Orla Mining Ltd. (TSE: OLA) disclosed its first quarter 2024 financial and operational results, showcasing a strong performance with significant gold production and revenue growth. The company's Camino Rojo mine demonstrated excellence in safety, environmental management, and cost efficiency. With a favorable increase in gold prices, Orla Mining experienced margin expansion and robust cash flow, contributing to a solid financial position. The quarter also marked the strategic acquisition of Contact Gold and the integration of the Pony Creek property into Orla's portfolio. Despite suspending investment in the Cerro Quema Project in Panama and facing legal challenges, the company remains positive about its future endeavors, including advancing exploration in Mexico and Nevada.
Key Takeaways
- Orla Mining mined 1.9 million tonnes of ore at an average gold grade of 0.82 grams per tonne.
- The company produced 33,223 ounces of gold and sold 32,000 ounces at $2,059 per ounce.
- Revenue for the period reached $67 million with all-in sustaining costs at $909 per ounce.
- Orla Mining ended the quarter with $118 million in cash and a net cash balance of $30 million.
- The acquisition of Contact Gold and the integration of Pony Creek property was completed.
- Investment in Cerro Quema Project has been suspended, with the company seeking legal remedies.
- The company anticipates delivering 110,000 to 120,000 ounces of gold in 2024.
Company Outlook
- Orla Mining is focusing on reducing debt and maintaining financial flexibility.
- The company is optimistic about the new Mexican administration's positive stance on mining.
- A Notice of Intent in Nevada is expected by the end of the year or early next year.
- Orla Mining is committed to organic growth and the pursuit of permitted projects ready for construction.
Bearish Highlights
- The suspension of investment in the Cerro Quema Project due to ongoing legal issues.
Bullish Highlights
- Strong cash flow generation is being reinvested into the business and used to repay debt.
- The company is optimistic about future projects and aims to be the emerging gold producer of choice.
Misses
- No specific misses were mentioned in the earnings call summary.
Q&A Highlights
- The company is prioritizing organic growth while remaining open to external growth opportunities.
- There are plans to advance necessary stripping and catch-up work from 2023 to align with budget and production guidance.
Orla Mining's Q1 2024 earnings call highlighted their strategic progress and promising outlook. With a focus on operational excellence and financial prudence, the company is positioning itself for sustainable growth. The integration of new assets and the anticipation of a favorable permitting environment in Mexico contribute to a positive future trajectory. Orla Mining's leadership is confident in delivering value to shareholders through disciplined investment and a commitment to becoming the preferred emerging gold producer.
InvestingPro Insights
Orla Mining Ltd. has shown resilience and strategic savvy in its Q1 2024 performance, navigating through operational challenges and market fluctuations. Let's take a closer look at some key metrics and insights from InvestingPro that could provide a deeper understanding of the company's financial health and stock performance:
InvestingPro Data:
- The company's market capitalization stands at $1.31 billion, reflecting investor confidence in its growth potential.
- With a P/E ratio of -56.36 and an adjusted P/E ratio for the last twelve months as of Q4 2023 at -50.63, the market may be anticipating future earnings growth.
- Revenue growth for the last twelve months as of Q4 2023 was a robust 20.91%, indicating a strong upward trajectory in the company's sales performance.
InvestingPro Tips:
- Analysts appear optimistic about Orla Mining's potential, as indicated by the three analysts who have revised their earnings upwards for the upcoming period.
- The stock price has experienced a large uptick over the last six months, with a 31.4% return, suggesting a bullish sentiment amongst investors.
These insights suggest that while Orla Mining has faced some challenges, such as the suspension of investment in the Cerro Quema Project, its overall financial health and market performance have positive aspects that could be of interest to current and potential investors. For those looking to delve deeper into Orla Mining's financials and stock analysis, there are additional InvestingPro Tips available, which can be accessed through https://www.investing.com/pro/ORLA. By using the coupon code PRONEWS24, readers can enjoy an extra 10% off a yearly or biyearly Pro and Pro+ subscription, unlocking a wealth of investment insights and data.
