--- Adds broker comment and quotes from chief executive ----
Orosur increased production from its San Gregorio mine in Uruguay by 17% to 13,970 ounces of gold in the three months to November compared to a year earlier.
This was despite ore production from all pits being slowed due to heavy rain during the quarter.
Ore mined from the Crucera pit during the quarter was also of a lower grade than planned, resulting in lower ounces produced and higher cash costs per ounce at that pit, Orosur said.
This increased the total cash cost per ounce for the quarter to US$1,215 an ounce compared with a target of around US$1,100.
Orosur added it remains on track to achieve its forecast production target of 63,000 to 68,000 ounces for the full year in spite of these problems.
The miner is currently focused on development of the Arenal Deeps ramp and lateral development to enable higher grade production from transverse stopes.
It is on track to complete this work by the end of February, it re-iterated today.
Revenue for the quarter to November rose by 15% to US$24.1mln with an average realised gold price of US$1,694.
Net profit after tax for the quarter was US$1.2mln (Q2 2011:US$2.6mln).
For the half year, net profit after tax was US$3.5mln (US$7.0mln).
David Fowler, Orosur's chief executive, said that production was at the lower end of expectations for the quarter due to lower than anticipated grades from the Crucera pit.
"During December we slowed the rate of mining at Crucera in order to adapt the mining approach to reduce dilution, thus achieving fewer tonnes of ore produced at an improved grade.
"Accordingly, and taking account of the significant progress made on developing the ramp at Arenal Deeps, we remain confident that we will meet our production target for the second half, and achieve production for the full year of between 63,000 and 68,000 ounces."
Because of the grades at Crucera, cash costs for the full year will now be in the range of US$1,000 to US$1,065 per ounce, compared to an original forecast of US$975, he added.
Orosur also now expects its cash balance at the end of the year will be approximately US$13mln (based on production of 65,750 ounces and a gold price of $1,625 an ounce) compared with an original estimate of US$15mln.
Fowler later told a conference call: "That's mainly due to the acceleration of San Gregorio and at this stage we believe our strategy and the timing of our planned dividend for the next financial year remain on track and are unchanged."
The firm plans to start paying a dividend in the middle of next fiscal year, aiming to pay out one third of cash flow over the next three to four years from operations after paying back debt and sustaining capital expenditure.
But analyst Asa Bridle said: "We remain positive on Orosur, which looks heavily discounted against its peers on all metrics.
"We take comfort from the overall performance of the company's operations in the first half and the board's guidance that the second half will see the situation continue to stabilise and improve as outlined in October 2012."
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