Earnings call transcript: Orla Mining Q4 2024 sees stable EPS, revenue miss

Orla Mining Ltd (OLA) reported its fourth-quarter 2024 earnings, revealing adjusted earnings per share (EPS) of $0.07, aligning with analyst expectations. The company missed revenue forecasts, posting $93 million against a projected $103.07 million. According to InvestingPro data, the company maintains a "GREAT" financial health score of 3.67, supported by strong liquidity metrics. Despite the revenue shortfall, Orla Mining’s stock price increased by 2.45% in after-hours trading, closing at $13.36, which is near its 52-week high of $13.76. Based on InvestingPro’s Fair Value analysis, the stock appears to be trading at premium levels.

Key Takeaways

• Orla Mining achieved debt-free status during Q4 2024.
• The company acquired the Musselwhite Mine, expected to significantly boost production.
• Record production at Camino Rojo with 137,000 ounces of gold in 2024.
• Stock price rose 2.45% post-earnings announcement.

Company Performance

Orla Mining’s performance in Q4 2024 was marked by strategic acquisitions and production milestones. The acquisition of the Musselwhite Mine in Ontario is anticipated to more than double the company’s annual production. In addition, the Camino Rojo project in Mexico set a new record with 137,000 ounces of gold produced in 2024. The company remains focused on expanding its operational footprint across North America, with ongoing projects in Nevada and Canada.

Financial Highlights

• Revenue: $93 million for Q4 2024, down from the forecasted $103.07 million.
• Adjusted EPS: $0.07, meeting analyst expectations.
• Net earnings: $26.1 million, translating to $0.08 per share.
• Operating margin: 64%.
• Cash flow from operations: $46 million.
• Free cash flow: $39 million.

Earnings vs. Forecast

Orla Mining’s Q4 2024 earnings per share met forecasts at $0.07, while revenue fell short of expectations by approximately 9.8%. This revenue miss is significant compared to previous quarters, where the company generally met or exceeded revenue forecasts.

Market Reaction

Following the earnings announcement, Orla Mining’s stock price increased by 2.45%, reaching $13.36. This movement reflects positive investor sentiment, likely driven by the company’s strategic acquisitions and production records. The stock’s performance is notable given its proximity to the 52-week high, indicating strong market confidence despite the revenue miss.

Outlook & Guidance

Looking ahead, Orla Mining plans to focus on integrating the Musselwhite Mine and advancing its South Railroad project in Nevada. The company targets a production of approximately 500,000 ounces across its three main assets in 2025. Additionally, Orla Mining aims to deleverage over the next three years while funding construction projects.

Executive Commentary

• "2024 was a transformational period for the company," stated CEO Jason Simpson, highlighting the strategic milestones achieved.
• "We intend to invest in both the team and the geology," Simpson added, emphasizing the company’s commitment to growth and development.
• "We continue to execute on our proven strategy to generate value," Simpson concluded, reflecting confidence in the company’s direction.

Risks and Challenges

• Potential cost overruns in integrating new acquisitions like the Musselwhite Mine.
• Regulatory and permitting challenges, particularly in Mexico and Nevada.
• Fluctuations in gold prices impacting revenue and margins.
• Execution risks associated with expanding production capacity.

Q&A

During the earnings call, analysts focused on potential cost savings at the Musselwhite Mine and the progress of ongoing permit discussions in Mexico. Orla Mining confirmed that it expects to file a Notice of Intent for the South Railroad project by mid-2025 and anticipates first production from this project in the second half of 2027.

Full transcript - Orla Mining Ltd (OLA) Q4 2024:

Abby, Conference Operator: Good morning, ladies and gentlemen, and welcome to Orla Mining’s Conference Call for the Fourth Quarter and Year End twenty twenty four Results. My name is Abby, and I will be your conference operator today. All lines have been placed on mute to prevent any background noise. And after the speakers’ remarks, there will be a question and answer session. Please be advised that this call is being recorded.

And 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 and Corporate Development, Orla Mining: Thank you, operator, and welcome to Orla’s fourth quarter and year end twenty twenty four results conference call. We will be making forward looking statements during today’s call, and I would direct you to the second 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 executives team is on the call this morning and I will now pass the call to Jason Simpson, President and CEO.

Jason Simpson, President and CEO, Orla Mining: Thanks, Andrew. During the fourth quarter, Camino Rojo had continued strong production at low costs. This production strength and low costs in a record gold price environment drove strong margins and cash flow. Notably, we announced the transformational acquisition of the Musselwhite mine in Ontario that will more than double Orla’s production profile. We continue to advance our exploration and development portfolio in Mexico, Nevada and now Canada.

