Orosur Mining Inc. Condensed Interim Consolidated ...Capital stock 8 61,110 60,751 Contributed...

Orosur Mining Inc. Condensed Interim Consolidated Financial Statements For the three and nine months ended February 28, 2017

Notice to the reader

The accompanying unaudited condensed interim financial statements of the Company have been prepared by, and are the responsibility of, management. The unaudited condensed interim financial statements have not been reviewed by the Company's auditors.

Contents

Condensed Interim Consolidated Statements of Financial Position 2

Condensed Interim Consolidated Statements of Profit and Comprehensive Profit/(Loss) 3

Condensed Interim Consolidated Statements of Cash Flows 4

Condensed Interim Consolidated Statements of Changes in Shareholders’ Equity 5

Selected explanatory notes 6 – 23

The accompanying notes are an integral part of these unaudited interim consolidated financial statements. 2

Orosur Mining Inc.

Condensed Interim Consolidated Statements of Financial Position Thousands of United States Dollars, except where indicated

Note Ref.

As at February 28, 2017 ($)

As at May 31, 2016 ($)

Assets

Cash 2,400 4,320

Accounts receivable and other assets 3 1,939 1,770

Inventories 4 12,189 12,069

Total current assets 16,528 18,159

Accounts receivable and other assets 3 550 550

Property, plant and equipment and development costs 5 14,686 10,106

Exploration and evaluation costs 6 18,785 17,250

Deferred income tax assets 11 2,534 2,534

Restricted cash 228 221

Total non-current assets 36,783 30,661

Total assets 53,311 48,820

Liabilities and Shareholders’ Equity

Trade payables and other accrued liabilities 3 10,981 10,586

Current portion of long-term debt 16 161 253

Environmental rehabilitation provision 7 360 360

Total current liabilities 11,502 11,199

Long-term debt 16 - 99

Environmental rehabilitation provision 7 5,232 5,327

Total non-current liabilities 5,232 5,426

Total liabilities 16,734 16,625

Capital stock 8 61,110 60,751

Contributed surplus 5,832 5,925

Deficit (29,433) (33,497)

Currency translation reserve (932) (984)

Total shareholders’ equity 36,577 32,195

Total liabilities and shareholders’ equity 53,311 48,820

Approved on behalf of the Board of Directors

“Ignacio Salazar” Chief Executive Officer “John Walmsley” Audit Committee Chair


Orosur Mining Inc.

Condensed Interim Consolidated Statements of profit/(loss) and Comprehensive profit/(loss) Thousands of United States Dollars, except for loss per share amounts

Note Ref.

Three months ended

February 28 February 29

Nine months ended


2017 ($) 2016 ($) 2017 ($) 2016 ($)

Sales 8,845 8,936 32,268 33,591 Cost of sales 18 (8,376) (8,187) (27,186) (33,352)

Gross profit 469 749 5,082 239 Corporate and administrative expenses (457) (474) (1,688) (1,664) Restructuring costs 12 (144) (217) 144 (1,911) Exploration expenses and exploration written off (6) (3) (17) (14) Obsolescence provision (1) - (101) - Other income 12 471 2,722 1,328 3,467 Net finance cost 17 (53) (68) (143) (205) Derivative loss - - (412) - Net foreign exchange gain/(loss) 78 378 (110) 560

(112) 2,338 (999) 233 Profit before income tax 357 3,087 4,083 472 Recovery (provision) for income taxes 11 6 (16) (19) 3

Net profit for the period 363 3,071 4,064 475

Other comprehensive profit/(loss) Cumulative translation adjustment 109 (144) 52 (951)

Total comprehensive profit/(loss) for the period

472 2,927 4,116 (476)

Profit per common share: Basic 15 0.00 0.03 0.04 0.00 Diluted 15 0.00 0.03 0.04 0.00


Orosur Mining Inc. Condensed Interim Consolidated Statements of Cash Flows

Thousands of United States Dollars, except where indicated

Note Ref.

Nine months ended February 28 February 29

2017 ($) 2016 ($)

Net inflow/(outflow) of cash related to the following activities Cash flow from operating activities

Net profit for the period 4,064 475 Adjustments to reconcile net income to net cash provided from operating activities:

Depreciation 4,208 5,006 Exploration and evaluation expenses written off 6 17 14 Obsolescence provision 101 - Fair value of derivatives 181 - Accretion of asset retirement obligation 57 57 Stock based compensation 9 49 28 Gain on sale of property, plant and equipment (187) (15) Other 213 337

Subtotal 8,703 5,902 Changes in working capital Accounts receivable and other assets (259) (2,325) Inventories (220) 3,137 Trade payables and other accrued liabilities 395 (4,142)

Net cash generated from operating activities 8,619 2,572

Cash flow from financing activities Loan payments 16 (191) (1,066) Proceeds on sale of common shares of Anillo SPA 6 - 710

Net cash used in financing activities (191) (356)

Cash flow from investing activities Purchase of property, plant and equipment and development costs

5 (8,829) (2,638)

