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Orla Mining Reports Second Quarter 2022 Results and Reconfirms 2022 Annual Production and Cost Guidance

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Orla Mining Reports Second Quarter 2022 Results and Reconfirms 2022 Annual Production and Cost Guidance

 

 

 

 

 

Record Quarterly Production Supporting Strong Cash Flow Generation

 

Orla Mining Ltd. (TSX: OLA) (NYSE: ORLA) announces the results for the second quarter ended June 30, 2022.

 

(All amounts are in U.S. dollars unless otherwise stated)

 

HIGHLIGHTS:

  • Total gold production of 25,672 ounces in the second quarter of 2022, and 48,704 ounces year to date, in line with plan.
  • Total cash cost and all-in sustaining costs for the second quarter were $439 and $601 per ounce of gold sold1, respectively.
  • Gold production guidance for the full year 2022 is maintained at 90,000 to 100,000 ounces at AISC of $600 to $700 per ounce of gold sold.
  • During the quarter, cash flow from operating activities before changes in non-cash working capital was $20.7 million, and free cash flow1 totalled $28.7 million. Orla had a cash balance of $66.7 million at June 30, 2022.
  • Adjusted earnings for the second quarter of $11.0 million or $0.04 per share, after adjusting for certain non-cash and non-recurring items.1
  • Net loss of $0.6 million or $0.00 per share. Net loss was impacted by a non-cash expense of $10.7 million related to the unamortized portion of the Camino Rojo project loan costs which were expensed upon the early repayment of the facility during the quarter.
  • Commercial production was declared at the Camino Rojo Oxide Mine (“Camino Rojo”) effective April 1, 2022.
  • Camino Rojo’s processing throughput for the second quarter exceeded nameplate capacity, achieving an average of 18,245 tonnes per day.
  • Announced acquisition of Gold Standard Ventures Corp. the owner of the South Railroad Project, a feasibility-stage, open pit, heap leach project located on the Carlin trend in Nevada.
  • Refinanced the Camino Rojo project finance facility with a $150 million secured credit facility composed of a $100 million term facility and a $50 million revolving facility.

 

“In our first quarter since achieving commercial production, Camino Rojo continued to demonstrate its unique status as a very low-cost, cash generating operation. We continue to deliver on our operating and development milestones, and we are on track to achieving 2022 guidance,” said Jason Simpson, President and Chief Executive Officer of Orla. “We look forward to closing the acquisition of Gold Standard and deploying our growing financial resources in the advancement of the South Railroad Project in Nevada.”

 

________________________
1 Cash cost, AISC, free cash flow and adjusted earnings are non-GAAP measures. See the “Non-GAAP Measures” section of this news release for additional information. Adjusted earnings for the second quarter 2022 includes the following adjustments: $10.7 million non-cash expense related to the unamortized portion of the Camino Rojo project loan, $2.5 million loss related to the premium paid on early repayment of the project loan, and $1.6 million unrealized foreign exchange gain.

 

FINANCIAL AND OPERATIONS UPDATE

 

Table 1: Financial and Operating Highlights Q2 – 2022 YTD 2022
Operating
Gold Produced oz 25,672 48,704
Gold Sold oz 25,431 46,315
Average Realized Gold Price1 $/oz $1,872 $1,879
Cost of Sales – Operating Cost $M $10.8 N/A
Cash Cost per Ounce1 $/oz $439  N/A
All-in Sustaining Cost per Ounce1 $/oz $601  N/A
Financial
Revenue $M $47.8 $87.4
Net Income (loss) $M $(0.6) $18.2
Adjusted Earnings1 $M $11.0 $30.8
Earnings (loss) per Share – basic $/sh $(0.00) $0.07
Adjusted Earnings per Share – basic1 $/sh $0.04 $0.12
Cash Flow from Operating Activities before Changes in Non-cash
Working Capital
$M $20.7 $40.5
Free Cash Flow1 $M $28.7 $45.1
Financial Position June 30,
2022
Dec 31,
2021
Cash and Cash Equivalents $M $66.7 $20.5
Net Debt1 $M $100.3 $140.8
1. “Average Realized Gold Price”, “Cash Cost per Ounce”, “All-in Sustaining Cost per Ounce”, “Adjusted Earnings”, “Adjusted Earnings per Share – basic”, “Free Cash Flow”, and “Net Debt” are non-GAAP measures. See the “Non-GAAP Measures” section of this news release for additional information.

 

 

CAMINO ROJO OXIDE OPERATIONS UPDATE

 

During the quarter, site activities were focused on mining and processing operations. Commercial production at Camino Rojo was declared effective April 1, 2022.