Andrew Cormier, Chief Operating Officer, Orla Mining: Part of our

Jason Simpson, President and CEO, Orla Mining: growth investment we’ll discuss today is the construction planning for our growth at the South Railroad project and exploration in Nevada on the broader South Tyland complex. We have the executive team on the call to provide specific updates. Stepping out from the quarter and looking back at the full year, 2024 was a transformational period for the company as Camino Rojo achieved record production and we expanded into Northern Ontario with the acquisition of the Musselwhite mine. By every measure, 2024 was a tremendous success for Orla and we will build on this momentum as we advance the South Railroad project in Nevada and the sulfide project at Camino Rojo in Mexico. We expect 2025 to be a catalyst rich year for the company with the integration of Musselwhite, and initial underground resource for the Camino Rojo sulfides and an updated resource for South Railroad.

Our preliminary guidance for 2025 at Camino Rojo is 110,000 to 120,000 ounces of gold produced at an all in sustaining cost of $875 to $975 per ounce gold sold. We intend to provide updated guidance inclusive of Musselwhite in the second quarter. Our Chief Operating Officer, Andrew Cormier, will now discuss our operating performance.

Andrew Cormier, Chief Operating Officer, Orla Mining: Thank you, Jason. As mentioned, our operating team in Mexico delivered another impressive quarter while remaining committed to the health and safety of all of our employees. During the quarter, we mined over 1,800,000 tonnes of ore at a strip ratio of 1.54. 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 fourth quarter was 0.94 grams per tonne, in line with our plan.

We also achieved an average stacking rate of 18,487 tonnes of ore per day. With the continued strong mining and operating performance in the fourth quarter, we produced nearly 27,000 ounces of gold. As a result, we produced a record 137,000 ounces of gold for the year, meeting the increased 2024 production guidance range of 130,000 to 140,000 ounces. As Jason mentioned, our preliminary gold production guidance for Camino Rojo in 2025 is 110,000 to 120,000 ounces. Permitting of our expansion in Mexico continues as we resubmitted the permit applications to the federal government in November with the full endorsement of the state government.

Following productive discussions with the new administration in the fourth quarter and early this year, we anticipate the new administration will be prepared to respond to our permit application this year. In Nevada, permitting for the South Railroad project continues to progress and we’re anticipating the posting of the notice of intent by mid year. The supplemental environmental reports have been submitted to the Bureau of Land Management, BLM, and are under review with the local office in Elko. Once finalized, the notice of intent will be reviewed by the state and then the federal BLM offices in advance of the final notice of intent publishing expected mid-twenty twenty five with the targeted record of decision and final permitting decision by mid-twenty twenty six. Following this approval, Earthworks and the South Railroad project would commence and the first, well production anticipated in the second half of twenty twenty seven.

The EPCM contract was awarded to M3 Engineering and Technology in the first quarter with basic and detailed engineering proceeding this year and into 2026 to align with construction following the record of decision. Long made equipment will be identified and purchase orders will potentially be placed in 2025. Now, over to our Chief Financial Officer, Etienne Moran, to discuss the financial results for the quarter.

Etienne Moran, Chief Financial Officer, Orla Mining: Thanks, Andrew. During the quarter, we sold 33,000 ounces of gold at a realized price of $2,669 per ounce, resulting in $93,000,000 in revenue for the quarter. All in sustaining costs for the fourth quarter was $826 per ounce, lower in part due to the higher gold sales and higher silver byproduct credits. For the full year, all in sustaining cost was $8.00 $5 per ounce, and this makes Camino Rojo 1 of the lowest cost coal mines globally. Our low cost production coupled with the higher gold prices are driving strong earnings and cash flow generation.

Our net earnings for the quarter were $26,100,000 or $0.08 per share. And after adjusting for the gain related to the change in fair value of the gold forwards outstanding at year end related to the gold prepaid facility on the Musselwhite acquisition and a few other items including unrealized foreign exchange gains, adjusted net earnings were $22,000,000 or 0.07 per share. These strongest earnings are reflected in a robust operating margin of 64%. During the quarter, exploration and project costs were $12,200,000 of which $2,600,000 was capitalized and $9,600,000 was expensed. Full year exploration project costs totaled $47,900,000 of which $13,300,000 was capitalized and $34,600,000 was expensed, in line with our 2024 guidance of $34,000,000 Cash flow from operating activities before changes in noncash working capital was $46,000,000 or $0.14 per share for the quarter.

Meanwhile, we generated $39,000,000 in free cash flow or $0.12 per share. During the fourth quarter, total capitalized expenditures was 5,200,000 of which $2,800,000 was non sustaining related to capitalized exploration in Mexico and $2,400,000 was sustaining. During the fourth quarter, we fully repaid our outstanding balance on a revolving credit facility to achieve a debt free status. As a result, we were able to take advantage of our strong balance sheet and financial flexibility to fund the purchase of the Musselwhite mine while mitigating any needs for upfront equity dilution to shareholders. The $810,000,000 in upfront consideration for the Musselwhite acquisition was funded from $250,000,000 of bank debt, dollars 200,000,000 in senior unsecured convertible notes, led by Auris Cornerstone shareholders and a $360,000,000 prepay facility.