Environmental tasks (152) (198) Proceeds from the sale of property, plant and equipment 240 33 Exploration and evaluation expenditure assets 6 (1,607) (2,239)

Net cash used in investing activities (10,348) (5,042)

Decrease in cash

(1,920)

(2,826)

Cash at the beginning of period 4,320 4,787

Cash at the end of period 2,400 1,961


Orosur Mining Inc. Condensed Interim Consolidated Statements of Changes in Shareholders’ Equity



2017 ($)

2016 ($)

Capital stock

Balance at beginning of period 60,751 60,544

Termination consideration - 195

Exercise of stock options 326 -

Grant of shares 33 -

Balance at end of period 61,110 60,739

Broker Warrants

Balance at beginning of period - 62

Balance at end of period - 62

Contributed surplus


Stock based compensation recognized 90 28

Exercise of stock options (183) -


Deficit

Balance at beginning of period (33,497) (32,287)

Net profit for the period 4,064 475

Balance at end of period (29,433) (31,812)

Currency translation reserve (932) (1,208)

Shareholders’ equity at end of period 36,577 33,633

Orosur Mining Inc. Selected explanatory notes to Condensed Interim Consolidated Financial Statements


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1. Nature of Operations

Orosur Mining Inc. (“Orosur” or “the Company”) is a gold production, development and exploration company focused on producing gold as well as identifying and developing mineral opportunities either directly or through earn-in agreements. Orosur was incorporated and is domiciled in Canada and is governed by the corporate laws of the Yukon Territory, Canada. The Company’s shares are listed on the Toronto Stock Exchange (TSX) in Canada and the Alternative Investment Market (AIM) of the London Stock Exchange in the United Kingdom. The Company’s corporate office is located at Apoquindo 5583 of 31 Las Condes, Santiago de Chile, Chile, and the address of its registered office is Suite 250 - 1075 West Georgia Street, Vancouver, British Columbia, Canada, V6E 3C9. Orosur operates in Uruguay, Chile and Colombia. In Uruguay, the Company operates the San Gregorio gold mine, and possesses a large land holding with active near mine and regional exploration programs. Gold is produced in the form of doré, which is shipped to refineries for final processing. In Chile and Colombia, the Company conducts exploration and development activities.

2. Basis of preparation

These unaudited condensed interim consolidated financial statements were prepared in accordance with International Financial Reporting Standards (“IFRS”) and IFRIC interpretations, as issued by the International Accounting Standards Board (“IASB”), applicable to the preparation of unaudited condensed interim consolidated financial statements, including International Accounting Standard (“IAS”) 34, Interim Financial Reporting. These unaudited condensed interim consolidated financial statements do not include all disclosures required by IFRS for annual consolidated financial statements and accordingly should be read in conjunction with the Company’s annual financial statements for the year ended May 31, 2016. The accounting policies followed in these unaudited condensed interim consolidated financial statements are those applied in the Company’s financial statements for the year ended May 31, 2016, as set out in Note 3. The preparation of these interim financial statements requires the use of certain significant accounting estimates and judgment by management in applying the Company’s accounting policies. The areas involving significant judgment and estimates have been set out in Note 4 of the Company’s audited consolidated financial statements for the year ended May 31, 2016. Functional and presentation currency The functional and presentation currency of the Company is the United States dollar. All of the Company's entities have the United States dollar as the functional currency, except for Waymar Resources Ltd., Cordillera Holdings International Ltd. and Minera Anzá S.A. (BVI), for which the functional currency is the Canadian dollar and Minera Anzá S.A. (Colombia branch), for which the functional currency is the Colombian peso. The results of operations and financial position of all the Company’s entities that have a functional currency different from the presentation currency (United States dollar) are translated into the presentation currency as follows: a) Assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;



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b) Income and expenses for each income statement are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions); and c) All resulting exchange differences are recognized in other comprehensive income under the caption “Currency translation reserve”. These unaudited condensed interim consolidated financial statements were prepared on a going concern basis under the historical cost method except for certain financial assets and liabilities which are measured at fair value, and were approved by the Board of Directors for issue on March 30, 2017.

3. Accounts receivable and other assets, trade payables and other accrued liabilities

(i) Accounts receivable and other assets

February 28, 2017 ($)

May 31, 2016 ($)

Tax receivables (a) 910 852

Prepaid expenses (b) 243 363

Marketable securities 8 8

Miscellaneous receivable (c) 778 547

Total accounts receivable 1,939 1,770

Non current

Miscellaneous receivable (d) 550 550

(a) Tax receivables consist of refunds to be collected for Uruguayan Value Added Tax and Canadian GST. (b) Prepaid expenses include advance payments to suppliers.

