Orosur Mining — San Gregorio stabilises as Colombia takes off

Orosur Mining — San Gregorio stabilises as Colombia takes off

Orosur’s H118 results indicate San Gregorio (SG) continues to perform well, albeit with a small deferral of 2koz of gold production to narrow FY18 guidance from 30-34koz to c 30koz. Orosur’s focus remains on the most profitable mining possible rather than extracting its reserves ad hoc. SG’s geological data are being thoroughly examined such that additional production opportunities are identified. The process has already yielded SG UG West (a current mainstay of production), with SG Central located adjacent and being developed to provide production during H218. Veta A is another old pit reopening as an underground mine project. We consider that Orosur should be able to return to profitability by end FY18, with upside clearly linked to the very positive initial drill results coming from its increasingly important Colombian asset base.

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Written by

Orosur Mining

San Gregorio stabilises as Colombia takes off

H118 results and outlook

Metals & mining

26 January 2018

Price

10.85p

Market cap

£13m

£/US$1.38

Net cash (US$m) at 30 November 2017

0.3

Shares in issue

117.6m

Free float

86%

Code

OMI

Primary exchange

TSX

Secondary exchange

AIM

Share price performance

%

1m

3m

12m

Abs

(10.5)

(27.1)

(37.1)

Rel (local)

(10.8)

(28.7)

(41.6)

52-week high/low

18.2p

10.8p

Business description

Orosur Mining owns (100%) and operates its San Gregorio gold mine in Uruguay. It explores for gold close to San Gregorio and further afield in Chile, at the Anillo gold property. It also owns 100% of the highly prospective, high-grade Anzá gold property in Colombia, which is currently undergoing a 15,000m drill programme.

Next events

Anza exploration results

Q3/Q4 FY18

Analysts

Tom Hayes

+44 (0)20 3077 5725

Charles Gibson

+44 (0)20 3077 5724

Orosur Mining is a research client of Edison Investment Research Limited

Orosur’s H118 results indicate San Gregorio (SG) continues to perform well, albeit with a small deferral of 2koz of gold production to narrow FY18 guidance from 30-34koz to c 30koz. Orosur’s focus remains on the most profitable mining possible rather than extracting its reserves ad hoc. SG’s geological data are being thoroughly examined such that additional production opportunities are identified. The process has already yielded SG UG West (a current mainstay of production), with SG Central located adjacent and being developed to provide production during H218. Veta A is another old pit reopening as an underground mine project. We consider that Orosur should be able to return to profitability by end FY18, with upside clearly linked to the very positive initial drill results coming from its increasingly important Colombian asset base.

Year end

Revenue (US$m)

PBT*
(US$m)

EPS*
(c)

DPS
(c)

P/E
(x)

Yield
(%)

05/16

42.9

3.2

(1.2)

0.0

N/A

N/A

05/17

44.2

2.1

2.6

0.0

5.8

N/A

05/18e

37.7

7.9

5.8

0.0

2.6

N/A

05/19e

44.5

10.1

8.1

0.0

1.8

N/A

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

SG UG Central drilling highlights remnant potential

The original San Gregorio open pit produced over 0.5Moz. Sitting beneath this old pit are gold resources that may well contribute to future production. This includes a gold-bearing crown pillar situated between the old SG pit floor and the uppermost reaches of the SG UG West workings. A separate SG UG Central gold resource, is being optimised and will replace production from SG UG West when it ceases during H218. In our view these underground resources, as well as development of Veta A (situated 1.2km from the SG plant) are the near-term sources of gold for Orosur to mine and maintain SG’s profitable operation.