Full transcript - Orla Mining (ORLA) Q1 2024:
Operator: Good morning, ladies and gentlemen, and welcome to Orla Mining's Conference Call for the First Quarter 2024 Results. My name is Ian and I will 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 session. [Operator Instructions] 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: Thank you, operator and welcome to Orla's first quarter 2024 results conference call. We will be making forward-looking statements during today's call, and I would 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. 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: Thanks, Andrew. Our first quarter highlights include continued strong performance at Camino Rojo on safety, environmental management, operations and costs. We have maintained consistent low cost gold production which coupled with an increase in gold price, has led to margin expansion and strong cash flow generation. Exploration ramped up in Mexico in the first quarter and we look forward to providing updates on the exciting Camino Rojo extensions. We recently completed the acquisition of Contact Gold and we are integrating the Pony Creek property into our portfolio and expanding our exploration efforts in Nevada. With respect to our interests in Panama through our Cerro Quema Project, we have suspended investment and are pursuing legal remedies with our preference being a constructive resolution with the Government of Panama that results in a positive outcome for all stakeholders. We have the entire executive team on the call to provide specific updates, so first I'll pass it over to Andrew Cormier, our Chief Operating Officer, for a first quarter operational update.
Andrew Cormier: Thank you, Jason. We are pleased to carry out the positive operational performance from 2023 into 2024. This was demonstrated by the strong Q1 mining and processing performance at Camino Rojo while maintaining the health and safety of our team. We mined over 1.9 million tonnes of ore at a strip ratio of 0.45. The average gold grade of ore processed during the first quarter was 0.82 grams per tonne. We also achieved an average stacking rate of 19,597 tons per day. The mined ore tonnes and grade continue to reconcile well to the block model. During the second half of 2023, we initiated a program to test the impact of reducing the crusher product size from a PAD of 28 mm to 23 mm. The initial results of this test program are positive and we're seeing higher gold recovery from the heap leach as a result. The testing will continue in 2024 to quantify the positive impact that the crush size will have on the various types of ore going forward. We produced 33,223 ounces of gold during the first quarter, setting us up well to deliver on our 2024 production guidance of 110,000 ounces to 120,000 ounces of gold. In terms of permitting, we're continuing to work through permitting delays in Mexico. Our operating team have adjusted our mine plan to not only maintain the tonnes and grade feeding gold production, but also stripping approximately 90% of our planned waste for the year. In Nevada, we are continuing our baseline environmental data collection and studies required to develop the environmental impact study and overall permitting process. We are currently in the federal NEPA process working with BLM and expect permitting to continue through 2024 and 2025, ideally allowing construction through 2026 and production in 2027. Based on this timeline, we expect to begin engineering optimization, updating estimates and procurement in 2025. As you can see from this chart, Camino Rojo has been a consistent gold producer quarter-over-quarter. It is our objective to maintain predictable operational results as a foundation for our business. And with that, I'll pass the call to Etienne Morin, our Chief Financial Officer, who will now discuss the financial results for the quarter.
Etienne Morin: Thanks Andrew. During the quarter, we sold 32,000 ounces of gold at a realized price of $2,059 per ounce, resulting in $67 million in revenue for the period. Our all-in sustaining costs for the first quarter was $909 per ounce, tracking very comfortably within our annual cost guidance range of $875 to $975 per ounce. As per our plan, the first half of 2024 includes higher sustaining capital as we complete the Phase 2 expansion of the Heap leach pad at Camino Rojo. As previously communicated, all-in sustaining cost is expected to remain in the higher end of the range in Q2 and expected to come down in the second half of the year as we complete these projects. Total capital expenditures in the first quarter was $8.5 million, of which $5 million was sustaining capital and $3.5 million was non-sustaining related to capitalized exploration in Mexico. Net earnings for the quarter were $17.5 million, or $0.06 per share, and after adjusting for unrealized foreign exchange gain and other small items, adjusted net earnings was $16.8 million, or $0.05 per share. It should be noted that during the quarter, expense exploration and project costs were $4.7 million, of which approximately $1.7 million was exploration in Mexico and $2 million was project development costs in Nevada. Cash flow from operating activities before changes in non-cash working capital was $21.7 million or $0.07 per share for the quarter. So, as outlined on this chart, we've continued to pay down the debt and strengthen our balance sheet. We ended the quarter with $118 million in cash, an increase of $21 million during the first quarter, and subsequent to quarter end, we repaid an additional $10 million on our credit facility, bringing the outstanding balance down to $78 million. So at March 31, our net cash balance had improved to $30 million. We'll continue to evaluate opportunities to reduce debt, particularly in this strong gold price environment, and allowing us to minimize interest charges and remaining, and maintaining rather our financial flexibility to fund our internal project pipeline. We also continue reinvesting into our business through our exploration programs and that is a helpful segue to pass the call over to Sylvain Guerard, our Senior Vice President of Exploration.