(c) Current miscellaneous receivable consists of expenses to be reimbursed by farm-out partners and suppliers and income from the Company’s laboratory for work performed for outside third parties. (d) Non-current miscellaneous receivable includes a prepayment of $550 made to a supplier in April 2013 to start the raiseboring of the Arenal underground. The supplier was unable to provide the services. As a result, the Company initiated actions to recover the amount and a positive arbitration award was received on April 3, 2014. The supplier repudiated the award, so in July, 2014 the Company filed a judicial action to execute it. As defence, the supplier filed for judicial review of the award offering as counter-guarantee equipment valued at $600. In May 2016, the defence was dismissed and the court ordered the freezing of the supplier´s bank accounts and the valuation of the equipment to sell it at auction. In March 2017, the court ordered the seizure of a second equipment in order to cover the total amount of damages and fines awarded by the arbitral tribunal.



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(ii) Trade payables and other accrued liabilities

February 28, 2017 ($) May 31, 2016 ($)

Commercial suppliers 7,744 7,101

Salaries, labour benefits and social security contributions 2,752 3,202

Mining royalties, income tax and other taxes 485 283

Total trade payables and other accrued liabilities 10,981 10,586

4. Inventories

February 28, 2017 ($) May 31, 2016 ($)

Ore in stockpiles (i) 1,778 1,198

Gold in circuit 1,213 1,607

Finished metals 12 150

Mine operating supplies 9,186 9,114

Total inventories 12,189 12,069

(i) Ore in stockpiles includes high and medium grade material that the Company processes within its normal operation cycle. Realization of ore in stockpiles within the next twelve months is subject to the Company’s discretion as such ore is usually blended with ore mined and transported directly to the processing plant to optimize production. The Company does not carry stockpiles to be processed in the long term. Ore in stockpiles is carried at its accumulated average production cost of $1,778 which is lower than its net realizable value of $2,310.



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5. Property, plant and equipment and development costs

Development costs

Tangible fixed

assets (1)

Environmental rehabilitation

provision (2)

Tangible underground development

costs (3)

Open pit development

costs subject to depreciation (4)

Development costs not subject to

depreciation (5)

Deferred Stripping asset (7)

Total

Cost

Balance May 31, 2015 $ 76,394 11,707 28,025 53,056 5,293 560 175,035

Additions $ 1,078 - 838 78 644 - 2,638

Others $ (8) - - 50 (50) - (8)

Disposals $ (272) - - - - - (272)

Balance February 29, 2016 $ 77,192 11,707 28,863 53,184 5,887 560 177,393

Additions $ 313 241 287 - 463 - 1,304

Reclassification from E&E (6) $ - - - - 770 - 770

Others $ 8 (822) - - - - (814)

Disposals $ (353) - - - - - (353)

Balance May 31, 2016 $ 77,160 11,126 29,150 53,184 7,120 560 178,300

Additions $ 2,873 - 4,816 183 957 - 8,829

Others $ 12 - 3,520 107 (3,627) - 12

Disposals $ (711) - - - - - (711)




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Development costs

Tangible fixed

assets (1)

Environmental rehabilitation

provision

(2)

Tangible Underground development

costs (3)

Open pit development

costs subject to depreciation (4)

Development costs not subject to

depreciation (5)

Deferred Stripping asset (7)

Total

Accumulated depreciation

Balance May 31, 2015 $ 70,922 9,907 21,582 52,758 2,644 560 158,373

Depreciation $ 2,451 360 1,794 401 - - 5,006

Disposals $ (254) - - - - - (254)

Others $ 62 - - - - - 62


Depreciation $ 472 (49) 541 5 - - 969

Impairment of assets $ - - 4,229 - - - 4,229

Others $ 3 - - - - 3

Disposals $ (194) - - - - - (194)

Balance May 31, 2016 $ 73,462 10,218 28,146 53,164 2,644 560 168,194

Depreciation $ 1,621 180 2,142 265 - - 4,208

Disposals $ (658) - - - - - (658)


Carrying amount

As at February 28, 2017 $ 4,909 728 7,198 45 1,806 - 14,686

As at May 31, 2016 3,698 908 1,004 20 4,476 - 10,106

As at May 31, 2015 $ 5,472 1,800 6,443 298 2,649 - 16,662

(1) Includes land, buildings, processing facilities, mobile and stationery equipment, furniture and other office equipment. The plant is located on leased land. The lease expires in 2026. No further payments are due on the lease.

(2) See note 7. (3) Includes the ramp and gallery access to ore for Arenal Deeps Underground operation, ventilation shafts and

other tangible development to access the ore body. (4) Includes exploration and evaluation costs for properties under production, including resource definition work. (5) Includes exploration and evaluation costs for properties for which commercial production has not begun. (6) Includes exploration and evaluation costs prior to the Company defining proven and probable reserves and

intention to develop the property commercially. (7) Includes pre-stripping extracted from Vaca Muerta during June 2014.

For the year ended May 31, 2016, the Company completed an assessment of the carrying value of its cash generating units (“CGUs”) and recorded a non-cash impairment charge of $4,229 for property, plant and equipment and development costs. The impairment was driven by changes in reserve estimations as the company entered the final stages of the Arenal Deeps project which reached the end of its mine life in November 2016. No impairment was recorded for other property, plant and equipment and development costs. For the nine months ended February 28, 2017, the Company assessed the carrying value of its CGUs and determined that there was no significant change in the assets at February 28, 2017.



