Orla Mining Q3 2023 Earnings Call Transcript

Quartr
Provided by Quartr
November 14, 2023

There are 6 speakers on the call.

Operator

Morning, ladies and gentlemen, and welcome to Orla Mining's Conference Call for the Third Quarter 2023 Results. My name is Chris, and I'll be your conference operator today. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer Please be advised that this call is being recorded. I'd like to turn the meeting over to Jason Simpson, President and Chief Executive Officer of Orla Mining.

Operator

Please go ahead, Mr. Simpson.

Speaker 1

Thank you, operator, and welcome to Orla's Q3 2023 results conference call. We will be making forward looking statements during today's call, and I direct you to the first and second slides of this presentation, Which contains important cautionary notes regarding these forward looking statements. All dollar amounts discussed today will refer to U. S. Dollars, unless otherwise indicated.

Speaker 1

Our Q3 was highlighted by In Environmental Management, including a safety award Andrew will highlight continued operational and cost performance At Camino Rojo, as a result of our continued outperformance at Camino Rojo, we have increased our 2023 production guidance, A testament to our team's continued execution as well as the strength of the asset. Because of our cost management and the strength of operations, we continue to generate strong cash flow and strengthen our balance sheet. Our net balance at quarter end stood at $3,000,000 I'm also pleased To communicate that we renewed our collective bargaining agreement with our team in Mexico, a vote of confidence We continue to systematically work through our extensive exploration program with a focus on Mexico and Nevada, which will support our growth ambitions. The ongoing events in Panama are something I'll discuss on this call. We have the full executive team On the call to provide specific updates.

Speaker 1

Over to Andrew Cormier, our Chief Operating Officer for the Q3 operational update.

Speaker 2

Thank you, Jason. The 3rd quarter was marked by continued strong mining and Processing performances at Camino Rojo. We did this while maintaining the health and safety of our team. This year, Camino Rojo was awarded the 2022 Silver Helmet Award for Open Pit Mining By the Mexico Mining Chamber, ChemMx. This award is the highest award in the Mexican mining industry, Recognizing companies and workers for safety at their operations.

Speaker 2

1,800,000 tonnes of ore was mined at a strip ratio At 0.59 and an average grade of 0.81 grams per tonne gold. The average grade of ore processed during the quarter was 0.85 grams per tonne gold. An average stacking rate of 19,205 tonnes per day was achieved, Another quarter above plant nameplate capacity. Mine ore tonnes and grade are reconciling well to the block model And processing recoveries remain in line with the metallurgical recovery model. Gold production in the 3rd quarter was a record With 32,425 ounces of gold poured, subsequent to quarter end, October was a record month for gold production With 11,760 ounces of gold produced, we are well on track to achieve our increased guidance range Of 110,000 to 120,000 ounces of gold, based on laboratory column tests, We made some adjustments to our crushing circuit and decreased our final product size during the quarter.

Speaker 2

The initial operational impacts to recovery have been positive, As previously mentioned, we are mining less waste than initially planned this year as we await permit amendments from the Mexican authority. We've had some positive indications from Semrinet, and we hope to have amendments in hand by year end, which will allow us to start mining in these areas in early 2024. I will now pass the call over to Etienne Morey, our Chief Financial Officer to discuss the financial results for the quarter.

Speaker 3

Thanks, Andrew. During the quarter, we sold 31,000 ounces of gold at a realized price of $19.21 per ounce resulting in $60,000,000 in revenue for the period. Our net income for the quarter was CAD5,400,000 or CAD0.02 per share. After adjusting for a few items, including unrealized foreign exchange gain And a loss on the early settlement of our credit facility, adjusted earnings were $6,600,000 or also $0.02 per share. It should be noted that during the quarter, we expensed about $11,000,000 in exploration and project costs as we continue to advance our growth pipeline in Mexico and Nevada.

Speaker 3

All in sustaining cost for the Q3 was $7.43 per ounce and on a year to date basis, Our all in sustaining cost is $7.12 per ounce. It's worth mentioning that we're going to accelerate the construction related to the 3rd expansion phase of heap leach pad at Camino Rojo, and we'll be bringing forward an additional $4,000,000 in sustaining capital into Q4, Spending that would otherwise scheduled to be taking place in the first half of twenty twenty four. The remaining $8,000,000 in Sustaining capital for this project will be spent in Q1 and Q2 of next year. Even with this additional capital in the Q4, we remain confident in achieving Our revised all in sustaining cost guidance of $700 to $800 per ounce for the year. Cash flow from operating Before changes in non cash working capital was $21,800,000 or $0.07 per share for the quarter, and we added Close to $19,000,000 in free cash flow in the 3rd quarter.

