In the third quarter of 2024, Orla Mining Ltd. (ORLA), a mid-tier gold producer, reported record gold production and a significant increase in its production guidance for the year. The company produced nearly 43,000 ounces of gold, with an all-in sustaining cost of $720 per ounce, and generated $99 million in revenue. Orla Mining also announced its debt-free status as of October 2024, boasting a strong financial position with a cash balance of approximately $145 million and total liquidity nearing $300 million.
Key Takeaways
- Orla Mining achieved record gold production, nearly 43,000 ounces in Q3 2024.
- The company increased its production guidance for 2024 to 130,000-140,000 ounces.
- All-in sustaining costs were reported at $720 per ounce.
- Orla Mining is now debt-free with a cash balance of $145 million.
- Construction planning for the South Railroad project in Nevada is ongoing, with permitting expected to progress.
- Sustainability and community projects, including a poultry farm, were highlighted.
Company Outlook
- Permitting for the South Railroad project is moving forward, with the Notice of Intent expected in early 2025 and first gold production targeted for 2027.
- The company anticipates predictable production for 2024 and 2025, maintaining consistent strip ratios and production levels.
Bearish Highlights
- Deeper mining challenges are acknowledged, although they are not expected to affect production levels or strip ratios in the near term.
Bullish Highlights
- Ongoing exploration activities are aimed at extending gold mineralization, potentially enhancing long-term mine life.
- The company's financial strength is underscored by its debt-free status and robust cash balance.
Misses
- There were no specific misses mentioned in the earnings call summary.
Q&A Highlights
- CEO Jason Simpson emphasized the company's operational execution and growth investments.
- Recent exploration results have indicated changes in pit shapes, but these will not affect current permitting or near-term mine plans.
- Plans for advanced engineering and procurement are in place to mitigate risks and ensure efficient construction of the Nevada mine.
In his remarks, CEO Jason Simpson praised the team's strong operational execution and the strategic investments that have positioned Orla Mining for future success. He confirmed that the mine plan for 2025 is set to maintain consistent production despite the challenges of deeper mining. The company's proactive approach to the South Railroad project, including early start options and advanced engineering, mirrors the successful strategy employed at the Camino Rojo project.
Orla Mining remains focused on its sustainability efforts and community engagement, with projects like the community poultry farm contributing to its social responsibility initiatives. As the company looks forward to the construction of its South Railroad project in Nevada, it continues to integrate exploration findings into its long-term planning, ensuring the longevity and profitability of its operations. With a strong financial foundation and a clear strategic direction, Orla Mining is poised to continue its growth trajectory in the gold mining industry.
InvestingPro Insights
Orla Mining's strong performance in Q3 2024 is reflected in the latest InvestingPro data and tips. The company's record gold production and increased guidance align with InvestingPro's expectation that net income and sales are set to grow this year. This positive outlook is further supported by analysts revising their earnings estimates upwards for the upcoming period.
The company's robust financial position, highlighted by its debt-free status and substantial cash balance, is corroborated by InvestingPro data showing that Orla's liquid assets exceed short-term obligations. Moreover, the company operates with a moderate level of debt, which is consistent with its prudent financial management.
InvestingPro data reveals that Orla Mining's revenue for the last twelve months as of Q2 2024 stood at $275.09 million, with an impressive revenue growth of 27.24% over the same period. This growth trajectory aligns with the company's record production figures and increased guidance mentioned in the earnings call.
Despite the recent stock price volatility, with InvestingPro data showing a 17.05% decline over the past week, Orla Mining has demonstrated strong long-term performance. InvestingPro Tips indicate high returns over the last decade and strong returns over the past five years, suggesting resilience in the face of short-term market fluctuations.
It's worth noting that while Orla Mining was not profitable over the last twelve months, analysts predict the company will turn profitable this year, as per InvestingPro Tips. This projection aligns with the company's positive operational outlook and strategic growth initiatives.
For investors seeking a more comprehensive analysis, InvestingPro offers 12 additional tips for Orla Mining, providing a deeper understanding of the company's financial health and market position.
Full transcript - Orla Mining (ORLA) Q3 2024:
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 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 of Investor Relations and Corporate Development. Please go ahead, Mr. Bradbury.
Andrew Bradbury: 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 would direct you to the first and third slides of the 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 pass the call to Jason Simpson, President and CEO.