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6. Exploration and evaluation costs

Uruguay Chile Colombia Total

Opening balance – May 31, 2016

4,418

6,407

6,425

17,250

Cash expenditure

882

238

487

1,607

Foreign exchange movement

-

-

(55)

(55)

Exploration expenses (i)

(17)

-

-

(17)

Closing balance – February 28, 2017

5,283

6,645

6,857

18,785

Uruguay Chile Colombia Total

Opening balance – May 31, 2015

4,122

6,137

6,867

17,126

Cash expenditure

1,129

892

218

2,239 Foreign exchange movement

-

-

(1,063)

(1,063)

Anillo transaction (ii)

-

(710)

-

(710)

Others

-

(1)

-

(1)

Exploration expenses (i)

(14)

-

-

(14)

Closing balance – February 29, 2016

5,237

6,318

6,022

17,577

(i) Includes expenses incurred prior to obtaining legal rights to explore an area (including expenses related

to the evaluation of properties that can be acquired by the Company) and expenses in areas that have been considered impaired in the past but the Company legally maintains for strategic reasons and, in some cases, continues to explore. It also includes depreciation of property, plant and equipment related to exploration activities.

(ii) As part of the Anillo project agreement, the Company transferred the Anillo property to Anillo SPA. AC holds 16% of the total project ($4,376); the Company reflected the corresponding reduction of $710 in its records, as also shown in the table above.

Exploration farm-in agreements, acquisitions and farm-out agreements are those disclosed in Note 8 of the Company’s audited financial statements for the year ended May 31, 2016. No changes occurred during the period ended February 28, 2017 regarding the status of each project as reported at May 31, 2016, except for the following: Minerales Cala (Uruguay): In September 2016, the Company retained a 20% interest and Phase 3 of the Option Agreement has commenced and exploration work has been carried on based on a proposed budget and drilling programme submitted by Minerales Cala and Patagonia Gold. In October 2016, the Company elected not to contribute to Phase 3 expenditures and thus its interests in the Project has been diluted and converted to a Net Smelter Return Royalty of 2%.



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Gladiator (Uruguay): In August 2016, Gladiator announced its intention to dispose its current interest under the Option Agreement and in September 2016, notified the Company of an offer received from a third party proposing to purchase all of its interest. Having analysed this offer, the Company has concluded that the offer is not compliant with the underlying Option Agreement and therefore cannot be accepted in its current form. In December 2016, Gladiator publicly announced that it had executed a binding agreement with a third party to dispose its interests in the Project, and in February 2017, without the Company’s consent, Gladiator completed the sale of its interest in the Project to Metamila Limited, a Belize based company. The Company considers the sale a breach of contract and intends to take all steps necessary to remedy the situation. Anillo (Chile): In July 2016, Asset Chile requested and the Company accepted an extension until March 2017 to allow Asset Chile to decide on exercising their option to move to Phase 2. In September 2016, Asset Chile contributed $120 to cover the minimum expenditure in Anillo. Asset Chile has to complete its required contribution to Phase 2 (up to $1,250 to fund 5,500 m of RC drilling) in order to earn into a 32.5% interest of the Company´s share in Anillo. In the event that Asset Chile does not complete the Phase 2, it will forfeit their earn-in achieved to date in Anillo. Pantanillo (Chile):

On November 30, 2016, the Company signed the documents for the return of the Pantanillo project back to Anglo American Chile. The transaction will close once Anglo American Chile has counter-signed. Talca (Chile): The Company´s option to acquire the remaining 75% of the Tellos ownership expired unexercised on August 22, 2016. The Company continues looking for opportunities to monetize this asset.

7. Environmental rehabilitation provision

The Company’s environmental rehabilitation provision relates to the retirement and remediation of the San Gregorio operation in Uruguay. The environmental rehabilitation obligations have been recorded as a liability at estimated fair value determined by calculating the net present value of estimated future costs. The following table summarizes the movements in the environmental rehabilitation provision for the nine months ended February 28, 2017:



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February 28, 2017 ($) May 31, 2016 ($)


Changes in cash flow estimates - (580)

Expenditure incurred in rehabilitation (152) (241)

Accretion expense 57 (210)


Less: current portion (360) (360)

Non-current portion 5,232 5,327

The Company has a legal and constructive obligation to restore the San Gregorio operation when mining operations cease. This estimate is revised annually according to a mine plan. The Company advances rehabilitation work previous to the closure date at its discretion and in accordance with the Uruguayan Environmental Agency. The environmental rehabilitation provision as of February 28, 2017, was $5,592 (May 31, 2016 - $5,687) of which the current portion was $360 (May 31, 2016 - $360). Uruguayan mining and environmental legislation requires environmental obligations to be supported by guarantees. As a result, a rehabilitation guarantee letter of credit of $1,300 (May 31, 2016 - $1,300) has been provided by Santander Bank (Uruguay) and an environmental guarantee for $5,000 (May 31, 2016 – $5,000) has been provided by AIG, the Uruguayan branch insurance company.