 

Camino Rojo produced 25,672 ounces of gold in the second quarter of 2022. The average daily stacking throughput for the quarter was above design capacity at 18,245 tonnes per day. Mining rates have steadily increased averaging 36,760 tonnes per day in the second quarter. Mined ore tonnes are reconciling well to the block model and process recoveries to date are in line with the metallurgical recovery model.

 

CAMINO ROJO SULPHIDE PROJECT UPDATE

 

During the quarter, the Company provided a summary of Phase 1 metallurgical test results on its Camino Rojo sulphide deposit, located in Zacatecas, Mexico2.

 

The Phase 1 metallurgical program has greatly increased Orla’s understanding of metallurgical characteristics of Camino Rojo Sulphides and appears to open up multiple processing options for the Camino Rojo Sulphides relative to what was suggested by previous work. The results confirm potential for a standalone processing option for the Camino Rojo Sulphides. The Company continues to work towards determining the optimal development plan with the goal of generating the greatest value for stakeholders. The metallurgical recoveries and geometallurgical zones will be used to determine new cut-off grades for open pit and underground mine designs. The respective mine designs will be used to support an updated sulphide mineral resource estimate, which is currently in progress, and will form the basis of a Preliminary Economic Assessment (the “PEA”) on the Sulphide Project targeted for end of year 2022. Work planned in 2022 includes the following:

  • Completion of 8,250-metre, Phase 2 Sulphide Project drill program to reinforce the geologic model and to continue to confirm the continuity of wide zones of higher-grade gold mineralization. The program has commenced on the first of 15 diamond drill holes and results are expected in the second half of 2022.
  • Update of resource estimate for the Camino Rojo Sulphides.
  • Completion of Phase 1 metallurgical test program, finalize the process design criteria, and develop the financial model for the selected mining and processing options as part of the PEA.

 

EXPLORATION PROGRAM

 

Drilling across the portfolio began in April after preparations during the first quarter. Exploration spending for 2022 is expected to total $15 million, with $10 million allocated to activities in Mexico and $5 million allocated to activities in Panama.

 

At Camino Rojo in Mexico, near-mine and regional exploration in 2022 is focused on increasing oxide reserves, supporting advancement of the sulphide deposit development scenario options, and testing priority targets defined in 2021 in an effort to make new satellite discoveries. Near-mine work will include oxide resource drilling on the Fresnillo layback area, a Phase 2 infill drill program on the Sulphides deposit to support an updated resource estimate. Regional exploration work will include reverse circulation drilling and continued target definition activities. Phase 2 of the Sulphides program is underway, with five oriented diamond drill holes completed since the program began in April. This current phase of drilling is infilling between Phase 1 north-to-south drill holes, reducing the spacing between south-azimuth drill holes to 150-200m. Drill results are pending.

 

In early 2022, a northwest dipping fault with significant shallow historical gold and silver intersections was identified as a near mine exploration target. A short program, consisting of approximately 3,000m of diamond drilling, was undertaken to test the metal potential of the structure over a 1km strike length southwest of the Camino Rojo Oxide pit, to a depth of approximately 300m. This drill program is approximately 60% complete. Drill results are pending.

 

___________________________
2 See the Company’s press release dated May 9, 2022 entitled “Orla Mining Announces Positive Initial Metallurgical Results on Camino Rojo Sulphide Project”.

 

On the Camino Rojo regional program, reverse circulation (“RC”) drilling, testing high priority, near-mine target areas along the Camino Rojo mine trend is underway, with 25% of the program completed. Highest priority targets are expected to be drilled in the second half of 2022, pending finalization of land access agreements and issuance of permits.

 

The 2022 Cerro Quema exploration program will consist of infill, metallurgical, and expansion (step-out) drilling of known deposits, drill testing exploration targets defined by recent geochemical soil sampling, geophysical Induced Polarization surveys, bedrock mapping, prospecting, and in some cases, historical drilling. In total, 11,700m of drilling is planned in 2022 for Panama.

 

In the second quarter of 2022, drilling at Cerro Quema was completed at the La Prieta and La Pelona targets. Diamond drilling at Cerro Quema will continue through the second half of 2022, with drills moving to metallurgical, infill and expansion drilling at Caballito, Quemita and Pelona. Drill results are being finalized.

 

GOLD STANDARD VENTURES ACQUISITION

 

On June 13, 2022, Orla and Gold Standard announced that they had entered into a definitive agreement whereby Orla would acquire all of the issued and outstanding shares of Gold Standard by way of a court-approved plan of arrangement (the “Transaction”). For more details, please see the June 13, 2022 press release: Orla Mining Expands into Nevada with Acquisition of Gold Standard Ventures.

 

Gold Standard’s key asset is the 100%-owned South Railroad Project, a feasibility-stage, open pit, heap leach project located on the Carlin trend in Nevada. In February 2022, Gold Standard completed a robust Feasibility Study and permitting activities are currently underway. Gold Standard also owns the Lewis Project, a large, strategically located, prospective land package on the Battle Mountain trend in Nevada.