Speaker 3

To quickly summarize some of the quarter over quarter variances in net income, we've provided a simple graph to show the key changes. This quarter, we saw more exploration spending, predominantly in Nevada, where we took advantage of the dry summer season to advance our work programs. Cost of sales was higher this quarter as we sold more gold during the period and we had a one time charge of $1,400,000 Related to the accrual of wages and bonuses resulting from the successful completion of our collective bargaining agreement in Mexico. During the quarter, we amended our credit facility to a $150,000,000 revolving facility at a lower cost of capital. The new facility removes mandatory quarterly repayments and extends to August 2027.

Speaker 3

I'd like to thank our lenders, Thank you, Scotia, BMO and CIBC for their continued support. Of the $150,000,000 facility, we had 100 And $13,000,000 outstanding at the end of the quarter. And subsequent to quarter end, we made a $25,000,000 repayment, which brings our current outstanding balance to $88,000,000 A quick reminder that in December, we'll be making our 3rd and final payment of $22,800,000 to Fresnillo as part of the layback agreement. We had a cash balance of nearly $133,000,000 at And continued operational cash flow generation at Communo Rojo and the debt repayment, including the Fresnillo payment, Our balance sheet is improving every day, and we anticipate to be in a net cash position by the end of the year. Over to Shafika, our Chief Sustainability Officer now, who will provide some update on our people approach.

Speaker 4

Thank you, Ittien. Last quarter, I discussed how proud we were with the release of our internal sustainability report, Certainly, an important milestone for our growing company. This quarter, I would like to talk about our approach to people As well as to mention the successful agreement we achieved with our collective bargain agreement renewal And our Camino Rojo in Mexico. Our employees and workers, including contractors, Are vital to our business. We want and need them to be aware that they are part of our shared success.

Speaker 4

We aim to have a productive, safe and healthy work environment where we operate with consistency, Work together and support our mutual growth. In order to have our people wanting the company to succeed, We must take care of our employees' basic needs, a safe and healthy work environment, Clearly defined work and fair and competitive compensation and benefits. We provide our employees with access to training and development that will help them advance their skills And get them closer to their aspiration. Employees help the company operate in a stable, Healthy and productive way through communication and effective actions to mitigate risk. We are honest and open.

Speaker 4

We lead all our relationships with CARE, including the one with our employees. We believe this genuine and transparent approach helps our shared success to increase our long term Sustainability as a business. As per our relationship with our employees' union, We see them as our operating partner. We understand their position. They recognize our position.

Speaker 4

And together, we seek to work proactively. As an example, oral awards to ensure medical and health benefits We're universally available without exclusion. This was a voluntary initiative from our company, Something we believe was a benefit to our workforce. In short, our 8 0As are critical And we work hard to nurture this important relationship. And with that, I'll pass the voice Thank you, Souspeng Gerard, our Senior Vice President, Exploration.

Speaker 5

Thanks, Safika. In the 3rd quarter, We invested just over $12,000,000 into exploration on our projects as we advanced the Camino Rocco Sulfide deposit And exploration at South Railroad in Nevada. As a reminder, our 2023 exploration project across the portfolio It's $35,000,000 mostly focused on Mexico and Nevada. At the end of the third quarter, We have incurred $26,000,000 out of the $35,000,000 At Camino Offo, A large portion of the 2023 program is focused on the sulfide infill drilling, and approximately 80% of the planned thirty 4000 meter has been completed. The intention of this program is to advance our understanding of the deposit.

Speaker 5

Approximately 20% of the 2023 sulfide drill holes are planned to be extended beyond the boundaries of the current open pit resource estimate to test the non planned continuity of the gold mineralization. As we reported earlier this year, one of the drill holes intersected significant polymetallic sulfide replacement spatter mineralization We need to the Caracol formation hosted sulfides along an adjacent to a dyke structural zone. Based on an updated geological model and success of all 15C, a drill section was designed to follow-up on historical drill results, 250 meter down plunge of hole 15C. Based on visual core results From all on this section, sulfide mineralization remains open at depth. In drilling, it's planned to further assess the potential of the sulfide extension.

Speaker 5

We will look to provide results once we complete this year program. In field drilling into the Keminojohu Sulfide continues to intercept wide zone higher grade gold mineralization and in conjunction with metallurgical results from 2022 Continues to support the potential for underground development and a stand alone processing option for chemical sulfides. The 2023 infill drilling is planned to be completed in the Q4 and is expected to inform a future update To a potential underground resource estimate, mining methods and production decisions. It's also worth noting that the near mine layback oxide drilling was completed. This new information would be reflected in the year end 2020 15,000 meter regional program has been completed to date with the focus on Camino Roco Mine trend and at other regional targets.

