioned from its underground operation at Arenal to the new mine in San Gregorio, which resulted in lower quarterly production, as previously announced and guided.

The Company defined and processed an additional 90,000 tonnes grading 1.4 g/t from the Arenal UG, which were not previously in the mine-plan or reserve base. The absence of development and mine fortification costs at Arenal in its final stages allowed the economic mining of ore with lower grades. In the short term, this has deferred higher grades previously planned for Q2 17 to the future, however management considers it is economically positive for the Company in the medium and long run.

The construction of the SGW UG mine was completed on time and budget to allow first stope production to commence on November 24th. The development included a total of 883 m of horizontal development, as well

as the drilling of a 103 m ventilation chimney. The ventilation development work was conducted by Peruvian contractor, Tumi, using a 3.1 m diameter raise borer. The raise borer technology was chosen to carry out the ventilation shaft work due to its productivity, reliability and cost advantages.

During the Quarter, a total of 13 underground diamond holes were drilled, amounting to 663 m of infill drilling in SGW UG. This drilling campaign was designed to enable a more thourough assessment of the geometry and grade of the mineralized body in levels from +35m up to -5m, which entered into production at the end of Q2 17 and comprises the bulk of the scheduled FY 17 production from the SGW UG mine.

Q2 17 Financial Summary

Average cash operating costs were of $914/oz, compared to $858/oz in Q2 16. As already announced, the Company had previously budgeted and expected higher unit costs in Q2 17, as a result of the shift of its underground staff and equipment from the Arenal UG operation in its final months of production to the new SGW UG mine.

During the Quarter, the Company invested $3.8M in capex and $0.6M in exploration compared to $0.9M and

$0.7M, respectively, in Q2 16. During Q2 17, the Company increased its investment in the construction of the SGW UG ramp and access and finalized the construction of the ventilation shaft. In addition, the Company advanced the construction of the phase 4A of the tailings dam. As of a result of the additional capex, AISC were $1,345/oz compared to $1,095/oz in Q2 16.

The average gold price realized for the Quarter was $1,252/oz (Q2 16: $1,100/oz).

Profit before tax for the quarter was $1.0M compared to a loss of $0.9M in Q2 16. Net profit after tax was

$0.9M compared to a loss of $0.9M in Q2 16.

Cash flow from operations before working capital variations was $2.2M compared to $0.9M in Q2 16. YTD cash flow from operations before working capital variations was $7.0M compared to $1.1M for the prior year due to better operating performance and higher revenue.

The cash balance at the end of the Quarter was $5.4M compared with $4.3M at May 31, 2016. The Company's debt balance was $0.2M compared to $0.4M at May 31, 2016 related to minor equipment leases.

FY17 Outlook & Guidance

The Company's forecast production guidance for FY17 remains between 35,000 to 40,000 oz of gold at operating cash costs of between $800 - $900/oz.

As in the past, variations in production and unit costs are expected to occur, quarter on quarter, as the mine plan draws ore from multiple sources at varying grades, stages of development and stripping factors. As already announced, the Company incurred higher unit costs in Q2 17 due to the transition from the Arenal UG to the SGW UG mine which are expected to gradually decrease during the remainder of the Company's FY17.

Uruguay Underground Exploration Projects - Potential for Significant Expansion of the SGW UG Mine

SGW UG is a continuation, at depth, of the historic San Gregorio open pit deposit which has produced approximately 536,000 oz at an average grade of 2.12 g/t. During FY17, the Company intends to add reserves and expand prospective SGW UG operations within three neighboring underground projects. These projects are the San Gregorio East Underground, SGW UG Deep Extension and the San Gregorio Underground Central area. The last two projects relate to areas which were not previously considered in the SGW UG mining plans and represent new opportunities with a strong potential for near term resource and reserve delineation.

A comprehensive and extensive drilling campaign is currently being carried out at San Gregorio. During FY17, a total of 9,000m of drilling are planned in order to confirm and increase reserves and extend the SGW UG mine. To the end of the Quarter, some 4,250m have already been drilled, with positive results.

San Gregorio UG cross-section looking North - highlighting west, central and east mineralized bodies

San Gregorio Central (SGC) - A New Mineralised Area in the Core of SG

New resources are being discovered at San Gregorio Central which are expected to have a positive impact on the economics of the SGW UG project. San Gregorio Central is an eastern continuity of the current SGW UG mineralized ore body.

A total of twelve drill holes (2,252m) have been drilled in the area. Ten of these from underground drilling stations (1,514m) and two from the surface (738m). All the holes drilled to date have intercepted grades considered at present to be economic mineralization. The last five holes (1,381m) were drilled during Q2 17 and their mineral intercepts are shown below.

Q2 17 intercepts from underground:

Hole ID	From (m)	To (m)	Intercept	Including
DDHUGSG16-024_08	119.45	125.45	6.0m @ 1.28 g/t Au	4.0m @ 1.44 g/t Au
DDHUGSG16-024_09	139.10	146.10	7.0m @ 0.60 g/t Au	1.0m @ 1.34 g/t Au
DDHUGSG16-024_10	155.95	164.35	8.4m @ 1.01 g/t Au	4.3m @ 1.53 g/t Au

Q2 17 intercepts from surface:

Hole ID	From (m)	To (m)	Intercept	Including
DDHUGSG16-177	239.85	244.05	4.2m @ 3.52 g/t Au	1.85m @ 5.55 g/t Au
DDHUGSG16-080	272.00	282.55	10.6m @ 1.11 g/t Au	1.10m @ 2.51 g/t Au

A total of 3,600m of drilling distributed over thirteen holes are planned for this target during the remainder of the fiscal year. It is management's belief that this work has the strong potential to increase reserves.

San Gregorio East (SGE)

To date, the results from surface based diamond drilling at San Gregorio East UG have confirmed the continuity of the mineralized body. The grades encountered have been more variable than expected. Additional mineralization has been defined outside the originally known boundaries. The Company's preliminary interpretation is validating the current reserves defined in the area. At present, the geological model is currently being re-interpreted.