Orla Mining Q3 2024 Earnings Report

Orla Mining EPS Results

• Actual EPS: $0.06
• Consensus EPS: $0.09
• Beat/Miss: Missed by -$0.03
• One Year Ago EPS: N/A

Orla Mining Revenue Results

• Actual Revenue: $99.31 million
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Orla Mining Announcement Details

• Quarter: Q3 2024
• Date: 11/12/2024
• Time: After Market Closes
• Conference Call Date: Wednesday, November 13, 2024
• Conference Call Time: 10:00AM ET

Orla Mining (NYSEAMERICAN:ORLA) is a Canada-based mineral exploration and development company focused on advancing gold and silver projects in the Americas. Its flagship asset is the Cerro Quema oxide gold-silver project in Panama, where the company holds approximately 13,000 hectares of mineral concessions. Through feasibility studies and pilot plant testing, Orla has demonstrated the potential of heap leach processing at Cerro Quema, positioning the asset for transition into construction and production phases.

In addition to Cerro Quema, Orla Mining expanded its portfolio in early 2023 with the acquisition of the Gold Springs project located along the Utah–Nevada border in the United States. Gold Springs hosts multiple oxide gold and silver deposits amenable to low-cost heap leach mining methods. Together, these projects provide diversification across two jurisdictions and reflect the company’s strategy of targeting near-surface, heap-leachable mineralization with scalable production profiles.

Headquartered in Vancouver, British Columbia, Orla is led by President and Chief Executive Officer George Paspalas, whose team brings experience in project development, corporate finance, and mine operations. The company emphasizes community engagement and environmental stewardship in all its activities, working closely with local stakeholders in Panama and the U.S. to advance its projects toward commercial production.

Orla Mining Q3 2024 Earnings Call Transcript

Key Takeaways

• Record Q3 production of nearly 43,000 ounces at Camino Rojo, combined with low costs and a high gold price, drove strong cash flow and enabled the company to pay off all outstanding debt, becoming debt-free.
• The company raised full-year production guidance for the second time in 2024 to 130,000–140,000 ounces while maintaining all-in sustaining costs at the low end of CAD 800–900 per ounce.
• Q3 financial results included record revenue of $99 million, net earnings of $21.1 million ($0.07 per share), and record free cash flow of $45 million, with total liquidity near $300 million.
• Permitting progress continues with the Mexico layback expansion submitted Nov 11 (federal response expected H1 2025) and the South Railroad project in Nevada on track with all 20 environmental reports due year-end, NOI in early 2025 and ROD by mid-2026.
• Exploration success in Mexico and Nevada delivered significant new gold intercepts beyond current pit boundaries at Quimby, Darkstar and Pinion, supporting potential resource growth and extended mine life.

Presentation

[Operator]

Good morning, ladies and gentlemen, and welcome to Orla Mining's conference call for the third quarter 2024 results. My name is Rob, and I will be your conference operator today. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session.

[Operator]

If you would like to ask a question during this time, simply press Star, followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press Star one. Please be advised that this call is being recorded. I would like to turn the meeting over to Andrew Bradbury, Vice President, Investor Relations and Corporate Development. Please go ahead, Mr. Bradbury.

[Andrew Bradbury, Vice President, Investor Relations & Corporate Development at Orla Mining]

Thank you, Operator, and welcome to Orla's third quarter 2024 results conference call. We will be making forward-looking statements during today's call, and I direct you to the first and third slides of the presentation, which contain important cautionary notes regarding these forward-looking statements. All dollar amounts discussed today will refer to U.S. dollars unless otherwise indicated. The Orla executive team is on the call this morning, and I'll now pass the call to Jason Simpson, President and CEO.

[Jason Simpson, President and CEO at Orla Mining]

Thanks, Andrew. During the third quarter, Camino Rojo had record production at low costs. This record production and low costs in a record gold price environment drove strong margins and cash flow. As a result, we took the opportunity to pay off all our outstanding debt, taking us to a debt-free status, positioning us well for future investment in the business.

[Jason Simpson, President and CEO at Orla Mining]

Part of the growth investment we'll discuss today is the construction planning for the South Railroad project and exploration in Nevada on our South Carlin Complex. We have the executive team on the call to provide specific updates.