Speaker 5

In Nevada, our exploration program is progressing well since the acquisition of Gold Standard Venture less than 16 months ago. The exploration objectives at South Railroad are to upgrade and grow resources and drill test multiple targets for new discoveries. Drilling ramped up in the second and third quarter focused on infill drilling to support upgrading resource at North Bullion deposit, Testing the pit extensions potential of the Dart Spire and Pinion deposit and drilling other targets Across our large NAND position, we are excited about the opportunities ahead at South Railroad and look forward to keeping you updated on our future development. I will now pass the call back to Jason.

Speaker 1

Thanks, Sylvain. As the executive team has outlined for you, the Orla business fundamentals are strong based upon Excellent sustainability performance, over achievement in production and our discipline to maintain our position as one of the lowest cost I think it is important that we touch on the ongoing resource development prospects in Panama. Like many, we are following the recent events in Panama leading up to the 2024 elections. Earlier in 2023, we saw great progress in the country to support mining investment and fiscal stability. First, we received the environmental permit for our Cerrokema project, which was an important step for its development.

Speaker 1

Then a new contract was agreed upon between the government of Panama and First Quantum, which they subsequently passed into law Another positive step. However, more recently, in response to opposition of the newly ratified law for Copra Panama, The government is seeking judgment from their Supreme Court on its constitutionality and placed a moratorium on resource exploration and development. The impact of these recent developments on the company's Cerro Cayman project remains uncertain. The company expects that various factors, including potential court challenges in the May 2024 Panamanian general election May impact its strategy in Panama. The company will continue to monitor these developments and make an informed assessment of its strategy Once additional information is available, we have and will continue to take a conservative approach to spending and development in Panama, Awaiting more certainty to inform our strategy.

Speaker 1

Our Cerroquema project in Panama It's a potential area for growth for Orla among others. It's a solid project with solid economics. We also believe that the responsible development of Cerro Cayman would be an important social and economic contributor To the host communities and governments. Finally, the presence of copper and gold on our property And the geologic potential for more in the nation has not changed and could be developed in a responsible way for the benefit of all stakeholders. I'd like to give special attention to the members of our team, the government of Zacatecas, As well as our industry colleagues, who supported us recently as we evacuated Acapulco, Mexico.

Speaker 1

There was a large mining conference taking place in Acapulco, where our Camino Roco team was receiving the Silver Helmet Award, recognizing Our achievements in people safety. Hurricane Otis, the largest hurricane to ever hit the Pacific Coast, A devastating landfall during the conference resulting in significant human and property destruction. It was the solidarity of our team and this industry that allowed us to return home safely. In a world where various destructive scenarios have unfolded, please consider making positive differences where you can. As we drive toward year end, we are on track to achieve our increased production and reduced cost guidance.

Speaker 1

That performance has us on track to be net cash positive in the near term. Thank you to our team who remain steadfast in their commitment to Orla's strategic objective of creating value for stakeholders. At this point, I'd like to turn the call to the operator for questions.

Operator

Thank you. It appears that we have no questions. I'll turn it back to Mr. Simpson for any closing remarks.

Speaker 1

Since there are no questions, I would like to thank you for your time. Never hesitate to reach out to Orla should you have any follow-up questions.

Operator

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.

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Key Takeaways

  • Camino Rojo delivered a record 32,425 ounces of gold in Q3 (and 11,760 oz in October), prompting an increase to 2023 production guidance of 110,000–120,000 ounces.
  • Disciplined cost management drove an all-in sustaining cost of $7.43/oz in Q3 ($7.12/oz YTD), generated $21.8 M operating cash flow and $19 M in free cash flow, and positioned the company to be net cash positive by year-end.
  • Orla renewed its collective bargaining agreement in Mexico and earned the 2022 Silver Helmet Award for safety, underscoring strong workforce relations and sustainability performance.
  • The $35 M 2023 exploration program is advancing, with over $12 M spent in Q3 on sulfide infill drilling at Camino Rojo (supporting underground potential) and resource growth work at South Railroad, Nevada.
  • Political uncertainty in Panama (moratorium on exploration pending a Supreme Court review) has led Orla to adopt a conservative approach to spending on the Cerro Quema project until further clarity emerges.
AI Generated. May Contain Errors.
Earnings Conference Call
Orla Mining Q3 2023
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