8. Capital stock

The Company has an authorized capital of unlimited number of common shares of no par value. As of February 28, 2017, the Company had a total of 100,846,403 issued shares outstanding (May 31, 2016 – 98,865,201) with a value of $61,110 (May 31, 2016 - $ $60,751).

Number of

shares (000’s)

($)

Balance as of May 31, 2015 96,635 60,544

Termination consideration (i) 2,104 195

Balance as of February 29, 2016 98,739 60,739

Compensation (ii) 126 12

Balance as of May 31, 2016 98,865 60,751

Compensation (iii) 196 35

Exercise of stock options (iv) 1,443 255

Exercise of stock options (v) 342 69

Balance as of February 28, 2017 100,846 61,110



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(i) On January 20, 2016, the Company issued 2,103,894 common shares to Pablo Marcet as termination consideration in connection with his resignation as the Company’s Exploration and Development Director.

(ii) On March 3, 2016, the Company granted 126,226 common shares to directors and officers in lieu of 20% of their standard cash compensation for the period commencing December 1, 2015 and ending February 29, 2016.

(iii) The Company granted 83,777 common shares on June 1, 2016, 54,480 common shares on August 31, 2016 and 57,946 common shares on November 30, 2016, to directors and officers in lieu of 20% of their standard cash compensation for the period March 1, 2016 to May 31, 2016, June 01, 2016 to August 31, 2016 and September 30, 2016 to November 30, 2016 respectively.

(iv) On August 24, 2016, October 31, 2016 and February 03, 2017, the Company issued 610,000, 280,000 and 553,332 common shares respectively, following the exercise of options by a number of its employees.

(v) On January 19, 2017, the Company issued 341,667 common shares following the exercise of options of a former Director.

9. Stock-based compensation

a) Stock options The Company has an option plan (the “Plan”) for the officers, directors, employees and consultants of the Company and its subsidiaries. Options under the plan are typically granted in such numbers which reflect the responsibility of the particular optionee and his or her contribution to the business and activities of the Company. Options granted under the Plan have a term between 5 to 10 years. Except in specified circumstances, options are not assignable and terminate on the optionee ceasing to be employed by or associated with the Company. The terms of the Plan further provide that the price at which shares may be issued under the Plan cannot be less than the market price (net of permissible discounts) of the shares when the relevant options were granted. One-third of options vest on the grant date, one-third of options vest twelve months from grant date and the final one-third vest twenty-four months from grant date. The following table summarizes information regarding the Company’s outstanding options at February 28, 2017:

Number of Shares

Option Price per Share Range

Weighted Average

Exercise Price per share

(000s) CDN $ CDN $

Balance at May 31, 2015 6,319 $0.185 - $1.20 $0.25

Expired (907) $0.185 - $1.20 $0.57

Forfeited (500) $0.185 - $0.23 $0.20

Granted (i) 2,920 $0.105 $0.11

Balance at February 29, 2016 7,832 $0.105 - $0.267 $0.17

Forfeited (130) $0.105 - $0.23 $0.18

Granted (ii) 194 $0.13 $0.13

Cancelled (iii) (220) $0.105 - $0.185 $0.14

Balance at May 31, 2016 7,676 $0.105 - $0.267 $0.17



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Expired (613) $0.105 - $0.267 $0.25

Forfeited (383) $0.105 - $0.235 $0.14

Granted (iv) 434 $0.18 - $0.280 $0.23

Granted (v) 1,960 $0.235 $0.24

Exercised (vi) (1,443) $0.105 - $0.235 $0.13

Exercised (vii) (342) $0.105 - $0.185 $0.18

Balance at February 28, 2017 7,289 $0.105 - $0.28 $0.18

(i) On January 20, 2016, 2,920,000 options were granted and $22 of compensation expense was recorded. The fair value was determined based on the Black-Scholes option pricing model using the following assumptions: strike price – CDN$ 0.105; risk free interest rate – 0.48%; expected daily volatility – 78.44%; expected life – 5 years; forfeiture rate – 10% and expected dividends - $nil.

(ii) On March 3, 2016, 193,880 stock options were granted to directors and officers in lieu of 20% of their standard cash compensation for the period commencing December 1, 2015 and ending February 29, 2016, equivalent to an aggregate cash amount of $18. All options are fully vested and are exercisable at a price of Cdn$0.13 per common share, on or before March 1, 2021. Pricing was determined by calculating the volume weighted average closing price of Orosur’s shares on the Toronto Stock Exchange over the period.

(iii) On April, 2016, 220,000 options were cancelled by a “cashless” exercise of options by certain employees.

(iv) On June 1, 2016, August 30, 2016 and November 30, 2016, 128,679, 83,680 and 221,186 stock options were granted respectively, to directors and officers in lieu of 20% of their standard cash compensation for the respective periods commencing March 1, 2016 to May 31, 2016, June 1, 2016 to August 31, 2016 and September 1, 2016 to November 30, 2016, equivalent to an aggregate cash amount of $18, $18 and $39 respectively. All options are fully vested and are exercisable at a price of Cdn$0.18, Cdn$0.28 and Cdn$0.235 per common share, on or before June 1, 2021, September 1, 2021 and November 30, 2021, respectively. Pricing was determined by calculating the volume weighted average closing price of Orosur’s shares on the Toronto Stock Exchange over the periods.