 

Under the terms of the Transaction, Gold Standard shareholders will receive, in exchange for each Gold Standard common share (a “Gold Standard Share”) held, 0.1193 of a common share of Orla (each whole share, an “Orla Share”) and C$0.0001 (the “Consideration”). The Consideration implies a purchase price of C$0.655 per Gold Standard Share, or gross consideration of C$242 million, and represents a 35% premium based on the close of Gold Standard’s and Orla’s share price on the Toronto Stock Exchange (“TSX”) on June 10, 2022 and a 35% premium based on Gold Standard’s 10-day volume weighted average price on the TSX for the period ended June 10, 2022. Existing shareholders of Orla and Gold Standard will own approximately 87% and 13% of the pro forma company, respectively, following the close of the Transaction.

 

Following a shareholder vote at a meeting of Gold Standard securityholders to be held on August 9, 2022, the Transaction is anticipated to close mid-August.

 

GUIDANCE

 

2022 guidance remains unchanged:

 

Table 2: 2022 Operational Guidance and Outlook1
Gold Production oz 90,000 – 100,000
All-in Sustaining Costs (“AISC”)2,3 $/oz Au sold $600 – $700
Capital Expenditures3
   Sustaining Capital Expenditures $M $5
   Non-Sustaining Capital Expenditures $M $20
   Total Capital Expenditures $M $25
Exploration3
   Mexico $M $10
   Panama $M $5
   Total Exploration $M $15
1. The outlook includes full-year 2022 figures except for AISC which is calculated from Q2-Q4 2022.
2. AISC is a non-GAAP measure. See the “Non-GAAP Measures” section of this news release for additional information.
3. Exchange rates used to forecast cost metrics include MXN/USD of 20.0 and CAD/USD of 1.25

 

 

CONSOLIDATED FINANCIAL STATEMENTS

 

Orla’s unaudited interim financial statements and management’s discussion and analysis for the three and six months ended June 30, 2022, are available on the Company’s website at www.orlamining.com, and under the Company’s profiles on SEDAR and EDGAR.

 

Qualified Persons Statement

 

The scientific and technical information related to Camino Rojo and Cerro Quema in this news release was reviewed and approved by Mr. J. Andrew Cormier, P. Eng., Chief Operating Officer of the Company, and Mr. Sylvain Guerard, P. Geo., Senior Vice President, Exploration of the Company, who are the Qualified Persons as defined under NI 43-101 standards.

 

About Orla Mining Ltd.

 

Orla is operating the Camino Rojo Oxide Gold Mine, a gold and silver open-pit and heap leach mine, located in Zacatecas State, Central Mexico. The property is 100% owned by Orla and covers over 160,000 hectares. The technical report for the 2021 Feasibility Study on the Camino Rojo oxide gold project entitled “Unconstrained Feasibility Study NI 43-101 Technical Report on the Camino Rojo Gold Project – Municipality of Mazapil, Zacatecas, Mexico” dated January 11, 2021, is available on SEDAR and EDGAR under the Company’s profile at www.sedar.com and www.sec.gov, respectively. The technical report is also available on Orla’s website at www.orlamining.com. Orla also owns 100% of Cerro Quema located in Panama which includes a near-term gold production scenario and various exploration targets. Cerro Quema is a proposed open pit mine and gold heap leach operation. The technical report for the Pre-Feasibility Study on the Cerro Quema oxide gold project entitled “Project Pre-Feasibility Updated NI 43-101 Technical Report on the Cerro Quema Project, Province of Los Santos, Panama” dated January 18, 2022, is available on SEDAR and EDGAR under the Company’s profile at www.sedar.com and www.sec.gov, respectively. The technical report is also available on Orla’s website at www.orlamining.com.

 

Non-GAAP Measures

 

The Company has included certain performance measures in this press release which are not specified, defined, or determined under generally accepted accounting principles (in the Company’s case, International Financial Reporting Standards (“IFRS””)). These are common performance measures in the gold mining industry, but because they do not have any mandated standardized definitions, they may not be comparable to similar measures presented by other issuers. Accordingly, the Company uses such measures to provide additional information and you should not consider them in isolation or as a substitute for measures of performance prepared in accordance with generally accepted accounting principles (“GAAP”).

 

In this section, all currency figures in tables are in thousands, except per-share and per-ounce amounts.

 

AVERAGE REALIZED GOLD PRICE

 

Average realized gold price per ounce sold is calculated by dividing gold sales proceeds received by the Company for the relevant period by the ounces of gold sold. The Company believes the measure is useful in understanding the gold price realized by the Company throughout the period.