Valuation: Revised for narrowed guidance, gold price

Factoring in all our valuation revisions (see pages 5 and 6), we now value Orosur’s shares at £0.17, using a US$/£ forex rate of 1.38 to convert the company’s US dollar-denominated earnings. While this represents a hefty 41% decrease over our previous valuation published in October 2017 (£0.29/share), it still provides a considerable 56% upside to the company’s current share price. The decrease in our valuation results, predominantly, from our long-term revision of expected yearly production, with 35kozpa estimated now compared to 40kozpa previously. We expect Orosur’s ongoing significant exploration programmes over its mining areas, both new and old, to provide significant increases in reserves. As and when these reserve estimates are formalised and released to market, we foresee a potential increase in our long-term production assumptions, which would represent an upside risk to our estimates and valuation. Our revised valuation uses our new gold price forecasts (comparable to our previous forecasts, see page 6) and a 10% discount rate to reflect general equity risk.

Realising San Gregorio’s further potential

Key to Orosur’s future in Uruguay is finding more gold in, under, and around the location of past producing assets as well the discovery of fresh new orebodies across the Isla Cristalina belt, in which it has a dominant land position. The potential for new discoveries, as well as the definition of new resources and reserves near to and underneath old open pits, is huge and only limited by the company’s financial position. Orosur has mined over 1.5Moz from its numerous open pit and underground operations at San Gregorio. Under previous management, it appears that this was not always undertaken in an orderly and responsible fashion. As a result, the application of modern and systematic exploration techniques are being applied by Orosur’s current management team to identify those areas of mineralisation that were previously missed, and which may potentially lead to far more gold being discovered as mining practices become increasingly focused on the underground extraction of ore. We also note that the Uruguayan government has granted Orosur an exemption on royalty payments (equal to 3% of sales) for the period April 2017 to March 2018. This is a definite positive, demonstrates a healthy relationship between the two parties and potentially bodes well for any permitting needed by Orosur as it looks to expand exploration in country.

FY18 outlook – guidance should still be met at lower end

It has been unfortunate that Orosur had to announce the deferral of 2koz of gold from its H118 production to the second half of FY18. However, it should be stressed that this was not due to an unexpected decrease in gold grades or any failure of the technical processes that feed into the mine planning process. The shortfall in production was simply due to the failure of long-hole mining machinery used underground. While this could be argued as avoidable, it is a far better reason for a production miss than any of the previous points mentioned.

As a result of the failure of its long-hold mining equipment, Orosur has narrowed its guidance and now expects c 30koz to be produced in FY18 vs previous guidance for 30-35koz produced. C1 equivalent cash cost guidance remains unchanged for FY18 at US$800/oz to US$900/oz.

Colombian assay results hint at high-grade potential

With increasing investment into exploration-stage mining plays in South America over the past couple of years and the opening of new regional offices in Ecuador by some 27 different companies, including the likes of BHP, Orosur has elevated the importance of its exploration-stage Colombian Anza project. This project is associated with the same type of tectonic processes that formed the more notable discoveries in Ecuador and Colombia. The reasoning for Anza’s elevated importance appears justified on viewing preliminary drill results, which indicate a strong presence at decent concentrations of both gold and base metals. The potential in Colombia is fast becoming evident, and to this end Orosur is potentially open to joint venturing on Anza and seeking further funding to significantly progress exploration. Exploration in Colombia runs alongside ongoing mining at its longstanding San Gregorio mine in Uruguay.

Orosur is well into its fully funded Phase 1 exploration programme (started October 2017) at its high-grade precious and base metals Anza project, located in the middle-caucus region of northern Colombia. The first assay results have been received with all holes intercepting mineralisation, indicating that the project has good potential to allow for a maiden mineral resource to be defined and, most importantly, for a far more precise understanding of both the geology and geological structures that govern the mineralisation known to be present. While Anza has been drilled before (most recently by previous owners Waymar Resources), questions remain as to what type of geological model best explains the high-grade precious and base metals occurrences that have either been observed in outcrop or drilled at depth. Previously, it was thought that mineralisation at Anza could hint at a volcanogenic massive sulphide deposit which can host, inter alia, significant tonnages of high grade metal sulphides rich in base metals such as copper, zinc or lead, as well as associated amounts of gold and silver. However, it is thought now that the mineralisation being encountered during drilling is epithermal in nature, narrow veined and potentially associated in regional setting with a much larger porphyritic system. Anzá is in the most prospective district in Colombia, the Colombian Gold Belt, where most of the largest gold deposits have been defined, close to Continental Gold’s Buriticá project located along strike to the north from Anza. The APTA target represents <10% of the total Anzá area. Anzá’s potential has yet to be tested given the identification of four high-priority targets with coincident geochemical and geophysical anomalies. Orosur´s exploration programme aims are as follows:

Step out drilling on extensions of the APTA discovery. Delineation and in-fill of the high-grade Au zones.

Initial drilling at nearby targets, starting with Charrascala.

Systematic exploration of the district potential.

Only partial drill results representing 30% of the samples to be analysed from the first two holes (MAP54 & MAP55) was sent to SGS Laboratory in Medellin, with the following table containing the results released by Orosur to date.

Exhibit 1: MAP54 partial assay results

Hole number

From (m)

To (m)

Interval (m)

Au g/t

Cu ppm

Zn (%)

MAP54

97.10

101.73

4.63

5.47

771.3

1.44

Including

97.10

98.20

1.1

2.59

140.1

0.48

98.20

99.50

1.3

3.67

424.0

0.75

99.50

100.75

1.25

4.41

1,050.1

1.87

100.75

101.73

0.98

12.43

1,584.9

2.90

MAP54

126.00

127.00

1.0

1.68

193.2

1.22

MAP54

144.50

149.82

5.32

17.76

4,724.7

4.84

Including

144.50

145.70

1.2

8.71

778.0

0.80

145.70

146.70

1.0

37.96

575.1

0.70

146.70

148.00

1.3

19.76

324.8

0.25

148.00

148.87

0.87

17.63

4,531.5

7.56

 

148.87

149.82

0.95

5.31

20,200.0

17.54

MAP54

149.82

159.10

9.28

1.84

2,398.0

2.26

Including

149.82

150.85

1.03

1.4

17,500.0

14.26

150.85

151.90

1.05

1.43

39.5

0.05

151.90

153.00

1.10

0.94

246.1

0.88

153.00

154.10

1.10

3.19

2,777.8

1.84

154.10

155.00

0.90

3.73

52.6

0.29

155.00

156.00

1.00

1.79

306.4

0.99

156.00

157.00

1.00

0.97

354.6

1.30

157.00

158.00

1.00

0.92

79.9

0.24

158.00

159.10

1.10

2.34

70.2

0.42

Source: Orosur Mining press release, 14 November 2017

MAP54 was drilled in the central area of the APTA project and appears to have been drilled to confirm the data contained within previous drill holes located nearby. Orosur has not indicated whether MAP54 confirms old drill data or not. Nonetheless, the assay results presented in the above exhibit show promising precious and base metal concentrations across meaningful and potentially economic mining widths. Of course, further drilling is required to confirm the potential for a high grade precious metal/base metal resource, and Orosur expects to release more drilling information over both Q318 and Q418 as it progresses through its fully funded 15,000m drill campaign.

H2 outlook: Reserve increases are a work-in-progress

During H118 mining was focused at the SG UG West development. This operation has been the mainstay for San Gregorio’s gold production since November 2016. As mining at SG UG West is expected to conclude during H218, development of the SG Central deposit (see below) has started with the development of an underground access ramp.

However, it appears that the mining of SG Central will require further refinement to the mine schedule as parts of this mineral resource are understood to be uneconomic at current gold prices, especially at depth and to the east due to narrowing thicknesses of the ore body and also a reduction in the gold grade. As a result, Orosur’s mining consultant, SRK Peru, is revising the mine schedule to focus on extraction of the most profitable parts. These are stated to be in the shallower (ie upper) reaches of SG Central orebody.