Sylvain Guerard: Thank you, Etienne. In 2023, we increased our exploration efforts company wide and we are maintaining that momentum this year. In the first quarter, our exploration efforts were concentrated on drilling at Camino Rojo in Mexico and preparing our drill program in Nevada. Throughout the quarter, we drilled nearly 13,000 meters focused on Camino Rojo oxide and sulfide extensions. We also issued a number of press releases highlighting the results of the exploration activities from the second half of 2023 at the Camino Rojo and South Railroad projects. As part of the near-mine exploration at Camino Rojo, we are focusing our 2024 efforts on the promising Camino Rojo Extension. We have designed a 30,000 meters drill program aimed at testing and expanding the potential of this still open mineralization at the extensive Camino Rojo deposits.
polymetallic: In Nevada, along the current trend, we have an exciting drill program starting this month. With the acquisition of Contact Gold, we have increased the 2024 exploration budget by $3 million, bringing the planned total exploration spent at South Railroad and Pony Creek to $14 million. Our 2024 exploration program is progressing well with drilling operation underway in Mexico and soon to commence in Nevada. We look forward to providing updates on our progress and results as we advance. I will now pass the call to Chafika Eddine.
sulphide: In Nevada, along the current trend, we have an exciting drill program starting this month. With the acquisition of Contact Gold, we have increased the 2024 exploration budget by $3 million, bringing the planned total exploration spent at South Railroad and Pony Creek to $14 million. Our 2024 exploration program is progressing well with drilling operation underway in Mexico and soon to commence in Nevada. We look forward to providing updates on our progress and results as we advance. I will now pass the call to Chafika Eddine.
sulphide: In Nevada, along the current trend, we have an exciting drill program starting this month. With the acquisition of Contact Gold, we have increased the 2024 exploration budget by $3 million, bringing the planned total exploration spent at South Railroad and Pony Creek to $14 million. Our 2024 exploration program is progressing well with drilling operation underway in Mexico and soon to commence in Nevada. We look forward to providing updates on our progress and results as we advance. I will now pass the call to Chafika Eddine.
sulphide: In Nevada, along the current trend, we have an exciting drill program starting this month. With the acquisition of Contact Gold, we have increased the 2024 exploration budget by $3 million, bringing the planned total exploration spent at South Railroad and Pony Creek to $14 million. Our 2024 exploration program is progressing well with drilling operation underway in Mexico and soon to commence in Nevada. We look forward to providing updates on our progress and results as we advance. I will now pass the call to Chafika Eddine.
Chafika Eddine: Thank you, Sylvain. On the sustainability front, there are two relevant updates to note. First, I would like to highlight our systems leadership program that we call Lead. This leadership training program is the cornerstone for our people strategy and for building our culture. We started implementing this system in 2023 to improve our team leaders understanding of leadership and how they are critical in creating and maintaining a positive working environment. The system also provides our leaders with skills to better understand our business and improve their contribution to Orla. We have trained more than 110 leaders across the four countries where we operate, and with this system, we are providing a safe space for our team leaders to grow, to share their experiences and to learn from each other. Despite being a young company, we are proud to see how our investment in training is cementing a positive culture at Orla and contributing to our employees personal and professional development. Another significant development in our ESG efforts is that we have updated our materiality assessment to continually prioritize our efforts on what matters to different stakeholders. The update will help us to keep addressing relevant issues of material matters on the environmental, social and governance setting. We continue to transparently report the information that is considered important to all our stakeholders. Now I'll pass the call back to Jason.
Jason Simpson: Thank you, Chafika. The recent gold price strength in combination with our low cost production is resulting in margin expansion and continued cash flow generation. This cash is being reinvested into our business and repaying debt to strengthen our balance sheet, thus enabling us to advance our future projects that will support the growth of Orla. As always, I would like to thank our team who remain committed to our vision of building the emerging gold producer of choice and delivering value to all of our stakeholders. At this point, I'd like to open the call to questions and pass the call back to the operator.
Q - Bryce Adams: Thank you, operator. Thanks all for the presentation. I have a couple of questions, if that's okay. First one is for Jason. Any thoughts on the Mexican election and what changes that could bring? Is there an immediate impact to your business? I'm thinking of the layback land use permit, but are there others?
Jason Simpson: Thanks, Bryce, and good to hear from you. Yes, in relation to Mexico, we know that the election will take place at the beginning of June, with the inauguration at the beginning of October. And I think it's safe to say that the current administration has not been helpful to the permitting processes, not only in mining, but more broadly across the country. So as we prepare and resubmit our permit amendments, we'll do so during the transition with the expectation that the new administration will be making decisions. And we're hopeful that the new administration will take a more positive view to all industries, including mining.