[Jason Simpson, President and CEO at Orla Mining]

As a result of the continued performance at Camino Rojo, we increased our production guidance for a second time this year and we're tracking to 130,000-140,000 ounces produced at the low end of the all-in sustaining cost guidance of $800-$900 per ounce. Our Chief Operating Officer, Andrew Cormier, will now discuss this operating performance.

[Andrew Cormier, COO at Orla Mining]

Thank you, Jason. As mentioned, our operating team in Mexico delivered an impressive quarter while remaining committed to the health and safety of the team. During the quarter, we mined over 1.9 million tons of ore at a strip ratio of 1.46. The increased strip ratio in the second half is in line with the mine sequence planned for the year.

[Andrew Cormier, COO at Orla Mining]

The average gold grade of ore processed during the third quarter was 0.93 grams per ton. We expect that in the fourth quarter, grades will come down slightly while remaining in line with the plan. We also achieved an average stacking rate of 18,434 tons of ore per day. The recovery improvement program continues to show positive results, and we have demonstrated that we can maintain the crushing and stacking rates.

[Andrew Cormier, COO at Orla Mining]

We are pleased with the positive recovery results, but it's worth noting that much of the test work and operational results have been with oxide material. As we increase processing rates of transition material, we will continue testing to understand if these recovery improvements can be expected as observed with the oxide material. With the continued strong mining and operating performance in the third quarter, we produced a new quarterly record of nearly 43,000 ounces of gold.

[Andrew Cormier, COO at Orla Mining]

Year to date, we have outperformed on tons, grade, and recovery for both gold and silver. As Jason mentioned, with the continued operational execution and performance, we increased our production guidance for the full year to 130,000-140,000 ounces of gold, and we are well on track to achieve this target.

[Andrew Cormier, COO at Orla Mining]

Permitting of our layback in Mexico continues, and we have resubmitted the application of permits to the federal government with the full endorsement of the state government. In recent weeks, the new administration has reached out to Orla and the broader mining community to discuss investment, including these meetings in Toronto and Mexico, which our CEO attended. We see this as a positive signal.

[Andrew Cormier, COO at Orla Mining]

We anticipate the new administration will be prepared to respond to our expansion permit application in the new year. In Nevada, permitting for the South Railroad project continues to progress. We are finalizing 20 supplemental environmental reports required to be prepared for the Bureau of Land Management prior to issuing the Notice of Intent. To date, 15 reports have been reviewed by the Bureau of Land Management and Cooperating Agencies, and our consultants are completing the final five and incorporating the feedback.

[Andrew Cormier, COO at Orla Mining]

The company aims to finalize all the supplemental environmental reports by the end of 2024. The completion of this work ahead of the Notice of Intent should aid in the preparation of subsequent EIS documents. The Notice of Intent is then expected to be published in early 2025 with the targeted Record of Decision, the final permitting decision, by mid-2026.

[Andrew Cormier, COO at Orla Mining]

Following this approval, construction on the South Railroad project would commence with the first gold production anticipated in 2027. At the state level, we have received Class I and II air operating permits. Applications have been prepared for the Water Pollution Control Permit and the National Pollutant Discharge Elimination System discharge permit, which will be submitted after the Notice of Intent in 2025. The EPCM contract is set to be awarded later this year.

[Andrew Cormier, COO at Orla Mining]

Basic and detailed engineering will proceed in 2025 and 2026 to align with the construction following the Record of Decision. Long-lead equipment will be identified, and purchase orders potentially placed in 2025. We have been asked if the election of the new president in the United States will have an impact on the permitting timeline.

[Andrew Cormier, COO at Orla Mining]

Our base schedule assumes that the Notice of Intent is received in early 2025. With the new president, we think the potential for delays in the schedule is reduced. We will monitor and update as we get more information. Now, over to our Chief Financial Officer, Etienne Morin, to discuss the financial results for the quarter.

[Etienne Morin, CFO at Orla Mining]

Thanks, Andrew. During the quarter, we sold 38,000 ounces of gold at a realized price of $2,477 per ounce, resulting in record $99 million in revenue for the quarter. Our all-in sustaining cost for the third quarter was $720 per ounce, lower in part due to higher gold sales and higher silver byproduct credits.