Exhibit 2: Current and near-term UG mining operations

Source: Orosur Mining, H118

As can be seen from the above exhibit, SG Central is planned to be accessed from the mining operation at SG UG West via a 250m development access ramp which is under construction. We also highlight the company’s ongoing assessment to mine the (pink shaded area) crown pillar shown in the exhibit above. Crown pillars are put in place when mining close to the floor of open pits (as in this example), or where a section of a mine needs to be protected from the effects of mining elsewhere.

Veta A underground – mining beneath old open pits

The historic Veta A open pit mined 29,000 ounces of gold at an average grade of 3.1g/t. Of most significance however, is that mining was stopped as the Veta A mineralisation appeared to run under the previous and now reclaimed tailings storage facility. This same tailings storage facility is no longer used and has been remediated and returned to nature, as has the historic Veta open pit. As such, all ground settlement should have ceased and mining beneath this TSF is now being considered due to the extension of the Veta A orebody thought to run beneath it. Exhibit 3 illustrates the potential mineralisation Orosur is looking to delineate an economic ore reserve from.

Exhibit 3: Exploration potential of the Veta A orebody at depth

Source: Orosur Mining

The current reserve estimate in place for Veta A is 9,440ozs (ie 122,328 tonnes at 2.40g/t Au), and Orosur intends to undertake further drilling to achieve “a significant increase in reserves following a positive drilling campaign that proved the continuity and extension of the ore body over 140m from the current defined reserves.’’ From the following drill results, it appears that the claims by Orosur that further mining at Veta A could capitalise on the highest-grade gold resource currently delineated at San Gregorio.

Exhibit 4 is a summary of drill results obtained from drilling across the Veta A and indicates that the potential for extensions at depth to known mineralisation is strong.

Exhibit 4: Veta A drill results

Hole ID

From (m)

To (m)

Intercept length (m)

Au g/t

VADD17-006

161.9

168.6

6.7

5.0

VADD17-007

165.2

167.1

1.9

3.3

VADD17-008

125.0

131.1

6.1

2.6

VADD17-009

170.5

175.3

4.8

1.8

VADD17-010

107.7

109.7

2.0

0.4

VADD17-011

107.6

110.2

2.6

5.8

VADD17-012

124.4

130.8

6.4

1.7

VADD17-013

97.5

99.0

1.5

1.5

VADD17-014

96.3

97.7

1.4

0.7

VADD17-015

155.4

157.0

1.6

1.6

VADD17-016

133.6

136.7

3.1

3.4

Source: Orosur Mining

Revisions to our model and valuation

We have made the following changes to our model:

We have reviewed our estimates for San Gregorio’s future production. In consideration of the mine’s performance over the past two years, we have reduced gold production from 40koz pa to 35koz pa through to FY24. We estimate that this production will be achieved within a cash operating cost range of US$800/oz to US$900/oz, also in line with the company’s cash cost guidance for the last two financial years.

We have adjusted our capital expenditure forecasts for FY18 and beyond, from US$5m to US$9m. Orosur stated in its H118 release that it had spent more than previously guided to, due to increased exploration and development expenditures (see financing section below).

We have removed the 3% government royalty on sales for FY18 due to the Uruguayan government’s ongoing support for its only operating gold mine – San Gregorio.

We have adjusted our US$/£ forex rate from 1.34 to 1.38, which affects our valuation of sterling-denominated shares.

Gold price revisions

We have published our annual mining review (Unlocking the price to NPV discount published November 2017), and as a result our gold price assumptions have changed. For the background to these changes please read page 79 onwards from the aforementioned report. Our revised gold price assumptions follow in Exhibit 5.