(v) On November 30, 2016, 1,960,000 stock options were granted to directors, officers and employees and a corresponding $32 of stock based compensation expense was recorded. The fair value was determined based on the Black-Scholes option pricing model using the following assumptions: strike price – CDN$ 0.235; risk free interest rate – 0.56%; expected daily volatility – 100.06%; expected life – 5 years; forfeiture rate – 10% and expected dividends - $nil.

(vi) On August 24, 2016 and October 31, 2016 and February 3, 2017, the Company issued 610,000, 280,000 and 553,332 common shares respectively, following the exercise of options by a number of its employees (820,000 at an exercise price of Cdn$0.105, 600,000 at Cdn$0.185 and 23,332 at Cdn$0.235).

(vii) On January 19, 2017, the Company issued 341,667 common shares following the exercise of options by a former Director (41,667 at an exercise price of Cdn$0.105 and 300,000 at Cdn$0.185).



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Outstanding Exercisable

Range of option Options Weighted average

Weighted average

remaining

Options Weighted average

Price 000s Exercise Price per

share contractual

life 000s Exercise Price

per share

CDN $ CDN $ Years CDN $

0.00 – 0.15 1,749 0.108 3.91

944 0.110

0.16 – 0.20 2,169 0.185 2.04

2,169 0.185

0.21 – 0.25 3,287 0.233 4.51

2,000 0.232

0.26 – 0.30 84 0.280 4.51

84 0.280

7,289 0.19 3.55 5,197 0.19

At February 28, 2017, there were 7,289,093 options outstanding, of which 5,197,425 were vested and exercisable (May 31, 2016 – 7,676,380 and 4,793,047, respectively). The weighted average exercise price of the options outstanding at February 28, 2017 was CDN$ 0.19 (May 31, 2016 – CDN$ 0.17). During the nine months ended February 28, 2017, $49 of stock-based compensation expense was recorded.

10. Related parties

Subsidiaries: The consolidated financial statements include the financial statements of Orosur Mining Inc. (parent) and the following subsidiaries (together referred as the “Company”): Name of subsidiary Country of

incorporation Equity interest as of February 28, 2017

Equity interest as of May 31, 2016

Functional Currency

International Mining Holdings Limited (IMHL) Barbados 100% 100% US dollar

Loryser S.A Uruguay 100% 100% US dollar

Minera San Gregorio S.A. Uruguay 100% 100% US dollar

Cinco Ríos S.A Uruguay 100% 100% US dollar

Nafypel S.A. Uruguay 100% 100% US dollar

Triselco S.A. Uruguay 100% 100% US dollar

Kevelux S.A Uruguay 100% 100% US dollar

Glendora S.A. Uruguay 100% 100% US dollar

Dalván S.A Uruguay 100% 100% US dollar

Bolir S.A. Uruguay 100% 100% US dollar

Brimol S.A. Uruguay 100% 100% US dollar

Montemura S.A. Uruguay 100% 100% US dollar

Ugdev S.A. Uruguay 100% 100% US dollar

Fortune Valley Resources Inc. Canada 100% 100% US dollar

Fortune Valley Resources Inc. BVI BVI 100% 100% US dollar



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Fortune Valley Resources Chile S.A Chile 100% 100% US dollar

Waymar Resources Ltd. Canada 100% 100% Canadian dollar

Cordillera Holdings International Ltd. BVI BVI 100% 100% Canadian dollar

Minera Anzá S.A. (BVI) BVI 100% 100% Canadian dollar

Minera Anzá S.A. (Colombia branch) Colombia 100% 100% Colombian peso

Anillo SPA Chile 82% 100% US dollar

All intercompany transactions and balances are eliminated on consolidation.

11. Income Taxes

(a) Current and deferred income tax composition:

Three months ended February 28 February 29

Nine months ended February 28 February 29,

2017 ($) 2016 ($) 2016 ($) 2015 ($)

Current income tax provision (recovery) for the period (6) 16 19 (3)

Total income tax provision/(recovery) for the period (6) 16 19 (3)

(b) Changes and composition of the deferred income tax asset:

Three months ended February 28, 2017 ($)

Nine months ended February 28, 2017 ($)

Year ended May 31, 2016($)

Balance beginning of period 2,534 2,534 551

Recognized deferred tax provision - - 1,983

Balance end of period 2,534 2,534 2,534

February 28, 2017 ($) May 31, 2016 ($)

Property plant and equipment and development costs 918 734

Inventories (1) (1)

Exploration and evaluation costs 23 23

Labour provisions 208 254

Fiscal losses 1,386 1,524

Deferred income tax asset 2,534 2,534

Changes in the value of the deferred income tax asset have been recognized in the statement of income. The deferred tax asset represents rights for future tax deduction in Uruguay. The Company has no deferred tax asset in any other jurisdiction it operates.