The gold prepay is a three year obligation to deliver a total of approximately 145,000 ounces in equal monthly deliveries starting this month. The facilities is based on the go forward prices averaging $2,834 per ounce over that three year period. As a result of the acquisition, the company’s current outstanding balance is, or debt outstanding balance is $450,000,000 with net debt of approximately $260,000,000 We intend to use our strong cash generation from our operation to delever over the next three years while we also prepare to fund the construction of South Railroad. Our cash balance at the February was closer to $190,000,000 And with that, I will pass it over to our Senior Vice President of Exploration, Sylvain Guerra, which will provide you a short update on the exploration activities.

Sylvain Guerra, Senior Vice President of Exploration, Orla Mining: Thank you, Richard. During the quarter the fourth quarter in Mexico, the company completed the drill program at the Camino Rojo extension, now referred to as Zone 22. The first year of drilling in Zone 22 successfully defined mineralization up to 0.9 kilometers from the current resource boundary. The system remains open down plunge and at depth. An updated on the ground resource of the Camino Hopeful solidified deposit is planned for the second quarter of twenty twenty five and its focus on the Caracol in the upper 500 meter of Zone 22.

In Nevada, twenty twenty four marked another successful year of exploration of the South Carden complex with significant drilling results at multiple targets over the entire 30 kilometer property strike land. The results from the 2024 drill program included multiple high grade intersection within and beyond the feasibility study open pit at Dark Star and Pinion, demonstrating potential for extensions and resource growth. Drilling in the south area of the property, which was extended by the acquisition of Contact Gold’s Pointe Creek property early in the year, increased our confidence in potential for additional oxide resource definition. At the sulfide targets within the north area, drilling tested the extension of the north bullion deposit as well as corn type targets which returned significant mineralization. This sets the stage for high priority follow-up drilling.

The results of the 2024 drilling program support our Nevada strategy to enhance project value and extend mine life by identifying additional oxide resources and making new discoveries across the land package. An updated resource and reserve estimate is expected to be completed in the second half of twenty twenty Sustainability Officer, Silvana Khosla.

Silvana Khosla, Sustainability Officer, Orla Mining: Thank you, Silvana. Over the past two years, we have made significant strides in strengthening our ESG performance framework and reflecting our unwavering dedication to responsible and sustainable business practices. As a result, we are proud to report notable improvements in our ESG ratings from Scotiabank in the last quarter as well as above industry average in our first year participating in the S and P Global corporate sustainability assessment. Both S and P Global and Scotiabank had recognized our overall ESG performance as exceeding industry benchmarks. Also during the fourth quarter, we continued our community engagement in our strategic investment initiatives the On the people front, in the fourth quarter, we prioritized a smooth transition for the MASA white line, welcoming new team members and addressing key processes like benefits, payroll, and employee records management.

These efforts have been vital in retaining critical talent and supporting onboarding. To reinforce our commitment to personal engagement, members of our executive team visited the site on our first day as owners and will return this week for a second town hall to warmly welcome Masawite employees to the company. With that, I’ll hand the call back to Jason, who will share more about the Masawite Mine acquisition.

Jason Simpson, President and CEO, Orla Mining: Thanks, Silvana. During the fourth quarter, Orla announced the acquisition of the Musselwhite mine, expanding our operating footprint into Ontario and adding a second operating gold mine to our platform. The addition of Musselwhite is expected to more than double our annual production. To many of you, I have communicated that the two most important aspects of the deal to me is that number one, there is highly favorable geology and number two, there is a great team. These two fundamental pieces give us great confidence about the long future at Musselwhite.

We intend to invest in both the team and the geology and we are launching an aggressive multi year exploration program to outline that Musselwhite extends for more than just six years. An additional critical mass of new gold inventory will give us a pathway to improve the material handling to increase production rates in a material way and reduce operating costs. We will also look to the experienced team on-site to bring their ideas forward on how to further improve the operations. Looking ahead to 2025, there are several catalysts for Orla. The integration of Musselwhite Mine into the business expected permitting milestones in both Mexico and Nevada resource updates for the South Carlin Complex and the Camino Rojo Sulfides advancing study work on the Camino Rojo Sulfides and construction planning information from our South Railroad project in Nevada.

In 2024, Borla delivered record production and cash generation, the transformational acquisition of the Musselwhite Mine and discovered more gold and additional exploration highlights throughout the year. We continue to execute on our proven strategy to generate value to the benefit of all of our stakeholders. I am proud of what the team has been able to accomplish in 2024 with only more to come in 2025. Thank you to our teams in all the countries where we operate, whose commitment and delivery are driving this business forward. At this point, I’d like to open the call to questions and hand the call back to the operator.

