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It has not been a good year for the Orosur (LSE:OMI) share price, having fallen from 50.28 pence per share on 12 September 2012 to 7.00 by 13 July this year. The share price has drifted in the doldrums for the past two months, managing to regain ground to the 10.00 range at 13 August in a slight recovery.
Today, however, has been a different story altogether, with OMI currently up 62.07% toe 17.62. At one time this morning, the share price had risen as high as 80% prior to a normal midday retraction.
The reaction today comes in response to the announcement of an initial indication that the plans that Orosur had promised to implement relative to its gold production in Uruguay are already appearing to have had some effect. The company has wasted no time implementing measures designed to reduce production costs by 20%. The company’s year end report included a $14.8 million loss against a modest profit the year before, although revenues increased nearly 20%. It does not take an accountant to figure out that something was very wrong with that picture.
By the time the year end report was released, the company had already initiated several changes at the board level, included confirmation of Ignacio Salazar as the new CEO.
At that same time the company projected that it would produce 50,000 to 55,000 ounces of gold per year for the next three years at an average cost of somewhere between $850 to $925 per ounce. During the loss year just completed, it had cost Orosur $1,093 per ounce to operate the only functional gold mine in Uruguay. Their projection for the first quarter was 13,500 to 14,500 ounces. Now here comes the news that prompted today’s dramatic increase.
Orosur actually produced 16,851 ounces during the first quarter . . . AND . . . the cost of production was only $755. The company continues to hold to its forecast for both annual production and the cost thereof. Increased production by itself is meaningless if it is not accomplished in a cost effective manner that generates a profit, so the main focus for Salazar will be cutting those production costs and keeping them under control. He’s off to a good start. Production is 9% higher for the quarter year-on-year, and costs are 30% lower.
Salazar commented on the first quarter performance, saying, “It is a pleasure to see robust operating figures realized so swiftly on the back of the focused operational and organizational improvement programs initiated over the recent months. The Company continues to strive to achieve further improvements both in the short and long term.”