Bryce Adams: Okay. And the land use permit that'd be resubmitted after the elections. Is that the right way to think about that?
Jason Simpson: Well, I think what I would characterize it Bryce is, we're going to submit all of the amendments that we acquired to grow the mine in Mexico under a single resubmission. We're currently selecting the environmental consultant that we're going to do that work with and we anticipate we'll be able to resubmit it after the election, but probably during the transition period, enable the technical people within the government to begin processing it and the final decision for the permit amendments to come in the new administration. So that's going to happen throughout this summer into the fall with the decisions being made within the new administration, which begins October.
Bryce Adams: Okay. Speaking in Mexico on the Camino sulphides, we get the underground resource later this year. On the back of that, do you have a rough timeline for when a PEA or a technical report could be made public?
Jason Simpson: Yes. We haven't talked about the timing for the next steps in the engineering process. What I have said is that people can expect, as you pointed out, and we repeated today, the underground resource in the second half of this year, we're on schedule to deliver that. That resource, of course, will be needed to inform the next steps. And we will take the well-known and predictable steps of engineering, starting with a PEA, all of that engineering leading towards a development plan so that we can be producing in the sulphides before the end of the decade.
Bryce Adams: Okay, two more questions, if I can hold the microphone for a little bit. Arbitration in Panama, sorry if I missed this in the disclosures, but is there a value that you've included in the arbitration case? Like, if it goes down that path, how much are you looking for?
Jason Simpson: Yes, we haven't included a value yet, Bryce. You didn't miss it. Where we are in the process is we've filed our Notice of Intent to arbitrate, which kicks off a period that we can work with the government to find a resolution. If that is unsuccessful, we'll move to the next step, which is our request to arbitrate. We anticipate that that will happen around June and at that time we will also need to communicate the sum, which will be arbitrary.
Bryce Adams: Okay, thanks. Last one in Pony Creek what gets you most excited about that property? What's the most obvious impact it can have on the South Railroad economics?
Jason Simpson: So I'm going to start this off, and then I'll let Sylvain carry on the answer, because he's probably the most excited about it, really. As he's explained to me, it comes down to the fact that we were able to, through our due diligence process, determine that the geologic structures continued in the southern part of our property, continued onto the Contact property through different geochemical and soil signatures that progress down there. So that is the reason that we thought that that modest tuck-in would be important geologically. We've also gotten a lot of interest from some of our key shareholders about the potential not only in our property, but now this expanded case. And maybe I'll defer to Sylvain to finish the answer of why we're excited about the addition of Pony Creek.
Sylvain Guerard: Yes, certainly. Pony Creek, it's a net natural extension of the same geology, structural setting extend to the south as well and we also have indication that the mineralization extends onto the Pony Creek property. There are three mineralized zones already defined, and we have very good working soil geochem trends that also extend onto the south area. This is part of what it's called the Railroad District. So, as I said, it's a natural extension. It belonged to the same project, and we are very pleased to have it, and we'll be drilling it later this year.
Jason Simpson: Bryce, our philosophy in Nevada is consistent with Mexico, which is to get the first oxide mine up and running, and on that cash flow from the oxide mine in Mexico and future oxide mine in Nevada. We can continue exploring both of those properties, not only discovering more oxides to extend the mine life, but then transitioning the company into the next phase, which would be the sulphide development starting in Mexico and then likely continuing into that.
Bryce Adams: Perfect. That's it from me. Thanks so much. I'll jump back in the queue.
Jason Simpson: Thanks, Bryce.
Operator: Our next question comes from the line of Andrew Mikitchook with BMO Capital Markets. Your line is opened.
Andrew Mikitchook: Jason, I guess lots of questions have already been asked, but can we just come back to this permitting in Mexico? You've been quite clear in your answers and your position. Can you just offer any context? Are you seeing any movement in your region or nationally that would suggest that there's any change in behavior in the permitting authorities at all or is it just unchanged?
Jason Simpson: Yes, right now, Andrew, there would be no change. Everybody is focused on the election process in Mexico, and we're not going to be able to get anything achieved under this current.
Andrew Mikitchook: Okay. And then still on permitting, but moving to Nevada, you guys put in fairly clear wording again in the text of the press release about the expectations for the BLM to publish the Notice of Intent. Any guidance on timing that we should expect to see that, I guess that that would be publicly disclosed?
Jason Simpson: Hello?
Andrew Mikitchook: Yes. Did I get cut off?