Exhibit 5: Edison’s old and revised gold price assumptions, 2018 to 2024

Calendar year

2018

2019

2020

2021

2022

2023

2024

Old gold price

1,220

1,284

1,362

1,344

1,281

1,274

1,257

New Gold price

1,220

1,263

1,482

1,437

1,304

1,303

1,264

% change

0.0%

-1.6%

8.8%

6.9%

1.8%

2.3%

0.6%

Source: Edison Investment Research

Valuation – 56% upside to current share price

Factoring in all our revisions, we now value Orosur’s shares at £0.17, using a US$/£ forex rate of 1.38 to convert its US dollar denominated earnings. While this represents a hefty 41% decrease over our previous valuation published October 2017, it nonetheless still provides a considerable 56% upside to the company’s current share price. The decrease in our valuation results predominantly from our long-term revision of expected yearly production, with 35koz estimated now as compared to 40koz previously. This has also resulted in the downward revision of our financial estimates (FY18e and FY19e EBITDA of US$12.2m and US$14.0m vs US$17.5m and US$18.7m before; see Exhibit 6 for more details).

We expect Orosur’s ongoing significant exploration programmes over its mining areas, both new and old, to provide for a visible increase in reserves. As and when these reserve estimates are formalised and released to market, we foresee a potential increase in our long-term production assumptions, which would represent an upside risk to our estimates and valuation.

Financials

H118 gold production was 15,677oz, a y-o-y decrease of c 7%. Operating cash costs for H118 were US$886/oz, a y-o-y increase of 13%, with all-in sustaining costs up 25% y-o-y from US$1,422/oz to US$1,135/oz. The average price received year to date for each gold ounce sold was US$1,277/oz. All told, Orosur ended H118 slightly in the red reporting a net loss of US$0.542m.

The increase in AISC was due to Orosur’s significant ramp-up in exploration drilling needed to aid delineation of new mineral resources and ore reserves, and also included development capital of US$1.704m in Q2 (ytd: US$6.164m).

Looking towards the end of FY18, Orosur’s expected year-end capex is estimated at around US$8m to US$9m. We include the upper end of this guidance in our model and valuation. We estimate an operating cash cost figure per H218 gold ounce produced of US$875/oz, which is towards the upper end of the company’s own guidance of US$800/oz to US$900/oz.

Cash position

Orosur ended H118 with cash on hand of US$2.1m, and net cash of US$0.3m. The company’s debt comprises a small Santander overdraft, which was fully drawn down during H118 due to the prolonged equipment failure that led to a 2koz deferral of gold production to H218. Orosur also classifies some equipment leasing as debt, but this amounts to no more than US$0.4m. We note Orosur has successfully renewed its Santander arrangement, making a further US$1.5m credit line available in case of unforeseen set-backs.

We assume an average gold price across all four quarters in FY19 of US$1,263/oz, factoring in our cost, capex and working capital assumptions, Orosur should be able to repay its Santander credit line and finish FY19 comfortably in the black. Our current estimate for end FY19 net cash is US$1.1m.

Exhibit 6: Financial summary

US$'000s

2014

2015

2016

2017

2018e

2019e

31-May

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

80,370

65,868

42,866

44,226

37,694

44,467

Cost of Sales

(72,905)

(69,715)

(42,073)

(40,271)

(30,903)

(35,228)

Gross Profit

7,465

(3,847)

793

3,955

6,791

9,238

EBITDA

 

 

23,935

10,708

9,121

9,436

12,191

13,956

Operating Profit (before amort. and except.)

5,197

(5,861)

3,146

2,293

8,097

10,356

Intangible Amortisation

0

0

0

0

0

0

Exceptionals

(869)

(43,164)

(6,328)

(101)

(810)

0

Other

0

0

0

0

0

0

Operating Profit

4,328

(49,025)

(3,182)

2,192

7,287

10,356

Net Interest

(666)

(376)

24

(164)

(224)

(288)

Profit Before Tax (norm)

 

 

4,531

(6,237)

3,170

2,129

7,873

10,067

Profit Before Tax (FRS 3)

 

 

3,662

(49,401)

(3,158)

2,028

7,063

10,067

Tax

1,461

(4,975)

1,948

557

(353)

(503)

Profit After Tax (norm)

5,123

(54,376)

(1,210)

2,585

6,710

9,564

Profit After Tax (FRS 3)

5,123

(54,376)