[Etienne Morin, CFO at Orla Mining]

With the strong gold production and cost management, we're now guiding to the low end of the improved 2024 all-in sustaining cost guidance range of $800-$900 per ounce of gold sold, and we remain on track to achieve that target. Our low-cost production, coupled with higher gold prices, are driving strong earnings and cash flow generation. Our net earnings for the quarter were $21.1 million or $0.07 per share, and after adjusting for unrealized foreign exchange gains and other small items, adjusted net earnings were $19.2 million or $0.06 per share.

[Etienne Morin, CFO at Orla Mining]

These strong earnings are reflected in robust operating margins of 65% and record free cash flow generation. During the quarter, exploration and project costs were $17.4 million, of which $13.7 million was expensed and $3.7 million was capitalized.

[Etienne Morin, CFO at Orla Mining]

Of note, this quarter represented the peak of exploration and project spending for the year, and we are on track to meet our full-year guidance for both exploration and project development spending. Cash flow from operating activities before changes in non-cash working capital was $52 million or $0.16 per share for the quarter, and we generated a record $45 million in free cash flow or $0.14 per share.

[Etienne Morin, CFO at Orla Mining]

During the quarter, our total capital expenditures were $7.9 million, of which $3.8 million were non-sustaining and related to capitalized exploration in Mexico, and $4.1 million were sustaining and mainly related to the construction of phase two of the heap leach pad, which was completed in the third quarter. At the start of 2024, we had nearly $90 million in long-term debt outstanding.

[Etienne Morin, CFO at Orla Mining]

We were making incremental quarterly payments, but as gold price continued to increase and our operating results strengthened, we were in a position to pay off the full amount outstanding in October and became debt-free only two and a half years after achieving commercial production, all while continuing to invest in our growth pipeline.

[Etienne Morin, CFO at Orla Mining]

Our cash balance as of today is approximately $145 million, with no debt and a non-drawn $150 million revolving credit facility, bringing our total liquidity to nearly $300 million.So with that, I'll pass it on to Sylvain Guerard, our Senior Vice President of Exploration.

[Sylvain Guerard, SVP Exploration at Orla Mining]

Thanks, Etienne. In Mexico, drilling in the first part of the year successfully defined gold and polymetallic mineralization within the first 500 meters beneath the Camino Rojo's oxide resources. In the second half, ongoing drilling is focused on extending this mineralization from half to one kilometer beyond the existing resources. New results are being received, and an update on our drill program is planned before year-end.

[Sylvain Guerard, SVP Exploration at Orla Mining]

I will now walk you through a short update on the exploration of the South Railroad project in Nevada, which is now part of what we are calling the South Carlin Complex. This complex is a 25,000-hectare land package with a 30-kilometer strike and combines the South Railroad and Point Creek properties. We recently released results from the first part of our 2024 program, which tested potential extensions of gold mineralization beyond the current projected open pit at Dark Star and Pinion.

[Sylvain Guerard, SVP Exploration at Orla Mining]

These results returned significant gold intercept in oxide and sulfide zones. The image on the right shows the Dark Star pit and how recent drilling is successfully intersecting new mineralization outside the current open pit boundaries, including the saddle area located between Dark Star Main and North Zone. We find these results very promising.

[Sylvain Guerard, SVP Exploration at Orla Mining]

At the Pinion deposit, in-fill drilling confirmed continuity and enhanced grade between historical holes, while new and historical results across the target area indicate that gold mineralization remains open southeast of the projected open pit. Ultimately, we intend to expand the resource base by following key structures that control mineralization and exploring open gold zones.

[Sylvain Guerard, SVP Exploration at Orla Mining]

This drilling program supports our Nevada strategy to enhance project value and extend mineralization by identifying additional oxide resources and making new discoveries across the land package. We now have the call back to our Chief Sustainability Officer, Chafika Eddine.

[Chafika Eddine, Chief Sustainability Officer at Orla Mining]

Thank you, Sylvain. On the sustainability front, we recently inaugurated our egg poultry farm in partnership with a local high school in San Tiburcio near our Camino Rojo mine, which achieved its first egg production. This project was designed for community economic development and agricultural education, and it's a model for multi-stakeholder partnership with pre-sold egg production set to supply Camino Rojo and other nearby mines, including Peñasquito.

[Chafika Eddine, Chief Sustainability Officer at Orla Mining]

We were pleased to celebrate this important achievement with our neighbors and project partners, and we hope it spurs continued partnerships and more local business endeavors. Internally at Orla, we've been equipping our leaders across our sites with essential soft and technical skills, empowering them to train others and facilitate learning modules within our leadership system and other initiatives.