Abby, Conference Operator: Thank you. And we will now begin the question and answer session. And your first question comes from the line of Wayne Lam with TD Securities. Your line is open.

Andrew Cormier, Chief Operating Officer, Orla Mining: Yeah. Thanks. Good morning, guys. I was just wondering, at Musselwhite, obviously, pretty transformational acquisition. Is there anything you can share with us on what we might be able to expect with the upcoming guidance?

Just wanted to understand with some of the improvements that Newmont had implemented prior to the sale, like the ventilation of the material handling system, are there substantial cost savings that can be realized relative to the $1,500, 16 hundred dollars ASIC run rate seen there in the past year?

Jason Simpson, President and CEO, Orla Mining: Yes. We’ll provide thanks, Wade, for the question. We’ll provide updated guidance in Q2, as we mentioned, which of course will include our expectation for the remaining three quarters for the all in sustaining cost. You’re quite correct. We are going to be benefiting from some of the investment that Newmont put into the asset in years prior.

The one that you described, on to Orla that will be the benef on to Orla that will be the benefactors of and not have to do going forward. The second grouping of cost reduction we often speak about is the size of the companies relatively speaking is quite different and Orlo will be able to run a different size operation and find some cost savings there. The third category of course is on the denominator and as we can increase gold production, that will of course help with an all in sustaining cost per ounce reduction. And then finally, as I mentioned on this call, we’ve already had a number of engaging conversations with the site team and have already identified a number of improvement opportunities from the underground mine that will benefit us on the cost front. So, we look forward to updating the market in Q2 of our first year, albeit a partial year of production at Musselwhite inclusive of costs.

Andrew Cormier, Chief Operating Officer, Orla Mining: Okay. Great. Looking forward to that. Maybe at Camino Rojo, just wondering with the environmental permit for the layback now resubmitted, how are you seeing the regulatory framework now in Mexico? And just wondering if the timing for resubmission of the change of land use permit has been impacted?

Just wondering if you could provide some color on what you’re seeing in terms of the ongoing discussions in country.

Jason Simpson, President and CEO, Orla Mining: Yeah. Just to be imminently clear to all the listeners on the call, the MIA that we resubmitted on November eleventh of last year is really the primary permit. There’s a subsequent change of land use where we pay for the additional ground. That’s a matter of process. So as we outlined, we had good, in the call today, we had good meetings with the new administration last year and as recently as a couple of weeks ago, that gives us confidence that we’re on track to deliver that permit this year, and that all the associated permits that are part of normal course operations will follow.

And we hope to provide an update on that in the second quarter as well.

Andrew Cormier, Chief Operating Officer, Orla Mining: Okay, great. Thanks. And maybe just last one. At South Railroad, similarly, just wondering how things are advancing on the permitting front. And just wondering, what you’re seeing with the notice of intent now expected in mid-twenty twenty five and the subsequent impact on timing for the record of decision?

Jason Simpson, President and CEO, Orla Mining: Yes. So, as many people have been following our story will realize, we submitted 20 supplemental environmental reports to BLM as Andrew characterized on the call. They’re under final review in the Elko office. They can then get transferred to Reno and Washington, and so we’ll be tracking that progression through the next quarter. And then once the notice of intent is filed, we can really get to work with the cooperating agencies so that in a twelve month period, we can move through the EIS process with BLM and the environmental consultant that does the work such that we can begin earth movement in 2026.

What we’ve characterized also similar to our approach in Mexico is, the board at the end of twenty twenty four approved a budget for construction engineering in the first half of twenty twenty five, which is underway by M3 that Andrew mentioned. That engineering will feed into a procurement process such that when we do begin turning dirt in 2026, we can build the project with the kind of pace that we built Camino Rojo. All of that such that we’ll be producing from Nevada another open pit heap leach operation in 2027 with similar low costs that we see in Mexico and then have a portfolio of three producing assets in Mexico, United States and Canada pushing us up to 500,000 ounce mark.

Andrew Cormier, Chief Operating Officer, Orla Mining: Okay, great. Looking forward to the updates and best of luck in the months ahead.

Jason Simpson, President and CEO, Orla Mining: Thanks, Mike.

Abby, Conference Operator: And there are no additional questions at this time. I would like to turn the conference back over to Mr. Jason Simpson for closing remarks.

Jason Simpson, President and CEO, Orla Mining: Since there are no further questions, I would like to thank you for your time. Never hesitate to reach out to Orlett should you have any follow-up questions. And I’d like to thank the team for their continued performance.

Abby, Conference Operator: And ladies and gentlemen, this concludes today’s call and we thank you for your participation. You may now disconnect.

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