Fate of Canadian gold miner in Uruguay uncertain

Known as the gold capital of Uruguay, the northeastern town of Minas de Corrales held an urgent community meeting this week with the ministers of Employment and Industry to analyze what can be done to support the hundreds of workers currently on employment insurance due to Orosur Mining’s (TSX, AIM: OMI) decision to slow down operations at its San Gregorio mine.

The Canadian miner applied to commence reorganisation proceedings for its subsidiary in the South American country, Loryser S.A., and put most of its employees on EI while waiting for an $8 million loan from the state-own Banco República to pay off some debts and be able to go on with its extractive activities.

Loryser operates the San Gregorio mine and processing complex, which has been in operation since 1997 and has produced approximately 1.5Moz of gold in the past two decades. Last year, the operation exported 30,000 ounces, mostly to Switzerland, and received $38 million for its yellow metal.

However, Orosur reported that since late 2017 the company "has been hindered by operational challenges." In a media statement, the Vancouver-based miner explained that the challenging situation is caused by the scarcity of alternative sources of ore, which is resulting in financial liquidity constraints.

"To continue the mineplan, a swift and timely transition from SG UG (San Gregorio Underground Mine) to the Veta A underground project would be needed, which itself would require external financing and the environmental permit in Veta A which are currently not yet available," the press release reads. In an email to MINING.com Orosur's Chief Executive Officer, Ignacio Salazar, said that in exchange for the permits and the financing, Loryser has committed to deploying all net revenues in exploring in Uruguay.

The Veta A is located underneath the mine’s tailings pond and, according to local media, it has been deemed as a very risky project by the National Environment Directorate, whose officials are still debating whether it is viable to grant it an environmental licence or not.

Uruguay's ministers of Employment and Industry in Minas de Corrales. Photo by the Office of the President of Uruguay.

Yet, at this week's meeting, the Minister of Industries, Carolina Cosse, said that Orosur has not applied for such environmental permit just yet.

In this regard, Salazar explained that the company believes that, despite the project being feasible from an environmental perspective, it would be irresponsible for Loryser, in a reorganization process, to keep spending money in Veta A without a firm commitment from the government to reach a deal.

"We are not progressing with the environmental permit process till we reach that overall agreement with the government. The Company believes Veta A is a good project which could add 2-4 years minelife," the executive said.

But the ministers want proof of this so they said they are thinking about hiring an international consultancy firm that is able to determine how much gold is left at the site and explain whether the operation can still be profitable.

"The government wants to confirm both the potential and the environmental feasibility and they feel they need an international consultant to do it but, unfortunately, at this very late stage, the consultant has not yet even been hired," Orosur's CEO wrote in his email.

Taking into account that it is estimated that for each direct job, the mine creates three indirect jobs, the Cabinet officials proposed providing training and entrepreneurship courses so that workers on standby can explore new fields of work.

“We are not going to leave you alone, we are going to work with you and we are going to walk the walk,” the Minister of Industries said.

But in the view of Ignacio Salazar, even though the investment in training is always good and welcomed, the State has to take into consideration that the mine is the town's main economic driver and that it is possible that Veta A could generate tens of millions of dollars in revenues.