[Chafika Eddine, Chief Sustainability Officer at Orla Mining]

This past quarter, team leaders in Canada, Mexico, and Nevada conducted workshops for their teams on responsible procurement practice, our social investment toolkit, and our leadership foundations workshop, which is rooted in systems leadership principles. Through this training, we are preparing our leaders to guide their teams effectively, fostering growth that's both responsible and sustainable. And with that, I'll pass the call back to Jason.

[Jason Simpson, President and CEO at Orla Mining]

Thank you, Chafika. Record production and cash generation, debt-free while making significant growth investments, more gold discovered, and permitting progressing. Orla is getting stronger, bigger, and more valuable. I am proud that this team continues to execute. Thank you to our teams in the countries where we operate, whose commitment and delivery are driving this business forward. And at this point, I'd like to open the call to questions and hand it back to the operator.

[Operator]

Thank you. We will now begin the question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one again. Your first question comes from the line of Anita Soni from CIBC. Your line is open.

[Anita Soni, Managing Director at CIBC Capital Markets]

Good morning, Jason and team. A question I had with respect to the mine plan in 2025. Your permits, I think you said you're going to submit them in November. Have they been submitted yet?

[Jason Simpson, President and CEO at Orla Mining]

Hi, Anita. Yes, thanks. I'm glad to have you on our call now. We submitted the permits on November 11th, so they have been submitted. That submission, as Andrew referenced, was with the full support of the state government, so we hand-delivered those on November 11th.

[Jason Simpson, President and CEO at Orla Mining]

As Andrew also mentioned, I've been fortunate enough to be asked to be part of two meetings with the Mexican government and facilitated by the Canadian government as they have open dialogue with the mining industry and other executives, most recently last Friday. We expect that with their feedback on the submission included, that we can expect a response from the federal government in the first half of 2025.

[Anita Soni, Managing Director at CIBC Capital Markets]

Okay. And then as we move into thinking about the first half of 2025, I'm assuming once you get the permits, you'll be able to move forward pretty quickly. But what does the mine plan look like? I know the strip ratio increased in the back half of this year in order to maintain consistent ore feed. Does that drop next year, or does that remain consistent?

[Jason Simpson, President and CEO at Orla Mining]

Yeah, no, that'll remain consistent, and as the permits are being evaluated and we receive response, our plan will continue, and we will not be interrupted in 2025. Earlier in 2024, we made a decision to invest in a redesign and internal ramp in the pit such that our production through 2024 and 2025 would remain uninterrupted,

[Jason Simpson, President and CEO at Orla Mining]

So we'll continue with that mine design, as Andrew referenced, the plan, and that includes throughout 2025, where we'll look to maintain a balanced amount of stripping and hence a balanced amount of cost to the business throughout the year next year.

[Anita Soni, Managing Director at CIBC Capital Markets]

Okay. And then how does that impact the grades next year as well? If I could ask that.

[Jason Simpson, President and CEO at Orla Mining]

The grades really are a function of where we are within the pit. There are portions, as you can imagine, of the pit that have higher grades and portions lower grades. And all of that will be part of our budget plan for 2025 that leads to our guidance calculation. The other thing that we should also keep in mind is what Andrew referenced related to the recoveries.

[Jason Simpson, President and CEO at Orla Mining]

We are extremely pleased with the recovery improvements that have translated to additional production in 2024. Some of that can be carried into 2025, but as we go deeper in the oxide pit, I remind our audience that there are four zones of material through that pit. And as we get deeper and deeper into the pit, the recovery profile changes.

[Jason Simpson, President and CEO at Orla Mining]

And so we'll need to consider that in our production planning for 2025, along with the grade that you asked about, and presumably maintaining our throughput despite getting deeper. That'll all come together for our 2025 guidance, and we should expect Orla's production over the past two years, this year, and next year to be reasonably predictable.

[Anita Soni, Managing Director at CIBC Capital Markets]

Okay. Thank you. That's it for my question.

[Jason Simpson, President and CEO at Orla Mining]

Nice to hear from you, Anita.

[Operator]

Again, if you would like to ask a question, press star one in your telephone keypad. Your next question comes from the line of Andrew Mikitchuk from BMO Capital Markets. Your line is open.