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12. Segmented Information

The Company is a gold producer, develops its own exploration programs and evaluates mining assets acquisitions throughout Latin America. Accordingly, the Company identifies the following three operating segments that management reviews regularly in order to evaluate their performance and make decisions about resources to be allocated: i) Production segment: The Company has one producing asset, the San Gregorio gold operations in the north of Uruguay (UY) and minor satellite pits, the only producing gold mine in the country that generates the whole of the Company’s ordinary revenues. During the year, the Company sold all its metal to one customer.

ii) Exploration segment: The Company carries on exploration programs on its mineral portfolio in Uruguay, in Chile (CH) and in Colombia with the objective of adding reserves to its production profile and/or generating other kind of joint ventures and farm out agreements. The segment additionally includes the evaluation of mining assets acquisitions throughout Latin America. iii) Corporate segment: The corporate segment includes general and administrative expenses and costs in connection with raising funds when needed to finance exploration programs, acquisition of assets and the development of mine operations.

Production (UY)

Exploration (UY)

Exploration (CH)

Exploration (Colombia)

Corporate

Total

For three months ended February 28, 2017

Sales 8,845 - - - - 8,845

Cost of sales (8,376) - - - - (8,376)

Exploration expenses and write off - (6) - - - (6)

Obsolescence provision (1) - - - - (1)

Restructuring costs (ii) (144) - - - - (144)

Corporate and administrative expenses - - - - (457) (457)

Other income (i) 430 - - 41 - 471

Total segment profit(loss) 754 (6) - 41 (457) 332

Investment in exploration and evaluation - 310 77 63 - 450

Investment in PP&E and development costs 3,206 - - - - 3,206

For nine months ended February 28, 2017

Sales 32,268 - - - - 32,268

Cost of sales (27,186) - - - - (27,186)


Obsolescence provision (101) - - (101)

Restructuring costs (ii) 144 - - - - 144

Corporate and administrative expenses - - - - (1,688) (1,688)

Other income (i) 1,272 - - 56 - 1,328

Total segment profit/(loss) 6,397 (17) - 56 (1,688) 4,748

Investment in exploration and evaluation - 882 238 487 - 1,607

Investment in PP&E and development costs 8,829 - - - - 8,829



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(i) Includes mainly the sale of crushed rock and also the income from the Company’s laboratory for work performed for outside third party companies.

(ii) The restructuring costs shown in the three and nine months ended February 29, 2016 included a provision for employee retrenchments as a consequence of the strategic cost reduction plan implemented during the year ended May 31, 2016. As certain retrenchments did not occur, the restructuring costs associated with these retrenchments will not be incurred, and thus part of the provision for these costs was reversed during the three and nine months ended February 28, 2017.

As at February 28, 2017

Property, plant and equipment and development costs

14,654 9 - 20 3 14,686

Exploration and evaluation costs - 5,283 6,645 6,857 - 18,785

Total assets 34,494 5,292 6,645 6,878 3 53,311

Production (UY)

Exploration (UY)

Exploration (CH)

Exploration (Colombia)

Corporate

Total

For three months ended February 29, 2016

Sales 8,936 - - - - 8,936

Cost of sales (8,187) - - - - (8,187)


Restructuring costs (ii) (217) - - - - (217)

Corporate and administrative expenses - - - - (474) (474)

Other income 2,714 - - 8 - 2,722

Total segment income/(loss) 3,246 (3) - 8 (474) 2,777

Investment in exploration and evaluation - 197 265 156 - 618

Investment in PP&E and development costs 879 - 1 - - 880

For nine months ended February 29, 2016

Sales 33,591 - - - - 33,591

Cost of sales (33,352) - - - - (33,352)


Restructuring costs (ii) (1,911) - - - - (1,911)

Corporate and administrative expenses - - - - (1,664) (1,664)

Other income 3,447 - - 20 - 3,467

Total segment income/(loss) 1,775 (14) - 20 (1,664) 117

Investment in exploration and evaluation - 1,129 892 218 - 2,239

Investment in PP&E and development costs 2,635 - 3 - - 2,638

As at February 29, 2016

Property, plant and equipment and development costs

11,807 1,055 761 18 565 14,206

Exploration and evaluation costs - 5,237 6,318 6,022 - 17,577

Total assets 24,864 6,292 7,079 6,040 6,040 50,315



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Reconciliation of segmented profit/(loss) to net profit/(loss) for the period is as follows:



2017 ($) 2016 ($) 2017 ($) 2016 ($)

Segment profit 332 2,777 4,748 117

Net finance cost (53) (68) (143) (206)

Derivative loss - - (412) -

Net foreign exchange gain/(loss) 78 378 (110) 560

Cumulative translation adjustment 109 (144) 52 (951)

Income tax recovery/provision 6 (16) (19) 3

Total comprehensive profit/(loss) for the period 472 2,927 4,116 (476)

13. Financial risk management and capital management

The Company is exposed to a variety of financial risks that are disclosed in Note 18 of the Company’s audited financial statements for the year ended May 31, 2016.