Jason Simpson: No, no, I think we got cut off Andrew, I apologize for that. Hopefully you heard the answer, the response on Mexico. Did you hear that?
Andrew Mikitchook: Yes.
Jason Simpson: We're preparing for the next administration and we'll look for resolution in Mexico in the next administration. I hope that you heard in Andrew's response that our technical team in Mexico has done the necessary redesign so that not only is gold production confirmed, but we'll actually be able to strip about 90% of the waste that we had originally planned. So we've mitigated all the risks to the business as it relates to the delay in the expansion permits in Mexico. I think your next question was about Nevada and what we've updated the market on with these results is, we are in the NEPA process. We are completing the supplemental environmental reports that will be the foundation for the EIS through the consultant that we and BLM work with to produce the EIS. Milestones within the NEPA process, which you've asked about, Notice of Intent and record of decision are key. If we can achieve Notice of Intent by the end of this year, beginning of next, that should put us in good shape to be fully permitted, i.e. record of decision, so that we can be constructing in 2026, which on the timelines of these style of constructions has us producing in 2027. The details of that permitting process are, there are 19 environmental reports that our team in Nevada is completing. We've submitted 18 of them to BLM, received 14 back with initial comments. So that's all evidence that we're progressing our work with BLM. And some of those costs are included in what we describe as growth project costs. Hopefully that helps with some timelines and some color on the process in Nevada.
Andrew Mikitchook: No, that's perfect. Thanks for the little bit further detail on what we should expect. Just last extension question here is the, I guess the new mining stripping plan for Camino Rojo, that change in stripping location, I guess, but nonmaterial change in tonnes. That will be essentially an in line expectations for what was guided for the year in terms of stripping impact on all-in sustaining costs. We shouldn't expect any material change in?
Jason Simpson: Yes, that's the way to think about it.
Andrew Mikitchook: You've guided for the year.
Jason Simpson: Yes, that's the way to think about it certainly, Andrew. When we guided for the year, we anticipated doing the necessary stripping that we require to assure production, as well as do some of the catch-up from 2023. So we already guided, anticipating that we would be able to strip waste. And now we have done the necessary engineering so that we'll be able to strip at least 90% of that waste. So everything should be as expected as it relates to our budget, which set up our guidance for tonnes and the associated costs to enable us to produce and strip for future production.
Andrew Mikitchook: Great. Thank you very much for answering my questions. I'll pass the microphone.
Jason Simpson: Thanks, Andrew.
Operator: Your next question comes from Bryce Adams of CIBC Capital markets. Your line is open.
Bryce Adams: I'm back again. I must have had too much coffee this morning. I want to ask about external growth. Sorry?
Jason Simpson: Sorry and again, Bryce to interrupt you.
Bryce Adams: Yes, I was going to ask about external growth. I'm sure you look at opportunities part of normal course, normal business process. Some of your peers have a preference for producing assets over projects. How do you think about buy versus build? My instinct is that it's more of a build scenario, leveraging your skill sets, but I wanted to double check on that point. So when you look at external options, bigger ones as compared to Contact Gold, is it still leaning towards projects?
Jason Simpson: Yes. Thanks for the question. I always start this answer, Bryce, as I have with you in the past, is the team needs to be focused on our organic pipeline. We have a lot of growth in our company already and we need to focus on permitting, engineering, construction and so on in our organic pipeline. However, of course, we will keep our eyes open for opportunities that could potentially accelerate that growth for Orla if it means acceleration that creates value for our shareholders. Now, to get precise on what we look for in our company, each company has to select a strategy that works for them. For us, we would be looking for something that is permitted because we are already in permitting processes on other projects that we could begin construction on. We will extend that search all the way over to producers. But as the knowledgeable person in industry knows, you'll pay more, particularly in this gold price environment for producers. We're happy to be constructors and if we can find the right project that's permitted ready for construction, I have great confidence in Andrew Cormier and his teams to repeat the successes of the past. So we'll focus on our organic work to grow the company. And if we can find an accelerant to that growth with the right inorganic opportunity that adds value for shareholders, then we'll transact.
Bryce Adams: Thanks, Jason. That's very clear and understood. Thanks again.
Jason Simpson: Thanks, Bryce.
Operator: There are no further questions at this time. I would like to hand things over to Jason for some closing remarks.
Jason Simpson: Thank you, operator. Since there are no further questions, I'd like to thank everybody for their participation on the call. Thank my teams both here in Toronto, but also in Mexico and Nevada for their continued efforts. Thank you.
Operator: Thank you all. This concludes today's conference call. You may now disconnect.
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