(1,210)

2,585

6,710

9,564

Average Number of Shares Outstanding (m)

78.1

96.6

97.6

99.9

114.7

117.6

EPS - normalised (c)

 

 

6.6

(56.3)

(1.2)

2.6

5.8

8.1

EPS - normalised fully diluted (c)

 

 

6.6

(56.3)

(1.2)

2.6

5.8

8.1

EPS - (IFRS) (c)

 

 

6.6

(56.3)

(1.2)

2.6

5.8

8.1

Dividend per share (c)

0.0

0.0

0.0

0.0

0.0

0.0

Gross Margin (%)

9.3

-5.8

1.8

8.9

18.0

20.8

EBITDA Margin (%)

29.8

16.3

21.3

21.3

32.3

31.4

Operating Margin (before GW and except.) (%)

6.5

-8.9

7.3

5.2

21.5

23.3

BALANCE SHEET

Fixed Assets

 

 

79,278

34,992

30,661

37,731

48,637

53,037

Intangible Assets

41,955

18,330

20,555

21,571

27,571

31,571

Tangible Assets

37,323

16,662

10,106

16,160

21,066

21,466

Investments

0

0

0

0

0

0

Current Assets

 

 

28,410

20,925

18,159

18,033

10,515

13,847

Stocks

14,254

14,362

12,069

13,157

9,191

10,843

Debtors

3,338

1,775

1,770

1,519

1,295

1,527

Cash

10,818

4,788

4,320

3,357

29

1,477

Other

0

0

0

0

0

0

Current Liabilities

 

 

(17,919)

(15,073)

(11,199)

(14,963)

(7,276)

(6,944)

Creditors

(13,941)

(13,944)

(10,946)

(14,761)

(7,074)

(6,742)

Short term borrowings

(3,978)

(1,129)

(253)

(202)

(202)

(202)

Long Term Liabilities

 

 

(6,789)

(6,958)

(5,426)

(5,606)

(7,077)

(5,577)

Long term borrowings

(961)

(352)

(99)

(201)

(1,672)

(172)

Other long term liabilities

(5,828)

(6,606)

(5,327)

(5,405)

(5,405)

(5,405)

Net Assets

 

 

82,980

33,886

32,195

35,195

44,799

54,363

CASH FLOW

Operating Cash Flow

 

 

22,767

11,753

6,539

12,349

7,531

11,237

Net Interest

(666)

(376)

24

(164)

(224)

(288)

Tax

0

0

0

0

0

0

Capex

(13,062)

(12,835)

(6,612)

(13,199)

(15,000)

(8,000)

Acquisitions/disposals

0

0

0

0

0

0

Financing

0

0

710

0

2,894

0

Dividends

0

0

0

0

0

0

Net Cash Flow

9,039

(1,458)

661

(1,014)

(4,799)

2,948

Opening net debt/(cash)

 

 

3,362

(5,879)

(3,307)

(3,968)

(2,954)

1,845

HP finance leases initiated

0

0

0

0

0

0

Other

202

(1,114)

0

0

0

0

Closing net debt/(cash)

 

 

(5,879)

(3,307)

(3,968)

(2,954)

1,845

(1,103)

Source: Company accounts, Edison Investment Research

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Pty Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

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Copyright 2018 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Orosur Mining and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Investment Research Pty Ltd (Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd (AFSL: 427484)) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.
Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2018. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Pty Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2018 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Orosur Mining and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Investment Research Pty Ltd (Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd (AFSL: 427484)) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.
Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2018. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

eServGlobal — Core business update

Delays in closing contracts in the core business resulted in a revenue shortfall for eServGlobal in FY17, although some of these have now been signed and will contribute from FY18. Continued efforts to reduce the cost base should reduce the break-even revenue level to c €12.5m/A$19min FY18, which the company is aiming to achieve through focusing on additional sales to its existing customer base. eServGlobal participated in the recent HomeSend funding round, marginally increasing its stake to 35.7%.

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