[Anita Soni, Managing Director at CIBC Capital Markets]

Thank you. Congratulations on a record quarter and being debt-free today. I just want to come back to South Railroad. You had a nice chart in the presentation, and I think the commentary indicated there were five remaining submissions. Is there any sense you can give us on how far along those submissions are in terms of the time and work that's already been put in to target this being finished for submission? I think the wording was by year-end.

[Jason Simpson, President and CEO at Orla Mining]

Yeah. Andrew, so those submissions, we've already gotten feedback from BLM on it, so we're incorporating that feedback in the next draft that will go to them so that we have all 20 submitted by year-end. So that's the work that's already gone into it. The report's already written, gone through one set of feedback with BLM. There could potentially be a second set of feedback. And if it follows the same pattern as the first 15, that would conclude our submission.

[Anita Soni, Managing Director at CIBC Capital Markets]

Okay. And there's a grayish box in the middle of that chart on page seven. It says, "Option for early start." Any commentary that's, I guess, if everything's rolling well, you can accelerate the EPCM? Is that what that infers?

[Jason Simpson, President and CEO at Orla Mining]

Yeah. We've spoken to this in the past, and the way I describe it is we would like to replicate the kind of success that we had in constructing Camino Rojo. Andrew Cormier and his team's approach to this is to make sure that we get the basic engineering done early such that we can let the contracts out early based upon detailed designs.

[Jason Simpson, President and CEO at Orla Mining]

Additionally, earlier procurement can enable us to de-risk the project by having key equipment on the ground. In the case of Camino Rojo, it was actually before construction began. So we'll look to do the same thing. We are, in a few weeks, going to submit a budget to the board for 2025, which will include, in the first half of the year, that basic engineering that I talked about.

[Jason Simpson, President and CEO at Orla Mining]

And potentially, we will go back to the board mid-year next year to begin the construction contracts and early procurement for long lead-time items in the second half of next year such that, similar to the Camino Rojo process, we can build the mine in Nevada in months.

[Anita Soni, Managing Director at CIBC Capital Markets]

And then, if I can indulge with the microphone here, one last question on the exploration, the long section, I think, on slide 11 of the Dark Star main and north pits. Obviously, the historical holes and your follow-up holes released today suggest that the pit shapes will change. And I think the commentary suggests that the same for Pinion.

[Anita Soni, Managing Director at CIBC Capital Markets]

To me, just to confirm that the start of the mine sequence looks intact. This just changes midway to later in the mining sequence around this and would be part of the future. So it wouldn't impact the current permitting effort or the near-term mine plan for this at the start. Is that accurate?

[Jason Simpson, President and CEO at Orla Mining]

Yeah, that's exactly how I would like it characterized, Andrew. Thank you. Clearly, we're going to need to incorporate those compelling results in addition to an update to the gold price considerations in due time. It is important that we continue on the path that we're on right now through the permitting process, begin the operation as designed, and then take the liberty to incorporate all of these additional results and opportunities into the long-term mine life.

[Jason Simpson, President and CEO at Orla Mining]

We, as miners, and similar to what we're doing at Camino Rojo, will look to add resources that replace depletion in addition to potentially expanding things when the time is right. And at those times that we have justified an expansion, we will need to submit for permit amendments in that regard.

[Anita Soni, Managing Director at CIBC Capital Markets]

Thank you. I'll sign off and let others ask questions. Congratulations.

[Jason Simpson, President and CEO at Orla Mining]

Thanks, Andrew.

[Operator]

That concludes our question-and-answer session. I will now turn the call back over to Jason Simpson, CEO, for closing comments.

[Jason Simpson, President and CEO at Orla Mining]

Okay. I want to thank everyone for their time and dialing in today. Thank you, operator. I'm very proud of the Orla team, and we continue to deliver results. If you ever have any questions, the Orla management team is available, so don't hesitate to reach out.

[Operator]

This concludes today's conference call. Thank you for your participation. You may now disconnect.

Participants

Executives

• Jason Simpson, President and CEO
• Chafika Eddine, Chief Sustainability Officer
• Andrew Bradbury, Vice President, Investor Relations & Corporate Development
• Etienne Morin, CFO
• Andrew Cormier, COO
• Sylvain Guerard, SVP Exploration

Analysts

• Anita Soni, Managing Director at CIBC Capital Markets