14. Cash flow – Additional information

Cash comprises cash at bank and on hand. Cash outflow from operating activities includes interest and income tax cash payments as detailed below:

For the three months ended

February 28 February 29 For the nine months ended


2017 ($) 2016 ($) 2017 ($) 2016 ($)

Income tax paid 1 2 3 2

Interest paid 18 39 31 61

The Company is reimbursed the Uruguayan VAT included in the purchase of goods and services through the issue of tax credit certificates. Income tax paid shown is a result of the application of such tax credits to the cancellation of income tax obligations. Cash outflow from investing activities in property, plant and equipment and development costs is detailed below:



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For the nine months ended


2017 ($) 2016 ($) 2017 ($) 2016 ($)

Tangible fixed assets as defined in Note 5 722 390 2,873 1,078

Mine development costs 2,489 491 5,956 1,560

Environmental work rehabilitation as in Note 7 7 23 152 198

Total invested 3,218 904 8,981 2,836

15. Basic and diluted profit per share

Basic earnings per share are calculated by dividing the profit of the Company by the weighted average number of ordinary shares outstanding during the year. Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding during the year to assume conversion of all dilutive potential ordinary shares. A calculation is done to determine the number of shares that could have been acquired at fair value (determined at the average market share price of the Company’s share for the corresponding period) based on the monetary value of all dilutive share options to acquire shares of the Company. The number of shares calculated as above is compared with the number of shares that would have been issued assuming the exercise of the share options to determine diluted earnings per share (treasury stock method). Details of such calculations are as follows: (a) Basic:



2017 2016 2017 2016

Basic Weighted average shares outstanding number 100,363,626 98,037,677 99,784,401 97,102,613

Net profit attributable to equity holders $000 363 3,071 4,064 475

Basic profit per share US dollars per

share 0.00 0.03 0.04 0.00

(b) Diluted:



2017 2016 2017 2016

Potential net incremental of dilutive shares number 5,327,078 1,946,667 4,497,068 584,000

Potential proceeds from dilutive share options $000 746 204 580 61

Average quoted market share price for the period CDN $ per

share 0.25 0.13 0.27 0.13

Potential shares to be repurchased number 2,942,767 1,585,862 2,171,934 475,759

Potential net incremental of shares after repurchase

number 2,384,312 360,805 2,325,133 108,241

Diluted weighted average shares outstanding number 102,747,938 98,398,482 102,109,535 97,210,854

Net profit attributable to equity holders $000 363 3,071 4,064 475

Diluted profit per share US dollars per

share 0.00 0.03 0.04 0.00



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16. Long-term debt

February 28, 2017 ($)

May 31, 2016 ($)

Santander loan (i) 161 352

Less current portion (161) (253)

Non-current portion - 99

(i) During the quarter ended August 31, 2014, the Company acquired seven small vehicles that were financed with a lease credit facility with Banco Santander (Uruguay) S.A. for a total amount of $0.3 million. During the quarter ended February 28, 2015, the Company acquired two Volvo trucks that were financed with a lease credit facility with Banco Santander (Uruguay) S.A. for a total amount of $0.4 million. The Company is following the contracted schedule of these lease repayments.

17. Finance income and finance cost





Finance income 2017 ($) 2016 ($) 2017 ($) 2016 ($)

Interest on bank deposits - 1 2 2

Total - 1 2 2





Finance cost 2017 ($) 2016 ($) 2017 ($) 2016 ($)

Environmental rehabilitation accretion 19 18 57 57

Interest expense on bank borrowings 35 50 88 150

Total 54 68 145 207

Net finance cost 53 68 143 205



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18. Cost of sales

The Company’s costs of sales are comprised of the following: For the three months ended For the nine months ended

February 28 February 29 February 28 February 29

2017 ($) 2016 ($) 2017 ($) 2016 ($)

Mining and transportations costs 4,127 3,061 11,646 14,014

Processing costs 2,380 2,138 7,524 7,715

Mine site administration costs (i) 881 972 2,372 3,485

Change in stockpiles, gold in circuit and finished goods (902) 789 (49) 2,831

Refinery charges 151 141 374 413

Depreciation 1,379 1,378 4,208 5,006

Mining royalties and other production tax (ii) 360 (289) 1,111 (47)

Other - (3) - (65)

Total cost of sales 8,376 8,187 27,186 33,352

(i) The costs in the nine months ended February 29, 2016 included $881 from an additional contingency recognized following a final verdict from the judge at the end of October 2015 related to a labour claim from 2006.

(ii) On December 4, 2015, the President of Uruguay granted Orosur an exemption on the royalty payment to the Government (3% of sales). It covers the period April 2015 to March 2016.

Orosur Mining Inc. Condensed Interim Consolidated ...Capital stock 8 61,110 60,751 Contributed...

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Transcript of Orosur Mining Inc. Condensed Interim Consolidated ...Capital stock 8 61,110 60,751 Contributed...