Jason Simpson: 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. 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. As a result of the continued performance at Camino Rojo, we increased our production guidance for a second time this year and are tracking to 130,000 ounces to 140,000 ounces produced at the low end of the all-in sustaining cost guidance of $800 to $900 per ounce. Our Chief Operating Officer, Andrew Cormier will now discuss this operating performance. Thank you, Jason.
Andrew Cormier: 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 tonnes of ore at a strip ratio of 1.46. The increased strip ratio in the second half is in line with the mine sequence plan for the year. The average gold grade of ore processed during the third quarter was 0.93 grams per tonne. 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 tonnes 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. We are pleased with 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 that 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. Year-to-date, we have outperformed on tonnes, 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 ounces to 140,000 ounces of gold and we're well on track to achieve this target. 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. 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 5 incorporating the feedback. 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 document. 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. 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 1 and Class 2 air operating permits. Applications have been prepared for the water pollution control permit and the National Fleet Discharge Illumination 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. 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. Our base schedule assumes that a Notice of Intent is received at 30 2025 with the new President, we think the potential for delays in this 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: 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. All-in sustaining costs for the third quarter was $720 per ounce, lower in part due to higher gold sales and higher silver byproduct credits. With a 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 to $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. 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. 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 of $0.14 per share. 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 2 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 debt outstanding. 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 2.5 years after achieving commercial production, all while continuing to invest in our growth pipeline. 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: Thanks, Etienne. In Mexico, drilling in the first part of the year successfully defined gold and polymetallic mineralization within the first 500 meter beneath the Camino Rojo sulfide 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. 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 25,000-hectare land package with a 30-kilometer strike and combines the South Railroad and Pony 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. 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 shallow area located between Dark Star main and north zone. We find these results very promising. At the Pinion deposit, infill 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 built zones. This drilling program supports our Nevada strategy to enhance project value and extend mine life by identifying additional oxide resources and making new discoveries across the land package. I will now hand the call back to our chief sustaining mobility officer, Chafika Eddine.
Chafika Eddine: 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 most stakeholder partnership with pre-sold egg production set to supply. 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. 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: 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. [Operator Instructions]. Your first question comes from the line of Anita Soni from CIBC (TSX:CM). Your line is open.
Anita Soni: Good morning, Jason and team. 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: Hi, Anita. Yes, thanks. I'm glad to have you on our call now. We submitted the permits on November 11, so they have been submitted. That submission, as Andrew referenced, with the full support of the state government, so we hand delivered those on November 11. As Andrew also mentioned, I have 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: 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: Yes, no, that will 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 '24 and '25 would remain uninterrupted. So we will 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: Okay. And then how does that impact the grades next year as well? If I could ask that.
Jason Simpson: The grades really are a function of where we are within the pit. There are portions as you can imagine in 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. 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. 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 will 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: Okay. Thank you. That's it for my questions.
Jason Simpson: Nice to hear from you, Anita.
Operator: Your next Your next question comes from the line of Andrew Mikitchook from BMO Capital Markets. Your line is open.
Andrew Mikitchook: 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 was 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: Yes, Andrew. So those submissions, have already we've already gotten feedback from BLM on that. 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 reports already written, gone through one set of feedback with BLM that could potentially be a second set of feedback and if it follows the same pattern of the first 15, that would conclude our submission.
Andrew Mikitchook: Okay. And, there's a grayish box in the middle of that chart on page 7. 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: Yes. 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 also early based upon detailed designs. Additionally, earlier procurement can enable us to derisk the project by having key equipment on the ground. In the case of Camino Rojo, it was actually before construction began. So we will 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 first half of the year that basic engineering that I talked about and potentially, we will go back to the Board midyear 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.
Andrew Mikitchook: 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 suggested the same for Pinion. To me, just to confirm that the start of the mine sequence looks intact. This is just changes in 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: Yes, that's exactly how I'd like to characterize, 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 are 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. We as miners and similar to what we're doing at Camino Rojo we'll 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 in expansion, we will need to submit for permit amendments in that regard.
Andrew Mikitchook: Okay. Well, thank you. I'll sign off and let others ask questions. Congratulations.
Jason Simpson: Thanks, Andrew.
Operator: And that concludes our question-and-answer session. I will now turn the call back over to Jason Simpson, CEO, for closing comments.
Jason Simpson: 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. [Operator Closing Remarks].
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