 

AVERAGE REALIZED GOLD PRICE Three months ended
June 30
Six months ended
June 30
2022 2021 2022 2021
Revenue $    47,797 $    87,442
Silver sales (197) (416)
Gold sales 47,600 87,026
Ounces of gold sold 25,431 46,315
AVERAGE REALIZED GOLD PRICE PER OUNCE SOLD $       1,872 $       1,879

 

 

NET DEBT

 

Net debt is calculated as total debt adjusted for unamortized deferred financing charges less cash and cash equivalents and short-term investments at the end of the reporting period. This measure is used by management to measure the Company’s debt leverage. The Company believes that in addition to conventional measures prepared in accordance with IFRS, net debt is useful to evaluate the Company’s leverage.

 

NET DEBT June 30,
2022
December 31,
2021
Current portion of long term debt $      32,135 $      25,293
Long term debt 134,866 136,060
Less: Cash and cash equivalents (66,743) (20,516)
NET DEBT $   100,258 $   140,837

 

 

ADJUSTED EARNINGS (LOSS)

 

Adjusted earnings (loss) excludes deferred taxes, unrealized foreign exchange, changes in fair values of financial instruments, impairments and reversals due to net realizable values, restructuring and severance, and other items which are significant but not reflective of the underlying operational performance of the Company.  We believe these measures are useful to investors because they are important indicators of the strength of our operations and the performance of our core business.

 

ADJUSTED EARNINGS Three months ended
June 30
Six months ended
June 30
2022 2021 2022 2021
Net income (loss) for the period $         (597) $         (899) $    18,185 $   (11,706)
Unrealized foreign exchange (1,634) (5,080) (621) (2,106)
Loss on early settlement of project loan 13,219 13,219
ADJUSTED EARNINGS (LOSS) $    10,988 $     (5,979) $    30,783 $   (13,812)
Millions of shares outstanding – basic 253.3 237.7 250.6 235.9
Adjusted earnings (loss) per share – basic $         0.04 $        (0.03) $         0.12 $        (0.06)

 

 

FREE CASH FLOW

 

The Company believes certain investors and analysts use Free Cash Flow to evaluate the Company’s operating cash flow capacity to meet non-discretionary outflows of cash.  Net Free Cash Flow is not meant to be a substitute for the cash flow information presented in accordance with IFRS. Free Cash Flow is calculated as the sum of cash flow from operating activities and cash flow from investing activities, excluding certain unusual transactions.

 

FREE CASH FLOW Three months ended
June 30
Six months ended
June 30
2022 2021 2022 2021
Cash flow from operating activities $    19,936 $           (40) $    40,429 $     (4,746)
Cash flow from investing activities 8,789 (28,337) 4,638 (76,893)
FREE CASH FLOW $    28,725 $   (28,377) $    45,067 $   (72,147)
Millions of shares outstanding – basic 253.3 237.7 250.6 235.9
Free cash flow per share – basic $         0.11 $        (0.12) $         0.18 $        (0.31)

 

 

CASH COST

 

The Company calculates cash cost per ounce by dividing the sum of operating costs and royalty costs, net of by-product silver credits, by ounces of gold sold. Management believes that this measure is useful to external users in assessing operating performance. Figures are presented only from April 1, 2022, as the Camino Rojo Oxide Gold Mine commenced commercial production on that date.

 

CASH COST Three months ended
June 30
2022 2021
Cost of sales – operating costs $      10,776 $               —
Related to previous quarter (503)
Royalties 1,099
Silver sales (197)
CASH COST $      11,175 $               —
Ounces sold 25,431
Cash cost per ounce sold 439                      N/A

 

ALL-IN SUSTAINING COST

 

The Company has provided an AISC performance measure that reflects all the expenditures that are required to produce an ounce of gold from operations. While there is no standardized meaning of the measure across the industry, the Company’s definition conforms to the all-in sustaining cost definition as set out by the World Gold Council in its guidance dated November 14, 2018. Orla believes that this measure is useful to external users in assessing operating performance and the Company’s ability to generate free cash flow from current operations.  Figures are presented only from April 1, 2022, as the Camino Rojo Oxide Gold Mine commenced commercial production on that date.

 

ALL-IN SUSTAINING COST Three months ended
June 30
2022 2021
Cost of sales – operating costs $      10,776 $               —
Related to previous quarter (503)
Royalties 1,099
Silver sales (197)
Office and administration 2,551
Share based payments 538
Accretion of site closure provision 117
Amortization of site closure provision 119
Sustaining capital 658
Lease payments 123
ALL-IN SUSTAINING COST $      15,281 $               —
Ounces sold 25,431
All-in sustaining cost per ounce sold 601                      N/A

 

Posted August 9, 2022

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