Orosur Mining (LON:OMI, TSX-V:OMI) shares had soared over 30% on London’s AIM market by midday following ‘excellent’ drill results from the Vaca Muerta project, which may boost the San Gregorio mine plan.
Like many gold stocks Orosur has had a particularly strong run in recent weeks. The shares have doubled in value since the start of September and with this latest move they reached a new 12-month high at 45.75p per share.
Vaca Muerta, along with the nearby Arenal Deeps project and the newly acquired Pantanillo mine in Chile, further strengthens Orosur's position as an emerging South American gold miner.
The company said that today's results from Vaca Muerta demonstrate potentially wide intercepts of gold mineralisation. The project is located in northern Uruguay, around 85 kilometres from Orosur’s operational San Gregorio gold mine.
“We are very pleased with the results in exploration over the past six months, identifying additional near mine resources at San Gregorio, defining a first NI 43-101 resource at Pantanillo and now delivering these results in Vaca Muerta.”
Orosur completed seven reverse circulation (RC) holes at Vaca Muerta.
All seven holes encountered anomalous gold values, and the best intercepts included 26 metres at 2.30 grams per tonne (g/t) gold and 16 metres at 2.58g/t. The gold mineralisation is open down dip and along strike.
The company expects to start a follow-up drill programme at Vaca Muerta this week.
The rising share price and growing interest in Orosur has followed a busy few weeks for the junior gold miner, as it continues to expand its operations.
Just over a year ago, Orosur was the loss-making owner of a single, low grade pit with a projected lifespan of just three years.
Now it has progressed substantially.
Since early September the company has completed the feasibility study for the Arenal Deeps deposit in Uruguay, and on the 1st October it pulled off a transformational merger with Fortune Valley Resources to add the one million ounce Pantanillo gold mine in Chile.
Furthermore San Gregorio’s mine life has been extended by a further three years.
“Last year we did not have the mine plan in Uruguay or the growth profile in Chile we have today,” Orosur’s chief financial officer Ignacio Salazar said on Friday.
Uruguay, Salazar says, will be the “cash machine” that will finance the development of Arenal Deeps and work on Pantanillo.
So there will be no need to issue shares to bankroll future development. It may take out a financing facility of US$4-5 million for plant and equipment. But if the gold price stays at around its present record level then even this will not be necessary.
Production for 2011 is projected to be in the order of 55,000 ounces of gold at a cash cost of $825.
At a price of $1,250 an ounce of gold, the company would generate $20 million of cash, where last year it made $9 million based on an average price of $1,050.
“We are leveraged play on the gold price,” Salazar says.
The company’s exciting Chilean properties, acquired through the Fortune Valley deal, are also expected to drive value creation.
The primary Chilean asset is the Pantanillo project, which comprises 11,750 of hectares optioned from Anglo-American.
Pantanillo is located on the Maricunga Belt, a gold rich area rich which is hosts 60 million ounces of the yellow metal.
First phase drilling has defined a maiden JORC resource of 1.05 million ounces at Pantanillo Norte, a small part of the total exploration area, and a second phase aims to build on this early impressive progress.
“Right now we have targeted the oxidized and mixed portion of the deposit and have confirmed (a resource of) 1 million. (Former owners) Kinross and Anglo were heading for two or three, so we will keep going and our objective of the next drilling campaign is to evaluate the deeper sulphide mineralisation which we believe is a significant exploration target” Salazar said.
A scoping study on Pantanillo began in June and will be completed by the end of the year.
“The study will look at the project and what we want to get from Pantanillo - whether we will concentrate on the oxide, or go for something bigger,” Salazar said.
A new exploration programme due is due to start by the end of the year, to look at other areas on the Pantanillo property.